A WORLD BANK COUNTRY STUDY                    PUB-2335
INDIA
Economic Issues in the Power Sector
November 1979



The World Bank issues country economic studies in two series. This report is a working
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Copyright ( 1979 The International Bank for Reconstruction
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INDIA
Economic Issues in the Power Sector
This report is based on the findings of a mission to India consisting of the mission leader:
C. Taylor, economist
and
C. White, consultant engineer
and M. Gellerson, consultant economist
in September/October 1978 and a follow-up visit by C. Taylor in February 1979. Ms. J.
Voigt and N. Poduval at headquarters and Y. Satyanarayana in the New Delhi Office
provided research assistance. V. Prakash, who is supervising the World Bank research
project "Patterns of Industrial Development" kindly made his data tapes available to the
mission.
South Asia Regional Office
The World Bank
Washington, D.C., U.S.A.






Preface
This review has grown out of the World Bank's increasing involve-
ment in the power sector in India. As the Bank's operations grew in number
and size it was felt that an overall strategy of assistance was needed and
that the initial step required was to increase the Bank's knowledge of the
operations and procedures within the power sector. Therefore, a review of
issues at the national level was undertaken, with the main mission visiting
India in September and October 1978 and a follow-up mission in February
1979. The present report contains the findings of those missions.
The range of subjects that could be covered at the national level
is very large and the complexity of the Indian power sector means that much
detailed work would be required for a definitive, comprehensive sector review.
This was felt to be beyond the scope of two brief missions. This review has,
therefore, concentrated on two major areas which are principally economic in
character. These are (i) demand for electricity and (ii) investment in the
power sector. It must be emphasized that the power sector is a sophisticated
and complex part of India's basic infrastructure: the many Central organiza-
tions and the 18 State Electricity Boards between them employ over 600,000
regular staff. Thus, even on the subjects reviewed -- demand and investment --
the examination has been cursory and more work on them is highly desirable.
In addition there are other major areas in which future work could be profit-
ably taken up, including investment implementation, thermal plant operation
and overall system management.
The Government of India is well aware that there are many problems
with the operation and development of the power sector. To define these
problems and to prescribe methods of dealing with them, a cpmmittee was
recently established under the chairmanship of one of the members of the
Planning Commission. The committee's terms of reference call for an exam-
ination of "all aspects of the functioning of State Electricity Boards and
Central Organizations engaged in electricity generation, transmission and
distribution and make recommendations for improving them". This committee
should have far-reaching impact when it reports its conclusions early in
1980.
The main text of this review is organized in two major sections:
Section I, entitled "Consumption", and Section II, entitled "Investment
Planning and Resource Allocation". Before these two major sections, there
is a summary followed by a background discussion of the relationship of the
power sector with the economy at large and the institutional and legal frame-
work of the sector, which should be particularly useful to readers who are
not familiar with the power sector in India. At the very end of the report
the main conclusions are drawn together in a separate section. The annexes
to the main report are mostly statistical but also include two notes on
terminology for the lay reader, graphs and an organization chart for the
sector.
Michael H. Wiehen
Acting Vice President
South Asia Region






TABLE OF CONTENTS
Page No.
Map
SUI{ARY  ...........            ................................    i -  iii
BACKGROUND:    1.   Electricity and  the  Economy  ......                      1
2.   The  Institutional  Framework  ......                   3
I *    CONSUMPTION .            ............... . ..................                 10
1.   Past  Patterns  of Demand  ........           ..    ........      10
2.   The  Incidence  and  Impact of Shortages  ....                    12
3.   The Efficiency of  Power Use  .............               .       18
4.   Tariffs  ...... ...........              .................        23
5.   Demand  Forecasts  ..........          ..      .............      27
II.     INVESTMENT PLANNING AND RESOURCE ALLOCATION  .... ...                         35
1. Resources Devoted to Power Sector
Development  ............................                     35
2.   The  Investment  Planning  Process  ..........                    40
3.   Present  Investment  Plans  ....                .............     43
CONCLUSIONS  .......................................                          51
ANNEXES    .         ..........................................               56
GRAPHS       ...........          ...............................    172
ORGANIZATIONAL  CHART   .............................    175






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ABBREVIATIONS AND ACRONYMS
CEA   -   Central Electricity Authority
REB       Regional Electricity Board
SEB   -   State Electricity Board
REC   -   Rural Electrification Corporation
APA   -   Atomic Power Authority
NTPC  -   National Thermal Power Corporation
NHPC  -   National Hydro Power Corporation
APS   -   Annual Electric Power Survey
NDP   -   National Domestic Product
KWh   -   Kilowatt hour (energy)
KW    -   Kilowatt (Power)
MW    -   KW x 103
MWh   -   KWh x 103
GWh   -   KWh x 106
TWh   -   KWh x 109
HP    -   Horse power
HT    -   High tension
LT    -   Low tension
km    -   Kilometers
V     -   Volts
KV    -   Kilovolts
KVA   -   Kilovolts-amperes
EHV   -   Extra high voltage
Since September 24, 1975, the Rupee has been officially
valued relative to a "basket" of currencies. As these cur-
rencies are now floating, the US Dollar/Rupee exchange rate
is subject to change. Currently, the value of the Rupee is
about US$0.12.






SUMMARY
i.        Background:  Economic growth in India depends critically on the
development of the power sector. As the rest of the Indian economy expands,
demand for power grows roughly twice as fast and, because power is relatively
capital intensive, its share in total fixed asset formation is increasing
rapidly.
ii.       The institutional structure of the electricity supply industry is
complex. The Ministry of Energy in the Government of India, and the Central
Electricity Authority -- the technical arm of Central Government for the
power sector -- are responsible for broad issues of policy, planning and other
matters affecting the power sector at the national level. In addition there
are two new generating companies at the Center, the National Thermal Power
Corporation and the National Hydro-electric Power Corporation, which are
planned to grow into important wholesalers of power in the coming years.
The Atomic Power Authority, reporting to a separate Ministry of Atomic Energy,
is responsible for all commercial nuclear power generation in India. The
Regional Electricity Boards, standing between the Center and the States, have
begun to coordinate operations among the utilities within their regions. The
most important agencies in the power sector are the State Electricity Boards,
which own and operate three-quarters of the Indian power system.
iii.      Consumption:  The demand for power has increased rapidly over the
last two decades. Most of the increase has originated with industry, both
because of industrial growth and increases in the intensity of power use
in the industrial sector. Agricultural demand for power has in fact grown
more rapidly than industrial demand but, starting from an almost negligible
base, it still constitutes only a modest fraction of total demand.
iv.       Not only has there been a change in the composition of power demand
among sectors, but also among different areas of the country. As the Western
Region industrialized more rapidly than the Eastern Region, the proportion of
electricity consumed in the West has risen. A similar shift in the growth of
capacity is apparent. In the country at large there has been a shift in elec-
tricity demand towards rural areas, for industrial as well as agricultural use.
v.        Shortages of both power and energy have been pervasive for several
years. While their exact extent is hard to measure, some States and regions
clearly have been more seriously affected than others. Shortages appear to
be somewhat seasonal, being most severe in the period preceding the monsoon
replenishment of hydro reservoirs. There was an estimated supply shortfall
of about 15% in 1977/78, and about 10% in the first 9 months of 1978/79.
vi.       Shortages fall largely on industry.  Since 1968/69, downturns in
the supply of electricity to industry have preceded industrial downturns by
a year; while other factors such as the performance of agriculture are un-
doubtedly important determinants of industrial performance, electricity
supply appears to be a major constraint on industrial growth. In the last



- ii -
few years, value lost as a result of power shortages probably represented
between 1 and 3% of GDP. The cost of power shortages is not only value-added
foregone but also misallocation of capital resources. A substantial invest-
ment in small uneconomic generating sets, mainly by industrial enterprises,
appears to have been undertaken in the last five years to help cope with
shortages of supply of electricity from the utilities.
vii.      In the Indian economy, power consumption is high relative to the
level of economic activity, and the rate at which electricity consumption has
been growing relative to GNP is much higher than is typical in other countries.
This power-intensity is particularly marked in industry where it appears that
both the intensity of power use within subsectors and the composition of
the industrial sector have contributed to the overall intensity of power use.
viii.     Electricity tariffs vary from State to State; generally they are
complex and low relative to marginal costs. There is evidence they have been
simplified to a limited extent in the last four years or so, and over the
longer term power rates have been increased, but they have not kept pace with
other prices in the energy sector or the general level of prices throughout
the economy.
ix.      Power forecasting in India is complicated by past shortages which
make it difficult to relate the level of economic activity to (unsuppressed)
electricity demand. In any case demand forecasting is very uncertain, whether
in India or elsewhere. The most recent detailed official forecast was prepared
by the Tenth Annual Power Survey Committee. The aggregate forecasts incor-
porated into the Draft Plan (1978/79-1982/83) are, however, much lower. The
regression analysis undertaken in this review produces forecasts that fall
between those of the Annual Power Survey and the Draft Plan.
x.        Investment:  Rs 157 billion (US$18.3 billion) is allocated to the
power sector in the Draft Plan. The proportion of Plan resources devoted to
the power sector has risen to a point where it now represents 35% of the State
Plans and 23% of the State and Central Plans taken together. Most of these
resources come from borrowings and general tax revenues and a very small
proportion is estimated to be generated internally from the retained earnings
and depreciation of the State Electricity Boards. In the past, physical
investment targets have not been met while expenditure forecasts have often
been exceeded, and the ex-post share of Plan expenditure has been higher
than the ex-ante share of allocations.
xi.       The planning process for the power sector is integrated into the
process of preparing the Annual and Five-Year Plans for the whole economy.
As in other sectors, it involves a lengthy series of discussions between
the Center and the States and among the concerned central ministries, until
a concensus is reached. While generation projects included in the power plan
are vetted from a technical viewpoint, they are not currently being reviewed
from a systems viewpoint to judge their economic merit. Sophisticated plan-
ning of the transmission system is just being introduced.



- iii -
xii.      Investment in hydro-electric generation has fallen behind investment
in thermal generation in recent years. Despite its long gestation and high
capital costs, in a number of cases hydro-electricity may offer a better
return than thermal. Similarly, investment in transmission and distribution
has been low relative to investment in generation and, correspondingly,
losses on the power system have been high.
xiii.     Conclusions.  Investment in the power sector to meet India's needs
will be massive, at least over the medium term. The demand forecasts of the
Planning Commission seem conservative and the investment program should be
pitched a little above the demand forecasts to allow for slippages that
inevitably arise. These considerations suggest that the investment target
of the Draft Plan should be raised, perhaps by as much as 3,700 MW to roughly
22,000 MW, in the expectation that roughly 21,000 MW would actually be com-
missioned. The planning of investment should look farther into the future,
say 10 to 20 years ahead, than has been the case in the past. One advantage
of planning further ahead is the opportunity to fit into the investment
program more hydro-electric capacity, which may have been underexploited due
to its long gestation period relative to that of thermal capacity. The pro-
portion of overall investment in transmission relative to generation capacity
should rise to approach one-half of total investment, compared to its past
level of roughly one-third. Increased expenditure on transmission is important
not only to enhance regional integration of State systems but also to reduce
system losses which have grown. Financing this large investment program
will require larger Plan outlays on power, which have already reached quite
high proportions. However, the funds should not come solely from the public
purse. Tariffs should be increased not only to increase the internal cash
generation of the State Electricity Boards but also to provide consumers of
all kinds with the incentive to conserve.






BACKGROUND
1.   Electricity and the Economy
1.        The power sector is a vital part of the infrastructure of the Indian
economy. The performance of the electricity supply industry and the economy at
large are closely linked, since the bulk of electricity generated is consumed
in one of the other productive sectors of the economy. Because electricity
cannot easily be traded internationally and because its use is instantaneous
and it cannot be stored readily, a shortage of electricity supply has an
almost immediate effect on the rest of the economy. In the longer term, the
substantial resources devoted to developing the power sector influence the
availability of resources for other purposes: electricity supply is one of
the most capital-intensive sectors in India. If, as in the last two decades,
the sector continues to grow at more than twice the rate of the economy as a
whole, both its draw on resources and the economy's capital-intensity will
grow more critical. Constraints affecting the power sector are among the
most important constraints on accelerated development in India today.
2.        Electricity consumption has grown by about 10% a year since 1951
(Annex B.l.l). Though this is discussed in more detail later, it is worth
noting here that about two-thirds of this consumption is by industry; agri-
culture accounts for less than 15% and services (other than power itself) for
about 10%. The remaining 10% or so is consumed by private households and in
public lighting. Total consumption was about 66 TWh in 1976/77.
3.        Electricity is, of course, not the only form of commercial energy
available in India, and commercial energy only recently has become as
important as traditional forms -- vegetable and animal. Commercial energy
now accounts for something over 55% of total estimated energy consumption
(using coal replacement measurement of energy to aggregate different types).
In proportion to the total consumption of commercial energy, electricity
consumption has steadily risen from about 10-15% in the early 1950s to about
25% by 1975/76.
4.        There is some degree of substitutability between electricity and
other forms of energy. After the 1973/74 oil crisis, the Government adopted
the policy of substituting coal and electricity for petroleum products wher-
ever feasible in the public sector. The Government used relative prices with-
in the energy sector to encourage the electrification rather than dieseliza-
tion of pumpsets. However, the number of technical options for substitution
that are both feasible and economical, is limited.
5.        Since machinery is almost always built specifically for one type of
energy use, a response to price changes or to any other stimulus to substitute
is usually slow and difficult to measure. Electricity tariffs have fallen
relative to coal and petroleum product prices, but the precise impact of these
price changes on demand is impossible to discern with the available data.



- 2 -
6.        Electricity generation uses considerable quantities of resources.
Apart from hydro-electricity, generation involves the depletion of non-
renewable fuels: mainly coal, and small amounts of oil and gas and nuclear
fuel. In 1977/78 about 56% of gross electricity generation was in conven-
tional thermal plants, 41% in hydro-electric plants and 3% in nuclear plants
(Annex B.1.2). The great bulk of fuel used in conventional power stations is
coal. In 1976/77, 28 million tons were used to generate electricity (Annex
B.1.3). Measured in coal replacement terms, this constituted about 86% of
all fuel used for thermal generation, compared with 4% from lignite and 10%
from oil. The percentage of oil rose until 1973 (13%) and has fallen
steadily, if only slightly, since then.
7.        India's official reserves of coking and non-coking coal stand at
20 and 60 billion tons respectively. This probably understates the total
that is economically available and if coal in thinner seams and at greater
depth than that included in the official estimate is added, coking and non-
coking coal reserves would be about 22.5 billion tons and 89 billion tons,
respectively. At present, just under one-third of all coal produced is
used to generate power. The great bulk of this is non-coking coal, but the
middlings from beneficiation of coking coal are also used. Assuming coal
production increases from its present level of about 100 million tons per
annum to about 500 million tons per annum in the next 30 years, and then
levels off, identified reserves should last for roughly a century.
8.         Reserves of hydro electric power are considerable.  The last com-
plete survey was done by the Central Water and Power Commission between
1953-60, and it placed the hydro potential of the country at 41,000 MW at
60% load factor. Thus, the total energy generating capability was estimated
as 222 TWh per annum (excluding available secondary energy). New data indi-
cate that the hydro-electric potential of India may be much higher because
more schemes are now economically attractive, with the rise in energy prices
and the improvements in techniques of site exploration and investigation.
These suggest total hydro-electric resources may be as much as 66,000 MW at
a 60% load factor, representing an annual generating capability of about
345 TWh. About 10,000 MW of hydro capacity have been commissioned in India
to date, and the present level of generation is about 38 TWh per annum. The
unexploited potential lies mostly in the North and North-eastern Regions.
9.        Uranium is the only primary fuel that can be used directly in
nuclear reactors at the moment. The most important region in India for
uranium ore so far discovered is in Bihar. The reasonably well assured
uranium resources in India are equivalent to about 20,000 to 30,000 tons
of yellow cake nuclear fuel.
10.       The long-range atomic power programme in India will depend on
thorium rather than uranium.   Thorium reserves are the largest in the world
and are estimated at 450,000 tons. The development of fast breeder reactors
based on thorium will, pose many technical problems, but when they can even-
tually be introduced on a commercial basis there should be virtually no limit
to the capability to generate electricity from a resources point of view.



-3 -
The presently known thorium resources in India represent 2.4 million TWh of
energy. If at the end of the century 10 TWh of power were produced annually
from this source, and production were to increase by 10% per annum thereafter,
these resources would not run out until the first decade of the twenty-first
century.
11.       The electricity sector has expanded rapidly since Independence.  The
installed generating capacity throughout India (utilities and non-utilities)
has increased from about 2,300 MW in 1950 to over 26,000 MW by the end of
1977/78. This represents an average annual rate of growth of just over 9%.
The bulk of this increase has been in the capacity owned by the utilities,
which has increased from roughly 75% to over 90% of total capacity. The
growth rate of capacity in the utility sector has been about 10% over this
period. This comprised a 10.8% growth in hydro-electric capacity and a 9.5%
growth rate in conventional thermal plants (Annex B.l.l).
12.       While long-term growth rates have been high, in recent years growth
has been less impressive. Since 1971, installed capacity has grown annually
by only 7% (7.2% in the utility sector) and the average annual growth rate of
hydro electricity capacity has fallen to only 6.6%. The long-term trend, of
hydro expansion being faster than thermal, has been reversed in the 1970s.
13.       NDP statistics on the value of capital investment in the power
sector are not available for recent years, but one can trace the increase in
net tangible assets in the power sector and the economy as a whole between
1950 and 1971. This shows the power sector accounted for 11.5% of all invest-
ment over this period, and rose from accounting for 1% of the capital stock
in the economy to about 5% (Annex B.1.4). In the power sectbr, the capital
stock increased almost three times as fast as it did in the rest of the
economy.
2.   The Institutional Framework
14.       As early as the turn of the century it was possible, in certain parts
of India, to buy electricity from a public utility company. Electricity sup-
ply was, of course, hardly widespread in 1900, and, indeed, was not recognized
as a separate industry by Government; legislation governing its development
was introduced in the Indian Telegraph Act of 1885.
15.       As the sector has grown and developed over the years, major insti-
tutional developments have usually been accompanied by new legislation. In
1910, the Indian Electricity Act empowered the State governments to grant
licenses to those supplying or planning to supply electricity. Licensees
were then required to conform to certain basic operational procedures and
to submit their accounts to their State governments. This Act also served
to establish the State Advisory Boards responsible for advising State govern-
ments on matters of electricity policy, and the Central Electricity Board,
responsible for policing the Act on behalf of the Central Government.
16.       In those early days, public power supply in India developed much
like that in most other countries. Generating plants were constructed next



- 4 -
to load centers and transmission lines were only used to evacuate power from
more remote hydro-electric schemes. A multitude of operating undertakings
sprang up, some of which were local authorities, but many of which were
private ventures.
17.       With Independence, the principle that both the Central Government
and the States should be able to legislate on power was embodied in the
Constitution. Shortly after this, legislative authority was more formally
divided in the Electricity Supply Act of 1948. The Act provided for the
establishment of the Central Electricity Authority (CEA) and of State Elec-
tricity Boards (SEBs) which were to become the main supplying agencies for
power throughout India. The mandate for the CEA was spelt out clearly
in the Act: to develop national power policy, to report the progress of the
electricity supply industry, to provide technical assistance, to train
personnel in the sector, to promote research and, in general, to facilitate
efficient power supply. Its role, however, was essentially advisory rather
than executive.
18.       Much more effective authority was vested in the SEBs.  Appointed by
their State governments, the Boards were given authority to build, own and
operate power systems and sell power to the public. The SEBs are largely
autonomous in matters relating to operations, but are subject to State gov-
ernment direction in many other areas such as investment and tariff policy.
The Boards are, of course, empowered to incur financial liabilities, hold
assets and undertake transactions. Subject to audit of financial practices
and the requirement to meet certain financial performance criteria, the Boards
are, in principle, free to set tariffs as they choose, though their financial
obligations are to be met in a particular order. Prior to the 1978 amendment
to the Electricity Supply Act, which is discussed below, the order was, first,
interest on unguaranteed debt, then depreciation, interest on guaranteed debt,
write-offs, contributions to general reserves, interest on debt from the State
government and finally amortization of State government debt from a develop-
ment fund. Amortization of non-State government debt was, and is, paid out of
the depreciation reserve. Net earnings over and above those required to meet
these priorities are subject to Central income tax under the 1922 Income Tax
Act, for which purpose Boards are treated as companies. (The 1948 Electricity
Supply Act specifically excludes the possibility of any of these taxes going
to the State government.)
19.       The SEBs were usually staffed in the first instance by officers of
the State Department of Power, and in many States, a number of responsibilities
remained with that Department. Among these it was common for hydro-electric
development to stay mainly with the government because many of the schemes
also served irrigation needs. Morever, experienced civil engineers were
often more readily available in the Irrigation Department of the State
government concerned.
20.       The Damodar Valley Corporation (DVC) was established in 1948 by the
Central Government to manage all the water resources for hydro-generation and
irrigation, and conserve and develop other resources of the Damodar Valley as



an integrated development scheme. Part of its responsibility was to generate
and sell electricity. Its sales are confined to bulk HT customers mainly
within the Damodar Valley area of West Bengal and Bihar.
21.       While the CEA was formally created in 1950, its functions and
responsibilities were for many years carried out by the Central Water and
Power Commission, the technical arm of the Ministry of Irrigation and Power.
In 1974, Presidential notification created a new Ministry of Energy which
comprised two departments, one dealing with coal and the other with power.
The CWPC was split in the subsequent year and its departments dealing with
power became the nucleus of a revitalized CEA, reporting to the Department
of Power in the Ministry of Energy.
22.       This evolution of the machinery of government was paralleled by
the growth of the electricity supply industry. By 1951, there were over 300
undertakings operated by private licensees and about 270 by State governments
and municipalities. This must have been close to the maximum number of
institutions in the sector, since with the subsequent gradual non-renewal of
licenses the SEBs have slowly but surely absorbed many of the smaller utili-
ties in their States. By the end of 1976/77, only 49 private licensees and
21 municipal undertakings were still supplying electricity. Only 12 were
generating as well as distributing electricity. The SEBs alone accounted
for 74% of total utility sales of energy in 1976/77; the public sector
accounted for 86% (Annex B.2.1). Licensees are becoming less important
with time. 1/
23.       In 1962, the Atomic Energy Act was brought into law, making the
development of atomic power resources for electricity generation the sole
preserve of Central Government. A Department of Atomic Energy was set up,
with the Prime Minister holding its portfolio, which delegated authority
for operating commercial nuclear power generation to a statutory body, the
Atomic Power Authority (APA). Responsibility for the construction and com-
missioning of new nuclear power installations remained with the Department
itself.
24.       This development recognized a major new technological opportunity
in the power supply industry. No less significant, but more gradual in its
impact was the additional realization that conventional technology could
deliver electricity more economically if the scale of the supply system could
be increased. It was recognized that interconnected systems require less
generating capacity due to diversity among daily peak demands, because larger
and more efficient generating plants can be built, because higher voltage
transmission (with lower losses) becomes economical and because thermal and
hydro-electric generating plants can be operated more economically in combina-
tion. Between May 1964 and February 1966, the State and Central Governments
thus established by common resolution five Regional Electricity Boards (REBs).
The REBs were established to help develop integrated power systems in their
respective regions (see paragraphs 43-46).
1/   Some new licensees are still being created:  in 1976/77, two new rural
electricity supply cooperatives were established.



- 6 -
25.       As the benefits of electricity supply became more widely recognized,
the SEBs began to electrify rural areas as well as urban. The burden in terms
of capital cost was so high, however, that special financing arrangements were
needed. Thus, in 1969, the Rural Electrification Corporation (REC) was set
up as a public sector financial institution. The main objectives of the Cor-
poration are to finance rural electrification schemes and to promote rural
electric cooperatives throughout India. The lending policies of the REC are
governed by Department of Power directives requiring, among other things,
that REC adopt an area development approach with emphasis on under-developed
areas, that it adopt standard viability criteria for projects and that every
effort be made to coordinate electrification with the development of other
elements of rural infrastructure to ensure the best possible impact of rural
electrification on agricultural productivity.
26.       In 1975, the Central Government established two power generating
undertakings, the National Thermal Power Corporation (NTPC) and the National
Hydro-electric Power Corporation (NHPC). The NHPC has taken responsibility
for three ongoing hydro-electric schemes. 1/ The NTPC intends to build, own
and operate large regional or "super thermal" power stations with capacities
of 1,000 MW to 2,100 MW each. Five of these stations are planned and all
will be located close to coal mines to minimize coal transportation costs.
27.       In 1976, the 1948 Electricity Supply Act was amended with the main
effects of extending the authority of the CEA and of providing for generating
companies to be set up in the public sector. Under this amendment, the NTPC
and NHPC were given statutory recognition. 2/
28.       The 1976 amendments required the States and the new generating
companies to submit for sanction to the CEA any schemes costing Rs 10 million
or more.  Since almost all generation and transmission schemes do cost more
than this, the CEA is now in a better position to plan and control investment.
The CEA now has effective authority to require that schemes be modified or
postponed or moved forward in the investment programs and, in principle, could
choose not to approve uneconomic schemes submitted to it by the states.
29.       The most recent legislation to affect the power sector was the amend-
ment of the financial provisions of the 1948 Act, passed in mid-1978. These
amendments provide various ways of strengthening the finances of the SEBs.
They permit State governments to convert outstanding debt ("contingent
liability") accrued to them into equity. The amendments also reverse the
priority of liabilities so that, in effect, cash outlays such as debt servic-
ing must be honored before transfers such as those to depreciation and general
reserve. More importantly, the Boards are now required to generate a surplus
after meeting all expenses properly chargeable to revenues, including operation
and maintenance expenses, taxes, depreciation and interest.
1/   These are the Loktak, Baira Siul and Salal Hydro projects of the Central
Government.
2/   Since about 1970, Karnataka has had a separate generating company, the
Karnataka Power Corporation, which was also given statutory recognition
by the amendments.



- 7 -
30.       Many of the initiatives for new legislation arise at the annual
conferences of State Power Ministers and Chairmen of the SEBs. The Power
Ministers' Conference, usually held in January, provides a forum for co-
ordinating policy between the Center and the States. For example, the 1978
Conference concentrated on the utilization of generation capacity, the finan-
cial and managerial performance of the SEBs and power project construction,
and recommended reviews or immediate policy changes in each of these critical
areas. The Conference of Chairmen of SEBs, which meets immediately before
that of the State Power Ministers, tends to concentrate on more technical
matters. Given that control of the sector is shared, these conferences are
of critical importance.
31.       Thus, the electricity sector has now developed a complex institu-
tional structure, the most important elements of which are the Ministry of
Energy, Department of Power and Central Electricity Authority at the Center
and the responsible government departments and the SEBs at the State level.
The central generating corporations -- NTPC and NHPC in particular -- and the
REBs should have particularly important roles in the future, if the significant
economies of operating a power system on a large-scale are to be realized.
32.       The Department of Power in the Ministry of Energy.  The Department
of Power is responsible to Parliament for laying down national policy for the
development and regulation of the power sector. Since the energy crisis,
emphasis on conservation of power resources has been added. All the technical
aspects of the Department's responsibilities are met by the CEA, under the
Department's guidance and authority. The Department itself has only 50 to
60 gazetted officers.
33.       The Department is organized under a Secretary to the Government of
India. The functions of the Department are divided among five wings, four of
which are headed by Joint Secretaries and the fifth by a Financial Advisor of
Joint Secretary rank. The wings are in turn subdivided into divisions and
sections.
34.       The allocation of responsibilities within the Department is kept
flexible. This permits it to respond to circumstances as they develop by
bringing to bear the necessary experience and expertise, wherever it may be
in the Department. This expertise must cover broad matters of policy, plan-
ning, energy legislation, research and development (including non-traditional
energy supply sources such as solar and tidal energy), and relations with
outside organizations such as the World Bank, and with neighboring countries
for such matters as the coordination of the development of hydro-electric
resources. The Department must also administer energy supply in the union
territories and the execution of Central schemes such as the Beas-Sutlej
link and DVC's new projects. It must oversee, on behalf of the Government,
Central agencies such as NTPC, NHPC and REC, and coordinate relations between
the Center and the States. The Financial Advisor is responsible for advising
the Ministry on investment and expenditure in the Central sector. Special
attention is also given to the operation of thermal generating plants through-
out the country. This involves, for example, expediting coal supplies with
the Department of Coal as and when necessary, and overseeing through the CEA



- 8 -
research and design aimed directly at improving thermal power station opera-
tions. Finally, the internal personnel functions both within the Department
and the CEA, must be administered.
35.       Thus, while the Department is not directly responsible for the
operation of the power system, it does address both short-term and long-term
problems that range from consideration of broad policy to assistance with the
minutae of system operations. As the apex organization in the sector with
the most direct access to other branches of Government, its role is central
in initiating and coordinating the activities of the organizations throughout
the power sector.
36.       The CEA.  The CEA consists of a chairman and five full time members
and a staff of about 2,300 officers, divided among six operating departments,
or "wings". The chairman is responsible for the Planning Wing and each member
is responsible for one of the other departments:
Chairman, CEA       -   Planning Wing
Member Thermal      -   Thermal Generation Wing
Member Hydro        -   Hydro Generation Wing
Member Systems      -   Power Systems Wing
Member Operations  -   Operations Wing
Member Commercial  -   Economic and Commercial Wing
37.       The recently established Planning Wing covers a wide range of activ-
ities including load forecasting, the identification of power resources and
their optimum development, the formulation of capacity and energy balance
studies, the development of reliability criteria, and the techno-economic
appraisal of all power generation and transmission and distribution schemes
(in collaboration with the Hydro, Thermal, and Power Systems Wings submitted
by SEBs and the Central Sector.
38.       The Hydro and Thermal Wings comprise specialist engineering organi-
zations which provide comprehensive project engineering services to the
electricity supply industry. As well as assisting in the techno-economic
appraisal of hydro and thermal projects, they monitor projects under con-
struction.
39.       The Power Systems Wing is responsible for the planning and design of
high voltage transmission systems and the integrated operation of State and
regional power systems. Like the Hydro and Thermal Wings, it monitors the
progress of transmission and distribution projects under construction.
40.       The Operations Wing is responsible for monitoring the performance
of thermal power stations, and has underway a program to identify remedial
measures needed to help to maximize generation. In addition, this Department
operates four training institutes for thermal power station personnel.



- 9 -
41.       The Economics and Commercial Wing deals with the commercial, legal
and economic aspects of the power supply industry and is also responsible for
the inspection of electrical installations belonging to the Government of
India.
42.       The CEA is organized according to specialization rather than func-
tion. Among its major functions, planning, sanctioning projects and pro-
viding technical assistance to the SEBs all cut across its departmental
organization. While it is a statutory body, its role is indirect: it may
help develop policy proposals, but it cannot very well promote them without
the Ministry; it may sanction projects, but it does not build them. Thus,
despite its central position and considerable technical resources, the CEA
role in the power sector is limited to a large extent to the use other
organizations choose to make of it.
43.       The REBs.  The REBs comprise the chairmen of their constituent
SEBs together with representatives of other major electricity supply under-
takings in the regions and a member secretary provided by the CEA. The SEB
chairmen take turns annually to chair the REBs. Each Regional Board is
supported by a small seconded staff.
44.       The REBs were established to coordinate planning and operation of
the electricity supply undertakings in their regions. Their responsibilities
include: reviewing progress of projects in their regions; planning integrated
operation among the State systems; preparing coordinated maintenance schedules
for their regions; determining the availability of power for inter-state
transfer; prescribing generation schedules; and determining a suitable tariff
for inter-state exchange of power.
45.       As forums for discussion, the REBs could function with only a small
staff. The role of the REBs is limited by their being 'voluntary' associa-
tions of their SEBs. Nonetheless, their role is growing more operational.
In all but the North-Eastern Region, interim Regional Load Dispatch Centers
have been set up in the last five years or so. These centers collect system
operation data, prepare daily generation schedules, coordinate emergency power
exchange, and provide special and regular monthly reports on the performance
of the regional grid. At the present time, only the Southern Regional Load
Dispatch Center is equipped for fully integrated regional operations. Equip-
ment for the other regions should shortly be in place so that all the regions
are expected to have fully integrated operations by the early 1980s.
46.       The REBs constitute the leading edge of institutional change
needed to integrate the operation of India's power systems. Their future
evolution will be critical to the effort to improve the efficiency of the
power sector through the realization of economies of scale.



- 10 -
I. CONSUMPTION
1.   Past Patterns of Demand
47.       Consumption of electricity has grown rapidly in relation to net
domestic product. Between 1960/61 and 1975/76, the annual average growth
rate of the former was 10.2%, while that of the latter was 3.4% (Annex I.1.1).
In most countries electricity consumption increases faster than the economy
as a whole and in the early stages of development, when all forms of commer-
cial energy are tending to replace non-commercial sources, this difference
in rates may be large. Nonetheless, India stands out for the exceptional
rate at which reliance on electricity has increased.
48.       Since the early 1960s, the major cycles in the economy and elec-
tricity consumption have gone hand in hand (graph I). Roughly speaking,
the economy was performing best at the very beginning, at the middle and
towards the end of the period 1960/61-1975/76, with troughs during the poor
monsoon years of 1965 and 1966 and again during the commodity crisis in
1973 and 1974. Electricity consumption followed the same broad pattern,
but differed in detail. The explanation of these differences lie in the
performance of individual sectors of the economy.
49.       The structure of the economy has changed over this period, with a
marked shift to industry in the 1960s and then a period of relatively rapid
agricultural growth in the 1970s, particularly in the last three years.
Between 1960/61 and 1968/69, agriculture grew at an average annual rate of
only 1%, compared with industry at 5.4%; between 1968/69 and 1975/76, the
corresponding rates were 2.8% and 3.7% 1/ (Annex I.l.1). Industry's growth
has of course been far more steady than agriculture's (graph II), and has
risen from accounting for about one-fifth of net domestic product to its
present position, where it provides about one-quarter of value added. 2/
50.       The shift in the pattern of electricity consumption has been in
the opposite direction. Agricultural demand accounted for only 5% at the
beginning of the period, but now constitutes 13%; industrial demand has
fallen from 78% to 65%. The respective growth rates of agricultural and
industrial consumption over this period average 17% and 10% (Annex I.1.1.
and 1.1.2). In both these dominant sectors (and in the residual tertiary
subsectors) power use intensified. While electricity input per unit of value-
added (measured in 1960/61 prices) increased in agriculture from roughly 12
1/   We use 1968/69 as the dividing year because in subsequent years the
relationship between value added and electricity consumption changed
markedly as power shortages became a feature of life.
2/   Industry throughout this review refers to both manufacturing and mining.
"Services", the "residual" or "other" sector are terms used inter-
changably to cover all other sectors of the economy (or sources of
electricity consumption) apart from agriculture.



- 11 -
GWh/Rs billion to 90 GWh/Rs billion, the increase in industry was from 470
GWh/Rs billion to 840 GWh/Rs billion: agricultural use of electricity inten-
sified far more rapidly than industry, but from a much lower level, so that
industry is still clearly - and not surprisingly - the electricity sector's
most important customer (Annex I.1.3).
51.        It is instructive to see how much of the increase in electricity
consumption can be ascribed to increases in value-added alone, to changes in
the co-efficient relating electricity use to value-added and to the combined
effect of these two factors. Annex 1.1.4 shows this for the 1960/61-1975/76
period and for three five year sub-periods, by sector and for the whole
economy 1/. Certain observations follow. Firstly, the contribution of indus-
try to electricity consumption growth has fallen from about three-quarters of
the total change to less than half between the two periods 1960/61-1965/66
and 1970/71-1975/76; the contribution of agriculture has tripled from 8% to
24% between the same two periods. This change in demand from agriculture is
heavily dominated by the change in the electricity coefficient. The rela-
tively slow growth of the sector compared with its rapid increase in power
use is hardly surprising considering the rapid rate at which bullock and
other traditional forms of energy have been superceded by electricity. In-
deed, across all sectors the change in the electricity coefficient has been
the single most important factor in electricity consumption growth; about half
of this increase has been in industry alone. This reflects a combination of
such factors as changes in efficiency in particular industries, substitutions
for other forms of energy by electricity, and changes in the composition of
products manufactured.
1/   Annex I.1.4 is most easily explained by an algebraic formula.  If we
use E to stand for electricity consumption, V for value-added and K
for electricity consumption per unit of value-added, then it is true
at any time that E=KV. If we use the subscript 1 for the beginning
and 2 for the end of a period, if follows that:
(E2 -E1 )      2 -v ) K1 + (K2 -K1) VI + (K2 -K1) (V  -v )
Change due to
Change due to       Change due to             change in elec-
Total      change in value-   change in elec-            tricity co-
or   Change    added alone           tricity coefficient    coefficient
applied to the
value added
change
As the text makes clear, this formulation reflects changes due to factors
other than those of a technological kind. This equation should not be
confused with an apparently similar formulation that might be derived
for a single industry where E might once again stand for electricity
consumption, V for physical output and K for consumption per unit of
physical output. The algebra would look the same, but such a relation-
ship would be governed entirely by technological considerations.



- 12 -
52.       The geographic pattern of electricity demand has changed since the
1960s. Electricity statitics are readily available on the five regions and
we have compiled comparable value-added statistics 1/ to provide the back-
ground for a discussion of the differences among the regions (Annex I.1.5-
1.1.9). These data, for 1975/76, are summarized in Annex 1.1.10. The follow-
ing conclusions can be drawn. Firstly, the Western Region is the largest
consumer of electricity, followed by the Southern and the Northern Regions,
with the Eastern Region trailing somewhat and the North Eastern Region clearly
smaller by a different order of magnitude. (To avoid repeating this last
point in every context, the North Eastern Region is excluded from the sub-
sequent discussion). This does not reflect weight in net domestic product
as much as the concentration of one-third of Indian industry in the Western
Region; only one-fifth remains in the Eastern Region, somewhat less than is
now in the South. Secondly, in agriculture, over half of production and
almost three-quarters of electricity consumption is concentrated in the
Northern and Southern Regions. Of the two, the Northern accounts for a hair's
breadth more output, but substantially more electricity use, reflecting the
higher incidence of electrified pumpsets in the North than in the South.
53.       This was not always the order of things (Annex I.1.11).  In 1960/61,
the Eastern Region was more prominent as a user of electricity (it ranked
second as opposed to fourth now) and in terms of its contribution to net
domestic product (even then it ranked fourth, but closer to the other major
regions). In the intervening years, fully one-third of the increase in
electricity consumption was in the Western Region, where one-half of that
increase (one-sixth of the total) can be ascribed to the increase in the
intensity of electricity use. Only 16% of the increase originated in the
Eastern Region -- a very low share of growth. At the same time these has
been a comparable shift in the distribution of generating capacity.
54.       The geographic distribution of electricity consumption has also
shifted between rural and urban areas. The more rapid than average growth
of agricultural consumption has already been noted. There is also the
evidence of village and pumpset electrification. Between 1951 and 1975/76
the number of villages electrified increased from 3,060 to 185,810; this is
roughly an 18.7% increase in electrified villages each year. From 1960/61
to 1977/78 the number of electrified pumpsets grew from 200,000 to 3.2 mil-
lion -- roughly a 20% annual growth rate. While the general phenomenon of
rural electrification is readily apparent, it is not widely recognized that
a significant part of this has affected rural industry. The census data
for 1960 and 1970 show that the proportion of rural establishments using
electricity throughout India increased from 1.2% to 5.4% over this period,
compared with an increase from 14.1% to 18.9% among urban establishments
(Annex I.1.12).
2.   The Incidence and Impact of Shortages
55.       Shortages of electricity have intermittently affected the majority
of States in India for some time. As far back as 1962 shortages were
1/   See the RBI Bulletin of April 1978 and the footnotes to tables.



- 13 -
recognized as an undesirable aspect of the power supply situation. The Energy
Survey of India Committee, which reported in that year, discussed at some
length the manner in which shortages were managed and the types of measures
that might be taken to overcome them. While shortages -- and unreliability --
were sporadic problems in the 1960s, by 1970 the situation had grown more
serious. A chronic shortage of capacity had appeared in a number of States
and the problem of electricity shortages had taken on a national dimension.
This was the result not so much of any sudden surge in demand as a shortfall
in new capacity during the latter half of the Fourth Plan and the beginning
of the Fifth. Subsequently the investment program did not catch up.
56.       To monitor the severity of shortages, data on their incidence has
been gathered in the last few years at the all-India level. These data record
the extent of shortages in three ways: (i) in data summarizing notified per-
centage restrictions on energy and power consumption in different States;
(ii) in statements that compare "requirement" and "availability" of power and
energy; and (iii) in data on unscheduled load-shedding. These three measures
may still understate the full severity of shortages since percentage restric-
tions on consumption and unscheduled load-shedding have been preceded in most
states by administrative measures aimed at spreading the load over the day
and the week. These measures have included scheduled tripping of particular
feeders, rostering of consumers during the day, staggering of work weeks in
industry and cutting back the voltage and frequency of supply at time of sys-
tem peak. Such measures vary among States and over time and are intrinsi-
cally difficult to quantify and compare. 1/
57.       Load-spreading administrative arrangements affect the power require-
ments on the system more than the energy requirement. Therefore, it is more
useful to concentrate on percentage energy restrictions which present a more
representative picture of the incidence of shortages. Annex 1.2.1 summarizes
monthly data on energy restrictions in 1977/78.
1/   Indeed, it is difficult to say precisely what the available statistics
on shortages mean. They should represent the difference between the
supply (availability) and demand (requirement) curves of electricity at
the prevailing electricity tariff. One must take it that the demand
curve represents what demand would have been had there been no shortages
in the period in question.
The measurement of shortages is fraught with problems. In the first
place, when restrictions are imposed on certain categories of consumers,
their level of consumption is held at some fraction of their consumption
during an earlier base period. The data in Annex 1.2.1 presents the raw
data on restrictions specified in this way. To estimate the extent of
shortage, the SEBs can take the shortfall in supply equal to these per-
centage restrictions and inflate it by a factor that reflects suppressed
growth in demand since the base period and the impact of unscheduled load
shedding. The figures in Annexes I.2.3 and 1.2.4 have been compiled by
such a method, but there is little to guarantee that the methodology is
uniform among States.



- 14 -
58.       The range of percentages given in this Annex refer to the percentage
of energy restriction on consumers in the major affected categories. In the
Northern Region, the most seriously affected States appear to be Haryana,
Uttar Pradesh and Punjab; at the other end of the spectrum, only Himachal
Pradesh suffered no notified energy restrictions during this period. In
the Western Region, only Gujarat appears to have been free from restrictions,
but Maharashtra and Madhya Pradesh -- which between them account for about a
quarter of India's value-added in industry -- were seriously affected.
Karnataka was the only State persistently faced with shortage in the Southern
Region. In the Eastern Region, notified restrictions throughout 1977/78 only
affected power demand in West Bengal, but the situation was nonetheless
serious because the Eastern Region was the most seriously affected by unsched-
uled load shedding amounting to 50% of the total load during 1977/78 and into
1978/79 (Annex I.2.2).
59.       As well as variation among States there is also variation seasonally
in the incidence of shortages. When capacity is short, there is cause in an
emergency to draw down hydro-electric reservoirs if this alleviates the short-
run situation, even if this means lowering the water to a level below that
for which the hydro-electric schemes were designed. Thus, in April, May and
the first half of June, the months at the beginning of the monsoon when the
reservoirs serving hydro-electric schemes are likely to be particularly low,
shortages are usually most difficult.
60.       These observations are supported with slightly different data in
Annex I.2.3. The regions most seriously affected are the Eastern and North
Eastern Regions, though all except the Western Region appear to have had
a 20% or more deficit in some months at least. Peak requirements come when
the agricultural pumping load is heaviest and is superimposed on the sub-
stantial industrial load in the winter months. In the South of India, the
peak demand period is usually November and December, while January to March
is the peak period in the West and North. Thus, there is some interregional
seasonal diversity around the all-India peak. This is usually in January,
a month when the deficit in supply also appears to be high.
61.       In recent years, the shortage situation was most serious in 1974/75
and 1977/78 (Annex 1.2.4). Throughout India the estimated deficit of energy
in 1974/75 was 14.1%; this fell in 1975/76 (to 10.3%) and again in 1976/77 (to
5.8%), but rose considerably to 15.5% in 1977/78. Partial data for 1978/79
suggest shortages in this most recent year may be less severe -- of the order
of 10% rather than 15%, though the situation may change toward the end of
the year.
62.       Though the effects of sustained shortages are hard to measure pre-
cisely, their impact is undoubtedly severe. Individual enterprises react to
shortages in different ways. Mild shortages of power and energy may not lead
to loss of production, since it may be possible to reschedule production or
reduce prime mover speeds and the use of ancillary units without losing much
output. To meet sustained shortages or chronic conditions of unreliable
supply, some enterprises find it worthwhile to install their own generating
plant. In any event, for most enterprises, sustained shortages of electricity
eventually force a cut-back in production.



- 15 -
63.       Captive generating plant is installed in some industries almost as
an inherent part of the process, sometimes to use waste products as fuel and
at other times to generate electricity in association with steam. Further-
more, it may be installed as insurance to protect vital equipment that would
be damaged in the event of even a minor power interruption. The official
statistics at the national level, which show at least 10% of electricity con-
sumed in industry throughout India is generated in captive plants, refer
mainly to the first two types of installation (Annex 1.1.13). These are both
registered and licensed. But there are a large number of generating sets,
usually much smaller, that are licensed but not registered and do not appear
in the national statistics. For example, in one eight-month period in 1978,
in Andhra Pradesh 18,400 KVA, or about 15.5 MW of stand-by diesel generating
sets were recorded by the SEB, all with capacity below 0.5 MW (Annex I.3.8).
This was thought to be representative of the rate of installation throughout
the last four or five years, and moreover Andhra Pradesh is a State with a
relatively good record of electricity supply from its Board. Such small
captive generating sets are inefficient and can generate electricity only at
a high cost relative to that bought from the grid, though this cost to the
industrialist is sometimes lowered indirectly by interest rate and installa-
tion subsidies. Nonetheless, it reflects a significant opportunity cost of
electricity on the one hand and a misallocation of investment resources --
from the viewpoint of the economy in the longer run -- on the other.
64.       At the aggregate level, there is evidence that industrial growth
is constrained by electricity supply. The rate of increase in industrial
electricity consumption is closely related to the rate of industrial growth:
before 1968/69 turning points of electricity and industry are roughly syn-
chronized, but after that -- when shortages became endemic -- industry
follows electricity with a lag of one year (graph III).
65.       Of course, changes in electricity supply are not the only cause
of the industrial cycle. In India agricultural incomes and production will
affect the demand for industrial goods and the supply of industrial raw
materials. Variations in agricultural performance will influence industrial
cycles, though the lags and the exact pattern of causality are complex.
Industrial enterprises sometimes overestimate the impact of electricity
shortages by failing to take into account what is sometimes a weak order
book position and demand failures, which have both contributed to past
industrial down-turns.
66.       There is also the problem of explaining why industry should lag
behind electricity supply by as much as a year, given that electricity use
is instantaneous. The explanation at the top of the industrial cycle may be
that industry cuts back on inessential uses first and reacts in the manner
outlined above when a shortage is mild (paragraph 62). A slow down in the
production of intermediate goods will not immediately affect other sectors
because inventories -- often kept prudently long -- can be run down before
production of final goods will be slowed. At the bottom of a cycle, the same
process running in reverse may explain the lag. There may also be a shift
during a full cycle in the composition of industrial production so that it



- 16 -
is less power-intensive than average during downswings, and at the transition
points -- the turning points in the cycle -- it may be that a lag between
electricity supply and industry develops.
67.       For the nine years 1960/61 - 1968/69, electricity consumption
increased at 3.6 times the rate of GDP growth; subsequently, from 1968/69 -
1976/77, consumption grew at only 2.1 times the GDP growth rate. Thus, one
of the major effects of shortages in the 1970s has been an adaptation of
consumption patterns so that incremental electricity consumption has been
more effectively used. This same pattern can be observed at the sectoral
level in the residual sector and to a more marked extent, in industry: there,
the elasticity was 2.2 for 1960/61 - 1968/69, and fell to 1.4 for 1968/69 -
1976/77. This shift may in part reflect a change in structure, but in part
it must be that less essential uses of electricity have been cut back (Annex
I.5.6).
68.       It is possible to make a very crude estimate of the impact of recent
electricity shortages on industry and GDP (Table 1.1). In the first place
it is reasonable to assume for this estimation exercise that all the energy
shortage falls on industry and there will be virtually no GDP lost on account
of power shortage in either the agricultural or residential service sectors:
restrictions are hard to enforce in both sectors and cuts in agricultural
supply at least are a last resort in the great majority of States. Then one
may argue that if industrial electricity supply were increased at a given
moment, the level of industrial activity (measured as value-added) would
increase as it has under shortages in the last few years. Thus, in 1974/75
the shortage of 14.1% for all consumption could be taken to be a shortage
of 21.4% for industry, since 66% of total electricity consumption was in
the industrial sector. Using the 1.4 elasticity from the 1968/69 - 1976/77
period, this would suggest there had been a 15.3% shortfall in industrial
activity on account of power shortages. While this would be unrealistically
high if shortages were a factor for one year only, it is quite plausible that
the impact would gradually have built up to this level in the preceding five
or six years. Thus, lost value-added in 1974/75 appeared to be about Rs 16.3
billion or about 2.6% of GDP. In the subsequent two years -- 1975/76 and
1976/77 -- lost value-added appears to have fallen to 2.0 and then 1.1% of
GDP and then risen to about 3% in 1977/78.



- 17 -
Table I.1: IMPACT OF RECENT POWER SHORTAGES ON INDUSTRY AND GDP
1974/75  1975/76  1976/77  1977/78
1.   Recorded percent of electricity
energy shortage                        14.1        10.3       5.8     15.5
2.   Percent of electricity consumption
by industry                            65.8       65.7      65.7      65.7
3.   Crude estimate of shortage faced by
industry (percentage)                  21.4       15.7       8.8      23.6
4.   Crude estimate of impact on industry
(percentage)                           15.3       11.2       6.3      16.9
5.   Crude estimate of impact on industry
(Rs billions)                          16.3       13.1       8.1      23.6
6.   Crude estimate of impact on GDP
(percentage)                            2.6        2.0       1.1       3.0
Notes: Row 1: Annex I.2.4. Row 2: Annex I.1.2 and estimates. Row 3:
Row 1 as a percentage of Row 2. Row 4: Row 3 divided by 1.379,
the 1968/69-1976/77 crude elasticity for industry in Annex I.5.6.
Row 5 and 6: Row 4 applied to GDP at factor cost figures from
the 1979 Economic Report of the World Bank on India.
69.       These estimates will overstate the impact of electricity shortages
to the extent that the percentage shortage may itself have been overestimated.
Against this consideration, the disruptive effect of shortages, especially
where they have been administered through unscheduled load shedding, may be
understated in these estimates. It must be emphasized that these are rough
and ready figures and that they should be taken as indicative of an order of
magnitude only. Nonetheless, they serve to dramatize the substantial cost of
power shortages. Even if, conservatively, only 1% of the GDP is lost, this
is equal to about Rs 8 billion (GDP was Rs 782 billion in 1977/78), or almost
5% of the Draft Plan program for power. It would therefore warrant an in-
crease of almost one half again in the investment program if that was neces-
sary to overcome comparable power shortages in the future. 1/ It would be
desirable to refine these estimates, both by further work on the incidence of
shortages -- in particular, the estimation of requirements -- and by cross-
checking their impact at the micro-economic, firm level through sample studies.
1/   Were the costs of shortages to remain at or near Rs 8 billion for the
next 30 years or more, the present value of these costs would be very
roughly Rs 80 billion (using a discount rate of 10%). This is over
half the proposed outlay in the Draft Plan. There would of course
be a resource constraint which might make such a course impractical;
or in other words general rather than partial analysis would be neces-
sary to justify any change in the investment program of this order of
magnitude.



- 18 -
3.   The Efficiency of Power Use
70.       Since electricity is particularly scarce in India, it is natural to
ask whether the available supply is being used efficiently. It is important
to know as much as possible about how much waste of electricity there is and
where. 1/ Are there times when it is too costly to use? Could more goods
and services be produced with a given supply of electricity if redistribution
among uses were encouraged? Would technological improvements in user sectors
aimed at economizing on electricity be worthwhile? Are there situations where
electricity should be substituted with another type of energy, or vice versa 2/?
71.       At the outset, it may be as well to observe that the direct evidence
needed to resolve the issues conclusively is not available. What is possible
in some instances is to show what are the more critical problems, and how
severe they are.
72.        Is there evidence that electricity is used when its economic cost
exceeds the benefits of its supply? The only evidence available on this score
is indirect. It is observed elsewhere in this review that electricity tariffs
understate the marginal cost of supplying electricity; consequently, one would
expect that, on occasion, consumers will derive a net benefit when using elec-
tricity supplied at prevailing tariffs that is smaller than the difference
between the cost and the tariff. This is likely to be true both where elec-
tricity is consumed domestically and personal benefits are less than costs
of supply and in productive uses of electricity where the marginal value of
output falls short of the costs of electricity.
73.       In India, the level of electricity consumption relative to the level
of economic activity appears high by international standards (Annex I.3.1). 3/
Almost, exactly 1 KWh/US$ of GNP was produced in India in 1975. In the Sub-
continent, this compared with 0.9 KWh/US$ in Pakistan and only 0.2 KWh/US$ in
Bangladesh. Some developing countries--for example, Egypt--may have comparable
levels of electricity use, but in general India is high by developing country
standards and falls in the range of developed countries.
1/   We do not have in mind waste in the sense that the electricity goes
unused, but rather waste in the sense of misapplication: electricity
being used where other energy forms might be cheaper, machines being
run at uneconomic rates and so forth.
2/   These questions are an informal statement of the partial conditions
for efficiency: (i) the marginal product equals the marginal costs;
(ii) the marginal product is equal in all uses; (iii) the marginal cost
of increasing efficiency -- changing technology -- equals the marginal
value of electricity saved; and (iv) the marginal cost of electricity
equals that of substitutes. Marginal product should be read as
marginal benefit when these conditions apply to final consumption of
electricity, as in some consumption of domestic or street lighting.
3/   Only production statistics as opposed to consumption statistics were
readily available for the sample of countries referred to in Annex I.3.1.



- 19 -
74.       The rate of growth of electricity consumption has been fast in
relation to GNP. Data are available for the period 1970-75 for a sample
of developed and developing countries (Annex I.3.2). Over this period,
electricity consumption grew at about 2.7 times the rate of GNP in India. 1/
(This elasticity was of course higher in earlier periods before shortages of
power became so widespread.) Among the developed countries, only Germany and
Sweden have elasticities greater than 2 (2.1 and 2.2, respectively), and most
have elasticities quite close to 1. Among the poorer countries in the sample,
the elasticity may to some extent be a function of the stage of economic
development, but even so, India's elasticity is higher than that of every
single country except Afghanistan.
75.       The explanation of this apparently high level of consumption and
high rate of growth of consumption lies in a number of factors. No doubt
part of the difference is only apparent since official exchange rates must
be used to compare GNP in different countries, which it is well known under-
represent the purchasing power of, for example, the Indian rupee relative to
that of the U.S. dollar. 2/ This is, prima facie, of more concern in com-
paring developed and developing countries than similar developing countries.
Secondly, there has been in India a marked substitution of other forms of
energy by electricity. This has been a matter of conscious policy in agri-
culture at least, so that part of the explanation may be that electricity
represents a high and growing share of total energy consumption. Thirdly,
India's pattern of industrialization in the last several years may have been
one which called for a higher level of electricity consumption than was
typical among developing countries.
76.       One may ask generally whether more goods and services could have
been produced with a given supply of electricity if redistribution between
uses were encouraged through marginal cost based tariffs or other reallocative
measures. As was noted in an earlier section, the industrial sector uses
two-thirds of all available electricity and the cost of electricity represents
between 6 and 8% of value-added in the industrial sector, compared with about
1% throughout the economy. Industry's predominance as a user of electricity
means the greatest scope for reducing power intensity may well be in and among
different industrial users (Annex 1.3.3).
77.       There are a handful of industries which are known to be particular-
ly power-intensive. Annex 1.3.4 summarizes data on electricity consumption
in relation to value-added and the value of output for seven such industries
for four recent years. The unit cost of electricity is roughly the same for
these industries as for industry as a whole, though there is some variation.
1/   This compares with 2.1 times the GDP growth rate for 1968/69 - 1976/77,
mentioned in paragraph 66. GNP rather than GDP is used here for the sake
of international comparability; for the same reason the period under
consideration is shorter.
2/   See, for example "International Comparisons of Real Product and Purchas-
ing Power", Kravis, Heston and Summers; 1978.



- 20 -
This will reflect particular arrangements between large manufacturers and
their supplying utilities, as well as differences in voltage of purchase and
individual load factors. In terms of value-added, fertilizers and cement are
the most power intensive sectors -- something close to ten times more power-
intensive than industry on average. 1/ Non-ferrous basic metals and chemicals
are also particularly power-intensive and of the other three industries in the
sample, castings and forgings of iron and steel is more power-intensive than
either synthetic fibre production or the manufacture of iron and steel metals.
78.        Some of the more power-intensive industries have grown particularly
rapidly (Annex I.3.5). Production of aluminum has averaged 16% annual
growth between 1960/61 and 1976/77, almost four times faster than the indus-
trial sector as a whole. Power consumption in aluminum manufacture has risen
by roughly 15% a year during this period, compared with 9% for industry as
a whole. Fertilizers should also be singled out as a very power-intensive
industry, where production has grown by 19% annually over this 16-year period
and electricity consumption by close to 15% each year. Thus, while there
has been a decline in electricity use per unit of production in both aluminum
and fertilizers, their rates of growth have been high enough to contribute
significantly to the overall increase in electricity intensity in industry.
The consumption of electricity in chemicals has also risen rapidly, but
statistics are not available on the growth of production over this period.
Cotton textiles also warrant a mention since growth has been rather slow --
1.4% annually in terms of final production -- but electricity consumption has
risen by almost 6% per annum. For example, over this period the textiles
industry has changed, with more firms devoted to producing synthetics and
less to coarser counts of cloth. Many of the older mills were designed to
use steam as a prime mover and many have either changed to using electricity
or closed down. Factors such as these may have accounted for the observed
trend.
79.       The pattern of past industrial growth has been determined partly by
the physical planning of the Government in successive Plans (particularly in
heavy industry -- the "core" sector) and partly by the reactions of individual
private entrepreneurs to market opportunities and the prevailing price regime.
A stronger recognition of the real economic cost of scarce inputs such as
electricity has been one of the factors leading to a shift in strategy in the
1978-83 Draft Plan: it "is designed to achieve, as one of its objectives, a
restraint on further increase in the intensity of energy consumption in
industry" (Page 162 of the Draft Plan). If electricity tariffs were raised
to more closely reflect marginal costs, the effect on the public sector might
be minimal since major production decisions are governed by many factors among
which cost considerations are but one. The effect on the private sector,
however, while modest in the short run, might in the medium term affect the
pattern of industrial development for the better.
1/   Value added is, of course, measured at domestic prices here.  For fertil-
izer, more than other industries perhaps, international prices are
different.



- 21 -
80.       That there are major differences in the productivity of electricity
in different sectors can also be illustrated with the Planning Commission
input/output model 1/. Table 1 of Annex I.3.6 shows the electricity input
per Rs 100 of value-added (column 8). These figures must be interpreted
cautiously because the coefficients of the input/output model were derived
from data relating to the mid-1960s, albeit modified and updated to reflect
anticipated input/output relationships for the period 1974/1979, expressed at
1971/72 producer prices during the preparation of the Fifth Plan. Thus the
relative prices in the model all predate the energy crisis. However, the
basic point that certain manufacturing industries such as engineering goods
(machine tools, motor vehicles, locomotives and rolling stock) and cotton
textiles use far less power than others such as fertilizers, inorganic heavy
chemicals and paper is still valid. From the coefficients in column 8 of
Table 1, Annex 1.3.6 (100 x 28.21 - 7.38) it is apparent that Rs 100 of
fertilizer production makes use of the same quantity of electricity as Rs 380
of cotton textile production. If the strict constraints of the input/output
model were to be observed and textiles production increased one would expect
the excess textiles to be exported and the deficit in fertilizer production
to be made up with increased imports: the net gain to the economy would then
be Rs 280 of additional value-added for each Rs 100 of fertilizer production
cutback.
81.       Further clues are also available through international comparisons,
particularly of the manufacturing sector in India and other countries. The
object of examining the composition of value-added in the manufacturing sector
alongside figures reflecting the intensity of electricity use in these sub-
sectors is to determine to what extent the intensity of power use in Indian
industry is the result of inefficiency within subsectors, or the pursuit of
an industrial strategy that emphasized subsectors that were intrinsically
and unduly electricity-intensive.
82.       Before examining the data, however, there are a number of caveats
that should be noted. Firstly, data from the United Nations on electricity
consumption is available only from 1968 onwards, while for India, it has only
been possible to collect comparable electricity consumption data up to 1966.
This has been adjusted somewhat roughly to reflect price changes in India
in the two subsequent years, and the international comparisons have been made
for 1968. Secondly, data both for India and other countries cover only the
Census sector; that is, small units have not been covered and the extent of
coverage will vary among countries. So may the treatment of captive genera-
tion: since this accounts for at least 10% of electricity use in India, this
is not a negligible factor (Annexes 1.1.13 and I.3.8). Thirdly, the conver-
sions at official exchange rates used here are quite unlikely to reflect real
l/   The categorization of manufacturing concerns in the input/output
model is not ideally suited to the purpose at hand. Nevertheless
this approach is interesting because it allows one in principle to
see throughout the economy what the differences in electricity pro-
ductivity are.



- 22 -
relationships between values of units of account, but this is a general
problem for international comparisons. 1/
83.        The data from the international comparison are analyzed in Annex
I.3.7. The Chenery-Taylor classification of manufacturing is used. 2/ This
annex presents India's composition of value-added in manufacturing and com-
pares it with other countries in the first three columns, and presents India's
electricity consumption per unit of value-added and compares that with other
countries in the second set of three columns. Where an "S" appears in the
fifth column, this indicates a judgment that the importance of this power-
intensive sector (or insignificance of this power-sparse sector) is evidence
of structural composition of Indian industry contributing to overall power-
intensity; where an "S" appears, this reflects an assessment that this in-
dustry has been de-emphasized and is power-intensive or vice versa; and an
"I" reflects a judgment that the industry in question is power-intensive by
international standards. The basis for these judgments is more precisely
spelt out in the footnote to the annex.
84.        Thus, for example, the paper products industry is clearly electricity
intensive -- 11.5 KWh/US$ of value added in India -- and is in fact 64% more
intensive than the average in the sample of countries available. It has, how-
ever, a relatively modest position in India's manufacturing sector, accounting
for only 2.1% of value-added, as opposed to about 3% on average in the sample
countries (S). On the other hand, the basic metals industry, while not par-
ticularly power-intensive by international standards is considerably more
power-intensive than average for Indian industry. At the same time, it is
relatively very prominant -- accounting for 12% of value-added in manufac-
turing, about twice what is typical in the sample (S).
85.        Eight of the thirteen subsectors of manufacturing identified here
are either prominant and power-intensive or relatively insignificant and power
"scarce"; against this only three are clearly prominant to a degree that one
would expect under a free market system and more efficient price regime.
There are therefore grounds to believe that India's choice of industries,
i.e., strategy of industrialization, has contributed towards the overall
1/   A fundamental difficulty with the type of inference it is proposed to
make here is that the efficiency or inefficiency of a particular pattern
of industrial production depends on the relative availability of basic
factors of production -- land, labor, capital and other national
resources -- and these of course vary from country to country. This
difficulty is perhaps less serious when discussing power in India
than it might be in general because the power sector is a capital-
intensive sector and India is a capital-scarce economy, so that, were
relative endowments of factors of production taken into account, there
is a fair chance that the inferences we wish to make regarding the over-
intensity of power use would be reinforced.
2/   This classification is explained in Hollis Chenery and Lance Taylor,
"Development Patterns among Countries and over time," in Review of
Economics and Statistics, November, 1968, Vol. I, No. 4, pp. 391-416.



- 23 -
power-intensity of the industrial sector. At the same time, eight out of
the thirteen sub-sectors considered here appear to be particularly power-
intensive by international standards, so the efficiency with which power is
used within sub-sectors has also contributed to overall power-intensity.
86.       To conclude this subsection, India's economy, particularly its
industry, seems to use greater quantities of electricity than other countries.
Certain power-intensive industries have grown particularly fast, and others
have shown a marked increase in their power-intensity over the past two
decades. There is probably scope to reduce overall intensity by increasing
tariffs. As long as power continues to be a binding constraint on overall
industrial growth, such increases would not lead to reduced production in the
short run in the majority of industries. (Some -- a very few -- might warrant
special treatment, with lump sum countervailing subsidies, if their operations
were efficient but the financial burden of their sunk costs and the increased
tariff would together be too great to meet from revenues). Indeed, improving
the allocation of power through the tariff mechanism should in fact spur
industrial production since it should improve the allocation of power. The
available international evidence supports the view that there is scope for
greater efficiency.
4.   Tariffs
87.       Retail electricity tariffs in most States have evolved in a somewhat
haphazard manner over the past 20 years as the SEBs themselves have developed.
The guiding principles were usually financial and, for want of a better word,
"moral." It was usually the intention of policy makers that the level of
tariffs be such as to meet certain financial criteria and the structure should
in some sense be fair, and not penalize certain groups arbitrarily. (The
latter argument is still used to justify low agricultural tariffs since it is
said that the farmer should not suffer for the fortuitous circumstance that
he is remote and costly to service.) But despite these guiding principles,
marginal changes have been introduced from time to time on an ad hoc basis:
sometimes old tariffs may have been retained when a licensee was taken over;
sometimes a declining block tariff was introduced to promote electricity
consumption; on other occasions, special tariffs may have been negotiated
to encourage industry to locate in the State in question; and it must often
have been the case that anomalies crept into tariff structures when it was
necessary to raise tariffs for financial reasons while minimizing the social
and political repercussions. The cumulative effect of such forces had by
about 1970 created a very complex picture of tariffs throughout India.
88.       Annexes I.4.1 to 1.4.18 summarize the structure of electricity
tariffs found in  various States in 1972 and 1976.  Most electricity tariffs
for low tension industrial 1/ and agricultural 2/ consumers in both 1972 and
1/   Exceptions are found in the states of Assam, Gujarat, Himachal Pradesh,
and Kerala, where there are decreasing block rates for energy consumption.
2/   In Himachal Pradesh, there was a decreasing block energy charge in both
1972 and 1976.



- 24 -
1976 were made up of a flat energy charge per KWh consumed, plus a demand or
minimum charge per HP or KW of connected or contracted load. Tariffs for
high tension industrial consumers typically consisted of a decreasing block
energy charge plus a demand charge per KVA or KW. Electricity tariffs for
domestic and commercial consumers were roughly split between flat energy
charges and decreasing block energy charges. Furthermore, there was usually
a monthly minimum charge; but, this charge was not related to demand, rather
to overheads of one kind and another. There was little change in this basic
pattern of domestic and commercial tariffs between 1972 and 1976.
89.       Some simplification of the tariff structure has occurred in a
number of States over this period. Firstly, in Andhra Pradesh, Assam, Haryana,
Kerala, Maharashtra, Punjab, Rajasthan, and Tamil Nadu, the number of declin-
ing blocks in the energy charges for domestic, commercial or high tension
industrial consumers have been reduced and in one or two instances replaced by
a flat rate. Thus, the incentive to consume large quantities of electricity
at successively lower block rates has been reduced. This change is appropriate
given the capacity and energy shortages which exist in many States. Secondly,
the different energy charges for electricity supplied by thermal plants, as
opposed to hydro plants, which existed in Orissa, Rajasthan and Tamil Nadu in
1972, were removed by 1976. Thus, the trend of tariffs to grow more complex
appears to some extent to have been reversed.
90.       The figures presented in Annexes I.4.1 to 1.4.18 indicate that
energy charges are typically lowest for agricultural consumers. Since the
costs of supplying electricity are likely to be high in rural, agricultural
areas, this provides but one indication that tariffs do not at the moment
correspond even loosely to the marginal cost principle. However, there may
be valid social reasons for having tariffs below costs, and in some States
many of the villages are electrified under the Minimum Needs Program, which
represents an attempt to provide service to very backward, underdeveloped
regions.
91.       With respect to average tariffs for different types of consumers,
the statistics presented in Annex I.4.19 indicate that they are lowest for
agricultural consumers and next lowest for large industrial cQnsumers. Con-
versely, average tariffs are highest for commercial and domestic consumers.
92.       Electricity prices have changed relative to those of other types
of energy and to the general price level (Annexes I.4.20). Relative to the
general price level, as measured by the wholesale price index for all com-
modities (WPI), the tariff level of electricity has fallen slightly in the
last 17 years: the shift is of the order of 23% or 1.3% per annum. In the
1960s, the shift was more marked as electricity prices fell by about 2.2%
annually. Coal prices increased very slowly within the WPI in the 1960s but
more rapidly thereafter; since 1960 their annual rate of increase has been
1-2% higher than that of electricity prices. Oil fell in price against the
WPI and other forms of commercial energy until 1970/71, but subsequent
increases have been much greater than those in any other sector as a result



- 25 -
of the change in international prices. Over the period as a whole, elec-
tricity has become cheaper than other types of commercial energy. 1/
93.       Tariffs and Incremental Costs.  The argument in favor of electricity
tariffs reflecting long run marginal costs of supply is based on a general
proposition about the way consumers of any product or service determine the
level of their consumption. Every consumer chooses to consume more of a
product until the benefit of additional consumption falls below the price he
pays; this establishes his personal optimum. This choice will also be optimal
from the viewpoint of the economy as a whole if, among other conditions, the
price he pays reflects the cost of supplying the product. Applying the
argument to the power sector, a tariff which is close to long-run marginal
costs is likely to discourage waste and encourage the efficient use of elec-
tricity by the many individual consumers supplied by utilities. The tariff
in this context is seen as a signal to the consumer, and to facilitate "read-
ing the signal" the structure of tariffs should be kept fairly simple.
94.       India has many individual consumers making decisions independently
about electricity use. In 1977 there were 24 million consumers: about 1
million industrial (16,000 high tension), 3 million agricultural, 3.5 million
commercial, 16 million domestic and about 0.5 million in other consumer cate-
gories. What is not known is how responsive consumers in each of these
categories are to changes in power tariffs. In most industries, the level of
electricity consumption is largely settled as part of an investment decision
when electricity tariff levels can affect the choice of product to be manu-
factured and the technology to be adopted. Subsequently, plant may be modi-
fied in response to tariffs -- power factor correction equipment may be
installed, for example -- but the level of consumption is by and large deter-
mined. Subsequently, the structure of tariffs -- when, for example, there
are seasonal or daily changes in tariff level -- can affect the choice of
time when an enterprise chooses to consume power, but, given how small an
element in costs electricity usually is, the overall level of consumption
is unlikely to be affected greatly by changes in tariff levels. The same
constraint -- of prior commitment at the time of investment -- affects all
consumers of electricity to a greater or a lesser degree so that in the short
run changes in tariff levels are unlikely to affect demand greatly. But in
the long run, over a period of years, the pattern of investment and conse-
quently the growth of power demand will probably be responsive to the level
of electricity tariff.
95.       In practice a number of other factors play a part in determining
actual tariff policy. Apart from being a signal to consumers, electricity
tariffs are linked to SEB revenues, and therefore, financial considerations
1/   Of course, cost decreases relative to the average price level are to
be expected as technological advances improve the efficiency of power
systems. These may be offset, most obviously in hydro-electric gen-
eration, by the increasing difficulty of exploiting limited natural
resources. In any case, tariffs have not been based on -- and have
not reflected -- economic costs.



- 26 -
must play a part in determining the tariff levels. Tariff policy also
reflects conscious policies to subsidize certain consumer categories -- such
as agricultural consumers -- for a variety of reasons: for example, in the
case of agriculture, that the farmer should not be 'penalized' for being
expensive to supply, and that cheap electricity should be one of the elements
in programs to develop remote or backward rural regions. Thus, long run
marginal costs are a reference point in considering tariff policy, and the
divergence between long-run marginal costs and actual tariffs is an indication
of the cost of subsidizing particular consumer groups.
96.       What are the level and structure of long-run marginal costs?  In
any power system there are two elements: a capacity cost that reflects the
cost of expanding the system to meet an extra KW of power demand; and an
operating cost, which is sometimes referred to as an energy cost since fuel
accounts for most of it, that reflects the cost of supplying an extra KWh of
energy. In India, all the States face some variation in demand during the
day, so that there is a definite peak of system load for one or two periods:
outside the system peak period(s) the cost of meeting an extra KW of demand is
nil, since the generation and system capacity must be there anyway to accom-
modate the peak; but a steady increase over the long run of an extra KW of
demand during the peak period can only be met by the system incurring the
long-run marginal cost of expanding the generation, transmission and distri-
bution capacity. Long-run marginal costs also vary among consumers: it is
more costly than average to build networks to supply remote consumers and
losses tend to be higher so that more capacity is used and energy generated
to supply a KW or KWh to a distant customer. Conversely, a large consumer
taking power at high tension close to a power station is relatively cheap
to supply with extra electricity.
97.       Long run marginal costs, like the existing structure of tariffs,
vary among States. In a number of States hydro-electric schemes are used
for peaking capacity. Since costs vary among schemes, it follows that the
long run marginal cost for capacity will differ among States. For this
reason, long run marginal capacity costs may be higher than average in the
North and North Eastern States where hydro-electric development will be a
major component of generation costs. Similarly marginal energy costs typic-
ally depend on coal costs and the efficiency of marginal stations, and this
too will be different in different States. These differences will tend to
diminish as regional systems integrate, since the marginal costs of the
cheapest State system then become the marginal costs of the Region as a whole.
98.       The 1975 World Bank study of electricity tariffs in Andhra Pradesh
gave an indication of the long-run marginal costs of electricity supply in
that State. The HT costs were 12 paise/KWh and 38 Rs/KW per month at time of
system peak and the LT costs were correspondingly higher at 14 paise/KWh and
82 Rs/KW per month during the system peak. At that time, actual tariffs
ranged from 60% below long run marginal costs in the case of agricultural
consumers, to 20% in the case of dometic bulk supply consumers. Since then,
a number of other state studies have been undertaken, which have yet to be
finalized. Their preliminary results are similar to those of the Andhra
Pradesh study in that the long-run marginal costs were almost without
exception higher than present tariffs.



- 27 -
99.       There is indeed, at the national level, reason to think long-run
marginal costs are generally greater than existing tariffs. It is possible
to show algebraically that the average revenue realized from the capacity
component of tariffs that exactly reflected long-run marginal costs would
be greater than the annuitized value of the investment program divided by
the increase in consumption during the program period (Annex 1.4.21). Based
on the forecasts of the Draft Plan, this is roughly 28 paise/KWh. In addi-
tion, the energy component of long run marginal cost based tariffs should
yield on average more than 12 paise/KWh. Thus a lower limit for the average
revenue realized by long-run marginal-cost-based tariffs applied throughout
India would be about 40 paise/KWh. The average revenue among public utili-
ties in 1976/77 was only 24.5 paise/KWh, and although it has risen since
then, it is still below 40 paise/KWh.
100.      To bring actual tariffs closer to long-run marginal costs, marginal
costs can be reduced through improvements in efficiency and tariffs can be
increased. The rate at which costs can be brought down is contrained by the
rate at which economies of scale in the investment program can be realized
and that at which more efficient operational practices can be introduced.
Tariffs will have to increase in real terms, that is, faster than the rate
of inflation, if they are to bear a closer relationship to costs.
101.      To summarize, electricity tariffs are set by the SEBs independent
of the Center or one another. There was in most States a tendency for
tariffs to grow more complex as ad hoc changes were introduced from time to
time. But between 1972 and 1976 there is evidence that this tendency was
reversed, and tariffs were for the most part gradually being simplified. The
average level of tariff has risen in nominal terms, but not as rapidly as
other energy prices or the general price level. In those States in which
studies have been made, tariffs appear low in relation to long-run marginal
costs, and at the national level, the average revenue realized by present
tariffs is below that which would be realized by tariffs that more nearly
reflected long-run marginal costs in each region or State. Tariffs should
reflect long-run marginal costs if they are to act as an incentive signal
to consumers to avoid waste and encourage the efficient use of electricity.
Given the rapid rate of increase in consumption in relation to the growth of
the economy as a whole and the pervasiveness of electricity shortage, this
argument for increasing tariffs appears particularly relevant.
5.   Demand Forecasts
102.      At the all-India level, forecasts of electricity requirement and
demand are made by the Planning Commission and the Annual Electric Power



- 28 -
Surveys (APS) convened by the Ministry of Energy. 1/ These are not inde-
pendent forecasts in as much as there is extensive discussion between the two
groups producing them, which has usually led to a reconciliation of results.
But there are different methodologies employed that can be broadly associated
with the Planning Commission, on the one hand, and the Central Electricity
Authority (CEA) -- in its capacity as secretariat for the APS -- on the other.
103.      The Planning Commission projects electricity demand as part of its
macro-economic analysis for all sectors of the economy. Industrial require-
ments are derived for a set of 'major' industries -- mostly large scale or
very electricity-intensive -- by applying consumption norms to production
targets. In the Draft Plan, consumption in the rest of the industrial
sector is assumed to be proportional to that in the major industries (60% of
that for major industries). Railway and irrigation requirements are also esti-
mated by using sectoral targets and norms of electricity use. Consumption
in other sectors -- domestic, commercial, public lighting, water works and
miscellaneous -- is based on trend growth rates or on regression analysis that
relates sector growth rates to electricity demand. Using the input-output
model, the Planning Commission is able to check the consistency of the
resultant macro-forecast with its expectations for the economy at large.
104.      By contrast, the APS begins with a detailed survey of industrial
establishments that demand 1 MW or more of electricity, to solicit their
views on how rapidly their requirements for power will increase. The methods
used to derive forecasts for other consumer categories are much the same as
those employed by the Planning Commission -- many of the coefficients relating
output to electricity consumption are identical -- but with two differences.
Regression analysis as opposed to trend analysis has not been used in the
past, and the exercise is conducted State-wise and then region-wise before
being aggregated to the national level. The views the APS forms about the
prospects for power in each State form the basis for the involvement of the
SEBs and State Governments in the demand forecasting exercise. Since fore-
casts underpin the State-wise investment programs and these in turn influence
the case for Central Plan assistance, there is a fundamental concern with
the APS position. The process of preparing the APS forecast provides
occasions when the States' views can be taken into account and a concensus
can be reached.
1/   Certain distinctions are important.  Following normal conventions,
"energy" is used to denote KWh and "power" to denote KW. "Requirements"
and "availabilities" are measured at the bus-bar:  This is the point at
which the APS usually discusses electricity forecasts. "Demand" and
"supply" of electricity are measured at the point of consumption;
they refer to the electricity wanted for use (or ready for use) after
transmission and distribution losses are subtracted from requirements
or availabilities. "Demand" and "supply" are the concepts used more
frequently in the Planning Commission and by us in the subsequent sub-
section dealing with regression analysis.



- 29 -
105.      Both the Planning Commission and APS rely heavily for forecasting
on the targets for other sectors -- major industries, agriculture (irrigation),
railway traction -- and then use electricity consumption norms to derive
electricity forecasts. Thus, they are both often characterized as end-use
forecasting methods. The major difference is that the Planning Commission's
analysis begins with macro-economic considerations and the APS' with complete-
ly disaggregated data. To assess the two forecasts that have been published
for the Draft Plan period, a third method is employed in this review, namely
regression analysis on the major economic sub-sectors -- industry, agriculture
and services. For industry and the residual sector, this sectoral regression
model relates electricity consumption to value-added and to time. Roughly
speaking it formalizes the proposition that consumption will grow faster if
value-added grows faster, but will grow anyway over time, principally because
of technological change. Consumption of electricity by the agricultural
sector is related to the pumpset electrification program, since agricultural
production (or value-added) is a poor indicator of electricity use.
106.      There are advantages and disadvantages associated with all three
methodologies. Forecasts based on the end-use methods, in the sectors where
end-use coefficients are applied, have the advantage that they are not
affected by uncertainties about the extent of shortages, past or present.
But the regression and trend elements of the APS and Planning Commission
approaches are affected, as is the sectoral regression model, firstly in
the estimation of the regression coefficients and secondly in the choice of
base period values. The Planning Commission approach has the virtue of
strong consistency with the overall Plan, but the disadvantage of not pro-
viding any clues to levels of consumption in individual States or in parti-
cular load centers. The APS, while providing disaggregated data, suffers from
its length of preparation and the considerable cost involved in organizing a
detailed survey of so many units throughout India. Furthermore, as discussed
below, it may be upwardly biased. The sectoral regression model has the
advantage of implicitly taking into account lags in the execution of projects
in other sectors since the regression coefficients are estimated on the past
performance of the economy, where the relationship between electricity con-
sumption and sectoral output was indeed affected by such lags. All three
approaches take sectoral shifts or structural change in the economy into
account, and all three make allowance in different ways for changes in tech-
nology in the consuming sectors.
107.      Past Forecasts.  How have past APS medium-term forecasts compared
with the level of demand that it was subsequently possible to meet? Annex
1.5.1 shows forecasts for all the earlier power surveys except the eighth,
which was not published. Forecasts exceed the demand met by between 20 and
80% among the earlier forecasts, and the divergence generally increases in the
later years, as might be expected. In the Ninth APS forecast, the divergence
in the third and most recent year is about 20%, roughly on a par with its
immediate predecessors. One reason for these divergences is that since the
beginning of the decade, it has not been possible to meet all the demand for
electricity, so the forecasts may have reflected unsuppressed demand more



- 30 -
faithfully than realized demand. Electricity demand forecasts based on the
end-use method are dependent on the achievement of investment and production
targets in other sectors: to the extent that lags occur for reasons uncon-
nected with electricity supply, unsuppressed electricity demand would in any
case fall below the forecasts. However, the APS forecasting methodology may
itself lead to an upward bias. This is so, since there is a strong incentive
for every reporting unit (individual factories and SEBs) to overstate demand
expectations in the hope that their real demands will still be met if the
investment program falls short of target. With shortages seriously affecting
consumers in recent years, it is impossible to judge the relative influence
of these two factors on the divergence between forecasts and demand met.
108.      The Present Forecasts.  The Tenth APS met in 1976 and 1977 to
produce medium-term electricity forecasts for 1982/83 and intervening years.
A report was published in 1977, but it did not constitute a consensus of
opinion of those represented and notes of dissent were attached by the
Planning Commission, the Ministry of Finance, and the Chairmen of the Western,
Eastern and Southern Regional Electricity Boards. Among the most critical,
the Planning Commission's note argued for lower forecasts, compatible with
the global forecasts for the economy that were then being built into the
Draft Plan, while the Western and Southern Regions argued for much higher
forecasts:  33% higher for the former, and 17% higher for the latter.  Sub-
sequently, the Draft Plan has been published and reviewed by the National
Development Council, and the Planning Commission with the assistance of the
CEA has undertaken an exercise to disaggregate the global Plan forecast to
regional and State level forecasts.
Table I.2: ENERGY AND PEAK LOAD (POWER) REQUIREMENTS (UTILITIES ONLY):
1982/83
Disaggregated
Planning Commission       Percentage
Region           Tenth APS Forecast            Forecast           Reductions
Energy    Power      Energy         Power    Energy  Power
(GWh)     (MW)       (GWh)
Southern           40,989    7,349      37,571         6,751       8.3    8.1
Northern           47,309    9,175      41,700         8,205      11.9   10.6
Western            49,151    8,439      43,624         7,481      11.2   11.4
Eastern            28,360    4,889      25,727         4,440       9.3    9.2
North Eastern       2,562       532      2,189           453      14.6   14.8
All India /a      168,392   30,390    150,811         27,330      10.4   10.1
/a   Including Andaman, Nicobar and Lakshadweep.
109.      As Table I.2 indicates, the disaggregated Planning Commission fore-
cast resulted in cuts to the APS forecasts of about 10% in all the regions.
The all-India figures from this exercise are almost exactly those of the Draft
Plan. The cuts were also disaggregated by State and by category of consumer



- 31 -
(but not by both) showing that the brunt of the reduction fell on industry,
for which, of course, the Draft Plan production targets were more modest than
before. Thus, the divergence between the disaggregated Planning Commission
forecast and the Regions' own forecasts are about 45% and 25% for the Western
and Southern Regions, respectively. It is important that these differences
should be reconciled and a consensus reached on future electricity demand
prospects as soon as possible.
110.      Regression Analysis.  This sub-section discusses in greater detail
some of the basic features of the sectoral regression model. This is not the
first or the most sophisticated attempts to forecast electricity demand using
regression techniques (Annex I.5.2). A more formal, algebraic statement of
the model is given in Annex 1.5.3, together with a discussion of why these
particular forms were preferred over other possibilities.
111.      In India, the effect of power shortages cannot be ignored.  Short-
ages affect forecasts based on regression analysis first when coefficients
are estimated and then in choosing values for the base period. The data here
span the 17-year period from 1960/61 to 1976/77 and, as can be seen below, the
relationships between electricity consumed and economic growth changed in the
second half of this period, when power shortages became endemic (Table 1.3).
Table 1.3: SECTORAL REGRESSION MODEL: SUMMARY OF REGRESSION RESULTS
Agricultural
Industrial Sector  Service Sector        Sector
Industrial           Service     Pumpsets
Time  Value-added  Time  Value-added  Electrified
1960/61-1976/77
C efficient               0.042      0.974    0.048    0.835          2.857
R  /a                     0.90       0.80     0.93      0.85         0.98
1960/61-1968/69
C efficient               0.067      0.974    0.065    0.835         2.894
R                         0.99       0.80     0.99      0.85         0.99
1968/69-1976/77
C efficient               0.014      0.974    0.038    0.835         3.184
R                         0.66       0.80     0.97      0.85         0.95
Source: Annex I.5.6
-2
/a   There are R  values for each coefficient in the industrial and service
sectors, because each coefficient is estimated in a separate regression
-- the value-added coefficients using cross-section analysis and the time
coefficients using time series analysis.



- 32 -
For example, considering the coefficients for the industrial sector, these
results suggest that electricity consumption increases at about 0.974 times
the rate industrial value-added grows, and, in addition, over the total period
1960/61-1976/77, there was a 4.2% average annual growth due to technological
change and other similar factors. The results for the two sub-periods show
that this residual growth was at first much higher at 6.7%, but that with the
advent of widespread chronic shortages, it adjusted to 1.4%.
112.      The same downturn phenomenon is observed in the service sector.
Agricultural demand, however, shows an upturn in relation to the number of
pumpsets electrified: this suggests that either new pumpsets are larger or
more marginal pumpsets are being electrified -- where for example the ground-
water level is falling -- or pumpsets are being used more intensively with the
gradual evolution of agricultural practices. While the rise might have been
higher in the absence of shortages, that there was any rise at all supports
the observation made elsewhere that agriculture has to some extent been
shielded from shortages of electricity.
113.      A case can be made for using the 1960/61-1968/69 coefficients for
forecasting, by arguing that they more nearly reflect the unrestrained rela-
tionship between the economy at large and the electricity demand. However,
this would mean abandoning the more recent observations. Should a forecast
into the 1980s be based solely on the evidence of the 1960s? Moreover, the
more recent data do reflect what is feasible (though not necessarily desir-
able) in terms of economizing on electricity use. Thus, the opposite, some-
what extreme case could be made for using the coefficients derived from the
observations of the second sub-period. The coefficients based on the full
period represent a pragmatic (though far from conceptually satisfactory)
compromise, and it is these that are used below for forecasting demand.
114.      The second way shortages complicate forecasting is in choosing the
base period values. The base year used here is 1977/78, for which total con-
sumption from the utilities was provisionally estimated as 68,963 Gwh; the
sectoral breakdown is given in Annex I.1.1. Also, there is an estimate of the
extent of shortages in this year -- 15.5% (Annex 1.2.2). Using the sectoral
distribution of (suppressed) demand in 1976/77 as a basis, and allocating 70%
of the impact of shortage to industry, 20% to services and 10% to agriculture,
an estimate of unsuppressed demand in 1977/78 is derived. This, together with
the sectoral growth rates of the Draft Plan, are summarized in Table 1.4.



- 33 -
Table I.4: ESTIMATES OF UNSUPPRESSED DEMAND FOR ELECTRICITY IN 1977/78
AND ANNUAL GROWTH RATES OF VALUE ADDED FROM THE PLAN
Agriculture   Industry       Services   Total NDP
Electricity Demand in
1977/78 (GWh)                    11,326       51,309        18,978       81,613
Historical Average Rate of                         4.12
Growth:  1961/62-1976/77 (%)       2.10        (4.03) /a      4.33         3.34
Forecast Average Rate of
Growth:  1977/78-1982/83 (%)       2.76         5.03          6.66         4.70
Forecast Average Rate of
Growth:  1982/83-1987/88 (%)       3.92         6.80          6.36         5.50
Increase in Growth Rates
1977/78-1982/83 over
1961/62-1976/77 (%)                  30           20            55           40
/a   4.12 for the secondary sector and 4.03 for mining.
For the sectoral model forecasts shown in Table I.5, the Plan value-added and
NDP rates are used, together with the Plan target of electrifying two million
agricultural pumpsets. To convert our forecast of demand into a requirements
forecast, the Planning Commission estimate of future transmission and distri-
bution losses of 18% of energy at the bus-bar is used (Table I.5). The
forecasts of the sectoral regression model fall between those of the Tenth
APS and the Draft Plan. They are about 4% above the Plan figures for 1982/83
and about 7% by 1987/88.



- 34 -
Table 1.5: FORECASTS OF ENERGY DEMAND AND REQUIREMENTS (UTILITIES ONLY):
1982/83 and 1987/88
Tenth      Draft
Sectoral Model                 APS        Plan
Agri-
Industry  culture   Services  Total
Demand
(GWh)
1977/78           51,309   11,326       18,978   81,613
1982/83           79,305   17,040       31,069  127,414
1987/88          132,573   25,641 /a  50,289  208,503        -
Requirements
(GWh)
1982/83           96,713   20,780       37,889  155,383  168,392  150,046 /b
1987/88          161,674   31,269       61,328  254,272  272,055  239,282 7U
Growth Rates
(%0)
1977/78-1982/83      9.1       8.5        10.4       9.3  10.9 /c       8.4 /c
1982/83-1987/88    10.8        8.5        10.1      10.4  10.1          9.8
/a   Assuming same growth rate as that between 1977/78 and 1982/83.
/b   Taken from the Draft Plan; the forecast of 1982/83 is close
(within 0.5%) to the disaggregated Planning Commission forecast,
but not exactly the same.
/c   Assuming losses in 1977/78 would have been about 20% of unsuppressed
demand.
115.      Four points should be made in concluding this discussion of fore-
casting. Firstly, forecasting is essentially uncertain and forecasts should
define a range around a central estimate within which it is agreed there is
a high probability unsuppressed demand will actually fall. In evaluating
the APS and Planning Commission forecasts, only central estimates have been
discussed, but for capacity planning purposes, a range of values would more
accurately reflect our extent of knowledge about the future. Secondly,
forecasts should be principally concerned with estimating demand more than
five years ahead. The Draft Plan includes a forecast ten years forward
and the APS does carry out a perspective forecast beyond the five-year
horizon, but the larger part of the discussion is focussed on the near future
in both documents. Generation projects in particular take a long time to
gestate and such large commitments of capital that initial decisions must
be made at least four to eight years before the project can be commissioned,



- 35 -
and generation projects typically have a life of at least 30 years. Fore-
casts should in future concentrate on the period, say, five to 15 years
ahead. Thirdly, the Draft Plan forecast does appear to be conservative.
The uncertainties surrounding the incidence of shortages at present and their
importance in the sectoral regression model does not permit any categorical
conclusions, but nonetheless do suggest that the central estimate of the
Plan may be conservative in relation to the other sectoral forecasts in the
Plan.
116.      Finally, there is a need to develop a single, generally acceptable
demand forecast (a single exercise that defines a single range of demand to
be expected) in the context of the Eleventh APS, which is now at an early
stage of preparation. A first step would be to reach a concensus on the
methodology to be employed for short-run forecasts. Is the end-use method
to be employed? If it is, could the costly and time-consuming survey be re-
placed by a sample analysis that would yield the same information more cheaply?
Can the incidence of lags in investment in relation to plans for the power-
using sectors (at the firm, the State or the national level) be analyzed and
methodicially taken into account? Over what period should trends, or regres-
sions, be studied -- the longest available period, the period of most recent
rapid growth, or some other period? Is it worth taking groundwater avail-
ability, cropping patterns and so forth into account, as well as the pumpset
electrification program in forecasting the requirements of the agricultural
sector? Should the State-level end-use forecasts be checked against sectoral
regression models based on State data? Can the measures of shortages cur-
rently available be standardized and improved? In the medium run -- 10 to
20 years ahead -- the choice lies between a methodology similar to the sector
regression model, which can reflect structural changes, and some trend or
modified trend method such as the Scheers' formula approach.l/ We would
argue in favor of a sectoral regression model as the basic analytical tool
for making longer run forecasts. The more basic point is that an acceptable
position needs to be reached on these many diverse issues before the computa-
tion of forecasts begins so that the subsequent discussion of computed fore-
casts between the CEA, the Planning Commission and the States rests on a
firmer basis that it has formerly.
II. INVESTMENT PLANNING AND RESOURCE ALLOCATION
1.   The Resources Devoted to Power Sector Development
117.      Almost all the assets of the power sector are publicly owned and
operated. Only 6% of capacity among power utilities was privately owned in
1/   This is a long-term forecasting method that projects electricity demand
as e, funQ.ion of population. It is characterized by a growth rate which
falls gradually over time, something which has been observed in the long
run in developed countries. However, using reasonable population fore-
casts for India, this method produces results almost indistinguishable
from those of the crude trend method.



- 36 -
1977, and it had been falling for some time. While registered captive capa-
city was a somewhat higher percentage of the total at that time -- about 10%
-- quite a significant proportion will in any case be in public sector enter-
prises in the basic industries of steel, fertilizers and chemicals. Therefore,
it is likely that close to 95% of fixed asset formation in the power sector
is publicly financed; this proportion is likely to rise.
118.      Delineating the responsibility for public investment in power is
a task made complex by the plethora of institutions in the sector. With the
creation of the NTPC and NHPC, Central investment in generation will in the
foreseeable future be channeled through these corporations; transmission,
for example for inter-State transmission links, will continue as the direct
responsibility of the Central Department of Power. At the State level, most
investment is carried out by the State Electricity Boards. The most important
exception in some states is investment in hydro-electric schemes which has
been retained in the State Departments of Irrigation and Power. Finally,
there are, in one or two States, local municipalities and small supply under-
takings other than the SEB, that make investments usually to extend the
distribution system in their domain.
119.      Almost all fixed asset formation in the power sector is financed
under the Plans. Prior to the Fifth Plan, outlays in all sectors were only
for net fixed asset formation (net investment), but in the Fifth and Draft
Plans, gross fixed asset formation (gross investment including depreciation)
is the relevant concept. In addition, the Plans for power include expenditure
on surveys and the investigation of power schemes which, though they are not
part of fixed asset formation, are an integral step in developing the invest-
ment program and are also of the same once-for-all nature as expenditures on
fixed assets.
120.      Plan outlays on power have risen fairly steadily from 12% of all
outlays in the First Plan to 23% in the Draft Plan (Annex II.1.1). This
percentage dipped in the Second Plan period and increased thereafter, accel-
erating quite sharply after the Fourth Plan. Parenthetically, it is worth
noting that power, as a category of Plan outlay, is relatively easy to define;
the only difficulty arises with respect to multi-purpose river projects, for
which some fairly arbitrary apportionment of outlays must be made.
121.      The bulk of Plan outlays on power occur at the State level.  Since
1974/75 over 85% of power expenditures have consistently been in the State
Plans, compared with between 1 and 2% in the Union Territories and the remain-
der of between 10 and 13% in the Central Plan (Annex II.1.2). In the last two
Plan periods, this represented about 5% of total resources from the Central
Plan compared with 30% of total State resources in the Fourth Plan and 35%
in the Fifth Plan (Annex II.1.3). While there are no statistics available for
allocations in the Draft Plan, it seems likely that this considerable burden
on the States will increase further. Firstly, the provision for power for
Center, States and Union Territories taken together is 4% more of the total
provision that in the Fifth Plan. Secondly, we know that certain sizable
individual States -- Andhra Pradesh, Maharashtra and Madhya Pradesh -- are
already spending over 40% of their Plans on power development.



- 37 -
122.      Plan outlays at the State level are of course funded in part by
transfers of Central assistance to the States, but this is not earmarked
for particular sectors and is fungible within the Plan for each government.
Budget surpluses on current account provide additional resources that may
be directly applied to the power investment program undertaken departmentally,
or lent along with Central assistance to the SEB. The Boards also have access
to market borrowing and internally generated resources. At the moment, the
one financial resource normally available to public utilities but denied to
the Boards is share capital, though under the 1978 financial amendments to the
Electricity Supply Act State governments may now convert debt into equity if
they wish.
123.      Some indication of the relative importance of these different sources
of capital can be gleaned from the General Statistical Review (see Sources
in the Annexes). Table 11.1 shows how important loans are in financing
the assets of the power sector, and underlines what a small contribution is
made by internally generated resources (reserves and surplus), other than
through depreciation.
Table II.l: THE AGGREGATED LONG-TERM LIABILITIES OF THE
STATE ELECTRICITY BOARDS, POWER DEPARTMENTS
AND THE KARNATAKA POWER CORPORATION ON
March 31, 1975
(Rs Millions)
Percentage
Absolute Amounts    Distribution
Loans                                             56,638                82
Reserves and Surplus - Depreciation                9,293                 13
- Other                     2,419                  3
Consumer Contributions                             1,127                 2
Total                                        69,477               100
124.      This point is perhaps more clearly made in the following table
relating to financial performance of utilities during the Fourth Plan period.



- 38 -
Table II.2:  ANNUAL AVERAGE INTERNALLY GENERATED RESOURCES IN THE
FOURTH PLAN PERIOD: 1969/70 - 1973/74
(Rs millions)
Public Sector   Utilities Total
1.   Internally Generated Resources         1,104               1,377
la.  - Surplus                                120                 304
lb.  - Depreciation                          984                1,073
2.   Gross Fixed Investment                4,331                4,774
2a.  - Net Fixed Investment                3,347                3,701
- Depreciation                          984                1,073
Memo Items
3.   Total Annual Revenue                   6,496                8,044
4.   Average Annual Plan Expenditure         5,862
Note:  Revenues, depreciation and surplus are estimated from Annex II.1.4.
Revenues reported here include revenue from sources other than
electricity sales; these constitute less than 10% of the total.
The public sector covers SEBs, Power Departments, the Karnataka
Power Corporation and municipalities. Net fixed asset formation
is estimated from Annex II.1.5 for the utilities total, and
directly from the General Reviews of Public Electricity Supply
Statistics for the public sector. Plan expenditures are deduced
from Annex II.1.6. Note that net fixed capital formation is taken
to be the net change in fixed generation, transmission and dis-
tribution assets and therefore must be a marginal understatement,
since fixed assets such as headquarters buildings are not included
in these categories.
In the public sector the surplus averaged less than 2% of total revenues and
less than 4% of net fixed investment.
125.      In comparing aggregated revenue and capital account figures for
public sector undertakings and figures of Plan expenditure some caution is in
order because: (i) conceptually there is some inconsistency since non-capital
account expenditures are included in the Plan figure, and there are capital
expenditures excluded from the Plan; and (ii) statistically there must be some
discrepancy, since, despite the conceptual difference, we would expect net
fixed asset formation and Plan expenditure to be much closer than the table
suggests. Since in the Fourth Plan, Plan expenditures encompassed only net
capital formation, the proper comparison to make is between the surplus in the
public sector and Plan expenditure. This suggests that only 2% of the Plan
expenditure on power was funded from internally generated resources. (On a
gross basis, adding depreciation to both the denominator and the numerator,
this increases to 16%).



- 39 -
126.      The Plan documents distinguish among four major categories of expen-
diture on power. These are generation, transmission and distribution, rural
electrification and a residual category. Since the First Plan, over 50% of
Plan expenditures have been on generation, and 20-30% on transmission and
distribution and the bulk of remaining resources has typically been devoted
to rural electrification ( Annex II.1.6).
127.      The pattern of expenditure in the power sector is somewhat differ-
ent from that provided for in the plans (Annex II.1.7). Expenditure on
transmission and distribution relative to that on generation has been less
than the provision. In the Fourth Plan, the transmission and distribution
allocation was equal to almost 60% of the generation allocation but expendi-
ture was 51%. Similarly, in the Fifth Plan, planned expenditure on trans-
mission and distribution was 60% of generation, whereas actual expenditure
was only 40%. Thus, there is some evidence that transmission and distribu-
tion receives a lower priority in implementation than at the planning stage.
128.      The Five-Year Plan process has never made allowance for the impact
of inflation in estimating the requirement for funds. The argument against
such a policy is that the Plan is an exercise intended to divide real resources
between different types of investment and it would be worthwhile to take
inflation into account only if relative price changes could be forecast. In
the case of the power sector, planning without inflation has serious conse-
quences because generation projects have long gestation periods. Funds are
locked into them early in a planning period, and if there is subsequent infla-
tion it makes sense to meet the increased requirements of the generation
projects which have begun and -- with limited funds available -- to cut back
on transmission, distribution and rural electrification investment which can
be fragmented more easily. The result is an unbalanced investment program.
129.      It is striking that actual expenditure has always exceeded planned
expenditure, 1/ while physical achievements have always fallen short of tar-
gets (Annex II.1.9). In the Fourth Plan, for example, actual expenditure on
generation was 24% higher than planned. By contrast, new capacity added was
only 50% of the original Plan at the beginning of the Plan period. This has
been generally true of all the Plans since the Second and supports the view
that finance is a constraint on the power program.
130.      Two main points have thus emerged:  (i) the share of investment in
power in the Plans has been large and is financed from borrowing and public
tax revenues; and (ii) finance has constrained the program in the past. On
the basis of past experience, it is possible that actual expenditure on power
during the Draft Plan period could be substantially higher (in current prices)
than the allocation in the Draft Plan document. In any case, the argument is
strong that internal resource generation in the SEBs should be increased.
1/   This was not altogether surprising since the increase of expenditure over
allocation was slightly less than the increase in the general level of
prices due to inflation: this was so for every Five-Year Plan except
the Fifth, where expenditure outpaced inflation.



- 40 -
This in turn provides one of the strongest arguments for raising the elec-
tricity tariff -- to relieve the burden of financing the power sector from
general revenue soures.
2.   The Investment Planning Process
131.      Planning in the power sector follows much the same process as in
other sectors of the Indian economy. The national Plan for power forms part
of the Annual and Five-Year Plans. The principal differences between the
power sector and other sectors are, first, that the sector is jointly controlled
by the States and the Central Government and second, that the level of invest-
ment is high and takes a long time to gestate. The former point means that the
process of consultation and coordination between the Center and the States as
the Plan is formulated is more intense than is typical in other sectors; the
latter point results in major problems of planning resource allocation between
the power sector and other uses.
132.      The first stage in the Five-Year Plan process is the development of
what is called a general approach to the formulation of the Five-Year Plan.
This begins to be drafted about three years in advance of the Plan period.
In principle, this should outline the general directions in which the Plan
will be developed and the areas in which a more intensive effort than formerly
will be required.  The general approach is prepared by the Planning Commission
and submitted to the Cabinet and the National Development Council for review.
It is followed by a "Draft Memorandum" on the physical content of the Five-
Year Plan. The orders of magnitude and the basic inter-relationships among
sectors are outlined in this document. The Planning Commission at this stage
constitutes a series of Working Groups, among them one which deals with power
sector development. The Draft Memorandum attempts to summarize the contribu-
tions of the different Working Groups. Once again this document is reviewed
by the Central government and the National Development Council. Comments are
duly noted by the Planning Commission and the Draft Plan is then prepared,
which is the basis for the first working level dialogue between the States
and the Center. In the meantime, the State governments will have made pre-
liminary assessments of their Plan programs and as the Draft Plan is under
preparation, the State Planning Departments discuss with the Planning Com-
mission the integration of different State objectives into the overall Plan
framework. Lastly, the final Plan is prepared and submitted to the Cabinet,
Parliament and the National Development Council for general approval and
authorization for its implementation.
133.      The Annual Plan cycle is similar to that of the Five-Year Plan,
excepting that the whole cycle takes about six months and is carefully coor-
dinated with the annual budgets of the Central and State governments. The
Annual Plan is not submitted to the National Development Council and is final-
ized after discussion between the State Cabinet and the Planning Commission.
134.      In the past, the Annual Plans provided an opportunity to modify the
particular allocations of the Five-Year Plan and to accomodate cost escalations
and emergency developments. But, in most sectors other than power, projects
were not added and the basic framework of the Five-Year Plan was adhered to.
With the introduction of the new rolling Plan procedure the later years of the



- 41 -
rolling Plan should, in time, become the early years of a subsequent rolling
Plan. The Annual Plans will become the more detailed elaboration of the first
years of the current rolling Plan. The rolling Plan framework should permit
more fundamental reassessment of priorities more frequently than in the past.
135.      The power sector Plan has in effect always been rolled over every
one or two years. When a new APS has been prepared the orders of magnitude of
the investment program have been revised accordingly. And of course projects
are continuously being identified, appraised, sanctioned and implemented.
The Five-Year Plan used in effect to take a slice out of an on-going rolling
Plan process in the case of the power sector.
136.      Apart from the Planning Commission, the Department of Power in the
Ministry of Energy and the Central Electricity Authority (CEA) are the two
Central Government agencies most closely associated with the development of
the Plans for power. The Ministry is responsible for Central policy in the
field of energy and under this imperative has Central responsibility for the
Plan of the power sector. Within the CEA the Planning Department is, appro-
priately enough, the main group responsible for the development of power plans.
The Department comprises three directorates: the Power Survey Directorate,
the Progress and Plan Directorate and the Technical Examination and Coordina-
tion Directorate. The first is responsible for preparing the Annual Power
Survey, with the help of four regional offices. The second provides the
secretariat for the Working Groups convened on power. The third is responsi-
ble for the techno-economic appraisal of all power generation and transmission
schemes submitted by State governments for clearance and inclusion in the Plan.
The technical examination and coordination directorate has therefore to work
very closely with the Hydro, Thermal and Systems Wings of the CEA.
137.      In preparation for the Five-Year Plans, a Working Group on power
has usually been convened. The group typically comprised representatives of
the Planning Commission, the Department of Power, the Ministry of Finance
and the departments dealing with two or three of the major electricity using
sectors, under the chairmanship of the Secretary of Power.
138.      The Plan for power begins with a forecast of demand.  The APS
methodology applies both a load factor and a loss factor, converting demand
for energy into a requirement for power at the bus-bar in each and every
State. Then margins for spinning reserves, forced and partial outages and
ancillaries raise the power requirement figure to a target for generating
capacity, from which the annual need for new capacity can be worked out.
The Working Group is responsible for meeting these needs with a schedule
of specific generation and transmission projects.
139.      The SEBs at the State level undertake most of the prefeasibility
and preparatory work for power projects. Geological and other specialized
functions are of course carried out by the concerned State government depart-
ment or agency, but the Board usually coordinates these efforts. Projects
at the feasibility stage and thereafter are reviewed by and discussed with the
State Government's Planning Department, the Department of Irrigation and Power
and the technical examination and coordination directorate in the CEA. The



- 42 -
State Planning Department is concerned mainly to place the power investment
program into perspective in the State Plan: to see that sectoral allocations
reflect State development priorities. The State Irrigation and Power Depart-
ment has similar concerns, but focused somewhat more narrowly on the trade-
offs to be made in water management between irrigation and hydro-electricity
generation. The parts of the power program that may affect inter-State river
disputes are also the subject of the Irrigation and Power Department, and in
fact projects in this part of the program are usually prepared and executed
by the Department and not the Board. The CEA is concerned with the technical
feasibility, the overall justification (narrowly construed to mean whether or
not there is a market for the power to be generated) and the financial justi-
fication; their review concentrates on the unit cost per KWh and the internal
rate of return of the project, both calculated using unadjusted financial data.
140.      Individual projects originating with a State must be approved by
the CEA and santioned by the Planning Commission, for inclusion in the Plan.
Central Government projects are also received and approved by the CEA and
passed on to the Planning Commission, but are sanctioned by the Public
Investment Board. This is a continuing process so that when a Working Group
reviews the needs for five years ahead, there are projects already sanctioned
as well as those underway that form the kernel of the investment program.
141.      Thus, the responsibility for investment decisions and, therefore,
the application of investment criteria, is shared between the Center and the
States. The investment program has grown so large that some increased sophis-
tication in the investment planning process is now warranted. Individual
State generation projects are usually assessed primarily on the basis of
whether their capacity is needed to meet State-level load -- and, of course,
on their technical soundness. That financial analysis which is now carried
out should be supplemented by an economic analysis that analyzes potential
fuel savings throughout the regional system concerned (even in shortage
regions this is relevant hopefully in the next 10 years or so, well within
the life of new investments), and their costs and potential benefits should
be shadow priced. Shadow pricing may have a marked affect on the comparison
of hydro versus thermal projects and generation versus transmission projects,
because costs composition over time and in terms of labor content are so dif-
ferent. Coal should be shadow priced at the long-run marginal extraction and
transport cost rather than the selling price. Multipurpose hydro-projects
should be subjected to the closest scrutiny to identify the best design and
operation characteristics to trade off generation and irrigation benefits
optimally. And of course, power itself can be shadow priced. 1/ Finally,
State projects should not be justified so much as the least-cost way of
meeting State loads but should be fitted under the regional load curves and
shown to be least-cost for the region as a whole. Economic analysis of this
kind could not replace financial analysis as a decision-making criterion,
but it should as soon as possible come to play a part in deciding on new
investment.
1/   The Planning Commission has used shadow pricing for the appraisal of
the super-thermals. Their shadow pricing of power took into account
daily and seasonal variations in opportunity costs.



- 43 -
142.      The second major tool of investment analysis available to power
planners is system modelling. Such modelling requires careful integration
with "system planning" exercises, a term usually used more narrowly to con-
note the technical analysis of transmission system development. 1/ Trans-
mission system planning has already been initiated in the CEA. However, the
CEA has yet to introduce systematic modelling that can analyze location
choices, phasing of projects, trade-offs between additional transmission and
generation and can thereby help establish the very rough initial parameters
within which the system planning exercise can best take place. As such, these
mathematical modelling techniques can primarily be used for forward planning
-- for sketching out and analyzing investment choices ten to twenty years
away -- since system planning considerations, and highly technical design
questions relating to such issues as system stability and reliability dictate
what alternatives are feasible within a shorter time horizon. Despite the
remoteness of their concerns, such modelling exercises can be useful as an
aid to long-term investment planning.
3.   Present Investment Plans
143.      This section reviews present investment plans in the power sector.
As discussed earlier, there are substantial differences between the Center and
the States regarding demand forecasts for electricity and these differences
extend to the investment program. The consultative process had reached an
advanced stage in analyzing the program when the more modest national targets
of the Draft Plan were formulated. The Working Group set up to review the
development prospects of the power sector in the Sixth Plan therefore went
ahead, basing its demand expectations on the Tenth APS, and produced a
detailed background report on the power investment program, which was
generally more ambitious than that of the Planning Commission in the Draft
Plan.
144.      The Working Group was formed in September 1977 to recommend a pro-
gram for power development for the five-year period 1978/79 - 1982/83.  Its
terms of reference called for it to indicate:
(a)  phased requirements of capacity and of funds;
(b)  key materials and manpower requirements to implement
the program; and
(c)  strategies for implementing the program.
145.      While the Working Group Report must carry less authority than the
Draft Plan, it is discussed here for two reasons: (i) it is far more de-
tailed than the Plan; and (ii) it represents a compromise position between
1/   Models have been developed for both the Southern and Northern Regions
by outside students of the power sector (Annex 1.2.1). But, for various
reasons, these have not been applied to decision making.



- 44 -
the strictures of the Center and the aspirations of the States. Before review-
ing the investment program it is useful to briefly look over the progress of
physical investment and the extent of the present system.
146.      Past Investment.  During the period 1950 to 1973/74 total installed
generating capacity increased from 2,300 MW to about 18,500 MW in 1973/74 at
the end of the Fourth Plan (Annex II.3.1). Basic transmission and distribu-
tion systems were also developed during the period: transmission from roughly
29,000 circuit km to 691,000 circuit kms for the HT voltage network
(Annex II.3.2).
147.      Despite this massive increase in generating capacity during the
first four Plan periods, power availability has not kept pace with growing
demand, and shortages became acute during the latter part of the Fourth Plan.
One of the main reasons for these shortages was the inadequate expansion of
generation facilities.
148.      The power program in the Fifth Plan (1973/74 - 1978/79) was also
beset with implementation difficulties. The problems encountered in keeping
to commissioning schedules included difficulties with civil works, with the
regular flow of equipment and with the availability of funds. In general, the
administration of the program was weak. A system of monitoring projects under
construction was initiated by the CEA during the Fifth Plan. This measure may
have helped raise the tempo of additions to installed capacity to between
1,700 and 1,800 MW during the last three years. However, this is much below
the average 3,000 MW or so that must be commissioned annually to meet Plan
targets.
149.      Progress of past programs has also been substantial in rural elec-
trification (Annex II.3.3). About 40% of all of India's villages have been
electrified, a tenfold increase since 1960. This comparatively recent surge
in investment has in part been aimed at exploiting groundwater potential
through the electrification of pumpsets: growth on this front has been even
more impressive with over 3 million pumpsets electrified, compared with less
than 25,000 in the early 1950s.
150.      The Present System.  The present system is large and extensive
(Annexes 11.3.2 to 11.3.4). Installed generating capacity is about 26,000 MW,
with about 15,500 MW of conventional thermal stations, almost 10,000 MW in
hydro-electric plants and 640 MW in nuclear plant. About 2,200 MW of the
conventional thermal plant is registered captive, in industrial establishments.
Among utilities, something like 7% is Centrally owned (including all the
nuclear plant) and about 5% is owned by private licensees; the remainder is
operated at the State or municipal level, mostly in the SEBs. About 7,000 MW
of capacity are in the Northern Region, 6,000 MW in each of the Western and
Southern Regions and 4,500 MW in the Eastern Region. The North-Eastern Region
accounts for but 280 MW. Correspondingly, about 300,000 circuit km of trans-
mission and distribution lines are in the Northern Region, about 200,000
circuit km in both the Western and Southern Regions and about 110,000 in the



- 45 -
Eastern Region 1/ (Annex II.3.5). The North-Eastern Region system is still
rudimentary comprising only 14,000 circuit km.
151.      Strategy for Power Development.  The Draft Plan and the Working
Group Report enunciate essentially the same strategy for future power devel-
opment, inasmuch as both recognize the desirability of overcoming shortages.
Emphasis is laid on the development of pit-head thermal power stations as
opposed to load center stations, of as much hydro potential as possible and
of a strong high-voltage (EHV) transmission network through which the benefits
of greater system integration can be realized.
152.      Both hydro and nuclear resources are potentially cheap sources of
additional electricity. However, the Plan notes that both are capital-
intensive and long gestating. The planned additions to conventional thermal
power plant far exceed those of these two types combined. The Working Group
Report makes special mention of hydro electric investigations as an activity
that must be intensified in the next few years if the hydro-electric program
is to be developed in a timely fashion in succeeding plans.
153.      To make the best use of existing and planned generating capacity,
improvements in the transmission and distribution system are advocated, since
it is recognized that system losses are high presently, partly on account of
theft but largely for technical reasons. The advantages of extending the
transmission network also include those of more economical operation of an
integrated system at the regional, and eventually, national levels through
exchange of power for peak assistance, more economic merit order operation
of more stations and so forth. The REBs are recognized as having a key role
in this gradual integration process.
154.      The efficiency of both program implementation and operations is also
addressed. These major responsibilities are largely borne by the SEBs, which
are thought to be often weak in organization and management. More functional
specialization, better staff and officer training and improved organizational
structure are seen as the main ingredients needed to improve this situation.
155.      The Draft Plan also recognizes the importance of solving the prob-
lem of financing the power program and proposes two parallel, complementary
approaches. The SEBs' financial performance must improve markedly and their
contribution to their investment programs increase. The second approach is
to consider creation of a power finance institution to finance projects by
SEBs or the State Governments outside the Annual Plan budgets. Such an
institution could tailor the disbursement of funds to the increasingly large
and lumpy requirements of power projects, thereby easing the shocks and
tensions presently placed on the State Plans and assuring that finance would
not delay project implementation as it has in the past.
1/   Above 500 V; i.e., excluding low tension distribution in townships and
urban areas.



- 46 -
156.      Thus, the strategy for the next several years, as enunciated at the
Center, contains all the major elements required to address sensibly the
problems of the power sector. But a tremendous effort will be necessary to
implement this strategy. With a view to identifying how this broad strategy
can be translated into specific measures, the Central Government has recently
established a committee to review the problems of the power sector. Under
the chairmanship of one of the members of the Planning Commission, the com-
mittee largely comprises administrators from the power sector; an independent
secretariat has been set up to support their deliberations with detailed
research. The committee's terms of reference call for an examination of
"all aspects of the functioning of State Electricity Boards and Central
Organizations engaged in electricity generation, transmission and distribu-
tions, including organizational structure, management practices, planning
systems, efficiency of operations, financial performance, tariff structure
and legislative framework and make recommendations for improving them".
Given its seniority and wide purview, this committee could have far reaching
impact when it reports towards the end of 1979.
157.      The Investment Program.  The program of new investments in the power
sector devised in the Working Group Report was considerably more detailed than
anything in the Draft Plan. Nevertheless a comparison of broad orders of mag-
nitude is possible. The Plan involved an overall reduction of the level of
resources stipulated in the Working Group Report of about 25% (Annex II.3.6).
This fell heavily in the physical program in transmission, distribution and
rural electrification where the reductions were about 35%. In the program as
a whole, however, the most severe cuts were in research, investigations and
surveys where the proposed expenditure was cut in half. The cut in the target
for capacity increases from 22,600 MW to 18,555 MW was largely in the conven-
tional thermal program which was cut back from 16,400 MW to 12,900 MW, but
still the conventional thermal capacity investment constitutes two-thirds of
the total planned generation investment. The rural electrification program,
which initially called for the electrification of 110,000 villages and 3
million pumpsets has been cut to 100,000 villages and 2 million pumpsets.
(It is worth noting that the Draft Plan is nonetheless large in relation
to past achievements -- to reach even a capacity increase of 18,500 MW will
require the rate of capacity commissioning to be double that of the Fifth
Plan).
158.      It is possible to use the Working Group Report as a touchstone
to assess the Plan, not so much with regard to the size of the Plan which
is of course to a large extent determined by demand expectations but with
regard to its composition. The Working Group Report laid emphasis on catch-
ing up in the transmission program, which had been neglected in the past.
The composition of the Plan program in transmission and distribution by
voltage level is not available, but it seems likely that much of the cut
will have to fall on the 400 KV system. The strategic objectives of reducing
system losses and integrating system operations are likely to be delayed.
159.      The hydro program in both the Draft Plan and the Working Group Report
was very small relative to the conventional thermal program. This runs counter
to the sector development strategy, but reflects the constraints imposed by



- 47 -
a short shelf of hydro projects. The natural course of action should then be
to undertake a major program of investigation with all due haste, and thereby
to accelerate the rate of hydro-electric development in subsequent Plans. How
large such a program should be is hard to say, but if the original estimate
of the Working Group was at all accurate, then the cut imposed in the Plan
is somewhat draconian. The choice between competing uses of limited resources
may seem to favor faster-gestating thermal projects, but the price in terms of
long-term development costs may well be high. The matter could do with closer
study and most detailed review.
160.      The comparison at the end of Chapter I between the results of the
regression analysis and the forecasts of the Draft Plan suggest that the Plan
forecasts may be conservative -- of the order of 4% too low, using the sec-
toral model results. The implications for the level of investment depend
upon the planning assumptions made about plant margins for outages, spinning
reserves, auxilliaries and so forth. The Planning Commission margins tend
to be demanding and reflect the higher standards of operation that should be
possible, while those of the Boards and the CEA (in the Tenth APS and the
Working Group Report) tend to allow larger margins which reflect past achieve-
ment. Since the Planning Commission margins are themselves quite generous by
international standards, it is theirs which are applied in the next few para-
graphs (Annex II.3.7).
161.      The Draft Plan calls for an investment in about 18,200 MW of new
capacity to bring total capacity to about 42,100 MW by 1982/83 (Annex II.3.8).
Since this was deemed sufficient to meet the Plan demand forecast, to meet
one 4% higher, a total capacity of about 43,800 MW -- 1,700 MW more -- would
be needed. This is not a large increase in an investment program the size of
India's, but it suggests that roughly 20,000 MW of new capacity should be
commissioned if the demand forecast on the basis of regression analysis were
to be met.
162.      This, however, makes no allowance for three important factors that
affect the investment program in any power sector. First, there is around
a "best-guess" demand forecast a range of uncertainty with some chance --
usually quite large -- that unsuppressed demand would (if it could) exceed
the forecast. Unlike most other sectors, power shortfalls cannot be made up
with imports at short notice. So, to achieve an acceptable level of security
of supply, the capacity built should in fact exceed that necessary to meet
the "best-guess" forecast by some allowance -- perhaps 1,000 MW or so in the
Indian system. Secondly, the lumpiness of power investments implies that,
between the commissioning of large units, there will be time for demand to
grow. The investment program should be sufficiently large and flow suffi-
ciently smoothly for demand to be met just before new units are commissioned
as well as just after. Thirdly, some allowance is required for delays in
plant commissioning. Certain delays cannot be identified and predicted at
the plant level, yet in a large program some delay in one or two of the
projects is inevitable. This is certainly borne out by past experience.
(It should be noted, however, that planning for this kind of contingency is
not condoning poor project implementation and is compatible with penalties at



- 48 -
the project level for poor project implementation performance.) In a program
this size, an additional allowance of the order of 1,000 MW might suffice
for this purpose. Thus, a program of about 22,000 MW could be planned and
commenced in the expectation that about 21,000 MW could be commissioned by
the end of the Plan period. 1/
163.      The Composition of the Investment Program:  Thermal and Hydro-
Electric Projects. The share of hydro-electricity in generating capacity
increased quite steadily during the first three Plans, and between 1959 and
1969 it almost doubled (Annex II.3.10). Since then, however, the trend has
been reversed and, if the Draft Plan program is realized, the share will
fall to only 33% by 1982/83, compared with over 40% in the late 1960s. Over
the next twenty or thirty years, some such decline in the share of hydro-
electricity is inevitable because the known potential for hydro-electric
projects is limited. Yet at the moment, only a small proportion is developed
-- some 10,000 MW of a total potential of as much as 66,000 MW -- and only an
additional 5,000 MW are to be developed by 1982/83. Most of the remaining
51,000 MW potential is in the north and north-western parts of India in the
Himalayan region.
164.      It is difficult to assess how rapidly this potential should be
exploited because there is insufficient information about the individual
schemes concerned. The experience of schemes already completed, underway
or just investigated is not a good guide to the potential costs and benefits
of the remainder. Costs depend critically on site location and geological
characteristics, and on the benefits derived from a scheme depend not only
on its capacity, but also on the hydrological conditions affecting the scheme.
These in turn determine whether the scheme will be designed to meet part of
the base load or be used seasonally or for peaking purposes. Nevertheless,
it is reasonable to suppose that a number of new schemes would prove suffi-
ciently attractive to warrant rapid development and that, with a more complete
knowledge of these hydro opportunities, long term investment plans could be
formulated more economically.
165.      There are indeed a number of reasons why the tempo of hydro-electric
investigation and development has fallen off. Firstly, in the present system
there is a chronic shortage of capacity and the case for diverting funds from
the more quickly gestating thermal generation investment program is, there-
fore, weak. Secondly, the initial costs of site investigation programs in the
north of India can appear to be high. Moreover, these costs do not necessarily
yield a worthwhile return since it must be expected that some investigated
sites will prove unattractive. (It should be emphasized that these costs are
small compared to either total development costs or potential benefits in most
hydro-electric schemes.) Thirdly, the geology of the Himalayas is more
difficult than that of the Deccan. The Himalayas are young and consequently
1/   This is a rough and ready estimate; all the types of allowances referred
to here may be estimated with much greater precision using available
analytical techniques.



- 49 -
surface geology does not necessarily reflect the types of problems which may
be met in tunneling or preparing dam foundations. It is impossible, therefore,
even after a project has been investigated to predict with much accuracy how
long a hydro-electric project will take to build, or how much it will in fact
cost. Fourthly, hydro schemes at the very best take seven to eight years to
complete and, therefore, they usually span more than one Plan period. It is
difficult to mobilize a strong political commitment to highly capital-intensive
schemes that yield benefits so far in the future. Fifthly, relocation of
persons displaced by the flooding of areas behind a dam is difficult. It may
take much time -- as much as the civil works or more -- to resolve the issues
surrounding this type of social upheaval. Finally, hydro-electric development
involves the use of waters which in India are often the subject of inter-State
river disputes. In the north of India, international water management problems
are also an issue. Despite the efforts spent on solving inter-State problems
since Independence, there are still situations in which hydro-electric develop-
ment could be held up for this reason.
166.      The costs of developing the larger hydro resources of northern
India may well be less than the similar hydro-electric schemes that have been
exploited in the past, but the uncertainties of costs and timing may be much
greater.  To minimize these risks, an intensive program of project identi-
fication and investigation is called for. In the past, the investigation of
hydro-electric projects has been insufficient. Some States, especially in the
North-Eastern Region where there is a large potential, do not have the proper
organization for carrying out the necessary investigations. Moreover, the
remoteness of the Himalayan sites will lead to a host of logistic problems
affecting communications and the transportation of men, equipment and materials.
To cope with these difficulties, the advisability of establishing some special
organization at the Center, capable of providing specialist support to the
States, should be reviewed and, as the Draft Plan is replaced by succeeding
rolling Plans, the allocation for investigations should be increased.
167.      The Composition of the Investment Program:  Transmission and
Distribution. Planning transmission and distribution requires detailed
studies of individual schemes and of the system as a whole.  In some in-
stances new interconnections can be justified as a way of economizing on
peaking capacity; in others system reinforcement will be warranted to reduce
losses; and in yet others, it may be right to argue in favor of new trans-
mission capacity for the increased reliability and stability brought to the
system. In this last instance, especially, there may be so many different
alternative technological solutions that nothing short of a study of the
relative merits of many different possible configurations of the trans-
mission network will suffice to settle the matter.
168.      With this basic consideration in mind, CEA have already initiated
system planning studies in collaboration with M/S Teshmont Consultants Inc.
of Canada. The overall scope of the studies is broad:
(a) forecast power requirements up to 1998/1999, identifica-
tion of load centers and the power demand in these centers;



- 50 -
(b)  capacity -- hydro, conventional thermal and nuclear -- to meet
future demands;
(c)  evolution and design of EHV systems, keeping in view the
long term needs and system security considerations; and
(d)  determination of generator parameters and design criteria
for control and protection equipments.
But in the first phase of this work the consultants developed only a trans-
mission system plan, taking the demand forecasts of the Tenth APS and the
generation program of the Working Group Report as given. This became the
basis for the transmission program for the Working Group Report.
169.      While the 400 KV and 220 KV lines have been individually identified,
the provisions for lower voltages in the overall transmission and distribution
program were computed on the basis of total network requirements assessed on
the basis of previous experience. The network details at these lower voltages
are being planned and will be executed by the SEBs within the framework the
EHV system developed on the basis of the system studies carried out by the CEA.
170.      There is some evidence that the present transmission and distribu-
tion system is inadequate. There is the evidence of the steady build-up of
system losses to what is now, many assert, an unacceptably high level. From
representing between 14 and 15.5% of generation between 1961 and 1965, the
percentage rose sharply to about 20% by 1972/73 at which level it has remained
roughly stable (Annex B.1.5).
171.      It has been argued that much of the increase in losses has been due
to the intensive program of rural electrification, and this may indeed be so
in part (Annex II.3.11). Between 1965/66 and 1975/76 total losses increased
by about 10,000 Gwh, compared with an increase of about 7,000 Gwh in agri-
cultural consumption. If agricultural losses were steady at about 30%, then
losses for the remainder of consumers would have risen from about 14.3% to
only 17.3%: thus two-fifths of the increase in losses could be ascribed to
agriculture. In order that all the increase in losses be ascribed to agricul-
ture the average or the marginal rate of losses in supplying agriculture would
have to be just over 50%, neither of which is likely. The rate of losses, it
should be noted, is aggravated by shortages in two ways. Firstly, rostering
concentrates load on feeders into particular periods; since losses increase
roughly with the square of the power delivered, the ratio of lost energy to
energy delivered will increase. Secondly, industrial loads -- especially
those of HT consumers -- tend to be cut back more than average during short-
ages; since some of the load associated with lower losses is cut, the average
of the remainder rises.
172.      Voltage in many areas is low during system peak periods, so that
the use of voltage regulators by consumers is widespread. These voltage
drops are used in some States to stretch the available power supply when



- 51 -
there is an unanticipated capacity outage, but their pervasive incidence
must be in large part a reflection of the over-extension and inefficiency
of the distribution network.
173.      If these factors suggest the transmission and distribution system
might be inadequate, this may well reflect an inadequate level of investment
in transmission and distribution in the past. Since the First Plan, when
over 50% of expenditure was devoted to transmission and distribution, this
percentage has been much lower -- between 23 and 26% (Annex 11.1.6). If
rural electrification is included too, this percentage has still been less
than 50% in every Five-Year Plan after the First. The Draft Plan provision
for transmission and distribution is almost exactly one-third of the total:
somewhat more than in the Fifth Plan but still quite low. In every Plan
except the Third, expenditure on transmission and distribution has been a
smaller proportion of the total than was the provision.
174.      The present rate of losses of roughly 20% is high by international
standards. Data from 1970 show that system losses in the developed world tend
to be in the range of 5 to 10% (Annex I.3.12). This comparison should not be
made without noting that one of the main determinants of losses is load den-
sity: with the exception of Sweden, the country with highest losses in the
sample considered here was Canada, where load density is 18 kwh/year/sq. km,
compared with 15 KWh/year/ sq. km in India. The U.K. by contrast is a
country of very high load density -- 883 KWh/year/sq. km and losses are
proportionately lower. Nonetheless, there is a statistical relationship
that shows losses rise as the proportion of investment spent on transmission
and distribution falls.
175.      Investment in transmission and distribution should bear some rela-
tion to investment in generating capacity. In a country the size of India,
with its generally low load density and with its new sources of power (pit-
head stations and more remote hydro schemes) being some distance from load
centers, one would expect at least one-half of the investment program to be
devoted to transmission and distribution.
III. CONCLUSIONS
176.      Because the power sector is such an important part of the economy,
the issues raised in this review have far-reaching implications for India's
development prospects. The efficiency of power use in the economy and the
effect of shortages, electricity tariffs and their impact on efficient con-
sumption and resource mobilization, demand forecasting and its implications
for the level of future investment, the process of investment planning and
the range of investment choices, and the financing of the growth of the
power sector -- all are subjects of central concern for India.
177.      In the Indian economy, power consumption is high relative to the
level of economic activity, and the rate at which electricity consumption has



- 52 -
been growing relative to GNP is much higher than is typical in other countries.
This power-intensity is particularly marked in industry, which consumes two-
thirds of total supply. A number of the most power-intensive manufacturing
industries, including fertilizers and aluminum, have grown more quickly than
average in recent years. Other industries, particularly textiles, appear to
have increased their intensity of electricity use.
178.      In the past, tariff increases have not kept pace with general price
increases in the economy, and have also fallen relative to electricity costs.
Tariff increases are not easy to implement in any of the energy sectors and,
were electricity to take the lead in the immediate future, some distortion
in relative prices might result; but this would be a small cost compared
with the long-run advantage of providing a better price signal to consumers
of electricity, so that their decisions regarding when additional electricity
consumption is worthwhile would correspond more closely to the same judgment
made from the standpoint of the economy as a whole.
179.      In the meantime, electricity is in short supply and shortages are
both severe and costly. Shortages have probably grown less severe than they
were in the first half of the decade, but they are still serious: the esti-
mated extent was 15% in 1977/78 and was roughly 10% in the first nine months of
1978/79. While it is impossible to pinpoint the cost of shortages precisely,
their impact in recent years has been in the range of 1 to 3% of GDP. The
burden of shortages has undoubtedly had the most severe impact on industry,
and it is no coincidence that in the Eastern Region, where power shortages
have been particularly disruptive, industrial performance has been particu-
larly lacklustre.
180.      An additional cost imposed by shortages is the misallocation of
resources when captive generating sets are installed by industry and commerce.
While it makes sense in the short run for the industries concerned, it would
be cheaper for the economy to provide additional power from the grid.
181.      Part of any solution to shortages of power will be increased capa-
city to supply power. Improved management and increased efficiency in the
power system will also be necessary, and indeed the assumptions made in this
review (the same as those in the Draft Plan that relate capacity increases
to demand increases) allow for improvements in efficiency.
182.      The demand for electricity is the main determinant of the need for
future system expansion. There are three major demand forecasts discussed in
this review: the Tenth Annual Electric Power Survey forecast, the forecast
incorporated in the Draft Plan and the sectoral model based on regression
techniques. The Tenth APS is the highest forecast, based on a disaggregative
approach and on pre-Draft Plan forecasts of economic growth. The Draft Plan
forecasts are most conservative, also derived using the enduse method, but
from aggregated analysis and somewhat lower forecasts of economic growth.
The sectoral regression model, which has been used to assess these two end-
use approaches, results in a forecast that falls between that of the Draft
Plan and the APS. From the standpoint of the sectoral model, the Draft
Plan forecast seems conservative.



- 53 -
183.      To improve the quality of forecasting, forecasts should define a
range around a central estimate, within which it is agreed there is a high
probability unsuppressed demand will actually fall. This would more accurately
reflect the state of knowledge about the future. Secondly, forecasts should
be principally concerned with demand more than five years ahead. The period
5 to 15 years ahead is more important for investment decision-making. The
Eleventh APS, which is now at an early stage of preparation, should provide
a context to settle some of the methodological points discussed here. As the
basis for the longer-term forecast, a five-year forecast based on the end-use
method in sectors where that is applicable and on regression analysis techni-
ques in other sectors may be most appropriate: for the 5 to 15 forecast, a
methodology based on regression analysis is probably to be preferred. The
investment program should be pitched above the central estimate forecast by
margin that reflects a trade-off between the advantages of additional security
of supply (which are considerable considering the costs of shortages) against
the costs of an expanded investment program. Additional margins to allow for
the lumpiness of investment and inevitable lags in commissioning should also
be provided. It must be emphasized that power is an input to the economy for
which temporary shortages cannot be met by drawing down stocks or by importing
extra supplies: cutting less essential uses of power is an expedient open to
few, which provides little insulation against electricity shortages.
184.      These considerations suggest that the investment target of the
Draft Plan should be raised perhaps by as much as 3,700 MW to roughly 22,000 MW
for the utilities sector, in the expectation that on the order of 21,000 MW
would actually be commissioned. Naturally, the feasibility of this course of
action is critical. This review has not examined the feasibility of imple-
menting even the proposed program, and this is a subject for further study.
185.      The investment program has grown so large that some increased
sophistication in the investment planning process is now warranted. The
financial analysis to which State projects are usually subjected should be
supplemented by an economic analysis of potential fuel savings throughout the
regional system concerned. Project costs and potential benefits should be
shadow priced. Shadow pricing should have a marked affect on the comparison
of hydro versus thermal projects and generation versus transmission projects,
because the cost composition over time and in terms of labor content are so
different. Coal should be shadow-priced at least at the full extraction and
transport cost rather than at the selling price. Multi-purpose hydro projects
should be subjected to the closest scrutiny to identify the best design and
operation characteristics to trade off generation and irrigation benefits
optimally. Finally, State projects should not be justified on the grounds
that they are the least-cost way of meeting State loads but should be fitted
under the regional load curves and shown to be least-cost for the region as
a whole.
186.      The second major tool of investment analysis available to power
planners is system modelling for forward planning -- sketching out and
analyzing investment choices ten to twenty years away -- since system plan-
ning considerations, and highly technical design questions relating to such
issues as system stability and reliability dictate what alternatives are



- 54 -
feasible within a shorter time horizon. Despite the remoteness of its
concerns, such modelling exercises can be useful as an aid to long-term
investment planning.
187.      The broader characteristics of an investment plan such as the
distribution of funds between major categories of expenditure, should be
determined by detailed considerations such as those outlined above. Without
that depth of examination, nothing definitive can be said about the composi-
tion of the investment program. Nonetheless, two features of the Plan are
worth noting and the consideration of broader issues does raise serious
questions about them. The first is the division of the generation invest-
ment program between hydro and thermal.
188.      If the Draft Plan program is realized, the share of hydro in total
generating capacity will fall to only 33% by 1982/83, compared with over 40%
in the late 1960s. Over the next twenty or thirty years, some such decline
in the share of hydro-electricity is inevitable because the known potential
for hydro-electric projects is limited. Yet at the moment, only a small
proportion is developed -- some 10,000 MW of a total potential of as much
as 66,000 MW -- and only an additional 5,000 MW are to be developed by
1982/83. Most of the remaining 50,000 MW potential is in the Himalayan
region.
189.      The costs of developing the larger hydro resources of northern and
north-eastern India may well be less than the similar hydro electric schemes
that have been exploited in the past, but the risks involved may be much
greater. To minimize these risks, an intensive program of project identifi-
cation and investigation is called for. To cope with these, the advisability
of establishing some special organization at the Center, capable of providing
specialist support to the States, should be reviewed and as the Draft Plan
is replaced by successive rolling Plans, the allocation for investigations
should be increased.
190.      The second major feature of the investment program is the division
between generation on the one hand and transmission and distribution on the
other. Planning transmission and distribution requires detailed studies
of individual schemes and of the system as a whole. The CEA has already
initiated system planning studies. The first phase of this work has become
the basis for the transmission program for India.
191.      There is the evidence of the steady build-up of system losses to
what is now, many assert, an unacceptably high level. From representing
between 14 and 15.5% of generation between 1961 and 1966, the percentage rose
sharply to about 20% by 1972/73 at which level it has remained roughly stable.
While some of this increase may have been caused by the rapid progress in
rural electrification, there is almost certainly a sizable remainder caused
by a deterioration in the efficiency of the transmission and distribution
system as a whole. This may well reflect an inadequate level of investment
in transmission and distribution in the past. This view is supported by
international data. Since the First Plan, when over 50% of expenditure was
devoted to transmission and distribution, this percentage has been much lower
-- between 23 and 26%. If rural electrification is included too, this



- 55 -
percentage has still been less than 50% in every Five-Year Plan after the
first. The Draft Plan provision for transmission and distribution is almost
exactly one-third of the total: somewhat more than in the Fifth Plan, but
still quite low. In every Plan except the Third, expenditure on transmission
and distribution has been a smaller proportion of the total than was the
provision. Investment in transmission and distribution should bear some
relation to investment in generating capacity. In a country the size of
India, with its generally low load density and with its new sources of power
(pit head stations and more remote hydro schemes) being some distance from
load centers, one would expect at least one-half of the investment program
to be devoted to transmission and distribution.
192.      The new rolling Plan framework calls for an annual revision in the
five-year economic program for the country, including the power sector. This
planning system has yet to become fully effective. In the power sector, it
may be difficult to undertake a complete reassessment so frequently, partly
because the State planning agencies and the SEBs play so vital a role (the
process of consultation in preparation for past Five-Year Plans has taken
two to three years in the past) and partly because circumstances in the sector
do not change that much that often. The Draft Plan provides for the first
time a discussion of the ten-year demand prospects and investment program, and
this is a step in the right direction. But for power planning, a still longer
perspective is needed, since investments about which decisions are made now
are not commissioned for at least four years and occassionally as much as ten
years, and their economic life is at least another thirty years. The long-
term plans must also be rolled forward and, of course, are likely to undergo
more radical change than the five-year rolling Plan between revisions, but
nonetheless, they should serve to ensure as far as possible that short-term
plans make sense over the long term.
193.      A larger power program will require more resources and the level of
resources devoted to the power program in the Plan is already high: 35% of
State Plans and 23% of the Central and State Plans taken together is presently
devoted to power. The opportunity cost to the rest of the Plan is already
considerable. The Draft Plan has proposed, and other Central Government
sources have suggested, that a channel for funds other than the Plan assist-
ance from the Center to the States may be needed. Specifically, the Draft
Plan suggests that the feasibility of segregating funds for power generation
schemes from the general flow of Plan funds, by creating a new national level
financial institution if necessary, be examined. This proposal warrants
careful consideration.
194.      However, the requirement for funds cannot be met solely from the
public purse. Increased internal resource generation in the SEBs is essential.
Tariffs must be increased and rationalized not only so that they may more
closely reflect marginal costs but perhaps more importantly to increase re-
sources for power development. This will become crucial if more hydro-
electricity is eventually deemed worth developing. The converse of the
vicious circle of low tariffs, rapidly expanding demand and inadequate
financial resources for expansion of capacity would be a regime of tariffs
based on marginal costs leading to the more efficient use of power and
generating adequate resources to expand investment and overcome the power
shortages of the past.



- 56 -
A N N E X E S



-  57  -
TABLE OF CONTENTS
Annex No.                               Title                                Page No.
A Note on Power Engineering Terms for the                     61
Non-Engineer.
A Note on Economic Terminology for the                        62
Non-Economist.
A Note on Annex Sources                                       66
B.l.l              Growth Rates of Basic Electricity Sector Indicators           68
B.1.2              Gross Electricity Generated According to Primary              69
Fuels
B.1.3              Conventional Thermal Power Stations:  Consumption             70
of Principal Fuels - 1965/66-1975/76
B.1.4              Electricity and NDP:  Capital and Growth: 1950-1971           71
B.1.5              Electricity Generated, Gross and Net                          72
B.2.1              Sales of Energy to Ultimate Consumers by Different            73
Supplying Agencies
I.l.l              Growth of NDP and Electricity Consumption for                 74
All India
I.1.2              Relative Shares in Net Electricity Consumption                75
I.1.3              India - The Relationship between Value Added and              76
Consumption: 1960/61-1975/76
I.1.4              The Decomposition of Changes in Electricity                   77
Consumption by Sector: 1960-61-1975/76
I.1.5              Growth of NDP and Electricity Consumption in the             78
Northern Region
I.1.6              Growth of NDP and Electricity Consumption in the             79
Western Region
I.1.7              Growth of NDP and Electricity Consumption in the             80
Southern Region
I.1.8              Growth of NDP and Electricity Consumption in the             81
Eastern Region
I.1.9              Growth of NDP and Electricity Consumption in the             82
North Eastern Region
I.1.10             Electricity Consumption and Value Added by Region            83
and by Sector (Utilities Only): 1975/76
I.1.11             The Decomposition of Changes in Electricity                  84
Consumption by Region (Utilities Only):
1960/61-1975/76
I.1.12             The Movement of Electricity into Rural Manufacturing:        85
The Evidence of the Censuses
1.1.13             Captive Generation in Industry                               91
I.1.14             Per Capita Electricity Consumption by State                  92



- 58 -
Annex No.                              Title                                   Page No.
I.2.1              Notified Energy Restrictions in 1977/78                        93
I.2.2              Load Shedding in the Eastern Region 1977/78 and                94
Part of 1978/79
I.2.3              Monthly Net Requirements and Availability of                   95
Electricity for the Five Regions: 1977/78 and
Part of 1978/79
I.2.4              The Net Requirement and Availability of Electricity:           96
Public Utilities Only: 1974/75-1977/78
I.3.1              Electricity Production Per Unit of GNP:  1975                  97
I.3.2              Crude Elasticities of Electricity Demand in a                  98
Sample of Countries:  1970-1975
I.3.3              Electricity Costs as a Percentage of Value Added               99
in Industry
I.3.4              Electricity Consumption in Selected Industries:               100
Selected Indicators
I.3.5              Electricity Consumption, Total Production and                 101
Electricity Consumption/Unit Production in
Selected Manufacturing Industries: 1960/61-1976/77
1.3.6              The Use of an Input/Output Model to Gauge                     102
Electricity-Intensity
I.3.7              The Manufacturing Sector in India - International             106
Comparisons of Power Intensity: 1968
1.3.8              Andhra Pradesh:  Stand-By Diesel Sets Installed in            107
1978
i.4.1              Electricity Tariffs for SEBs from 12-31-72 to 12-31-76:   108
Andhra Pradesh
1.4.2              Electricity Tariffs for SEBs from 12-31-72 to 12-31-76:   109
Assam
1.4.3              Electiricty Tariffs for SEBs from 12-31-72 to 12-31-76:   110
Bihar
1.4.4              Electricity Tariffs for SEBs from 12-31-72 to 12-31-76:   111
Gujarat
I.4.5              Electricity Tariffs for SEBs from 12-31-72 to 12-31-76:   112
Haryana
I.4.6              Electricity Tariffs for SEBs from 12-31-72 to 12-31-76:   113
Himachal Pradesh
I.4.7              Electricity Tariffs for SEBs from 12-31-72 to 12-31-76:   114
Jammu & Kashmir
I.4.8              Electricity Tariffs for SEBs from 12-31-72 to 12-31-76:   115
Karnataka
I.4.9              Electricity Tariffs for SEBs from 12-31-72 to 12-31-76:   116
Kerala
I.4.10             Electricity Tariffs for SEBs from 12-31-72 to 12-31-76:   117
Madhya Pradesh
I.4.11             Electricity Tariffs for SEBs from 12-31-72 to 12-31-76:   118
Maharashtra



-  59  -
Annex No.                              Title                                    Page No.
I.4.12             Electricity Tariffs for SEBs from 12-31-72 to 12-31-76:         119
Orissa
I.4.13             Electricity Tariffs for SEBs from 12-31-72 to 12-31-76:         120
Punjab
I.4.14             Electricity Tariffs for SEBs from 12-31-72 to 12-31-76:         121
Rajasthan
I.4.15             Electricity Tariffs for SEBs from 12-31-72 to 12-31-76:         122
Tamil Nadu
1.4.16             Electricity Tariffs for SEBs from 12-31-72 to 12-31-76:         123
Uttar Pradesh
I.4.17             Electricity Tariffs for SEBs from 12-31-72 to 12-31-76:         124
West Bengal
I.4.18             Electricity Tariffs for SEBs from 12-31-72 to 12-31-76:         125
Delhi (Desu)
I.4.19            Average Revenue Realized from Sale of Electricity by             126
State Electricity Boards
I.4.20             Price Indices in the Energy Sector (1970/71 = 100)              127
I.4.21             Average Revenue Per Unit of Power Sold                          128
I.4.22             The Level of Long Run Marginal Cost Based Tariffs               129
1.5.1              Forecast and Actual Energy Requirements for All India           133
in the Annual Electric Power Surveys
I.5.2              Earlier Efforts at Regression Analysis                          134
1.5.3              The Regression Analysis:  Technical Description                 137
1.5.4              Cross-Section Data on Electricity Consumption:                  139
1974/75 and 1975/76
T.5.5              Results of Regression Analysis:  All India                      140
I.5.6              Results of Regression Analysis:  1960/61-1975/76                141
II.1.1             Outlays on Power in Relation to the Total Plans                 142
II.1.2             Actual Plan Expenditures:  1968/69-1978/79                      143
II.1.3             Financing the Plans:  The Burden on the Centre and              144
the States
II.1.4             Revenue and Operating Costs:  1969/70-1975/76                   145
II.1.5             Consolidated Capital Account of the Power Sector:               146
All Utilities
II.1.6            Actual Plan Expenditure on the Power Sector                      147
II.1.7             Plan Provisions and E7xpenditure on Power:                      148
Utilities Only
II.1.8             The Distribution of Plan Provisions in the Fourth,              149
Fifth and Rolling Plans
II.1.9             Power Generation -- Targets and Achievements                    150
II.2.1             Power Investment Planning Models in India                       151



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Annex No.                            Title                                 Page No.
II.3.1           Electricity Supply - Installed Capacity                      158
II.3.2           Length of Transmission and Distribution Lines                159
Constructed
II.3.3           Number of Villages Electrified & Irrigation                  160
Pumpsets/Tubewells Energised
II.3.4           Installed Generating Capacity at March 31, 1978              161
II.3.5           Transmission and Distribution - 1974/75-1976/77              162
II.3.6           The Investment Program in the Working Group Report           163
and the Draft Plan: A Comparison: 1978/79-1982/83
II.3.7           Capacity Margins and Other Planning Norms                    164
II.3.8           Installed Capacity Throughout India - The Draft              167
Plan for Power
II.3.9           Energy and Capacity Requirements (Utilities Only):           168
1982/83
II.3.10          The Shift Away from Hydro Electric Development               169
II.3.11          Transmission and Distribution Losses for All India:          170
1965/66-1975/76
II.3.12          International Comparison of Transmission and                 171
Distribution Losses and Other System
Characteristics:  1970
Graph I          Annual Percentage Changes in NDP and Total                   172
Electricity Consumed
Graph II         Annual Percentage Changes in Agricultural and                173
Industrial Value Added
Graph III        Annual Percentage Changes in Industrial Value                174
Added and Electricity Consumed by Industry
Organization                                                                  175
Chart



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A NlOTE ON POWER ENGINEERING TERMS FOR THE NON-ENGTN7ERR
The distinction between power and energy is important at some points
in this review. Power is the rate of consumption of energy; in discussing the
supply of electricity, power is the amount supplied instantaneously while
energy is the amount supplied over a period. Power is measured in KW or MW,
while energy is measured in kwh or Mwh. Thus, with power on the vertical axis
and time of day on the horizontal axis, if a graph is plotted to show the supply
of power at each instant in a given powersystem, the area under the curve --
which is the daily load curve -- equals the energy supplied by the system.
POWG e(VCW)i
W                        _ ~~~~~~~~~Time ( HOuI5)
24.
The capacity of the system is the main determinant of the maximum power that
can be supplied. Because daily load curves are typically peaked, it is usually
possible to flatten the curve, lower the peaks and keep the same area under the
curve. Thus, when capacity is short, administrative measures can sometimes be
used to cut back the power demanded on the system without greatly affecting the
energy demanded.
In discussing forecasts or the supply situation, there is also a dis-
tinction between "demand" and "supply" on the one hand and "requirements" and
"availabilities" on the other. The former pair of terms is measured at the
point of consumption, while the latter pair is measured at the bus bar, where
power leaves the power station. The difference is losses in transmission and
distribution.



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A NOTE ON ECONOMIC TERMINOLOGY FOR THE NON-ECONOMIST
1.   GNP, GDP, NDP and Value-added.   GNP (Gross National Product), GDP (Gross
Domestic Product) and NDP (Net Domestic Product) are all measures of the level of
economic activity throughout the economy in any given year. Each measure is built up
by summing the net value of production in different sectors. For example, in-industry,
from the value of production in each sub-sector is subtracted the value of inputs
from other industries, from agriculture and the service sectors. This net value,
the value-added for an industry can be added to that of other industries without
double counting the activity of raw material and intermediate-input industries,
to derive a value-added figure for all industry. Similarly, the value-added in
each branch of agriculture and services can be defined, estimated and aggregated,
and the grand total, the sum of value-added from all the branches or sectors of
the economy is the GDP. The distinctions between GDP, GNP and NDP are: (i) the
gross measures -- GDP and GNP -- make no allowance for the depreciation of
capital as a cost to be subtracted in estimating value-added; NDP does, and is
the more relevant though less easily estimated measure for most purposes;
(ii) the domestic measures -- GDP and NDP -- are the sum of value-added of
activities within the country, whereas the GNP includes for example income from
labor working abroad -- the value-added due to the efforts or assets of nationals
wherever they may be. GNP includes for example worker's remittances from abroad,
while GDP and NDP do not.
2.   SDP and RDP.  The SDP (State Domestic Product) and RDP (Regional Domestic
Product) are defined in a way exactly analagous to NDP at national level: the
sum of value-added in all economic activities within the borders of the relevant
unit concerned.



- 63 -
3.   Industry, Agriculture and Services.  Industry is defined in this Review to
include mining and manufacturing. Agriculture is defined to include forestry
and fishing as well as livestock and crop farming. Services, or the "other"
or "residual" sector, embraces all other economic activities.
4.   Constant Prices and Current Prices.  The value of GDP has risen over the
last several years both because economic activity has increased and prices have
risen. In many circumstances, it is useful to concentrate on the increase in
economic activity alone, and then the GDP figures must be adjusted to remove
the effect of inflation. Suppose, for example, GDP in a given country was
Rs 20 billion in 1960 and Rs 50 billion in 1970, and the level of prices in-
creased by 50% over this period. Then Rs 50 billion in 1970 was worth Rs 50 +
1.5 or Rs 33 billion in 1960. Thus the "real" or "actual" increase in GDP was
from Rs 20 billion in 1960 to Rs 33 billion in 1970, measured in "constant 1960"
prices. To make the distinction quite clear, in some contexts one can say by
contrast that the "nominal" increase in GDP was from Rs 20 billion in 1960 to
Rs 50 billion in 1970; here GDP is measured in "current" prices. The distinction
between constant and current prices can be drawn in measuring changes in many
other economic indicators apart from GDP.
5.   Efficiency.  "Efficiency" in an economic discussion has a broader connotation
than in a technical context. While a process may be efficient in that energy
is converted with least loss, or a product is manufactured with minimum energy
use, the activity is inefficient from the economic viewpoint if the service or
product could be produced more cheaply by using different inputs, or by using a
different technology and combination of inputs. In general, an activity is
efficient if it provides a particular product or service at the least resource
cost to the economy as a whole.



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6.    Market Prices, Opportunity Costs and Shadow Pricing.  Market prices are
simply the price an individual or organization must pay for a particular ser-
vice or product in the course of a normal market transaction. Shadow pricing
is a technique used in the analysis of investment alternatives whereby so-called
"shadow" prices are used in place of market prices to evaluate project costs and
benefits. The object is to more accurately reflect the costs and benefits to
the economy at large, rather than merely the private costs to the individual
parties to each transaction. For example, consider a situation where unemploy-
ment or underemployment is a feature of the district in which a project is to be
sited. The analysis of the investment calls for a comparison between two alter-
natives, one of which uses a good deal more labor than the other. Then, if costs
are valued at market prices, -- the market price for labor being the hourly or
daily wage actually paid -- they will overstate the cost to the economy at large.
This is so since if more labor were employed, little is lost: GDP would not
fall appreciably since labor is not being taken out of other employment. In other
words, the opportunity cost of this additional employment is small. To reflect
this in calculating costs of the two alternatives, a lower wage rate, the "shadow
wage" rate, below the market wage rate, can be assigned to labor employed. Simi-
larly, raw materials, capital, foreign exchange and infrastructure costs can all
be shadow priced, so that the choice of project or project design reflects the
real costs and benefits to the economy as a whole.
7.    Long Run Marginal and Incremental Costs.   Marginal or incremental cost is
simply the first derivative of cost. In manufacturing, marginal costs are the
costs to the enterprise of making one extra unit of output. In the power sector,
the marginal cost is the cost of providing one extra KW of capacity or supplying
one extra kwh of energy.



-  65  -
The distinction between the short run and the long run is whether or not
additional investment is taken into account. The short run marginal cost in-
cludes only operating cost: it is not possible in the short run to add to
capacity to meet extra, unanticipated demand. Long run marginal costs comprise
both capital and recurrent, operating costs; in the long run the capacity
expansion program can be accelerated to meet extra demand.
8.   Coal replacement measure.  In order to aggregate or compare different
types of energy, a method of rendering them equivalent is needed. Since the
Energy Survey Committee of India (1962), the common unit of energy most widely
used in India is that of coal replacement. Products manufactured from coal,
such as coke, are measured by the amount of coal needed to produce one ton.
Electricity is measured in terms of how much coal is required to generate one
kwh in a representative thermal power station. In the case of petroleum products,
the quality of coal needed to substitute in a particular application is taken to
measure the energy value. For example, the Energy Survey Committee determined
that about 9 tons of coal were needed to replace one ton of diesel oil for loco-
motive use on Indian railways. In this manner, energy in a variety of forms and
applications can be reduced to one standard unit of value and compared or aggregated.
It should be noted that other measures for aggregating energy exist, and in
particular there are two or three which rely on the heat value of different energy
forms. Clearly comparisons and aggregations performed using these alternative
measures can lead to different results that may sometimes affect the inferences to
be drawn from a discussion.



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A NOTE ON ANNEX SOURCES
The main sources for the statistical data in these Annexes are listed
below. To refer to these sources in the Annexes themselves, the
acronyms given in brackets are used.
(i)    Public Electricity Supply, All India Statistics
General Review;
Central Electricity Authority, Ministry of Energy;
various years (GR)
(ii)   The National Accounts;
Central Statistical Office, January 1978 (NA)
(iii)  The Reserve Bank of India Bulletin, Supplement on
State Domestic Product and Other Economic Accounts;
The Reserve Bank of India, May 1978   (RBI)
(iv)   The Working Group Report on Power Development:
1978/79 to 1982/83;
Ministry of Energy, February 1978 (WGR)
(v)    The Report of the Working Group for Assessing the
Revised Power Demand and Energy Requirement for
the Five Year Plan: 1978-83;
Planning Commission and the Central Electricity
Authority; May 1978 (DPCF) 1/
(vi)   The Draft Plan: 1978-83;
Planning Commission (DP)
1/ Referred to in Volume I as the disaggregated Planning Commission
Forecast.



_ 67 -
(vii)   All India Electricity Rate Books;
1972 and 1976;
Central Electricity Authority, Ministry of
Energy (ERB)
(viii)  The Power Supply Position in the Country:
The Central Electricity Authority, Ministry
of Energy; various months (PSP)



GROWTH RATES OF BASIC ELECTRICITY SECTOR INDICATORS
The Longer Term                                  The 1970s
Average Annual                                 Average Annual
Period        Growth Rate                   Period           Growth Rate
1.   Installed Capacity           1950-1977/78                              1970/71-1977/78
1.1  Hydro                                      10.8%                                           6.6%
1.2  Conventional                                9.5%                                            8.0%
Thermal
1.3  Nuclear                                      -                                              6.2%
1.4  Total (Utilities)                           9.9%                                            7.2%
1.5  Total (including                            9.1%                                            7.0%
non-utilities)
2.   Gross Electricity                                                                                                  00
Generation
2.1  Utilities               1951-1977/78       11.1%                  1970/71-1977/78           7.4%
2.2  Total (including        1951-1976/77       10.7%                  1970/71-1976/77           7.7%
non-utilities)
3.   Electricity Consumption
3.1  Total                   1951-1976/77       10.3%                  1970/71-1976/77           7.4%
3.2  Per Capita              1960/61-1976/77     7.4%                  1971/72-1976/77          4.9%
Source: GR



GROSS ELECTRICITY GENERATED ACCORDING TO PRIMARY FUELS
(Utilities Only)!/
1951  1956 1960/61 1965/66 1968/69 1970171 1971/72 1972173 1973/74 1974/75 1975176 1976/77  1977/78  '
1. Absolute amounts (GWh)
Hydro                2,860 4,295 7,837   15,225   20,723  25, 248  28, 024  27, 196  28, 972  27,875  33, 302  34, 836    38,001
Conventional Thermal 2,779 5,135 8,732   17,372   26,394  27,797  31,237  35,614  34,853  39,539   42,760  49,744    50,560
Nuclear                -     -      -       -        -      2,417   1,189    1,132   2,396   2,206    2,627   3,252      2,272
Other!                 219   233   368       393     317      366     475      603     468      571     542      501       453
Total                5,858 9,662 16,937  32,990  4T7, 434  55,828  60,925  64,546  66, 689  70, 191  79,231  88,333    91,286
2. Relative shares 3/
(percentages)
Hydro                   49    44    46        46       44      45      46       42      43       40      46       39      41.5     a
Conventional Thermal    47    53    52        53       56      50      51       55       52      56      49       56      55.5
Nuclear                  -     -      -       -         -       4       2        2        4       3        4        4      2.5
Other 2/                  4     2     2         1       1       1       1       -1        1       1        1        1      0.5
Total                   100   100   100       100     100     100    100       100      100    100      100       100      100
1/ Almost all generation by non-utilities is from conventional thermal stations
2/ Gas turbine and diesel
/ Subtotals may not add up to totals because of rounding.                                                                        I
Source: GR



CONVENTIONAL THERMAL POWER STATIONS: CONSUMPTION OF PRINCIPAL FUEIS;
1965/66 - 1976/77
Units       1965/661917  1973/74 1974/75  197~576~ 1976 77                      Trended Annual
Growth Rate
Amounts Consumed                                                                                       (1965/66-1976/77)
Coal                (million tonnes)  10.27    16.19    18.31    21.68    24.29        28.27                   8.9,%
Lignite            (million tonnes)   2.18      3.02     2.88     2.45      2.39        3.13                  1.°X
Fuel Oil           (million kilolitres) 0.61    1. 42    1.81      1.97      1.87       1.91                 11 0X3/
Gas                 (million cu. meters) n.a. 142      153.781  113.41   143.33       172.0                    2.2%2/
Shares in Primar,
Energy Consumedy
Coal                                 85        82       82       84        86            86
Lignite                               7         6        5        4          3            4
Oil                                    8       12       13        12       11            10
Total                               100      100       100      100       100          100
1/ Excluding gas, which in 1971/72 accounted for less than 2%; these figures are estimated using the same conversion
facto-rs as used by D. Henderson in "India: The Energy Sector", which in turn was based on data on
heat input into steam power stations by state.
2/ 1971/72 - 1976/77
3/ The level of fuel oil consumption is thought to have fallen in 1977/78, due to conservation efforts.
Source: GR
=l



-  71  -                    ANNEX B.1.4
ELECTRICITY AND NDP: CAPITAL AND GROWTH: 1950-1971
Average
Annual
1950-61                1961-71               Growth Rate
1950    Increments    1961    Increments    1971    1950-1971
--------------(millions of 1960/61 Rupees)------           ()
1/
Electricity -Capitall/       3220        8560       11780        21130       32910     11.7
- Value Added-/  180          520         700         1310        2010     12.2
- CoR_/          17.9         -          16.8          -          16.3        -
- ICOR             -         16.5         -           16.1         -          -
1/
Other Sectors - CapitaT  237490        109840      347330      224210      571540       4.3
- NDP        91430       45370     136800        54500      191300       3.6
- COR -/        -          -           -            -           -         -
- ICOR          -          2.4         -            4.1         -
Total -    - Capital -/  240710        118400      359110       245340     604450       4.5
- NDP           91610       45890      137500        55810     193310        3.6
-COR              2.6         -           2.6          -           3.1        -
-ICOR              -          2.6         -            4.4         -
Source:  Tables 1 and 2 of "Capital and Growth in India: 1950-71".
1/ Capital is reproducible tangible assets, which is roughly the same as net fixed
assets for the electricity sector.
2/ The revised figures for 1950/51 are used; the NDP figures whown are in fact for
1950/51, 1961/62 and 1971/72.
3/ Total here includes house property and other services but not "actual" agriculture
as distinct from agriculture reported in the national accounts.
4/ COR stands for the average capital output ratio.



ELECTRICITY GENERATED, GROSS AND NET
1951  1956  1960/61  1965/66 1968/69 1970 71 1971/72 1972/73  1973/74  1974 75  19756 176/77  1977/78
1. Absolute arnounts (Gwyfl
Utilities: Public sector   2, 458 5,294 11,016   26,072  40,391   49561    53, 990  57,216   60, 683  63, 910   72,572   81, 995    n.a.
Private sector  3, 400 4, 368  5, 9211   6, 918   7, 043   6,267     6, 935   7,330    6,006   6, 281    6, 659    6,338    n.a.__
Total, utlities,       . 5,858  9, 662 16, 937   3, 990  47,434  55,828    60,925  64,546   66,689  70, 191   79,231   88,333   91,286
Non-utilities-            1,656 2,210  3,186   3,835    4,208   5,.384         5,459   5,970    6,107   6,488    6,695    7,282    7900 3/_
Total gross generation   7,514 11, 872 20, 123  36,825   51, 642  61,212    66,384  70,516   72,796  76, 679   85, 926   95, 615   99,186
Less consumption of powpr
station auxiliaries-f'  218    386   722   1, 647    2, 532   3, 433     3,723   4,036    3, 61 5   4, 130    4, 556    5,334    5,5263/
Total net generation      7,296 11, 486 19, 401  35, 178   49, 110  57,779    62, 661  66, 480   69, 181  72, 548   81, 370   90, 381   93,660
Less line losses           864 1,335  2,486   4, 621    7,2159,306    10,862  12,230   12,931  13,556   14,526   16,446   16,855
Electricity consumption  6, 4:32 10, 151  16, 915  30, 557    41,895  48, 473    51,799  54, 250   56,250  58, 991   66, 844   74, 335   76,8053/
2. Relative shares(percentages)
Utilities: Public sector     33     45      55       71        78      81         82       81        83      83        84        86    n.a.
Private sector     45    37        29      19        14       10         10   -  10         9        9         8         6   n.a.
Total, utilities             78     81      84       90        92       91        92       92        92      92        92        92     92       -
Non-utilities                22     19      16       10         8        9         8.       8         8        8        8         8        8
Total gross generation      100   100    100        100       100     100        100      100       100      100      100       100      100
Total net generation         97    97       96      96         95      94         94       94        95       95       95        94       94
Line losses                  11    11       12      13         14      15         16       17        18       18       17        17       17
Electricity consumption      86    86       84      83         81      79         78       77        77       77       78        77       77
3. Losses
Line losses as a percentage  15.3  14.4   15.3    14.7        16.1,  17.8        19.0    20.2       20.5   20.5       19.4      19.8   19.6
of electricity sent out by
utilities
1/ For non-utilities, the figures for 1951, 1956 and 1960/61 exclude the amounts generated by the railways, which, however, are a very small fraction
the total.
2/ Figures apply to utilities only.
3/ Mission Estimates.
n.a. = not avaitabte
Source;  GR
w
U,



SALES OF ENERGY TO ULTIMATE CONSUMERS BY DIFFERENT SUPPLYING AGENCIES
1971/72            1974175              1975/76           1976/ 77
Amount Relative  Amount  Relative  Amount Relative Amount Relative
Supplied  Share   Supplied   Share   Supplied  Share   Supplied  Share
(GWH)   (%)       (GWH)    (%)        (GWH)       (%)     (GWH)    (%)
1.StateElectricityBoards   31.28         66     37.02       70     43.66       73      48.96       74
2. Other public sector;       6.12       13      6.05       12      7.20       12       7.84       12
(a) Municipalities        (2.58)      (5.5)  (2.98)      (6)    (3.02)      (5)    (3.26)       (5)
(b) Corporations and
governmental
departments           (3.54)      (7.5)  (3.07)       (6)    (4.18    ) (7)  (4.58)  _
Total, Public Sector      37.40       79      43.07      82      50.86       85     56.80       86
3. Private Sector             9.66       21      9.57       18       9.39      15       9.81       14
Total, all utilities      47.06      100      52.63     100      60.25      100     66.61      100
Source: GR
"3



GROWTH OF NDP AND ELECTRICITY CONSUMPTION
FOR ALL INDIA
Pumpset             Electricity Consumption                                  Net Domestic Product
Electri-      Agri-             1                               Agri-
Year        fication     culture    Industry-' Services      Total          culture     Industry   Services       Total
('000)      -------------------Gwh -----------------          --------(Rs Million 1960/61 prices)-------
1960/61       199          833         9696       3424       13953           68310       26830        38210      133350
1961/62       241          991        11545       3912       16448           68890       28870       40490       138250
1962/63       291         1104        13110       4465       18679           67080       30910       43040       141030
1963/64       351         1153        15842       4799       21794           68980       33860        45980      148820
1964/65       424 2!      1397        17379       5443       24219           75160       36330       48790       160280
1965/66       513         1892        18876       5967       26735           64790       37410       50140       152340
1966/67       659 2       2107        20391       6630       29128           64000       37820       51830       153650
1967/68       847 2!      2585        22852       7300       32737           73770       39020       53650       166440
1968/69      1089         3466        25891       7995       37352           74140       40730       56250       171120
1969/70      1332         3774       28379        8909       41062           78770       44140       59110       182020
1970/71      1629         4470        29579       9675       43724           85450       45260       62110       192820
1971/72      1901         5006        31637       10420      47063           83700       45700       65460       194860
1972/73      2185         5918        32244       10926      49088           77630       47460       67260       192350
1973/74      2426         6310        32481       11455      50246           84410       48770       69630       202810
1974/75      2614         7763        32690       12179      52632           87E r40     49930       71740       202810
1975/76      2792         8721        37568       13957      60246           90163       52701        77366      220230
1976/77 3/   3029         9634        41501       15418      66553           85399       57168        81959      224526
1977/78 3/     -         10061        42454       16448      68963             _
Annual Crorth D'ates
1960/61-
1968/69    23.7%        19.5%      13.1%        11.2%      13.1%            1.0%        5.4%        5.0%        3.2%
1960/61-
1975/76    19.3%        16.9%       9.4%         9.8%      10.2%            1.9%        4.6%        4.8%        3.4%
.                        .~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~-
1/ Excluding captive generation
2/ Estimate
3/ Provisional
Source: GR, NA



RELATIVE SHARES IN NET ELECTRICITY CONSUMPTION-
(PERCENTA9ES)
1960/61  1965/66  '1968 69  1970/17  1971/72  19721731/ 1973-742  1974/75   1975/76   1976 77
Agriculture and irrigation    5.0       6.3       8.4       9.2      9.7      10.9        11.3       13.3      13.2        13.2
Railway traction             2.7       3.5        3.0       2.8      3.2       3.4         2.8        2.6       2.8         3.0
Industry                    74.5      74.0       72.1      70.9    70.2       68.9        68.0      65.8       65.7        65.7
Commercial and government 5.1          5.4        5.2       5.3      5.7       5.1         5.4        5.3       5.3         5.7
Public lighting              1.2       0.9        0.9       1.0      0.9       1.0         1.0        1.0       0.9         0.8
Domestic                     8.9       7.8        7.8       7.9      7.9       8.0         8.4       8.9        8.8         8.7
Public water works,                                                                                                                 -
drainage and miscellaneous  2.6        2.1        2.6       2.9      2.4       2.7         3.1       3.1        3.3         2.9
1/ Including non-utilities, of which the output goes almost entirely to industry.
2/ The percentages shown for the years 1972-73 and 1973-74 are actuals taking into account purchase and captive generation.
Source: GR
z
2
X-
H-



INDIA - 'I'HE RELATIONSHIP BETWEEN VALUE ADDED AND CONSUM'TION:  1960/61 - 1975/76
1960/61                                    1965/66                                       1970/71                                          1975/76
Electricity                                    Electricity                                   Electricity                                   Electricity
Value      Electricity   per unit of          Value       Electricity   per unit of          Value      Electricity   per unit of          Value      Electricity   per unit of
added      Consumption   value added          added       Consumption   value added          added      Consumption   value added          added       Consumption   value added
(Es billion      (Gwh)         (Gwh/Rs       ills billion        (Gwh)        (Gwh/Rs        (Es billion       (Gwb)        (Gwh/Rs        (Rs billion       (Gwh)         (Gwh/Rs
at 1960/61                     billion)       at 1960/61                      billion)       at 1960/61                     billion)       at 1960/61                      billion)
prices)                                       prices)                                        prices)                                       prices)
Agriculture         68.3            833           12.2            64.8            1892           29.2            85.5           4470           52.3             90.1           8721            96.8
1/
Industry            26.8         12696           473.7            37.4          22609           604.5            45.3         34926           771.0            52.7           44225           839.2
Other               38.2          3424            89.6            50.1           5967           119.1            62.1           9675          155.8            77.4           13957            180.3
Total              133.3         16953           127.1           152.3          30468           200.1           192.8         49071           254.5           220.2           66903            303.8
1/
Including captive generation in electricity consumption figures.
Sources: CR, NA



TIE DECOMPOSITION OF CHANCES IN ELECTRICITY CONSUMPTION BY SECTOR: 1960/61 - 1975/76
(Gwh)
1960/61 - 1965/66                                    1965/66 - 1970/71                                      1970/71 - 1975/76                                      1960/61 - 1975/76
Change in                                              Change in                                              Change in                                                Change in
Electricity                                            Electricity                                            Electricity                                              Electricity
Change                      Coefficient                Change                       Coefficient               Change                      Coefficient                  Change                       Coefficient
in Value   Change in        Applied tE                 in Value   Change in         Applied to                in Value   Change in        Applied to                   in Value   Change in         Applied to
Added       Electricity   Value Added    Total    Added             Electricity   Value Added   Total    Added            Electricity   Value Added          Total    Added         Electricity    Value Added   Total
Alone       Coefficient   Change             Change   Alone         Coefficient   Change            Change   Alone        Coefficient   Chang.               Change   Alone         Coefficient   Change            Change
Agriculture        -43          1161             -60         1059          604          1497            478          2578        241          3805             205            4251         266          5778             1844         7888
(-0.3)        (8.6)          (-0.4)         (7.8)       (3.2)         (8.0)           (2.6)       (13.9)       (1.1)       (17.7)            (1.0)         (19.7)       (0.5)         (11.6)           (3.7)       (15.8)
Industry          5021         3505            1386          9913         4776         6227            1315        12317        5705          3089             505            9299      12269           9795            9466        31529
(37.2)       (25.9)          (10.3)        (73.3)      (25.7)        (33.5)           (7.1)       (66.2)      (26.5)        (14.3)           (2.3)          (43.2)     (24.6)         (19.6)          (19.0)       (63.1)
Other             1066          1127            351          2543         1429         1839             440          3708       3251          3066            1671            7990       3512           3465            3555        10533
(7.9)        (8.3)           (2.6)       (18.8)        (7.7)         (9.9)           (2.4)       (19.9)      (15.1)       (14.2)            (7.8)         (37.1)       (7.0)          (6.9)           (7.1)       (21.1)
Total             6044          5793            1677        13515         6809         9563            2233         18603       9197          9960            2381           21540      16047          19038           14865        49950
(44.7)       (42.9)          (12.4)       (100.0)      (36.6)        (51.4)          (12.0)      (100.0)      (42.7)       (46.2)           (11.1)        (100.0)      (32.1)         (38.1)          (29.8)      (100.0)
Source: Annex 1,1.3



GROWTH OF NDP AND ELECTRICITY CONSUMPTION
IN THE NORTHERN REGION
Pumpset               Electricity Consumption                                  Net Domestic Product
Electri-       Agri-                                                  Agri
Year        fication      culture    Industry   Services         Total           culture      Industry   Services          Total
('000)         --…------ Gwh ---              ------                          (Rs. Million 1960/61 prices) ----
1960/61         23.11/         285        1069         735         2089             18690          3230       11290         33210
1961/62         2 8. 5-1       346        1892         860         3098             19190          3450       11870         34510
1962/63         35.11/         332        2407        1069         3808             18440          3620       12300         34360
1963/64         43.21'         300        3428        1072         4800             17470          3760       12650         33880
1964/65         53.21/         351        3801        1153         5305             20320          3970       13650        37940
1965/66         65.6          554         3932        1172         5658             18510          4200       14000        36710
1966/67         95.41/         679        4518        1356         6553             17800          4370       14070        36240
1967/68        138.81         657         4584        1875         7116             21720          4100       14750        40570
1968/69        201.9 /        1110        5877        1795         8782             19800          4530       15150        39480
1969/70        253.1-         1333        6436        2016         9785             22590          5050       16260        43900
1970/71        317.2-         1614        5693        2123         9430             25150          5230       17400        47780   x
1971/72        397.5-         1797        6128        2199        10124             22690          5430       18010        46130
1972/73        498.2          2194        6274        2421        10889             22730          5640       18870        47240
1973/74        567.3          2383        6194        2623        11200             23060          5830       19520        48410
1974/75        611.8         2830         5771        2780        11381             23350          6100       19580        49030
1975/76        653.8          3576        7408        3482        14466             26120          6750       20970        53840
Annual
Growth
Rate
10
1960/61        31.1%         17.0%       19.9%        11.8%       17.1%             0.7%           4.3%        3.7%        2.2%    H
1960/61        25.0%          18.4%       13.8%       10.9%       13.8%             2.3%           5.0%        4.2%        3.3%
-19 75/76
1/ Estimated.
Note:  The data are for Haryana, Jammu and Kashmir, Rajasthan, Delhi and Uttar Pradesh.  Himachal Pradesh is excluded
for lack of data on the level of economic activity there.
Sources:   GR, RBI



GROWTH OF NDP AND ELECTRICITY CONSUMPTION
IN THE WESTERN REGION
Pumpset              Electricity Consumption                              Net Domestic Product
Electri-      Agri-                                           Agri-
Year        fication      culture    Industry   Services       Total      culture      Industry   Services       Total
('000)     ……--------------- Gwh ---…………-----                         (Rs. Million 1960/61 prices) ----
1960/61        16.0           39        2960        1111        4110        14830          6230       10610       31670
1961/62        21.31/         60        3534        1222        4816        14430          6690       11200       32320
1962/63        28.41/         71        3878        1332         5281       14100          6850       11660        32610
1963/64        37.81/         72        4432        1159         5663       14840          7370       12340        34550
1964/65        50.31/        137        4933        1653         6723       15600          7880       12910        36390
1965/66        67.0          202        5587        1755         7544       12070          8320       13190       33580
1966/67        95.1 -        325        6082        1952         8359       12300          8720       13750        34770
1967/68       135.01/        398        6789        2325         9512       15550          8900       14330       38780
1968/69       191.7          610        6841        3191        10642       14220          9010       15440       38670
1969/70       243.41/        714        8497        2583        11794       15130          9820       15820       40770
1970/71       308.91/        826        9184        2845        12855       16540         10260       16740       43540
1971/72       392.21/        920        9907        3226        14053       16780         10710       17600       45090
1972/73       497.8         1239       10491        3330        15060       19480         11400       17890       41770
1973/74       560.9         1242       10898        3261        15401       15980         11880       18920       46780
1974/75       627.9         1839       11489        3617        16945       15420         11960       19310        46690
1975/76       680.7         1842       12032        4017        17891       19200         12300       20670       52170
Annual Growth Rates
1960/61-
1968/69     36.4%         41.0%       11.0%        14.1%     12.6%        -0.5%          4.7%        4.8%          2.5%    X
1960/61-                                                                                                                     I
1975/76     28.4%         29.37        9.8%         8.9%      10.3%        1.7%          4.6%        4.5%          3.4%
Note:  Data are for Gujarat, Maharashtra and Madhya Pradesh.
Sources:  GR and RBI



GROWTH OF NDP AND ELECTRICITY CONSUMPTION
IN THE SOIJTHERN REGION
Pumpset              Electricity Consumption                                   Net Domestic Product
Electri-       Agri-                                               Agri-
Year       fication      culture    Industry   Services        Total          culture      Industry   Services        Total
('000)       …----------------- Gwh --…--------------            ------- (Rs. Million 1960/61 prices) -----
1960/61      155.2            485       2431         742         3658           17970         3500       10470         31940
1961/62      184.0-- -        553       2686=-       995         4214           18120         3810       11020         32950
1962/63      218.1 /          662       2968 2/      864         4512           18220         4030       11420         33670
1/                       2/
1963/64      258.5            747       3280-/       951         4978           18410         4350       12120         34880
1964/65      306.1/           867       3624-2/     1144         5635           19310         4680       12530         36520
1965/66       363.2 /        1082       40052/      1315         6402           17070         4990       13030         35090
1966/67      438.5-          1029       4560='      1247         6836           18160         5130       13610         36900
1/                       2
1967/68      529.3-         1425        5191-       1627         8243           18990         5360       14780         39130
1968/69      639.0           1631       5910        1686         9227           18400         5640       15580         39620
1969/70      691.5-          1606       6893        1874        10373           19280         6020       16110         41410
I/
1970/71      748. 3-         1903       7738        2196        11837           21510         6380       16820         44710
1971/72      809.91/         2179       8421        2199        12799           22000         6720       17640         46360
1972/73      876.4           2333       8141        2212        12686           20750         7030       17880         45660
1973/74     1170.6           2543       8315        2552        13410           22800          7160      19320         49280
1974/75     1241.1           2920       8196        2580        13696           22060         7680       19600         49340
1975/76     1309.2           2744       9760        2906        15410           24160         8130       20350         52640
Annual
Growth
Rate
1960/61      19.4%          16.4%      11.7%       10.8%         12.3%           0.3%         6.1%        5.7%           2.7%
-1968/69
1960/61      15.3%         12.2%        9.7%        9.5%         10.1%           2.0%         5.8%        4.5%            3.4%
-1975/76
_/ Estimated.
2/ Tamil Nadu data was not available for industry for these years;
Therefore we have estimated these values to fit log linear trends between the available
more comprehensive observations of other years.
Note: Data are for Andhra Pradesh, Karnataka, Kerala and Tamil Nadu
Sources: GR and RBI



GROWTH OF NDP AND ELECTRICITY CONSUMPTION
IN THE EASTERN REGION
Pumpset              Electricity Consumption                               Net Domestic Product
Electri       Agri-                                                Agri-
Year        fication      culture    Industry   Services       Total          culture      Industry   Services         Total
(000)       ------------------- Gwh ----------------             ------- (Rs. Million 1960/61 prices) -
1960/61         3.3           20         3042        860         3922           13040          4730       9290         27060
1961/62         4.21          24          3274       945         4243           13260           4790      9630          27680
1962/63         5.41/         26         3826       1137         4989           13070           5470     10110          28650
1963/64         6  1/         24         4570       1234         5828           13930           5960     10240          30130
1964/65         8.71/         26         4979       1415         6420           14470           6320     11030          31820
1965/66        11.1           35         5289       1651         6975           13280           6710     11300         31290
1966/67        1    /8.5      58         5271       1839         7168           12020           6510     11420          29950
1967/68        31.0           75         5583       1847         7505           13760           6170     11310          31240    m
1968/69        51.7           86         5076       3367         8529           14310           6370     11730         32410
1969/70        59.71/         93         5146       3298         8537           14580           6830     12090          33500
1970/71        69. 01"/      101          6653      2185         8939           15510           6700     12300          34510
1971/72        79.71-         81         6969       2280         9331           15730           6810     12760          35300
1972/73        92.0          119          7097      2386         9602           15280           7030     12810          35120
1973/74       106.2          112         6883       2314         9309           15520           7820     12800          36140
1974/75      115.2          124           7035      2450         9609           15610           8030     13080          36720
1975/76       133.3         515          8642       2721        11363           16640           8010     13330          37980
Annual Growth Rates
1960/61 -
1968/69    39.5%        20.6%           7.7%     15.6%        10.0%            0.4%          4.1%        3.0%          2.0%
1960/61 -
1975/76    31.1%        29.8%         16.0%       9.9%         6.9%            1.6%           3.1%      2.3%           2.3%   X
1/  Estimated                                                                                                                    X
Note: Data are for Bihar, Orissa and West Bengal.
Sources: GR and RBI



GROWTH OF NDP AND ELECTRICITY CONSUMPTION IN THE NORTH EASTERN REGION
Pumpset               Electricity Consumption                               Net Domestic Procuct
Electri-      Agri-                                                Agri-
Year         fication    culture        Industry   Services    Total           culture    Industry   Services         Total
(°000)      ______-------  Gwh ---------- …-------               ----- (Rs. Million 1960/61 prices)…
1960/61           -            -            12          19           31          1920          640          920         3480
1961/62           -            -            15          20           35          1900          690        1040          3630
1962/63           -            -            18          22           40          1890          750        1140          3780
1963/64           -            -            23          28           51          1880          810        1250          3940
1964/65           -            -            31          31           62          1870          880        1340          4090
1965/66           -            -            24          36           60          1870          960        1440          4270
1966/67           -            -            42          48           89          1990         1020        1400          4410
1967/68           -           0.0           47          65          112          2060         1080        1420          4560
1968/69          0.1          0.4           99          95          194          2160         1150        1410          4720
1969/70          0.2          0.4          139         119          258          2250         1220        1410          4880   w
1970/71          0.31/        0.3          164         129          293          3210         1300        1440          5050
1971/72          0.4 1!       1.0          212         143          356          2360         1310        1550          5220
1972/73          0.7          2.0          240         167          409          2670         1360        1600          3650
1973/74          0.7          2.0          192         226          420          2720         1400        1750          5870
1974/75          0.9          5.0          199         256          460          2700         1510        1960          6170
1975/76          1.0          6.0          241         272          519          2810         1570        2110          6490
Annual Growth Rates
1960/61-1968/69  n.a.         n.a.        30.2%       22.3%         25.8%        1.5%         7.6%          5.5%        3.9%    '
z
1960/61-1975/76  n_a.         n.a.        22.1%       19.4%         20.7%        2.6%         6.2%         5.7%         4.2%    x
I/  Estimated
Note:  Data are for Assam and Manipur only.  Data on NDP are not available for the other states in the North
Eastern Region for this period.
Sources: GR and RBI



ELECTRICITY CONSYTP'TION AND VALUE ADDED BY REGION AND BY SECTOR (UTIJITTIES ONY) : 1975/76
Absolute Amounts                                    Percentage Distribution
Agriculture      Industry      Other      Total         Agriculture       Industry      Other      Total
Value-added
(Rs billion -
1960/61 prices)
Northern Region               26.1              6.8         21.0      53.8              29.4           18.4          27.1       26.5
Western Region                19.2            12.3          20.7      52.2              21.6           33.4          26.7       25.7
Southern Region               24.2             8.3         20.4       52.6              27.3           22.4         26.3        25.9
Eastern Region                16.4             8.0         13.3       38.0              18.5           21.6         17.2        18.7
North Eastern Region           2.8              1.6          2.1        6.5              3.2            4.3           2.7        3.2
Total                      88.7            37.0         77.5      203.1            100.0           100.0        100.0      100.0
Electricity Consumption
(Gwh)
Northern Region               3576            7408          3482     14466              41.2           19.5          26.0       24.3
Western Region                1842           12032         4017      17891              21.2           31.6          30.0       30.0
Southern Region               2744            9760         2906      15410              31.6           25.6         21.7        25.8
Eastern Region                 515            8642         2721      11363               5.9           22.7          20.3       19.0
North Eastern Region             6             241           272      519                0.1            0.6           2.0        0.9
Total                      8683           38083        13398      59649            100.0           100.0        100.0      100.0
Source: Annexes 1.1.5-I.1.9



TIlE DECOMPOSTTION OF CHANGES IN ELECTRICITY CONSUMPTION BY REGION  ('TILITIES ONEY   196(/61-1975/76
___________     1960/ 61                             _____      _1 97 5/76                                      - -1960/61-1975/76                            ___________
Change in Elec-
Electricity                                               Electricity          Change in         Change in       tricity Coefficient
Electricity       per unit of                             Electricity        per unit of        Value Added        Electricity        Applied to Value          Total
Value Added       Consumption        Value Added          Value Added        Consumption       Value Added            Alone           Coefficient          Added Change            Change
(Rs billion           (Cwh)            (Cwh/Rs            (Rs billion           (Gwh)             (Cwh/Rs
at 1960/61                            billion)            at 1960/61                            billion)
prices)                                                   prices)
Region
Northern              33.2             2089                62.9                 53.8              14466             268.9              1296               6839               4244                   12377
(2.7)             (14.5)                (9.0)                (26.3)
Western               31.7             4110               129.7                 52.2              19200             367.8              2659               7548                4881                  15090
(5.6)             (16.0)              (10.4)                 (32.0)
southern             31.9              3658               114.7                 52.6             15410              293.0              2374              5688                3691                   11752
(5.0)             (12.1)                (7.8)                (24.9)
Eastern               27.1             3922               144.7                 38.0              11363             299.0              1577               4182                1682                   7441
(3.3)               (8.9)               (3.5)                (15.9)
North Eastern          3.5                31                8.9                  6.5                519              79.8              2(7                 248                 213                    488
(0.1)               (0.5)               (0.5)                 (1.0)
TOTAL-               127.4            13810               108.4                203.1             60958              300.1              1933             24505               14711                   47148
(16.8)            (52.0)              (31.2)                 (100.0)
1/  Totals do not correspond exactly to all India data, because certain states -- Manipur and Tripura in the North Eastern
Region -- have not been covered in Annexes I.1.5-T.1.9.
Source: Annex 1.1.10



_ 85 -
ANNEX I.1.12
Page 1 of 3
THE MOVEMENT OF ELECTRICITY INTO RURAL MANUFACTURING
THE EVIDENCE OF THE CENSUSES
There has been a marked increase in the proportion of industrial estab-
lishments using electricity in rural areas. While the general phenomenon of rural
electrification is readily apparent from data on agricultural use, pumpset and
village electrification, it is not widely recognised that a significant part of
this shift has affected rural industry. The census data for 1960 and 1970 show
that the proportion of rural establishments using electricity throughout India
increased from 1.2% to 5.4% over this period, compared with an increase from
14.1% to 18.9% in the comparable urban figures (Table 1).
There are certain difficulties in using the census data in this way. First,
the character and size of different establishments is not reflected in these
statistics: the larger establishments are likely to constitute a higher proportion
of urban establishments than rural. Second, the census does not cover all house-
hold and factory enterprises: establishments below a certain size are not included,
with the result that the proportion of establishments using electricity will be
over-stated, especially in rural areas. Third, the definition of what constitutes
rural areas is not necessarily comparable with the areas covered by rural electri-
fication schemes. Moreover, between censuses an area which was formerly classified
rural may develop to such an extent that it is re-classified by the time of the
second census as urban.
Despite all these caveats the evidence from the census is at least highly
suggestive. In 1960 there were only four states where more than 6% of rural



-  86  -                   ANNEX I.1.12
Page 2 of 3
establishments used electricity (Table 2). These were Kerala in the Southern
Region and Punjab, Haryana and Himachal Pradesh, taken together, in the Northern
Region. These four states had fairly high percentages of urban establishments
using electricity, but so did Gujarat, Maharashtra, West Bengal, Karnataka,
Andhra Pradesh, Rajasthan and Jammu & Kashmir, with over 10% of their urban in-
dustrial establishments electrified. These seven states had only one or two per-
cent of their rural establishments electrified.
By 1970, the number of states that had reached the point where about 10%
of their rural establishments used electricity, had increased and included Maha-
rashtra, Gujarat and Karnataka. While the proportion of establishments using
electricity in urban areas did indeed rise in almost every state between 1960 and
1970, the rate of increase is more modest. The exception was West Bengal, perhaps
reflecting the depressed state of the electricity supply industry and of the Eastern
Region economy as a whole.
The most important industry groups using electricity in 1960 in rural areas
were food products, petroleum and coal products, and machinery (Tables 1 and 3).
These three industries all show about 5% of establishments using electricity in
urban areas but the proportion of electricity-using establishments in these indus-
tries was high. But it is also high in other chemicals, paper products and petro-
leum and coal products both increased the proportion of establishments using elec-
tricity. The proportion for machinery appears to have declined in both rural and
urban areas, which is surprising. It seems likely that some marginal redefinition
of this particular industry may account for this decline in electricity use. In
rural areas paper products emerged as the leading industry in terms of electricity
use by 1970. This contrasted with its ranking as the third most electricity using
industry in urban areas.



-  87  -               ANNEX 1.1.12
Page 3 of 3
While, in general, the rate of increase in the proportion of rural
establishments using electricity was rapid over this period, and while it was
spread geographically among the major regions of India, it seems to have been
confined to relatively few industries.



THE PERCENTAGE DISTRIBUTION BY INDUSTRY OF ESTABLISHMENTS USING ELECTRICITY:
1960 and 1970
Rural                        Urban                             Total
1960          1970           1960           1970                1960      1970
Food Products                         4.8           22.4           32.1          43.8                11.6       28.6
Beverages and tobacco products        0.4            0.3            7.2           2.2                 2.0        0.8
Cotton textiles                       0.3            1.1            8.3          11.3                 2.7        4.7
Wool and synthetic textiles           1.6            1.1           12.2           32.9                2.8       12.5
Jute textiles                         1.0            0.6           15.0            8.2                3.5        1.8
Textile products                      0.3            0.4           4.9             3.3                2.4        1.6
Wood products                         0.4            1.6           13.0            4.7                2.4        4.4
Paper products                        9.6           30.4           41.6          49.4                39.3       48.0
Leather and fur products              0.1            0.1            1.1           1.3                 0.3        0.3
Petroleum and coal products          10.8           21.2           35.6          51.2                29.7       45.2
Other chemicals                       4.1            6.1           23.6          17.6                16.4       12.8
Non-metallic mineral products         0.4            0.6            7.3            7.5                1.2        1.5
Basic metal and metal products        0.4            1.5           20.8          29.2                 5.1       10.2
Machinery                            32.7           14.5           67.7          66.9                64.4       51.6
Transport equipment                   2.0            4.8          12.2           47.0                 9.0       29.5
Other                                 0.4            1.5            6.4           9.2                 3.2        5.4
Miscellaneous                          -             2.6             -           11.7                  -         8.4
Total                              1.2           5.4           14.1           18.9                 5.0      10.1   X 1H
Source: 1960 and 1970 Census of Industrial Establishments



THE PERCENTAGE DISTRIBUTION OF INDUSTRIAL ESTABLISHIMENTS USING ELECTRICITY:
1*60 gnd 1970
Rural                            Urban                             Total
State/Union Territgry          1960             1970            1960             1970             1960             1970
Northern Region
Punjab, Haryana & 1/
Himachal Pradesh-/          6.0              9.9            23.9             28.0             14.9             17.0
Jammu & Kashmir               0.5              2.9            11.3             10.8              2.4              4.8
Rajasthan                     0.7              2.3            14.0             16.5              6.3              6.9
Delhi                        neg.             29.4            51.8             34.4             51.8             34.2
Uttar Pradesh                 1.5              6.1             9.9             15.8              4.4              9.3
Western Region
Gujarat                       3.7              7.1            27.1             29.8             17.3             17.9
Madhya Pradesh                0.1              1.8             8.4             16.4              1.5              4.7    1
Maharashtra                   0.7              8.1            14.5             25.6              5.8             15.6    0
Southern Region
Andhra Pradesh                1.1              3.6            10.9             13.0              3.4              6.1
Karnataka                     3.4             10.2            13.6             17.3              8.0             13.1
Kerala                        6.2             10.5            10.9             17.1              7.8             12.4
Tamil Nadu                    4.1              8.4             8.8             11.5              6.7             10.1
Eastern Region
Bihar                         1.2              5.7             9.6             16.3              2.6              8.2
West Bengal                   1.0              2.5            23.2             18.3             10.1              9.1    3
Orissa                        0.1              1.6             4.3             12.5              0.3              3.0     x
fD H
North Eastern Region
Assam                         1.5              5.1             9.3             10.0              4.6              6.8
All other union
territories & areas         0.2             4.4              3.1             12.4              0.5              6.8
All India
1/  Including Chandigarh  /  Source:  1960 and 1970 Census of Industrial Establishments



PERCENTAGE AND ABSOLUTtE CHANGES IN THE NUMBER OF ESTABLISHMENTS
IN RURAL AND URBAN AREAS: 1960 - 1970
Increase in Electrified            Percentage of Increased
Increase in All Establishments                Establishments                 Establishments Electrified
Rural     Urban      Total            Rural     Urban      Total          Rural    lUrban       Total
Food Products              143.4       80.9     224.3             67.3       32.7     100.0           46.9       40.4      44.6
Beverages and
tobacco products           8.6     1i.7        23.3           - 0.2      - 1.8      - 2.0            -          -          -
Cotton textiles             40.8       52.9      93.7              2.7        9.7      12.4            6.6       18.3       13.2
Wool and synthetic
textiles                  10.7      14.6       25.3              0.0       5.3        5.3            0.1       36.3       20.9
Jute textiles                2.0        0.6        2.6             0.0        0.0        0.0           -          -          -
Textile products            10.0       71.2      81.2              0.5        0.6        1.1           5.0        0.8        1.4
Wood products               59.7       35.7       95.4             3.7        6.1        9.8           6.2       17.1       10.3
Paper products               1.1       15.7      16.8              0.6        9.0        9.6          54.6       57.3       57.1   0
Leather & fur products    28.2          9.4       37.6             0.1        0.1        0.2           3.5        1.1        0.5
Petroleum and coal
products                   2.2        9.5      11.7              0.5        5.2        5.7          22.7       54.7       48.7
Other chemicals              6.8        7.8      14.6              0.6        0.7        1.3           8.8        9.0        8.9
Non-metallic mineral
products                  73.7       13.1      86.8              0.7        1.0        1.7           1.0        7.6        2.0
Basic metal and metal
products                 -17.6       20.7        3.1             1.7       10.6      1.2.3           -          -          -
Machinery                   13.3       23.8        7.1             1.7       15.8      17.5           12.8       66.4       47.2
Transport equipment        -19.0     -43.1      -62.1           - 0.2      - 2.5      - 2.7            -          -          -
Other                        0.6       16.5      17.1              1.2        3.9        5.1         200.0       23.0       29.8
Miscellaneous               91.5      159.5     251.0              2.4       18.6      21.0            2.6       11.7        8.4
Residual                   125.3        0.0     123.5             17.9       14.6       32.5          14.3        -         26.3 ~
Total                    581.3     503.5    1084.8            101.2      129.6      230.8           17.4       25.8       21.3
1/ Figure inconsistent with residual of electrified establishments
Source: 1970 and 1970 Census of Industrial Establishments



-  91  -           ANNEX I.1.13
CAPTIVE GENERATION IN INDUSTRY
(Gwh)
1/                                  Captive Generation
Captive-        Purchased                     as a Percentage
Generation    From Utilities    Total               of Total
1960/61                    3000 2/          9696          12696               23.6
1961/62                    3287            11545          14832               22.2
1962/63                    3862            13110          16972               22.8
1963/64                    3659 2/         15842          19501               18.8
1964/65                    3466            17379          20845               16.6
1965/66                    3733            18876          22609               16.5
1966/67                    4048            20391          24439               16.6
1967/68                    4039            22852          26891               15.0
1968/69                    4136            25891          30027               13.8
1969/70                    4703 2/         28379          33082               14.2
1970/71                    5347            29579          34926               15.3
1971/72                    5416            31637          37053               14.6
1972/73                    5741 2/         32244          37985               15.1
1973/74                    6086 2/         32481          38567               15.8
1974/75                    6452            32690          39142               16.5
1975/76                    6657            37568          44225               15.1
1/   Gross generation in selected industries; coverage may be neither complete nor
consistent in different years.
2/   Estimated
Note:  Gross generation overstates what is used in industry because of (i) auxilliary
consumption and (ii) sales to utilities or other consumers. In the years for
which data is available, the former accounts for about 10% of gross generation,
the latter for considerably less.  Thus all that can be said with confidence
is that, in recent years, at least 10% of electrical energy used in industry is
captively generated.
Source: GR



PER CAPITA ELECTRICITY CONSUMPTION BY STATE
(KWH)
1960/61  1965/66  1971/72  1972/73  1974/75    1975/76    1976 77            1977/78-
Andhra Pradesh              19      31         57       54        62           66           77           82
A ssam                       4       8         25        27       27           28           34           36
Bihar                       42      57         65        66       71           84           89           89
Gujarat                     52      85        140      152       177          180         192           207
Haryana                    NA     NA          111       130      125          153          174          173
Himachal Pradesh           NA        9         44        49       59           61           65           55
Jammu & Kashmir             14     NA          40       40        53           58           69           65
Karnataka                   44      55        115      119       122         141          148           135
Kerala                      29      42         74       79        83           90           93          100
Madhya Pradesh              20      38         58       64        71           83           90           95
Maharashtra                 52      85        168      173       177          178         199           210
Manipur                   NA         4          5      NA          8            9           10            5
Meghalaya                 NA      NA          NA       NA         27           34           33           33
Nagaland                  NA         2         11        17       27           27           26           31
Orissa                      43      79         97        93       91          109          112          117
Punjab                      33    102         169      165       155         232          242           227
Rajasthan                   12      21         53        60       65           73           83           87
Tamil Nadu                  51      89        135      131       133          144         147           159
Tripura                    NA        3        NA       NA          6            8            8           10
Uttar Pradesh               15      30         60        64       61           73           86           82
West Bengal                 84    114         115       121      114          119          125          119
Delhi                      187    206         283      305       322         318          338           346
All India                   38      61         94        97       99          110         119           121
1'  ProvisionaL
NA = Not Available
Source: GR



NOTIFIED ENERGY RESTRICTIONS IN 1977/78
(percentages)
April         May        June        July       August      September    October    November    Decemnber    January    February           March
Northern Region
Haryana                            50-100*        25*      -           40-100*       25-50*        0-25*                                  0-40        0-40       -
Himachal Pradesh
Jammu & Kashmir                         2/                                                              *           *                    13-18*      12-18*        3-16*
Rajasthan                                         25*                                 0-10*                    0-20         0-30         10-30       10-30        10-30
Delhi                                 * 1/        *1/       0-10                                                                            10          10           10
Chandigarh                            1/2/    40-601/*
Uttar Pradesh        25-50*        25-50*      25-100*    25-100*          33*          33*       33-50*      25-50*       25-50*        25-50*      25-50*       25-50*
Punjab                                40*          40*    20-40*       20-25*        10-25*        0-25*                        *
Western Region
Gujarat
Madhya Pradesh         5-15*        5-15*       5-15*       5-l5*       5-15*         5-15*       10-15*      10-15*       10-15*        10-15*      10-15*       10-15*
Maharashtra           15-30*       10-20*      10-20*      10-20*      10-20*        10-20*       10-20*      10-20*       10-20*        10-20*      10-20*       10-20*   W
Goa                  25-40         25-40       25-40       25-40       25-40         25-40        25-40       25-40        25-40         25-40       25-40        25-40
Southern Region
Andhra Pradesh                                                          0-30*
Karnataka             25-50        25-50       25-50       25-50       25-50         25-50        10-55       10-55         10-55        10-55       10-55        10-55
Kerala
Tamil Nadu            30-40*       25-30*      25-30*
Eastern Region
Bihar
West Bengal                *            *          *            *           *
Orissa
D.V.C.               -
North Eastern Region
Asssm                 10-25*       10-25*      10-25*      10-25*      10-25*        10-25*       iO-25*      10-25*        10-25*       10-25*      10-25*       10-25*
* Demand restrictions
1/  No use of air conditioner
2/  Load shedding day to day
Note:  The fivures in this tah]e refer to the Dercentage restrictions on energy consumption in                                                                       H
different major categories of consuimer.  Thus, for example, the entry "10-55" for Karnataka                                                                  H
for December means that certain consumer groups were subject to a 10% restriction, others
to 55% restriction and yet others to levels of restriction in between.
Source: PSP



LOAD SHEDDING IN THE EASTERN REGION 1977/78 AND PART OF 1978/79
Name of State/System
Bihar S.E.B.                     D.V.C.                 West Bengal S.E.B.                  C.E.S.C.
Load Shed-    No.of           Load Shed-    No.of           Load Shed-    No.of           Load Shed-    No.of
Month           ding in MW    days            ding in MW    dCys            ding in MW    days             ding in MW    days
1977/78
April                40-180         28              n.a.           27             2-136          15              2-170         27
May                  40-180          31             n.a.           14             4-55           25              5-118         27
June                 60-180         30              n.a.          22              8-79           25             3-90           24
July                 30-200         25              n.a.          20              3-98           22             3-158          23
August               30-190         31             16-128         29              2-75           12             9-158          27
September            50-100         30             35-150--       29              3-91          24              7-125          25
October              30-200         30             50-190-        29              9-79          19             31-180          24
1/
November             30-250         30             15-19O          30             4-79           27             8-150          30
December             30-300                         n.a.          28              4-57           20            14-120          29
January              24-125         29              n.a.          28             16-117          30            28-141          29
February             60-200         28             30-120-        22             31-93           28            18-136          28
March                30-200         31              n.a.          26              6-102          31            60-180          29
1978/79
April                40-100          30             n.a.          26             22-76           26             6-165          28
May                  50-300         31              n.a.          29              2-87           26            16-200          26
June                 10-250         29              6-100         20              5-58            8             4-147          25
July                 30-230         29             13-90          12              5-76           19            15-120          29
August               20-100         29              n.a.          30             13-92           30             5-185          29    w
Memo item: The Installed
Capacity in Each System in  845                           1241.5                        619                             328
March 1978
1/ MVA rather than MW
Note (1)[he region comprises these four systems and the Orissa SEB and Dugapur Projects Limited. CESC and DPC are usually
included in WBSEB for statistical purposes, though not in this instance. The total capacity in the region in
March, 1978 was 4193.5 MW.
(2) This table indicate the number of days when shedding affected operations in these systems.
Clearly this hides any distinction between occasions when there were many disruptions in
one day or where disruptions were short and few.
Source: The Monitoring and Information Directorate, CEA



MONTHLY NET REQUIREMENTS AND AVAIIABILITY OF ELECTRICITY FOR THE FIVE REGIONS:
1977/78 and part of 1978/79
1977/78                                                            _                              1978/79
NnApril     May       June       July      August    September    October    November    December    January    February                March         April        May       June        July
Northern Region
Requirement (Gwh/day)         67.4        74.1      74.2       73.1        65.6         70.5         73.5          76.0         84.4         84.0         80.8         83.7          78.5       74.9       73.8       73.8
Availability (Gwh/day)        57.9        55.3      56.3       56.5        58.1         59.3          60.5         65.5          65.9        67.2          64.3        63.4          70.4        75.1      71.4       70.1
Deficit (Gwh/day)             -9.5      -18.8    -17.9        -16.6         -7.5       -11.2        -13.0         -10.5        -18.5        -16.8        -16.5        -20.3          -8.1       -0.2       -2.4       -3.7
Percentage Deficit           -14.1      -25.4    -24.1        -22.7       -11.4        -15.9        -17.7         -13.8        -21.9        -20.0         -20.4       -24.3         -10.3       -0.3       -3.3       -5.0
Western Region
Requirement (Gwh/day)         75.3        82.0      78.9       75.1        75.1         79.5          84.8         88.5         88.8         93.4          88.6        85.1          86.1       84.9       78.2       78.0
Availability (Gwh/day)        72.3        71.4      68.4       65.2         66.1        68.6          75.3         76.4          77.9        78.9          79.5        81.0          81.5       80.8       69.4       71.9
Deficit (Gwh/day)             -3.0      -10.6    -10.5         -9.9        -9.0        -10.9          -9.5        -12.1        -10.9        -14.5          -9.1        -4.1          -4.6       -4.1       -8.6       -6.1
Percentage Deficit            -4.0      -12.9    -13.3        -13.2       -12.0        -13.7        -11.2         -13.7        -12.3        -15.5        -10.3         -4.8          -5.3       -4.8      -11.3       -7.8
Southern Region
Requirement (Gwh/day)         69.5        66.8      67.4       67.2        68.9         68.7         69.4          70.8         70.8         72.2          77.2        78.2          77.0       74.9       75.2       75.2
Availability (Gwh/day)         56.1       50.9      54.2       59.6         60.5        63.9          57.0         54.2          62.6        65.2          69.6         72.3         68.2        64.5      68.0       66.0
Deficit (Gwh/day)            -13.4      -15.9    -13.2         -7.6        -8.4         -4.8        -12.4         -16.6          -8.2        -7.0          -7.6        -5.9          -8.8      -10.4       -7.2       -9.2
Percentage Deficit           -19.3      -23.8    -19.6        -11.3       -12.2         -7.0        -17.9         -23.4        -11.6         -9.7          -9.8        -7.5         -11.4      -13.9       -9.6      -12.2
Eastern Region
Requirement (Gwh/day)         43.2       49.8       47.0       47.5        50.4         48.3         48.4          49.6         49.6         49.6          43.8        48.2          49.5       48.9       48.7       48.7
Availability (Gwh/day)        40.1        40.0      40.4       40.3        40.5         41.9          38.5         39.1          38.2        38.9          39.6        39.7          40.4       40.3       44.1       41.3
Deficit (Gwh/day)             -3.1        -9.8      -6.6       -7.2         -9.9        -6.4          _9.9        -10.5        -11.4        -10.7          -4.2        -8.5          -9.1       -8.6       -4.6       -7.4
Percentage Deficit            -7.2      -19.7    -14.0        -15.2       -19.6        -13.3        -20.5         -21.2        -23.0        -21.6          -9.6       -17.6         -18.4      -17.6       -9.4      -15.2
North Eastern Region
Requirement (Gwh/day)          2.5         2.5       2.5        2.5          2.5         2.5           3.3          3.3           3.3         3.3           3.3          3.3          3.3         3.3       3.3        3.3
Availability (Gwh/day)          2.0        2.0       2.0        2.0          2.2         2.2           2.3          2.3           2.2         2.0           2.2          2.0           2.1        2.2       2.5         2.3
Deficit (Gwh/day)             -0.5       -0.5       -0.5       -0.5         -0.3        -0.3         -1.0          -1.0          -1.1        -1.3          -1.1        -1.3          -1.2       -1.1       -0.8       -1.0
Percentage Deficit           -20.0      -20.0    -20.0        -20.0       -12.0        -12.0        -30.3         -30.3        -33.3        -39.4         -33.3       -39.4         -36.4      -33.3    -24.2        -30.3
All India
Requirement (Gwh/day)        257.9       275.2    270.1       265.3       262.5        269.4        279.4         288.2        297.0        302.5         293.7       798.4         294.4       286.8    279.0       279.1
Availability (Owh/day)    228.2          219.6    221.3       223.6       227.5        235.8         233.6        237.5         246.8       252.2         255.2       258.4         262.6       263.2    255.5       251.7
Deficit (Gwh/day)            -29.7      -55.6    -48.8        -41.7       -35.0        -33.6        -45.8         -50.7        -50.2        -50.3         -38.5       -40.0         -31.8      -23.6    -23.5        -27.4
Percentage Deficit           -11.5      -20.2    -18.1        -15.7       -13.3        -12.5        -16.4         -17.6        -16.9        -16.6         -13.1       -13.4         -10.8      - 8.2       -8.4       -9.8
Source: PSP
LA



THE NET REQUIREMENT AND AVAILABILITY OF ELECTRICITY PUBLIC 1TILITIES ONLY: 1974/75-1977/78
(Gwh: figures in brackets are percentages)
2/
________  1974/75                                   _          1975/76                                          1976/77                                              1977/78
State Electricity           Require-            Avail-                             Require-         Avail-                            Require-         Avail-                            Require-          Avail-
Board/Utility               ment              ability          Deficit             ment           ability          Deficit       R     ent           ablity        Deficit               sent            abilit        Deficit
Northern ReRion
Haryana                     2446                635           811(33.2)            2528            2055           473(18.7)           2523            2332        191(7.6)               2804              2354       450(16.0)
Himachal Pradeah             315                280            35(11.1)             316             305            11(3.5)             336             306         30(8.9)                325               289        36(11.1)
Jammu and Kashmir            455                331           124(27.3)             484             375           109(22.5)            493             413         80(16.2)               560              541         19(3.4)
Rajasthan                   2284               2256            28(1.2)             2558            2486            72(2.8)            2861            2841         20(0.7)               3336              3008       328(9.8)
Delhi                       1700               1625            75(4.4)             1834            1795            39(2.1)            1984            1923         61(3.1)               2104              1998       106(5.0)
Chandigarh                   191                130            61(31.9)             194             166            28(14.4)            170             162          8(4.7)                186               173        13(7.0)
Uttar Pradesh               9135               7253           1882(20.6)          10080            8716          1364(13.5)          10829           10593       236(2.2)               13150             9668       3482(26.5)
P     1Jab-/                3532               2636           896(25.4)            4290            3964           326(7.6)            4511            4299       212(4.7)                5124             4163        961(18.8)
Total Northern Region   20058                 16146          3912(19.5)           22284           19862          2422(10.9)          23707           22869       838(3.5)              27589             22194       5395(19.6)
Western Region
GnJarat                     6084               5856           228(3.7)             6501            6110           391(6.0)            6793            6719         74(1.1)              7873              7761        112(1.4)
Madhya Pradesh              3460               3476            16(0.5)             4331            4100           231(5.3)            4706            4518       186(4.0)               5322              4978        344(6.5)
Maharashtra                12107              11147           960(7.9)            12984           11467          1517(11.7)          13847           13088       759(5.5)              16790             14010      2780(16.6)
Goa                          236                143            93(39.4)             238             165            73(30.7)            237             183        54(22.8)               283               198         85(30.0)
Total Western Region       21887              20622          1265(5.8)            24054           21842          2212(9.2)           25583           24508      1075(4.2)              30265             26792       3473(11.5)
Southern Region
Andhra Pradesh              4355               3269          1086(24.9)            4603            3782           821(17.8)           4757          4662           95(2.0)              5255              5012        243(4.6)
Karnataka                   6021               4635          1386(23.0)            6289            5353           935(14.9)           6952          4680         1272(18.3)             7876              5215      2661(33.8)
Kerala                      2470               2268           202(8.2)             2585            2474           111(4.3)            2704          2606           98(3.6)              2910              2853         57(2.0)
Tamil Nadu                  8656               7338         1318(15.2)             8952            7917         1035(11.6)            9026          8042          994(10.9)             9713              8965        748(7. 7)
Total Southern Region   21502                 17510          3992(18.6)           22428           19526         2902(12.9)           23439         20990         2449(10.4)            25761             22081       3680(14.3)
Eastern Region
Bihar                       2029               1797           232(11.4)            2286            2154           132(5.8)            2600          2526           74(2.8)              3710              2603      1107(29.8)
West Bengal                 4867               4068           799(16.4)            5367            4658           709(13.2)           5560          5040          520(9.4)              6183              5021       1162(18.8)
Orissa                      2261               1898       -  363(16.1)             2558            2527            31(1.2)            2698          2606           92(3.4)              2868              2719       149(5.2)
D.V.C.                      4357               4049           308(7.1)             3784            3705            79(2.1)            3989          4090        -101(-2.5)              4738              4151        587(12.4)
Total Eastern Region    13514                 11812          1702(12.6)           13995           13044           951(6.8)           14847         14262          585(3.9)             17498             14515      2983(17.0)
North Eastern Region           639                557            82(12.8)             747             635           112(15.0)            913            736         177(19.4)             1058                772       286(27.0)
Total                      77600              66647          10953(14.1)          83508           74909         8599(10.3)           88489         83365         5124(5.8)            1021,71            86357    15814(15.5)
Source:  CEA, Operations and Monitoring Information Directorate and PSP
Note:    A minus sign in one of the deficit columns denotes a surplus
1/  Including Nangal Fertilizer Plant
2/  Provisional:  Some of the changes in Availabilities and requirements at the State level between 1976/77 and 1977/78 are anamolous.  it seems unlikely that requirements might fall
- in Himachal Pradesh or increase by 25% in Uttar Pradesh. The data should therefore not be interpreted as showing any trends so much as the state of affairs in four recent years.



- 97 -
ANNEX I.3.1
ELECTRICITY PRODUCTION PER UNIT OF GNP: 1975
Electricity       Electricity Production
GNP            Production            Per Unit of GNP
(US$ millions)         (Gwh/year)              (Kwh/US$)
India                          85,965               85,926                  1.000
Nigeria                        25,600                3,211                  0.125
Egypt                           9,540               10,386                  1.089
Ethiopia                        2,730                  666                  0.244
Japan                         496,260              475,794                  0.959
Bangladesh                      7,280                1,703                  0.234
Pakistan                       11,270               10,072                  0.894
Thailand                       14,600                8,866                  0.607
Sri Lanka                       3,540                1,149                  0.325
USSR                          649,470            1,038,625                  1.599
Germany (FR)                  412,480              301,802                  0.732
UK                            211,700              272,082                  1.285
Italy                         156,590              147,333                  0.941
France                        314,080              185,312                  0.590
USA                         1,519,890            2,003,002                  1.318
Canada                        158,100              273,392                  1.729
Mexico                         63,200               43,298                  0.685
Brazil                        110,130               78,068                  0.709
Indonesia                      29,120                4,030                  0.138
Sources: World Energy Supplies: 1972-1976
World Bank Atlas, 1977



-  98  -           ANNEX I. 3.2
CRUDE ELASTICITIES OF ELECTRICITY DEMAND IN A SAMPLE OF COUNTRIES: 1970-1975
Annual Growth
Rate of Elec-
Annual Growth       tricity Con-          Elasticity
GNP per       Rate of GNP            sumption         of Electricity
Capita          1970-75              1970-75            Consumption
(US$)
India                      140             2.6                 7.1                 2.7
Sweden                    8150             2.7                 5.8                 2.2
U.S.A.                    7120             2.4                 4.1                 1.7
Canada                    6930             4.7                 5.9                 1.3
Norway                    6760             4.0                 5.8                 1.5
Federal Republic
of Germany              6670             2.1                 4.4                 2.1
France                    5950             4.2                 5.6                 1.3
Japan                     4450             5.3                 6.3                 1.2
United Kingdom            3780             2.2                 1.8                 0.8
Yugoslavia                1550             6.8                 9.0                 1.3
Brazil                    1030             9.1                11.6                 1.3
Taiwan                     930             7.7                10.4                 1.3
Thailand                   350             6.5                14.6                 2.2
Kenya                      220             5.9                14.9                 2.5
Indonesia                  220             5.9                11.7                 2.0
Sri Lanka                  190             2.8                 6.6                 2.3
Pakistan                   160             3.8                 5.3                 1.4
Afghanistan                150             4.3                11.8                 2.8
Sdurces:  1977 World Bank Atlas and U.N. Energy Supply Statistics; Series J, 1973 and 1976



-  99   -              ANNEX I.3.3
ELECTRICITY COSTS AS A PERCENTAGE OF VALUE ADDED IN INDUSTRY
Electricity Costs as
Industrial          Electricity        Average Cost          a percent of
Value Added        Consumption 2/       per kwh 1/           Value Added
(Rs millions)3/          (Gwh)               (paise)
1970/71           50,580              34,926                9.7                 6.7
1971/72           55,580              37,053                9.9                 6.6
1973/74           73,380              38,567               11.5                 6.0
1974/75           97,180              39,142              15.4                  6.2
1975/76          104,640              44,225               18.8                 7.9
Sources: 1/ Annex I.4.22
2/ Annex I.1.15
3/ January 1978 national accounts: manufacturing and mining at current prices
Note:     Data for 1972/73 is not fully available



-  100  -                 ANNEX I.3.4
ELECTRICITY CONSUMPTION IN SELECTED INDUSTRIES: SELECTED INDICATORS
1969       1970       1971        1973
Inorganic Fertilizers
- Value of electricity consumed
per unit of value added (percent)               36.9       30.0       50.8        48.5
- Value of electricity consumed per
unit of value of output (percent)                6.6        6.8         7.4        8.5
-  Unit value of electricity (paiselkwh)            4.1         5.5        6.2       11.6
Inorganic Heavy Chemicals
- Value of electricity consumed
per unit of value added (percent)               27.9       28.2       27.9        34.7
- Value of electricity consumed per
unit of value of output (percent)                7.9        8.3         8.1        9.0
-  Unit value of electricity (paise/kwh)            6.7         7.4        7.9       16.7
Synthetic Fibres
-  Value of electricity consumed
per unit of value added (percent)               12.8       12.5       10.0        11.2
- Value of electricity consumed per
unit of value of output (percent)                3.8        3.9         3.4        4.0
-  Unit value of electricity (paise/kwh)           10.3         9.3        9.5       16.2
Iron and Steel (metal)
- Value of electricity consumed
per unit of value added (percent)               18.7       17.3       22.9         NA
- Value of electricity consumed per
unit of value of output (percent)                3.5        3.4         3.5        NA
-  Unit value of electricity  (paise/kwh)           8.3         8.5        8.9       11.3
Iron and Steel (castings and forgings)
- Value of electricity consumed
per unit of value added (percent)               16.0       25.2       17.4        27.2
- Value of electricity consumed per
unit of value of output (percent)                4.2        4.3        4.3         7.2
-  Unit value of electricity  (paise/kwh)          12.4       11.9        12.4       17.3
Non-Ferrous Basic Metal (Industries)
- Value of electricity consumed
per unit of value added (percent)               21.4       23.2        36.4       41.3
- Value of electricity consumed per
unit of value of output (percent)                6.2        6.2        6.9         6.8
-  Unit value of electricity  (paise/kwh)           4.1         6.4        5.6        5.9
liydraulic Cement
- Value of electricity consumed
per unit of value added (percent)               33.5       35.8        42.9       60.7
- Value of electricity consumed per
unit of value of output (percent)                6.5        8.2        8.0         9.2
-  Unit value of electricity (paise/kwh)            9.1         9.1        9.0       11.3
Note: The figures in this table that show value of electricity consumed
per unit of value added are of course higher than the value of
electricity consumed per unit of product value.
Source: Central Statistical Office



ELECTRICITY CONSUMPTION, TOTAL PRODUCTION AND ELECTRICITY CONSUMPTION/UNIT PRODUCTION
IN SELECTED MANUFACTURING INDUSTRIES: 1960/61 - 1976/77
Annual Average Rates of Growth
1960/61-    1970/71-    1960/61-
1960/61      1965/66      1970/71           1973/74      1974/75      1975/76      1976/77           1970/71      1976/77       1976/77
Electricity Consumption
Aluminium (Gwh)                                      448        1,566       3,375              2,825        2,962        3,695        4,021             22.4         3.0           14.7
Iron and Steel (Gwh)                              1,613        2,545        3,195              3,796       4,326         4,798        5,480              7.1         9.4           7.9
Cotton Textiles (Gwh)                             2,088        2,783        3,138              4,056        4,393        4,780        5,124              4.2         8.5            5.8
Fertilizers (Gwh)                                    477       1,828        2,531              3,115        3,048        4,473        4,302             18.2         9.2           14.7
Chemicals (Gwh)                                     404           642       1,614              1,545        2,028        2,338        3,108             14.9        11.5           13.6
Cement (Gwh)                                        936        1,059        1,371              1,284        1,707        1,755        2,340              3.9         9.3            5.9
Paper (Gwh)                                         508           666          899             1,059        1,188        1,272        1,335              5.9         6.8            6.2
Engineering (Gwh)                                  n.a.           298          839               651          817          898        1,117              n.a.        4.9            n.a.
Production
Aluminium  (thou2and tonnes)                          18.3         62.1        166.8             147.9        126.6        187.3        208.7           24.7         3.8           16.4
Iron and Steel -  (thousand tonnes)              10,120.0    18,130.0    17,640.0             17,230.0    18,920.0    22,800.0    25,610.0               5.7         6.4            6.0
Cotton Textiles (million meters)                  6,740.0      7,440.0      7,596.0            7,946.0      8,267.0      8,319.0      8,399.0            1.2         1.7            1.4
Fertilizers (thousand tonnes)                        150.0        344.0     1,059.0            1,379.0      1,512.0      1,855.0      2,380.01/         21.6        14.4           18.9
Chemicals (1970 base index)                        n.a.         n.a.           112.2             125.3        131.7        155.5        170.5-           n.a.        7.2            n.a.
Cement (million tonnes)                                8.0         10.8         14.4              14.7         14.7         17.2         18.8            6.1          4.5           5.5
Paper (thousand tonnes)                             350.0        558.0         755.0             776.0        836.0        836.0        891.0            8.0         2.8            6.0
Engineering (1970 base index)                      n.a.         n.a.           105.4             129.3        120.2        126.6        146.5-/          n.a.        5.6            n.a.
Electricity Consumption Per Unit of Production
Aluminium  (Gwh per thousand tonnes)                24.5         25.2         20.2              19.1         23.4         19.7         19.3             -1.9        -0.8           -1.5
Iron and Steel (Gwh per thousand tonnes)            0.2           0.1         0.2                0.2          0.2          0.2          0.2              1.4         3.0            1.9
Cotton Textiles (Gwh per million meters)            0.3           0.4          0.4               0.5          0.5          0.6          0.6              3.0         6.8            4.4
Fertilizers (Gwh per thousand tonnes)               3.2           5.3          2.4               2.3          2.1          2.4          1.8             -3.4        -5.2           -4.2
Chemicals (Gwh per unit production)                n.a.         n.a.         14.4               12.3         15.4         15.0         18.2              n.a.        4.3            n.a.
Cement (Cwh per million tonnes)                   117.0         98.1         95.2               87.4        116.1        102.0        124.5             -2.2         4.8            0.4
Paper (Gwh per thousand tonnes)                     1.5           1.2          1.2               1.4          1.4          1.5          1.5             -2.1         4.0            0.2
Engineering (Gwh per unit production)              n.a.         n.a.           8.0               5.0          6.8          7.1          7.6              n.a.       -0.7            n.a.
1/ Through October
2/ Includes pig iron, steel ingots and finished steel
Sources:  Electricity Consumption;  GR:
Production in Selected Industries; Table 1.14, the Economic Survey 1977/78
n.a.  =   not available
Note: The data are subject to the qualification that the vategorization of production used by the State Electricity Boards
in collecting the electricity consumption figures is not necessarily strictly compatible with the Economic Survey
categorization.



-  102  -                ANNEX I.3.6
Page 1 of 3
THE USE OF AN INPUT/OUTPUT MODEL TO GAUGE ELECTRICITY-INTENSITY
The estimates in Table 1 of this Annex are based on the input/output model for the
Fifth Five-Year Plan. This model may be summarized in a single equation as:
X= <k-I)yX+F                                                 (1)
where            =< XC0)               gross output vector,
A                 =      the technical production
coefficient matrix,
tf - ?¶ C   ij)    =  the coefficient matrix of
intermediate imports,
F =  (fc;)      =      final demand (net of imports);
that is the sum of consumer,
government, exports, investment
and stock change demands.
Thus, equation (1) states that the gross output X is divided between final
demand F and direct and indirect inputs 1P a           (;)_ ( P -ti)x.   Equation (1)
implies that                                    X                                  CL)
LAW          a =  (la j) -- F- - CA  _M)]-'
We may use equation (2) to express P  as a function of F  , for equation (1)
can be rewritten:
p  = X-F    F-F w (t)                                       Cu)
To produce   =cj I Cij XS o    imust be used and since    o CLj wJ
is the value of all inputs,  value-added           -  v    is given by:
V ;= j Z        2     G*j Xj e                              (Ij



-  103  -                 Annex I.3.6
Page 2 of 3
Thus:                C W. =   0
~~~~~ ;T
~ (A   'a                                      (V8+ k=  .2)
Now, there are two ways to estimate the change in power input (subscripted e)
associated with the change in value added in a given sector. In the partial
equilibrium approach, what happens to final demand (and hence price changes
that would be needed to continue to absorb the surplus produced in demand) is
ignored and the definition of  e   is derived from an expression for   b
Thus:                *a  =         -   
implies                             ev I   VV%
But                             Z ea
_    ha)  "'Cj )   -   .0L4)  (from 5.1 and 5.2)
- e j    -S c sQ,j)(6)
because no electricity is imported.
Alternatively, using a general equilibrium approach, and keeping final demand
unchanged, except for a small change in one component,          , one may argue that
(  )implies        +           e        ^
where  Wet is the Kronecker delta,
and (2) implies a
o W



-  104  -            ANNEX 1.3.6
Page 3 of 3
These statements in turn mean that a change  dL L will lead to a change
and    Ck Pe    (6et '-      t ) a' 
Thus,         d         6 et   L beL dx; Xi                                         (7)
6; L
(5.1)and (5.2) imply that   JcT. will be associated with a change  dv;
given by              ckVj    (b           a    ) tV                                   ()
Thus, (7) and (8) imply
dv; \13l 6. L             S,.aj
If only   - ; changes, that is if  j -            , this becomes
at Pe  _  6o ej         e-j                                 (e
In Table 1 column (3) is           C      , column (4) is  Vj /C;
column (5) is   I        '.  j _                 ,  column (6) is
column (7) is  c e/    as defined in equation (6) above and column (8)  is
J\ pe      as defined in equation (9) above.
a V



Coefficients of Power Intensity in a Sample of Sectors
Electricity   Electricity   Value           Gross Output  Electricity    Electricity Input
Input Per     Input Per      Added Per       Per Rupee    Input Per       Per Rs 100 of
Sector                 Subsector                  Rs 100 of      Rs 100 of     Rupee of        of Final      Rs 100 of       Value Added
Gross Output  Final Output  Cross output   Output         Value Added1,  (General)  i
_____________  ________  -____________ __________ _  j 'artial)  -
(1)                     (2)                       (3)            (4)           (5)            (6)            (7)              (8)
Agriculture       -  1.  Foodgrains                             1.09          1.85          0.780          1.060          1.40              2.24
2.  Jute, Cotton, Sugarcaue,Etc.           0.36         0.69           0.775          1.168          0.46              0.76
Mining           -  6.  Coal                                    2.82         3.71           0.873          1.009          3.23              4.21
7.  Misc. Coal & Petroleum Prods.          1.60         3.42           0.494          1.022          3.24              6.77
8.  Iron Ore                               1.82         2.55           0.861          1.000          2.11              2.96
9.  Crude Oil                              1.53         2.10           0.945          1.001          1.62              2.22
Manufacturing    - 15.  Cotton Textiles                         1.65         2.97           0.392          1.027       f  4.21              7.38
20.  Paper & Paper Products                 5.07         7.92           0.167          1.019         30.36             46.54
23.  Fertilizers                            7.43        11.15           0.374          1.057         19.87             28.21
24.  Inorganic Heavy Chemicals              5.89         8.56           0.466          1.049         12.64             17.51
25.  Organic Heavy Chemicals                1.01         2.66           0.417          1.016          2.42              6.28
26.  Plastics                               3.85         6.26           0.353          1.035         10.91             17.13
30.  Petroleum Products                     0.03         0.61           0.158          1.004          0.19              3.85
31.  Cement                                 0.70         2.16           0.434          1.001          1.61              4.98
34.  Iron and Steel                         1.99         4.08           0.416          1.209          4.78              8.11
35.  Non-ferrous Metals                     2.64         5.29           0.388          1.363          6.80             10.00
42.  Machine Tools                          1.79         3.22           0.541          1.000          3.31              5.95
53.  Motor Vehicles                         0.24         1.59           0.318          1.578          0.75              3.17
56.  Locomotives & Rolling Stock            1.95         3.90           0.408          1.058          4.78              9.03                   1
Electricity      - 62.                                         18.44        23.13           0.514          1.231         35.88             36.56
Construction     - 63.                                          0.55         1.95           0.485          1.018          1.13              3.95                  F-
Railways         - 64.                                          4.48         5.91           0.692          1.005          6.47              8.50
Other Transp.    - 65.                                          0.00         0.10           0.892          1.009          0.00              0.11
Services         - 66.                                          0.44         0.61           0.953          1.021          0.46              0.63
Source:  Technical Note to the Fifth Five-Year Plan; Planning Commission April 1973.
1/  (7)  -  (3)      (5) ; (see Annex I.3.6)
2/  (8)  -  (4)  *  ((5)  x  (6) ) ;   (see Annex I.3.6)



THE KA.NUFACTURING SECTOR IN INDIA - INTEPNATIONAL COMPARISONS OF POWER INTENSITY:  1968
Share in i4anufacturing                Electricity Consumption per
Value-Added                           unit or Value-Added
--__ ___ __  ___ ___ _ __ Evidence    of   Struc-
Indian                                   Tndian            tural (S) or Internal
Tneian          Value as /                 .lue as                              (I) Reasons for
Percentages        of Avera                Indian           of Aver,ge.           Power Intensity
(Kwh/UJSS)
(1)                (2)                    (3)               (4)                        (5)
Food Products                   12.30              42.6                   1.850            151.6                    S       I
Textiles                        22.29             204.7                   5.047            246.2                   S        1
Clothing & Footwear              0,3)                7.9                 0.742             153.0                    s       I
Leather Products                 0.39               96.3                 0.244              23.2
Wood Products                     1.07              22.2                  0.997             95.9                   S
Paper Products                    2.14              70.6                 11.514            163.9                            I
Printing                          2.62              68.1                 0.711             149.4                   S        I
Chemicals                       15.C4              129.9                 8.196             170.4                   S        I°
Rubber Products                   2.46             110.8                 2.245             146.9
Non-metallic Minerals
lndustries                   4.05              69.6                  8.490            184.6                   S        I
Basic Metals Industries         11.98              208.0                 9.166              81.6                  S
Metal Products                   23.44             127.3                 1.472              91.6                  S
Miscellaneous                     1.91              39.6                 1.059              72.5                  S
Total Manufacturing            1i0 90                                    4.615            173.9
Notes:  1.  The last r1-" (clumns, under heading (5), interpret the rest of the table.  If the values in column (2) are
greater tY-ti-; !.0.0 and in (3) greater than 5.0 or if the values in (2) are less than 80.0 and in (3) less
than 4.0, ',i. is denoted by S in column (5).  If the values in (2) are less than 80.0 and in (3) greater
than 5.0 or in (2) greater than 120.0 and in (3) less than 4.0, this is denoted by S in column (5).  If the
value in column (4) is greater than 125.0, this is denoted by I in column (5).
2.  Both interntional samples were as large as possible and sample size was constrained primarily by the avail-
ability of data.
Source:      Centril Statistical Office and World Ban'- Research Project: "Patterns of Industrial Development".



-  107  -            Annex I.3.8
1/
ANDHRA PRADESH: STAND-BY DIESEL SETS INSTALLED IN 1978-=
Installed Capacity
Capacity Range                        in each Range
(KVA)                                   (KVA)
Less than 9                                  345
10-24                             1726
25-49                             1809
50-99                             2212
100-199                            7106
200-399                            2781
400-599                            2415
600-999                               0
1000                                  0
All ranges                         18394
1/ Installation of captive plant permitted in an eight month
period in 1978.
Souce: Andhra Pradesh State Electricity Board



ELECTRICITY TARIFFS FOR SEBs FROM 12-31-72 to 12-31-76: ANDHRA PRADESH
(energy charge and tariff are in paise/kwh and demand charge and minimum charge are in rupees)
Domestic           Industrial L.T.        Industrial H.T.        Agricultural         Public Lighting           Commercial
End of 1972
First 50 Kwh        First 500 Kwh          Demand Charge                 16                                    Demand Charge
35                  22               First 500 KVA         Minimum Charge                 24             First 500 KVA
Next 50 Kwh         Balance                  Rs 15/KVA/mo.         60/HP/year           plus Rs 1.8/mo/          Rs 18.75/KVA/mo
27                  20               Next 1500                                       fixture              Next 1500
Balance             Minimum Charge           Rs 14/KVA mo.                                                       Rs 17.50/KVA/mo
22            Rs 7/KW/mo.            Balance                                                              Balance
Minimum Charge      Rs 7.5HP/mo for          Rs 12/KVA mo                                                        Rs 15/KVA/mo
Rs 3/mo.              rice mills           Energy Charge                                                       Energy Charge
First 50,000 Kwh                                                    First 5000 Kwh
11.5                                                                58
Next 150,000 Kwh                                                    Next 5000 Kwh
11                                                                  52
Next 300,000 Kwh                                                    Balance
10.5                                                                47
Next 500,000 Kwh                                                                          O
8.5                                                                                 X
Next 1,000,000 Kwh
8                   1
Balance 4.5/(L.F.xP.F.)-
End of 1976
First 200 Kwh             32-35            Demand Charge               16                       38                   75
40             depending on          First 1000 KVA         Fixed Charge            plus Rs 1/mo/        Minimum Charge
Balance             specific industry        Rs 21/KVA/mo          Rs 3/HP/mo               fixture              Rs 10/mo
45            Minimum Charge         Balance                Minimum Charge          Minimum Charge
Minimum. Charge     Rs 7-10/HP/no            Rs 19/KVA/mo           Rs 60/HP/mo             Rs 2/point
Rs 5/mo.                                Energy Charge
First 100,000 Kwh
21
Next 100,000 Kwh
19
Next 1,800,000 kwh                                                                  R
18
Balance   15
1/ L.F.   Load Factor, P.F. - Power Factor; this rate or 8 paise/Kwh was charged, whichever was less.
-RB



- 109 -
ANNEX 1.4.2
ELECTRICITY TARIFFS FOR SEBs FROM 12-31-72 to 12-31-76: ASSAM
(energy charge and tariff are in paise/kwh and demand charge and minimum charge are in rupees)
Domestic            Industrial L.T.         Industrial H.T.         Arctural             Public Lighting           Commercial
End of 1972
For lights and fans  First 5000 Kwh          For demand 100 KVA           17                     34             For lights and fans
40                  16                   - 500 KVA                Minimum Charge                                   43
For heat and small  Next 5000 Kwh           Demand Charge              Rs.36/KW/year                           Heat & Small Power
power      15                    First 100 KVA                                                            28
22                Balance 14               Rs 13/KVA/mo.                                                   Cold Storage
Minimum Charge       Minimum Charge         Next 200                                                                  15
Rs. 3/kw/month       Rs 5tkw/month             Rs 12/KVA/mo.                                                   Minimum Charge
Balance                                                             Rs 10/KW/mo.
Rs ll/KVA/mo.
Energy Charge
First 50,000 Kwh
9
Next 50,000 Kwh
8
Balance 7
Minimum Charge
Rs 7/KVA/mo.
For demand greater
than 500KVA
Demand Charge
First 500 KVA
Rs ll/KVA/mo.
Next 500 KVA
Rs 9/KVA/mo.
Next 1,000 KVA
Rs 8/YVA/mo.
Balance
Rs 6/KVA/mo.
Energy Charge
First 100,000 KWH
7.5
Next 200,000 Kwh
7
Next 200,000 Kwh
6.5
Next 500,000 Kwh
6.25
Balance 6
Overall  'axirum Rate
12 paise/Kwh
End of 1976
Lights, Fans        First 5,000 Kwh         Demand Charge           21                           34          Lights and fans
48                   22               First 500 KVA          Minimum Charge                                    60
Heat and Power      Balance 21                 Rs 14/KVA/month        Rs. 5 /KVA/mo.                         Heat and Power
30           Minimum Charge           Next 1,000 KVA                                                          45
Minimum Charge      Rs 10/KVA/month            Rs 13/KVA/mo.                                                 Minimum Charge
Rs 5/KW/month                              Balance                                                             Rs. 15/KW/month
Rs 12/KVA/month
Energy Charge
First 1,000,000 Kwh
18
Next 2,000,000
17
Next 2,000,000
16
Balance 15
Overall Maximum Rate
23/paise/Kwh
Source: ERB



ELECTRICITY TARIFFS FOR SEBs FROM 12/31/72 to 12/31/76 :  BIHAR
(Energy Charge and Tariff are in PaiseAcwh and Demand Charge and Minimum Charge are in Rupees)
Domestic           Industrial L.T.        Industrial H.T.         Agricultural         Public Lighting            Commercial
End of 1972
First 50 KWH             20               Demand Charge-/               18           Metered Street Lighting   First 300 KWH
30            ini     Ch           Rs 14/KVA/month                                      25                        30
Balance 35, plus  Rs 160/BHP/year         Energy Charge                               plus 50 P/lamp/month       Balance 35' plus
Fixed   Charge                                 8.5                                   Unmetered Street Light    Fixed   Charge
Rs 3/month                                                                            40 w lamp Rs 3/month       Rs 5/month
60 w lamp Rs 4/month
75 w lamp Rs 5/month
100 w lamp Rs 6/month
200 w lamp Rs 12/month
End of 1976
First 50 KWH       For consumption        Demand Charge                  3                      48               First 100 KWH       C
32           over 200/BHP          Rs 20/KVA/month                            plus Rs 1/lamp/month               42
Balance 37, plus         20               Energy Charge                                                          Balance
Fixed   Charge    For consumption         If over 340/KWH/                                                              52 plus
Rs 3/month         between 100-200/       KVA/month               Fixed Charge                                   Fixed   Charge
BHP/month                 12.5                Rs 10/BHIP/month                                Rs 30/month
22               If between 280-         for private
For consumption        340 KWH/KVA/month       tubewells
less than 100/            14.5                Rs 15/BHP/month
BHP/month             If between 220-         for state tube-
24               280 KWH/KVA/month       wells
Minimum Charge            15.5
Rs 67/BHP/month        If less than 220
KWH/KVA/month
17
1/ Other tariffs apply to other specific categories of high tension consumers.
Source: ERB



ELECTRICITY TARIFFS FOR SEBs FROM 12/31/72 to 12/31/76: GUJARAT
(Energy Charge and Tariff are in Paise/kwh and Demand Charge and Minimum Charge are in Rupees)
Domestic           Industrial L.T.        Industrial H.T.        Agricultural         Public Lighting           Commercial
End of 1972
Lights  31         First 100 BHP          Demand Charge          Fixed Charge         Fixed Charge              Lights 31
Minimum Charge    Contracted/Con-         First 500 KVA           First 5 BHP         Rs 1/pole                 Minimum Charge
Rs 1.5/month       nected Load            Rs 12/KVA/month        Contracted/Con-       plus                        15month
17.50P/KWH/month      Next 500 KVA            nected loan         Balance 20
H1eat and Power    Next 150 BHP           Rs ll/KVA/month        Rs 1.25/BHP/mo.   Minimum Energy               Heat and Power
15           16P/KWH/month         Next 4000               Next 10             Charge                           15
Minimum Charge    Balance               Rs 10/KVA/month         Rs 1.5/BHP/mo.        2200 KWH                Minimum Charge
Rs  4/month        13P/KWH/month          Balance                Next 10              Consumption/              Rs 4/month
Minimum Charge        8.5/KVA/month           Rs 1.75/BHP/mo.    KWF connected
Rs 6/BHP/month        Energy Charge           Balance 2/BHP/mo.  load
First 200 Kwh          Energy Charge
S                Balance 14
Next 150 Kwh
7.5
Next 150  Kwh
6
Balance 5
End of ]?76
Lights & fans      Demand Charge          Demand Charge          Fixed Charge        Energy Charge              same as domestic
First 40 kwh         Rs 7/KW/mo           First 500 KVA          First 5 BHP                20
31             Energy Charge           Rs 12/KVA/mo            Rs 1.25/BHP/mo  Fixed Charge
Balance   34       First 150 kwh/KW/mo  Next 500 KVA             Next 10 BHP           Rs 1/pole
Minimum Charge          15                  Rs ll/KVA/mo           Rs. 1.5/BHP/mo.
Rs 1.5/mo        Balance   10          Next 4000 KVA           Next 10 BHP
Heat & Power       Additional Charges       Rs 10/KVA/mo            Rs 1.75/BHP/mo
21              on all consumption  Balance                   Balance
Minimum Charge           11                 Rs 8.5/KVA/mo          Rs 2/BHP/mo
Rs 4/mo for                            Energy Charge           Energy Charge
single phase;                          First 200   8                 14
Rs 10/mo for                           Next 200    7           Additional charge
three phase                            Next 150    6             on all consumption
Balance      5               8
Additional Charge
8 kwh
Source: ERB



ELECTRICITY TARIFFS FOR SEBs FROM 12-31-72 to 12-31-76: HARYANA
(energy charge and tariff are in paise/kwh and demand charge and rinimum charge are in rupees)
Domestic           Industrial L.T.!/    Industrial H.T.           Agricultural         Public Lighting            Commercial
End of 1972
First 15 kwh        First 500 Kwh          Demand Charge                15              Energy Charge            First 30 kwh   37
34                  11               First 1000 KVA          Demand Charge              21.6               Next 50 kwh    21
Next 25 kwh         Next 1000 Kwh            Rs 6.5/KVA/mo           Rs 1.5/BHP/mo      Fixed Charge             Balance          16
15                  10.5             Balance                                         Rs 2.5-3/lamp/mo       Minimum Charge
Balance   13        Balance                  Rs 5.5/KVA/mo                                                         Rs 3/mo
Minimum ChALSe            9.00             Energy Charge
Rs 2/mo                                 First 1,000,000 kwh
5
Next 2,000,000 kwh
4.5
Balance   4
End of 1976                                                                                                                              H
First 15 kwh               21              Demand Charge           Demand Charge        Energy Charge            First 80 kwh   40
37              Minimum Charge         Rs15 /KVA/mo             Rs 2/BHP/mo             25                 Balance          50
Next 25 kwh             Rs 10.50/KW/mo    Energy Charge            Energy Charge        Fixed Charge
22.5                                       10                        20             Rs 3 to 4.125/lamp
Balance 31.25
Minimum Charge
Rs 2/mo
1/   Other tariffs apply to other specific categories of agricultural consumers.
2/   For small LT Industrial consumers.
>4
Source:  ERB



ELECTRICITY TARIFFS FOR SEBs FROM 12-31-72 to 12-31-76: HIMACHAL PRADESH
(energy charge and tariff are in paise/kwh and demand charge and minimum charge are in rupees)
Domestic            Industrial L.TI/        Industrial H.T.          Agricultural         Public Lighting            Commercial
End of 1972
Urban Areas           First 500 Kwh          Demand Charge            Demand Charge               14            First 30 Kwh
First 15 Kwh              11                 Rs 6.5/KVA/mo.           Rs.0.5/BHP/mo.       plus Rs 1.5/                35
34              Balance                                                               month/bulb           Next 50 Kwh
Next 25 Kwh               10                 Energy Charge            Energy Charge                                    20
15                                     First 100,000 Kwh        First 1,500kwh                            Balance   12
Balance 8                                         5.5                      9
Rural Areas                                  Next 200,000 Kwh         Balance
First 15 Kwh                                      5.25                     8
15                                    Balance   5
Next 25 Kwh                                  Overall Maximum Rate
20                                       8 paise/Kwh
Balance 8
End of 1976
First 15 Kwh          First 500 Kwh          Demand Charge            First 1,500 Kwh             25            First 30 Kwh
37                  18                 Rs. 17/KVA/mo.                 9               plus Rs 3/bulb            45
Next 25 Kwh           Next 1000 Kwh          Energy Charge            Balance   8                               Next 50 Kwh
27                  15.5               First 100,000 Kwh                                                        35
Balance 17            Balance  13                  12                                                           Balance
Next 200,000                                                             28
10
Balance
8
1/  For small industrial consumers.
Source:  ERB



ELECTRICITY TARIFFS FOR SEBs FROM 12-31-72 to 12-31-76: JAI1Th!U & KASHMIR
(energy charge and tariff are in paise/kwh and demand charge and minimum charge are in rupees)
Domestic            Industrial L.T.        Industrial H.T.         Agricultural         Public Lighting           Commercial
End of 1972'
First 50 Kwh        Demand Charge           Demand Charge              10                Energy Charge          First 200 Kwh
25              Rs. 4/KVA/mo.          Rs. 4/KVA/mo.         Minimum Charge          Rs. 1.5-9/lamp/             35
Next 50 Kwh          Energy Charge          Energy Charge             Rs. 24/H.P./year  month depending on   Next 300 Kwh
20            4 for Kashmir          2.5 for Kashmir                               wattage                      30
Balance 15           6 for Jammu            4   for Jammu                                Maintenance charge   Balance 25
Minimum Charge                                                                             Rs. 1-11 depending
Rs. 3.5-6                                                                              on wattage
End of 1976
First 50 Kwh        Demand Charge           Demand Charge              10                                      First 200 Kwh   >
28              Rs. 4/KVA/HP/mo.       Rs.4/KVA or           Minimum Charge                                      38
Next 150 Kwh         Energy Charge          HP/month                  Rs.24/H.P./year                          Balance
33              4 (Kashmir)          Energy Charge                                                               40
Balance  38            6 (Jammu)              2.5 (Kashmir)                                                    Minimum Charge
Minimum Charge                                4   (Jammu)                                                         Rs.6.75/Kw/mo.
Rs.4-6.75/mo.
Source:  ERB



ELECTRICITY TARIFFS FOR SEBs FROM 12-31-72 to 12-31-76: KARNATAKA
(Energy charge and tariff are in paise/kwh and demand charge and minimum charge are in rupees)
Domestic            Industrial L.T.        Industrial H.T.        Agricultura1         Public Lighting           Commercial
End of 1972
Lights  30                12               Demand Charge                 11                     15             First 120 kwh   40
Minimum Charge      Rs 71BHP/mo            First 500 KVA         Minimum Charge         Minimum Charge         Balance           35
Rs 2/mo                                    Rs 9/KVA/mo           Rs 36/HP/vear          Rs 30/KW of con-   Minimum Charge
Heat & Power                               Next 500   8                                   nected load            Rs 3/250 W of
12                                   Next 2000  7                                                           connected load
Minimum Charge                             Next 3000  6
Rs 8/KWI                                 Balance    5
Energy Charge
First 100 kwh 5
Next 100        4
Next 100      3.5
Balance         3
1/
End of 1976
Lights              Demand Charge          Demand  hrge          Demand Charge                                 Demand Charge
First 30 kwh          Rs lO/instal-          Rs lO/KVA/mo          Rs lO/instal-                                 Rs 3/installation/mo
30                  lation/mo           Energy Charge            lation/mo                                   Energy Charge
Balance  35 +       Energy Charge            6                   Energy Charge                                 First 30 kwh  40
15                                           15                                         Balance  50
Demand Charge                                                    Minimum Charge
Rs I/instal-      Minimum Charge                                 Rs 50/HP/year                               Minimum Bill
lation/mo           Rs 7/NHP/mo                                                                                Rs 3/installation/mo
Heat & Power
14
Demand Charge
Rs 10/instal-
lation/mo
Minimum Charge
Rs 8/KW/mo
1/ There was a 15% surcharge on both demand and energy charges in 1976 for every consumer category except
agriculture.
Source: ERB



ELECTRICITY TARIFFS FOR SEBs FROM 12-31-72 to 12-31-76: KERALA
(energy charge and tariff are in paise/kwh and demand charge and minimum charge are in rupees)
Domestic            Industrial L.T.         Industrial H.T.         Agricultural          Public Lighting           Commercial
End of 1972
First 60 Kwh         First 2,000 Kwh         Demand Charge                  9              Rs.1-603/year/bulb             38
30                     15             First 500 KVA            Minimum Charge        depending on wattage Minimum Charge
Balance 15           BAlance 14                Rs ll/KVA/mo.            Rs. 7/month        and hours of use         Rs. 6/mo.
Minimum Charge       Minimum Charge          Next 500 KVA
Rs. 4/mo.            Rs. 4/KW                Rs I0/KVA/mo.
Balance
Rs 9KVA/mo.
Energy Charge
First 50,000 Kwh
7
Next 50,000 Kwh
6.75
Next 50,000 Kwh
6.5                                                                            I
Next 50,000 Kwh
6.25
Next 50,000 Kwh
6
Next 50,000 Kwh
5.75
Balance 5.5
Minimum Charge
End of 1976                                      Rs 4/KW
First 50 Kwh         First 2,000 Kwh         Demand Charge            Single-phase          Energy Charge         Lighting
25                      15              Rs.22KVA/mo.           Fixed charge                30                   38
Next 50 Kwh          Balance 14              Energy Charge            Rs.5 meter/mo.        Fixed Charges         Minimum Charges
15            Minimum Charge          First 250KWH/KVA/mo.   Energy Charge           Rs 4.25 to               Rs.6/mo.
Balance 10             Rs.4/KW/mo.                 6                      10                  Rs 8.50 per lamp  Heat and Power
Fixed   Charge                               Next 250KWH/KVA/mo.    Three Phase                                        24
Rs.4/month                                         5                  Fixed Charge                                Minimum Charge  x
Balance   4               Rs. 10/meter/mo.                             Rs. 8/mo.
Energy Charge
10
Source: ERB



ELECTRICITY TARIFFS FOR SEBs FROM 12-31-72 to 12-31-76: MADHYA PRADESH
(energy charge and tariff are in paise/kwh and demand charge and minimum charge are in rupees)
Domestic           Industrial L.T.       Industrial H.T.        Agricultural        Public Lighting          Commercial
End of 1972
28                  15.5-/            Demand Charge               13              First 12000 kwh       Same as domestic
Minimum Charge      Minimum Charge        First 500 KW         Minimum Charge          31
Rs 2/mo             3OKwh/BHP/mo          Rs 10/KW/mo        36OKwh/BHP/year       Next 36,000 kwh
Next 1000 KW                                 29
Rs 9.5/KW/mo                             Balance 21.5
Balance
Rs 8.5/KW/mo
Energy Charge
First 50000 kwh
7.7
Next 150,000 kwh
7.5
Next 300,000 kwh
7.25
Balance  6.8
End of 1976
First 50 kwh            22                Demand Charge             16               First 12000 Kwh       Lighting   40
30             Minimum Charge        First 500 KW         Minimum Charge           37                  Minimum Charge
Balance  32           Rs 10.75/BHP/mo        13.85               Rs 3.75-6.25/mo    Next 36000 Kwh            Rs 3/mo
Minimum Charge                            Next 1000 KW         depending on BHP         34.8               Power       25
Rs6.25/mo                                  13.3                                    Balance 25.8          Minimum Charge
Balance 11.9                                                        30 Kwh/BHP/mo
Energy Charge
First 50,000 Kwh
12.2
Next 1,500,000                                                                     >
11.9
Next 3,000,000                                                                     x
11.6                                                                           H
Balance  10.95
1/  Alternative tariffs are available                                                                                            o
Souce: ERB



ELECTRICITY TARIFFS FOR SEBs FROM 12-31-72 to 12-31-76: MAHARASHTRA
(Energy charge and tariff are in paise/kwh and demand charge and minimum charge are in rupees)
Domestic            Industrial L.T.        Industrial H.T.        Agricultural         Public Lighting           Commercial
End of 1972
First 30 Kwh                18               Demand Charge                  18             Energy Charge                 35
31                  Minimum Charge        First 1000 KVA        Minimum Charge         First 200 kwh/mo/KW  Minimum Charge
Balance  25               Rs 4.95/BHP/mo        Rs 12/KVA/mo          Rs 40/BHP/year            20                  Rs 3.5/mo
Minimum Charge                                Balance                                      Balance   6
Rs 2.00                                     Rs ll/KVA/mo                                Fixed Charge
Energy Charge                                  Rs 1 lamp/mo for
First 100,000 Kwh                              street lights on
8                                         distribution lines
Next 200,000 Kwh                               Rs 2.5 lamp/mo for
7                                        street lights not
Balance  6.5                                   on distribution lines
End of 1976
I-.
Lights & fans              25               Demand Charge                 22              First 100 Kwh/mo/KW Lights & fans          m
First 30 kwh         Minimum Charge           Rs 16/KVA/mo        Minimum Charge            18                       40
31                   Rs 5/BHP/mo         Energy Charge            Rs 40/BHP/mo         Next 100 Kwh/mo/KW  Minimum Charge
Balance  35                                      11                                         22                    Rs 4 /mo
Minimum Charge                                                                            Balance  10           Heat & Power
Rs 4 /mo                                                                                                           30
Heat & Power                                                                                                    Minimum Charge
20                                                                                                              single phase supply
Minimum Charge                                                                                                      Rs 15  /mo
single phase                                                                                                    three phase supply
supply Rsl1/mo                                                                                                    Rs 30,/mo
three phase
supply Rs20 /mo
Source:  ERB



ELECTRICITY TARIFFS FOR SEBs FROM 12-31-72 to 12-31-76: ORISSA
(energy charge and tariff are in paise/kwh and demand charge and minimum charge are in rupees)
Domestic          Industrial L.T.        Industrial H.T.        Agricultural          Public Lighting           Commercial
End of 1972
Hydro             Hydro                  Hydro                                        Hydro                  Hydro
First 30 Kwh        14                   Demand Charge            12                   21                    First 100 KWH
28         Minimum Charge          First 4000 KVA         Minimum Charge        plus maintenance             28
Next 50 Kwh       Rs.6.5/kw/mo.           Rs. 9/KVA/mo.            Rs.24/BHP/year    charge of between    Balance 23
20         or Rs.5/BHP/mo.         Balance                Diesel                Rs.1-5.5/lamp/mo.    Minimum Charge
Balance 13                                Rs. 8/KVA/mo.            25                 according to type        Rs. 2.5 for the
Minimum Charge   Diesel                  Energy Charge           Minimum Charge       and wattage            first KD  and Rs. 2
Rs.1.5 for first  25                     First 1,000,000 Kwh       Rs.5/BHP/mo.       Diesel                 for each additional
KW and Rs 1 for  Minimum Charge                 8                                       19                   KW
each additional    Rs.5/BHP/mo.          Balance  7                                   plus maintenance
KW                                       Overall Maximum Rate                         charge of Rs.12/
10 paise/Kwh                                lamp/year
Diesel
44-50
End of 1976
First 30 KWH       First 200 KWH/KW/mo.  Demand Charge                  16               26                   First 100 KWH
31                 18               First 4000 KVA         Minimum Charge        Fixed Charge                 34
Next 50 Kwh        Balance   17             Rs.10/KVA/mo.         June - Oct.          Rs 1-8.00/lamp         Balance 29
23           Minimum Charge          Balance                  Rs.l/BHP/mo.                              Minimum Charge
Balance 16           Rs.10/KW/mo.           Rs.9/KVA/mo.          Nov. - May                                    Rs.4.5,5, and
Minimum Charge       Rs.7.5/BHP/mo.       Energy Charge             Rs3/BHP/mo.                               10 for the first
Rs.5 for first                          First 400KWH/KVA/mo.                                                one half KW, second
KW and Rs.6 for                                 12                                                            one half KW, and
each additional                           Balance 11                                                          remaining KW's.
KW                                        Overall Maximum Rate
14.5 paise/Kwh
Source:  ERB                                                                                                                     H



ELECTRICITY TARIFFS FOR SEBs FROM 12-31-72 to 12-31-76: PUNJAB
(energy charge and tariff are in paise/kwh and demand charge and minimum charge are in rupees)
Domestic            Industrial L.T.        Industrial H.T.        Agricultural          Public Lighting          Commercial
End of 1972
First 15 KWH        First 500 Kwh          Demand Charge          Fixed Charge          Energy Charge        First 30 KWH
32.81              11.0                 First 1,000 KVA        Rs.7-9/BHP/mo.               15               32.81
Next 25 KWH         Next 1000 Kwh          Rs. 6.5/KVA/mo.        depending on BHP    Maintenance Charge  Next 50 KWH
14.06              10.5                 Balance                Demand Charge        Rs.1-17/lamp/mo.         14.06
Balance 7.81        Balance  9.0           Rs.5.5KVA/mo.          Rs.l/BHP/mo.          depending on type of Balance 10.94
Minimum Charge      14inimum Charge        Energy Charge                                lamp and wattage      Minimum Charge
Rs.l/ o.            Rs 2.50/KW           First 100,000 KWH                                                    Rs. 1.5/mo.
5
Next 200,000 KWH
4.5
Balance 4
End of 1976
First 15 KWH               18.5            Demand Charge          Demand Charge                25             First 80 KWH
35           Minimum Charge         Rs.14/KVA/mo.           Rs.1.5/BHP/mo.       Fixed Charge                40
Next 25 KWH           Rs 9.00/KW           Energy Charge          Energy Charge         Rs 3.25-4.50/lamp    Balance 50
20                                       11                   19.0                                      Minimum Charge
Balance 18                                 Overall Maximum Rate  Minimum Charge                               Rs.5/month
Minimum Charge                             18 paise/Kwh           Rs.9/BHP/mo.
Rs. 3/mo.
1/ Small Industrial LT consumers.
Source: ERB
I-J



ELECTRICITY TARIFFS FOR SEBs FROM 12-31-72 to 12-31-76: RAJASTHAN
(energy charge and tariff are in paise/kwh and demand charge and minimum charge are in rupees)
Domestic            Industrial L.T.       Industrial H.T.          Agricultural         Public Lighting           Commercial
End of 1972
Hydro & Steam       Hydro & Steam         Hydro & Steam           Hydro & Steam         Hydro & Steam        Hydro & Steam
37                 13.5             Demand Charge                13                     28            Lighting
Minimum Charge      Minimum Charge        First 600 KVA           Minimum Charge        Minimum Charge          40
Rs.2/mo.             Rs.42/BHP/year      Rs.8.25/KVA/mo.          Rs.42/BHP/year        Rs.2/lamp/mo.    Minimum Charge
Diesel              15% surcharge in      Next 1,200 KVA          Diesel                Diesel                Rs.2/mo.
50              effect from 6-1-69   Rs.8/KVA/mo.                13                   35                 Heat and Power
Minimum Charge      Diesel                Rs. 7.5/KVA/mo.         Minimum Charge        Minimum Charge            22
Rs.2/mo.              26                 Energy Charge            Rs.42/BHP/year        Rs. 2.5/lamp/mo.  Minimum Charge
Minimum Charge        First 50,000                                                        Rs.5/mo.
Rs.84/BHP/year            7                                                           Diesel
Next 150,000                                                      Lighting
6.75                                                           53
Next 300,000                                                      Minimum Charge
6.5                                                          Rs.2/mo.
Balance                                                           Heat and Power      -
6.25                                                             28
Minimum Charge
Rs.2/mo.
End of 1976
Light                    28               Demand Charge                 30              Energy Charges        First 500 KWH
43                 Minimum Charge       Rs.18/KVA/mo.            Minimum Charge         33                       55
Heat and Power       Rs.10/HP/mo.         Energy Charge            Up to 3HP            Minimum Charge        Next 500 KWH
30                                   First 300,000 KWH        Rs. 90/HP/year         Rs 3.00/point            50
16                 3HP-5HP                                    Next 500 KWH
Next 500,000 KWH         Rs. 100/HP/year                                 45
15                5HP - 7.5HP                                Balance 35
Next 700,000 KWH         Rs. 140/HP/year                           Minimum Charge
14                7.5-lOHP                                    Rs.10/KW/mo.
Next 1,000,000 KWH       Rs. 160/HP/year
12                above 10HP
Lalance 11                Rs.175/HP/year
Minimum Charge                                                                       z
Rs. 110-130/KVA/mo.                                                                  x
Source:  ERB



ELECTRICITY TARIFFS FOR SEBs FROM 12-31-72 to 12-31-76: TAMIL NADU
(Energy charge and tariff are in paise/kwh and demand charge and minimum charge are in rupees)
Domestic            Industrial L.T.        Industrial H.T.         Agricultural         Public Lighting           Commercial
End of 1972
First 50 kwh             18              Hydro                    First 100 kwh          Filament lamps         First 500 kwh  45
35            Minimum Charge         Demand Charge                  12             First 16,000 kwh       Balance   40
Balance  30           Rs 5.00/HP/mo        First 500 KVA          Balance   11                   18             Minimum Charge
Minimum Charge                               Rs 12.5/KVA/mo       Minimum Charge         Balance   15             Rs 5/mo
Rs 3/mo                                  Next 500 KVA             Rs 20/HP/year        Mercury Vapour lamps
Rs ll.5/KVA/mo                               Rs 1.75-5/mo
Balance                                      Fluorescent lights
Rs 9.5/KVA/mo                                Rs 5-8/mo
Energy Charge
First 50,000 kwh
9.25
Next 50,000 kwh
8.75
Next 200,000 kwh
7.75
Next 500,000 kwh
6.25
Balance 6
Thermal
Demand Charge
First 1000 EVA
Rs 14.5/KVA/mo
Balance
Rs 14/EVA/mo
Energy Charge
First 50,000 kwh
11.75
Next 450,000 11.5
Next 500,000 11.25
Next 500,000 10.75
Next 1,000,000 10.25
Balance 7.5
End of 1976
35             20 + 50% surcharge   Demand Charge                   16              Energy Charge               45  + 50%
Minimum Charge        + lP/kwh special       15/EVA/mo             Fixed Charge               27                  surcharge  +
Rs 3/mo             surcharge            Energy Charge          Rs 2.50/HP/mo          Fixed Charge             1P/kwh special
Minimum Charge         First 500,000 kwh                             Rs 1.25-5.00/lamp        surcharge
Rs 5/HP/mo            12
Balance 11.5  +
50% surcharge +
lP/kwh special
surcharge
Minimum Charge
Rs 225/EVA/year
1/  Small industrial consumers.
Source:  ERB



ELECTRICITY TARIFFS FOR SEBs FROM 12-31-72 to 12-31-76: UTTAR PRADESH
(energy charge and tariff are in paise/kwh and demand charge and minimum charge are in rupees)
Domestic           Industrial L.T.1/    Industrial H.T.            Agricultural         Public Lighting            Commercial
End of 1972
Lights                    20                Demand Charge           Energy Charge              26                Rs.3/mo.
30                                         Rs.12/KW/mo.                 20              Minimum Charge          same as domestic
Minimum Charge                              Energy Charge           Fixed Charge          Rs.1.5/lamp/mo.
Rs.3/month                                  First 200 KWH            Rs.36/BHP/year
Power                                           9.25
19                                       Next 200 KWH
Minimum Charge                                  7.75
Rs.3/month                               Balance
6.75
End of 1976
-~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~-
Lights                     24               First 200 KWH/KW        Rs.15/BHP/mo.              28                Light
46                 Minimum Charge               19                                                                 56
Minimum Charge         Rs.15/BHP/mo.        Balance                                                              Minimum Charge
Rs.5/mo.                                      13                                                                 Rs.50/mo.
Power                                       Minimum Charge                                                       Power  46
36                                           Rs.25/KW/mo.                                                       Minimum Charge
Minimim Charge                                                                                                     Rs.50/mo.
Rs.5/mo.
1/ Small Industrial consumers only
Source: ERB



ELECTRICITY TARIFFS FOR SEBs FROM 12-31-72 to 12-31-76: WEST BENGAL
(Energy charge and tariff are in paise/kwh and demand charge and Tinimum charge are in rupees)
Domestic            Industrial L.T.        Industrial H.T.        AgrLcultural         Public Lighting          Commercial
End of 1972
Lights   36         First 2000 kwh  11   Demand Charge           First 500 kwh  16    Rs 3-11.5/lamp/mo    Same as domestic
Minimum Charge      Balance       10       First 100 KVA         Balance   14             depending on wat-
Rs 2/mo           Minimum Charge          Rs 13/KVA/mo         Minimum Charge           tage
Heat & Power          Rs 36/HP/year       Next 200 KVA             Rs 50/HP/year        Minimum Charge
15                                       Rs 12/KVA/mo                                  75P/lamp/mo.
Minimum Charge                             Balance
Rs 2/mo                                   Rs ll/KVA/mo
Energy Charge
First 10,000 kwh
7
Next 20,000 kwh
6.5
Balance 6
End of 1976
Lights   45         Same as agri-          6/11 KV                       32             Fixed Charge           Lights  55
Minimum Charge        cultural             Demand Charge         Minimum Charge         Rs 4.50-16.30/         Minimum Charge
Rs 4.5/mo                                 Rs 30/KVA/mo           Rs 75/HP/year         lamp                    Rs 5.5/mo
Heat & Power 32                            Energy Charge                                                       Heat & Power  40
Minimum Charge                               12                                                                Minimum Charge
Rs 4.5/mo or                            33 KV                                                                  Rs 6/mo or
Rs 6/HP/mo de-                          Demand Charge                                                          Rs 8/HP/mo de-
pending on use                             Rs 30/KVA/mo                                                        pending on use
Energy Charge
9.5
Source:  ERB



ELECTRICITY TARIFFS FOR SEBs FROM 12-31-72 to 12-31-76:  DELHI (DESU)
(Energy charge and tariff are in paise/kwh and demand charge and minimum charge are in rupees)
Domestic            Industrial L.T.       Industrial H.T.        Agricultural         Public Lighting         Commercial
End of 1972
Lighting & fans         15               Demand Charge          same as indus-        15  +  mainten-              22
18           Minimum Charge         Up to 500 KW            trial L.T.             ance charge         Minimum Charge
Minimum Charge       Rs 5/KW               Rs 10/KW/mo                                  Rs 3/lamp/mo           Rs 3/mo
Rs 1.5/mo                              Up to 1000 KVA
Power    14                                Rs 8/KVA/mo
Minimum Charge                           Next 4000 KVA
Rs 2.5/mo if                             Rs 7/KVA/mo
below 5KW                              Balance
Rs 3/mo if                               Rs 6/KVA/mo
above 5KW                              Energy Charge
First 500 kwh 9.5
Next 500,000 kwh
9
Next 1,000,000 kwh
8.5
Balance    8
Overall Maximum Rate
End of 1976                                  13.50 paise/Kwh
25                  22               Demand Charge                  20                    22                     35
Minimum Charge    Minimum Charge         For 500 KW                                    Fixed Charge          Minimum Charge
Rs 3/mo            Rs 6/HP/mo            Rs 20/KVA/KW/mo                               Rs 5.50/lamp          Rs 5/KW/mo
For 1000 KVA
Rs 16.5/KVA/KW/mo
Next 5000 KVA
Rs 16/KVA/KW/mo
Balance
Rs 15.5/KVA/KW/mo
Energy Charge
First 500,000 kwh
19.5
Next 500,000  19
Next 1,000,000 18.5
Balance   18
Source: ERB



AVERAGE REVENUE REALISED FROM SALE OF ELECTRICITY BY STATE ELECTRICITY BOARDS
(Paise per Kwh)
Year        Region           Domestic       Comercial        Agricultural        Small Industry       Large Industry         Average
1974/75
Northern          29.07           45.97             18.44              20.47               18.84                20.99
Western           30.12           35.48             19.16              20.28                16.75               19.20
Southern          35.79           59.48             13.23              21.99               17.37                21.09
Eastern           37.24           41.01             18.35              23.07               18.64                21.21
Total           32.78          49.53              16.61              21.17               17.64                20.57
1975/76
Northern          29.84           46.51             19.72              20.78               19.06                21.61
Western           30.11           35.49             22.12              23.49               19.54                21.91
Southern          37.49           65.39             16.52              24.38               19.37                23.92
Eastern           38.85           47.02             15.39              28.61               23.43                25.41
Total           33.68           52.47             18.94              23.38               20.06                23.01    V
1976/77
Northern          35.78           47.06             19.99              22.09               22.27                23.78
Western           30.46           36.35             22.91              25.03               22.15                23.87
Southern          37.56           65.93             17.50              24.49               20.45                25.11
Eastern           38.68          47.35              15.91              28,56               23.87                25.40
Total           35.56           53.21             19.60              24.00               21.87                24.46
Notes:  The average electric rates used are:  (1)  Domestic lighting (30 kwh/month), (2) Commercial lighting (200 kwh/month),
(3) Agricultural 10 HP, 15% LF (817 kwh/month), (4) Small Industry, 10 KW, 20% LF (1460 kwh/month), (5) Large
Industry 7 250 KW, 407 LF (73,000 kwh/month).
Northern Region -  Haryana, Himachal Pradesh, Punjab, Rajasthan and Uttar Pradesh
Western Region  -  Gujarat, Madhya Pradesh & Maharashtra
Southern Region - Andhra Pradesh, Karnataka, Kerala & Tamil Nadu                                                     x
Eastern Region  -  Bihar, Orissa & West Bengal.                                                                      H
Sources:  Average Electric Rates and Duties in India, August 1976, Central Electricity Authority  and
GR



PRICE INDICES IN THE ENERGY SECTOR
(1970/71 =100)
1961/62   1962763   1963/64  1964/65  1965/66  1966/67                               1969/70
All Commodities(WPI) 55.2          55.4       59.7      67.4      72.8       84.4      88.3       91.3       94.7
(1000.00)
Coal (11.47)            59.6       62.5       66.8      69.3      72.5       76.5      88.1      100.2       98.9
E lectricity (24.00)    66.6       72.6       76.6      79.7      83.2       91.4      92.2       95.4       95.8
Petroleum  (6.02)        71.8      73.3       80.9      81.2       83.5      88.6      91.7       93.8       97.1
Growth Rates
1970/71  1971/72  1972/73  1973/74  1974/75  1975/76  1976/77  1977/78  1961/62-    1970/71-
-        ~~~1970/ 71   1977/78
All Commodities(WPI) 100.0    105.6   116.2    139.7           174.9   172.9   176.6   185.6            6.8         9.2
Coal                    100.0    103.2   112.5   122.9         146.6   185.0   197.6    197.6          5.9         10.2
Electricity             100.0    102.5   105.7   111.3         137.2   158.1   171.6    181.4           4.6         8.9
Petroleum               100.0    130.2    142.0    317.1        686.5    700.3    740.3    785.2        3.7        34.2
Source: RBI Bulletins, various 1977 editions and the Fuel Policy Committee Report, 1974.
The index for 1961/62 to 1970/71 for petroleum is only for petrol and diesel oil, weighted with the 1970 weights
frorm the WPI. Thereafter, it is the index for crude petroleum and natural gas.
Note:   Figures for 1961/62 to 1970/71 are based 1960, spliced into the 1970/71=100 WPI by dividing by the index
value to the last year.
x



- 128 -           ANNEX I.4.21
AVERAGE REVENUE PER UNIT OF POWER SOLD
(paisepkwh)
1970/71 1971/72 1973/74  1974/ 75   1975/76
Domestic          25.0k!   24.8    26.0    27.0        29.0
Commercial          -       25.1    27.2    35.7       38.8
Industrial         9.7v/    9.9    11.5    15.4         18.8
Public Lighting     -      24.8    25.0    26.8        31.8
Traction            -       11.5    12.8    16.2        19.7
Agricultural      14.2      14.4    16.0    18.9        21. 9
Water Supply and
Sewerage          -        9.2    13.0    14.8        18.6
Average-!         12.4      12.7    14.5    18.4        21.6
1/ The average revenue per unit sold excludes miscellaneous revenue not directly
attributable to any particular class of consumer, e. g., rent.
2/ Includes Commercial.
3/ Includes Traction.
Note:   Regarding the 1970/71 figures, while it is not clear from the source tables if
public lighting and traction are included under industry this seems likely. The per
unit revenue for industry excluding these categories would be less than that given
here, but not verAnuch so, since public lighting and traction are relatively small
classes of consumer.
Source: GR



- 129 -
Annex I.4.22
Page 1 of 4
THE LEVEL OF LONG RUN MARGINAL COST BASED (LRMC) TARIFFS
This note is in three parts. The first two parts deal with long run
marginal capacity costs, the third with LRMC tariffs as a whole. The first
part shows that the average revenue realized from the capacity element of LRMC
tariffs bears a simple relationship to the total size of the investment program
and the expected increase in demand. The second part shows that this in turn
is almost unaffected by considering only a short time slice of the investment
program in a steady state growth situation. The third part uses the conclusions
of the first two parts to calculate a lower bound for the average revenue that
would be realized by LRMC tariffs.
Part I
This discussion is in terms of the average incremental cost concept
rather than any other approach to LRMCs. This is not to argue that this is the
best or most applicable way to calculate long run marginal costs, but, given the
system characteristics in India (by and large mixed hydro-thermal systems) it is
reasonable to assume that this concept yields values close enough for our purposes
here to those that might otherwise be derived.
Let   AlrC    =  average incremental costs per KW of demand at time
of system peak.
4    =  present value of future generation expansion costs
N    =  present value of future transmission expansion costs
v   =  present value of future distribution expansion costs
V    =  demand (KW) at time of system peak
=  energy demanded (kwh) per year
L   =  low tension, or distribution
X   =  high tension, or transmission
Xi  =  capacity margins
X   W=  losses
=  annuitizing factor
iE = D / D
AR   =  average revenue from the capacity component of a LRMC tariff
per kwh sold, and
=  the present value of increments in...



- 130 -
Annex I.4.22
Page 2 of 4
Then    NIc C        -    >I       14    N ^)                                  (1)
AT CLu      (    :l         "        )      l   e  +  S )/ Nz  t       (2)
and                                                                            (3)
Rearranging (3), substituting (1) and (2) and expanding the  1 4>  terms implies
A R .:D >  (G N)/L~b~              4 ^ 9 ^ /t\9    %QC4N4S)C,, ./6-. -    (4)
where                  5    h                   [ (>f4 XI  + D  J, Eq           t6  9L
Rearranging terms,
<   i>X           +  4 (  +>4>NL)                > L.' 9H    ' _____D_
/h'Dm )                               )       " L               D   t % 4D i-
Conservative estimates of the values of the terms in if are:
_ ~-    ~    X~-o.ir,   D               .C         N D.2. ;            . 
Thus,      J .>  qo4  h   037 4                  O.2 x o.l- c              \ z o '   f  
- ~ ~ ~ ~ A
In India, it is reasonable to assume   S  C. O            , and so   I-i >  S q   D 
Substituting into (4) implies  '@ .~ A      >  (Cq 4N4XS) i           4^@   ___D 
But   C    ,. - e :DM        and  Q ;1L         L.
Therefore  NIL>  e(Q+-N*S)  (9                ZD                   >    (c+N4)
h D       \~~'D; L.  &-D    tD IXD 
since   1- L    and 9 .'         are together greater than 1.  Furthermore  :.         -
so it follows that
AR  >   G(C9 C C -S)                                (5)



- 131 -
Annex I.4.22
Page 3 of 4
(5) may be restated in words as: the average revenue realized from the capacity com-
ponent of LRMC tariffs is greater than the annuitized present value of the in-
vestment program divided by the present value of the increase in kwh of consump-
tion. Since this is true using the average incremental cost method of calculating
LRMCs, it is an indication of the relationship for other methods of calculating
incremental system costs in India, since peaking capacity in Indian systems is
largely hydro; gas turbines are not being widely advocated for peaking in long
term expansion plans.
Part II
The relationships in Part I are all defined in terms of present values
of long investment streams. The purpose of this part is to show that the relation-
ships are likely to be well approximated by summing investment in consecutive
years and by considering just a short time period, i.e. 5 rather than 15 or 20
years.
It is reasonable to assume that increments in capacity costs (X) and
consumption (Y) will grow at about the same rate, O4 and that, as a first approx-
imation, both will grow logarithmically. If i is the continuous discount rate and
t the time subscript, then consider the expression U, where
(A%    r X eSO  XFQ  I ]/ E. O     Mee~'.*                         (6).
Since     X .       e     c    Yr     Ye e?
a S. xo       (gSOCLkk     Ltot}
Removing the constants XO and YO from the integration, the integrals in the
denominator and numerator are the same, so that U                . Multiplying top
and bottom by a simpler integral, it follows:
and taking the constant terms into these integrals, this implies
t1 -     oX tUt  /   S       H.(7)
(7) has been shown to approximately equal to (6) when the discount factor i is
removed and the period is shortened from 30 to 5 years. Applying this logic to
expression (5) it is now shown to be true when G+N+S is simply the cost of the
investment program for the next 5 years and 4t is the increase in consumption
(kwh) expected over this period. (5) has now become a very simple formula it is
possible to apply in Part III of this note.



-  132  -
Annex I.4.22
Page 4 of 4
Part III
LRMC have of course two elements, a capacity cost and a recurrent
cost and they vary from category to category of consumer. The average revenue
per kwh sold for any consumer category or for all consumers taken together will
be the sum of the average revenue of the capacity cost component of the tariff
(A1) and a recurrent cost component (A2). Using (5), we can derive a lower
bound for A1, for all consumers taken together.
The New Draft Plan calls for an investment of Rs 157,500 million in
the 5 years, 1978/79 to 1982/83. (This is the value of G+N+S in (5).) The
annuitized cost of this investment is about Rs 16,700 million, when it is an-
nuitized over 30 years at a 10% discount rate. Over the Plan period, total con-
sumption (from the utility system) is expected to rise from 69,000 Gwh to
129,000 Gwh, per year, or by 60,000 Gwh. Thus, dividing Rs 17,000 million by
60,000 Gwh, a lower bound for A1 of about 28 paise/kwh is derived. In the original
Andhra Pradesh study , marginal energy was considered to be generated from the
older plant on the system, at an operating cost of roughly 10 paise/kwh. The
study estimate was in 1975 prices, so that 10 paise/kwh is probably a conservative
estimate of marginal energy costs in 1977/78 prices, in most States in India.
(More recent work on tariffs in Andhra Pradesh, undertaken as part of a review
of all aspects of the State power sector, suggests that between 11 and 13 paise/
kwh is the cost of energy supplied to H.T. and L.T. consumers respectively.)
Allowing for sytem losses that average 18% throughout India (as forecast in the
New Draft Plan), A2 for all consumers probably exceeds 12 paise/kwh. Thus, the
average revenue realized by LRMC tariffs would be greater than 40 paise/kwh.



FORECAST AND ANNUAL ENERGY REQUIRENENTS FOR ALL INDIA IN TBlE ANNUAL ELECTRIC POWER SURVEYS
(Twit at the bus-bar)
Annual
Percentage
1962/63   1963/64   1964/65   1965/66   1966/67   1967/68   1968/69   1969/70   1970/71   1971/72   1972/73   1973/74   1974/75   1975/76   1976/77   Gvmt Rates
Actuals                            23.7       25.4      28.1       30.5       34.6      39.2       45.0      49.3       53.6       58.2       62.1       64.1      66.9       75.6       84.1!'       9.1
Forecasts
Date of      Number of
Publieation   Power Survey
1963              I                    29.2       35.1      44.9       52.6       61.0      70.6       81.4       95.1                                                                        1*6
(15.0)    (24.9)    (47.2)    (52.0)    (55.6)    (56.9)    (65.1)    (77.4)
1964             II                              33.3       42.9       51.5       62.0                                                                                                        20.5
(18.5)    (40.7)    (48.8)    (58.2)
1965            III                                         39.3       48.8       59.0      70.6                                                                                              19.5
(28.9)    (41.2)    (50.5)    (56.9)
1966             IV                                                    38.5       46.3      54.8       62.5       76.0                                                                        16.6
(11.3)    (18.1)    (21.8)    (26.8)    (41.8)
1968              V                                                                         48.4       56.3       66.2      74.5       85.1       99.3                                        19.4
(7.6)    (14.2)    (23.5)    (28.0)    (37.0)    (54.9)
1969            VI                                                                                     53.9       61.3      68.3       75.7       87.7                                        11.8
(9.3)    (14.4)    (17.4)    (21.9)    (36.8)
1970           VII                                                                                                           60.9      68.1       76.3       86.1                             11.5
(4.6)     (9.7)    (19.0)    (28.7)
1974            IX                                                                                                                                           80.3      91.0      102.3        11.7
(20.0)    (20.4)    (21.6)
Notes:  1.  Figures in brackets are percentage deviations from actuals.  For a number of years, the
later ones especially, the actuals reflect shortages, that is they represent restricted
requirements. The series of actuals is taken from successive Annual Electric Power
Surveys and therefore does not correspond exactly to any of the series in the other
tables of this report.  There is a deviation in some observations of about 2=1 from the
series for net generation by utilities, to which the actual series shculd correspond;
this deviation is unexplained.
2. The Eighth Annual Electric Power Survey was not published.
Source:    The Annual Electric Power Surveys of India:  various volumes.



-  134  -             ANNEX I.5.2
Page 1 of 3
EARLIER EFFORTS AT REGRESSION ANALYSIS
This annex takes note of earlier attempts at using regression analysis
to forecast power demand. A number of European countries have used this general
method, including Austria, Belgium and the Netherlands. Indeed, it is such an
obvious technique to apply, there must be very few developed countries where the
method has not been tried out.
In India, the Fuel Policy Committee experimented with regression tech-
niques for long-term forecasting. Subsequently, the Planning Commission has used
regression analysis to forecast energy demand as part of the work of the Energy
Policy Group. Though the details of their work are not yet available, their
approach is broadly similar to that used in this review (and the review of the
Andhra Pradesh Power Sector). A more elaborate approach was recently adopted in a
study for Andhra Pradesh undertaken by the Administrative Staff College (ASC) in
Hyderabad.
The ASC study disaggregated electricity demand into seven major cate-
gories and one miscellaneous, for each of which two equations were fitted: one
for the number of customers and one for the number of kwh consumed per customer.
The equations were either linear or log linear depending on which fitted better,
and were estimated starting with a large number of explanatory variables that
was eventually reduced by stepwise elimination to 12 1/.
The strength and weakness of this model lay in its flexibility. With
so many explanatory variables that could be related to various state government
1/ In addition, there were 9 lagged endogenous variables.



-  135  -               ANNEX I.5.2
Page 2 of 3
policy instruments (as well as external factors such as the weather), it was
possible to illustrate the likely effect of different policies: for example,
the impact an increase in the number of L.T. Industrial consumers, which might
have been the expected result of a policy of promoting small scale industry,
could be readily analyzed. Its weaknesses as a tool for forecasting were two-
fold. First, a statistical problem the model faced was multicollinearity. The
effect is to render many of the explanatory variables next to valueless in fore-
casting: many could be eliminated and the model simplified and virtually the
same forecast result.
The second problem was one of practicality. Any decision-maker using
an analytical tool likes to know where errors are likely to arise and be able
to make allowances for them. In statistical forecasting models there are five
commonly recognised reasons why forecasts may go astray. These are: (i) the
wrong equation or variables are used (specification error); (ii) coefficients
are inaccurately estimated (estimation error); (iii) one-off shocks to the
economy may alter the underlying situation (e.g.: the oil crisis or a change in
State boundaries); (iv) more gradual changes in the economic structure may not
be anticipated (e.g. an acceleration of rural electrification with a new Govern-
ment); and (v) the exogenous variables -- the weather, the level of economic
activity and so forth -- may be incorrectly forecast. In a relatively simple
model it is easier to make allowances for errors of types (iii) to (v). Analysing
the possible errors in the final demand forecast that may result from faulty fore-
casts of 12 exogenous variables in a relatively complex business: there are 12



-  136  -           ANNEX I.5.2
Page 3 of 3
assumptions to dispute instead of two or three in a simpler model. It is our
judgment that, at the risk of maying type (i) specification errors, a simpler
forecasting model is much to be preferred.



-  137  -              ANNEX I.5.3
Page 1 of 2
THE REGRESSION ANALYSIS: TECHNICAL DESCRIPTION
This annex provides a more technical description of the regression
model used in this review and acts as a guide to the statistical annexes that
summarize the results of the regression.
The model divides the economy and the consumption of power into three
sectors: agriculture, industry and a residual or service sector. The industry and
services parts of the sector model can be formallv descrihed hy equation (1):
E:  o vXQ9 t                                         (1)
where e is consumption in industry or
in services,
V is value-added in industry or services,
+_ is the year in question,
and O% kand b are coefficients to be determined by statistical
regression.
The agricultural part of the model is even more simple:
CI-E- =  c.dP j(2)
Where de is the increase in electricity consumption in a given year in Kwh
clP is the increase in pumpsets -- i.e. the number of sets in the
pumpset program, and
C  is a coefficient to be determined by regression.
Cross-section analysis among States has been used to avoid multicoll-
earity between value-added and time. The coefficient X in eauatino (Il)
is in fact estimated from the data in Annex I.5.4 using a truncated form of the
equation:         E   . cLV                                                   (1?)



-  138  -            ANNEX I.5.3
Page 2 of 2
Annex I.5.5 presents the results of alternative approaches to analysing
the available data. Approach 1 analyses the relationship between value-added
and electricity consumption using time series data but not taking time as an
exogenous variable. The value-added coefficient, the simple elasticity, corre-
sponds to x in equation (1'). The results for agriculture are not reported be-
cause the statistical fit was too poor. The elasticities for different sectors
and time periods are quite high, and may overstate the relationship of value-added
to electricity consumption to value-added, a view borne out to some extent by the
results of the cross-section analysis; these are summarized in column (8) of
Annex I.5.5.
One of the most obvious alternatives to the sectoral model is
that of fitting equation 1 to time series data alone. The results of such an
exercise are summarized as approach 2 in Annex I.5.5. As the Annex shows, while
the explanatory power of the two variables taken together is good, the significance
of the coefficient estimate is generally in doubt, and negative values have no
clear and acceptable economic interpretation. The sectoral model, the results for
which are summarized under Approach 3, are therefore preferred.
Annex I.5.6 presents analagous results for the five regions and for India
(a) for the period 1960/61-1975/76, for which regional data are available, and (b)
for regressions where captively generated electricity is included in the electricity
consumption of both industry (based on the data in Annex I.1.15). As can be
seen from that Annex, including captive generation makes little difference.



Cross-section Data on Electricity Consumption:  1974/75 and 1975/76
State Domestic Product at Current Prices                                                             Electricity Consumption by Sector
(Rs Millions)                                                                                           (gwh)
rcricu tture          Industry                   other               Total                 Agriculture            Industry               Other                 Total
1974075   1975/76   1974/75   1975/76       1974/75    1975/76   1974/75   1975/76          1974/75   1975/76   1974/75   1975/76   1974/75   1975/76   7974/7%   1975/76
Andhra Pradesh        27,418    22,149      4,685     4,936         14,981    17,081    47,084    44,166           674.2      616.7    1,307.7   1,537.0   587.1         642.8    2,569.0  2,796.5
Assam                  8,006     8,539      2,364     2,697          2,781     2,974    13,151    14,210             5.0        5.0       192.5      219.0   226.8       212.4      424.3    436.4
Bihar                 25,155      N.A.      6,960      N,A.         11,247      N.A.    43,362       N.A.           75.1      454.2    2,188.6   2,598.5   617.5         711.9    2,881.2  3,764.6
Gujarat               10,230    14,050      9,000     8,850         10,890    12,600    30,120    35,500         1,008.7      869.0    3,055.3   3,347.8   728.7         795.3    4,792.7  5,012.1
Haryana                8,021     8,386      1,701     1,174          3,669    44,165    13,391    14,625           527.6      594.6       520.4      777.9   191.0       229.2    1,239.0  1,601.7
Himachal Pradesh       2,373     2,361        187       191          1,348     1,442      3,908     3,994            2.1         2.6       40.5       47.7   166.6       170.2       209.2    220.5
Jammu & Kashmir        2,540     2,712        249       271          1,433     1,594      4,222     4,577           20.3       22.3        90.1      100.5   150.9       168.1       261.0    290.9
Karnataka             17,816    17,253      2,598     3,038          5,027     5,767    25,441    26,058           295.0       312.4    2,'70.0   3,330.0   675.6        771.9    3,740.6  4,414.3
Kerala                11,055    10,753      1,957     2,010          7,306     8,579    20,318    21,342           101.1       120.5    1.395.1   1.497.4   332.9        379.1    1,829.1  1,997.0
Madhya Pradesh        22,959    20,815      5,997     6,601          8,685     9,360    37,641    36,776           161.8       170.5    2,082.7   2,660.0   534.9        555.6    2,779.4  3,386.1
Maharashtra           23,922    24,703    16,366    17,175          29,438    32,874    69,726    74,752           667.9      802.7    6,274.0   5,934.6 2,429.3    2,753.2    9,371.2  9,490.5
Orissa                11,545    12,955      1,389     1,621          3,665     4,298    16,599    18,774             8.9        9.0    1,426.6   1,844.5   194.7         241.9    1,630.2  2,095.4
punjab                13,411    13,384      2,162     2,534          6,262     7,378    21,835    23,296           695.9      897.2    1,191.6   2,048.41/ 331.9         434.2    2,219.4  3,379.8
Rajasthan             14,171    15,926      2,024     2,284          6,628     7,372    22,823    25,582           347.0      353.9       878.8   1.092.5   334.5        374.9    1,560.3  1,821.3
Tamil Nadu            13,932    13,920      9,192     9,718         14,806    16,735    37,930    40,373         1,849.8    1,694.0    2,673.8   3,341.4 1,035.5    1,169.3    5,559.1  6,204.7
Uttar Pradesh         45,507    40,732      6,987     7,089         24,329    26,961    76,823    74,782         1,233.4    1,702.2    2,535.0   2,790.7   913.5    1,432.0    4,681.9  5,924.9
West Bengal           20,182    18,663    11,762    11,949          18,572    21,124    50,516    51,736            40.3       51.6    3,419.9   3,683.1 1,634.8    1,768.5    5,095.0  5,503.2    X
1/ N.ng.l Fertilizer Project consumption of electricity is excluded from the 1974/75 figure and Included In the 1975/76 figure.
Sources:  CSO for state domestic product -
CEA General Review, all India Statistics, 1974/75 and 1975/76



RESULTS OF REGRESSION ANALYSIS: ALL INDIA
_ Approach 1                                        Approach 2                                                    Approach 3
Standard    Standard                                                 Standard
Value Added       _2      Value Added           Time         Error of    Error of       _2        Value Added           Time      Error of
Coefficient       R       Coefficient       Coefficient        (3)          (4)          R        Coefficient       Coefficient    (9)            R2
(1)          (2)           (3)                (4)          (5)          (6)         (7)             (8)             (9)         (10)         (11)
1960/61-197(-'77
Industry              1.989        0.983         2.222           -0.010          0.402        0.017       0.983         0.974           0.042        0.004       0.899
Services    1         2.002        0.993         1.572            0.194          0.566        0.025       0.993         0.835           0.048        0.002       0.931
Agriculture -           -             -                                                                                 2.857             -             -        0.981
190/(,1-1968/69
Industry              2.216        0.980         1.077            0.062          0.226        0.012       0.996         0.974           0.067        0.003       0.989  H
Services              2.169        0.987         0.546            0.079          0.295        0.014       0.998         0.835           0.065        0.002       0.994
Agriculture  -/        _                                            -              -            -           -           2.894             -             -        0.989
1968/69-1976/77
Industry              1.379        0.967         1.491           -0.004          0.472        0.017       0.963         0.974           0.014        0.004       0.661
Services    I/        1.704        0.998         2.017           -0.014          0.249        0.011       0.998         0.835           0.038        0.002       0.973
Agriculture -          -                           -                -              -            -           -           3.184             -            -         0.948
1/ Coefficient relates electricity consumption to pumpset electrification



RESULTS OF REGRESSION ANALYSIS: 1960/61-197 /76
Approach 1                           AoDroach 2
Standard  Standard                                          Standard
Value Added    _2    Value Added       Time       Error of  Error of    _         Value Added        Time      Error of
Coefficient    R      Coefficient  Coefficient    Q)_          (4)        R2      Coefficient  Coefficient        (9)     _R
(1)       (2)        (3)           (4)          (5)        (5)  -   (6)            (7)           (8)         (10)     (11)
North Eastern Region - Industry              3.781    0.938      2.045          0.105        1.701      0.101    0.938         0.974         0.168       0.015      0.898
- Services            4.028    0.811    -1.358           0.256        0.282      0.013    0.934         0.835         0.163       0.010      0.953
- Agriculture -                                                                                         4.815                                0.860
Northern Region       - Industry             2.076    0.756      0.124          0.912        2.269      0.105    0.753         0.974         0.523       0.014      0.489
- Services     1/    2.275    0.957    -0.953            0.134        1.091      0.045    0.973         0.835         0.604       0.005      0.928
- Agriculture                                                                                           4.455                                0.972
Eastern Region        - Industry             1.748    0.886      0.858          0.032        0.371      0.012    0.920         0.974         0.028       0.005      0.738
- Services     1/    3.298    0.782       4.770         -0.036        2.187      0.052    0.775         0.835         0.055       0.012      0.599
- Agriculture                                                                                           1.928                                0.536
Western Region        - Industry             2.042    0.991      2.200         -0.007        0.512      0.024    0.991         0.974         0.049       0.003      0.955
- Services     1/    2.060    0.934       2.237         -0.008        2.688      0.117    0.930         0.835         0.053       0.006      0. 831
- Agriculture                                                                                           2.589                                0.977
Southern Region       - Industry             1.784    0.970      1.796         -0.001        1.031      0.056    0.968        0.974          0.044      0.005      0.864
- Services      1/    1.967    0.978      2.712         -0.034        1.098      0.050    0.977         0.835         0.051       0.004      0.924
- Agriculture                                                                                           2.103                                0.973
All India             - Industry             2.045    0.985      2.277         -0.010        0.367      0.016    0.985         0.974         0.044       0.004      0.902
- Services      1/   2.029    0.993       1.737          0.013        0.568      0.025    0.993         0.835         0.053       0.002      0.978
- Agriculture   -                                                                                       2.740                                0.983
-(Industry 2/         2.001    0.980       2.541         -0.024        0.484     0.021    0.981         0.974         0.043       0.004      0.883)
1/ Coefficient relates electricity consumption to pumpset electrification.
2/ Includes self-generation in industry in captive plants



- 142 -
ANNEX 11.1.1
OUTLAYS ON POWER IN RELATION TO THE TOTAL PLANS
Power as a Percentage
Power Sector                   Total Plan               of the Total Plans
Provision   Expenditure       Provision   Expenditure       Provision   Expenditure
First Plan        260           260           2219            2166            11.7         12.0
Second Plan       427           460           5025            4993             8.5          9.2
Third Plan       1039          1252           8449            8938            12.3         14.0
Annual Plans    1065           1223           6665            6879            16.0         17.8
Fourth Plan      2447          2931          16427           16273            14.9         18.0
Fifth Plan       7294          5716-1/       39303           29571-1/         18.6         19.3
Draft Plan      15750           -            69380             -              22.7          _
1/    First four Years
2/    Estimated
3/    P.74 Fourth FFP = resources for the Annual Plans:  original estimate
Source: Various Plan Documents, Planning Commission



ACTUAL PLAN EXPENDITURES: 1968/69-1978/79
(Rs. Millions)
Union                                                 Union                               Investment-/
States   Territories      Center       Total         States   Territories        Center       Total   Price Index
------------- Current Prices -------------           --------- Constant 1970/71 Prices --------
1968/69         2846.5       161.0          380.5      3388.0         3238.3       183.2          432.9      3854.4        87.9
(84.0)      (4.8)          (11.2)    (100.0)
1969/70         3036.5       155.5          479.2      3671.2         3265.1       167.2          515.3      3947.5        93.0
(82.7)      (4.2)         (13.1)    (100.0)
1970/71         3758.3       179.5          886.3      4824.1         3758.3       179.5          886.3      4824.1       100.0
(77.9)      (3.7)         (18.4)    (100.0)
1971/72         4136.6       123.0         1030.1      5289.7         3795.0       112.8          945.0      4852.9       109.0
(78.2)      (2.3)         (19.5)    (10,).n)
1972'73         4565.9       110.3         1352.4      6028.3         3798.6        91.8         1124.9      5015.2       120.2
(75.7)      (1.8)         (22.4)    (100.0
1973/74         5320.3       173.6         1380.0      6873.9         3849.6       125.6          998.6      4973.9       138.2    4
(77.4)      (2.5)         (20.1)    (100.0)                                                                       L
1974/75         6577.0       149.0          939.6      7665.6         3799.5       866.1          542.8      4428.4       173.1
(85.8)      (1.9)         (12.3)    (100.0)
1975/76         9664.1       161.6         1190.1    11015.8          5423.2        90.7          667.8      6181.7       178.2
(87.7)      (1.5)         (10.8)    (100.0)
1976/77        12709.7       187.2         1637.1    14534.0          6933.8       102.1          893.1      7929.1       183.3
(87.4)      (1.3)         (11.3)    (100.0)
1977/78        16524.0       249.0         2343.2    19116.2          8812.8       132.8         1249.7    10195.3        187.5
(estimated)     (86.4)       (1.3)         (12.3)    (100.0)
1978/79        19194.3       365.2         2612.1    22171.6          9748.2       185.5         1326.6    11260.3        196.9-
(anticipated)   (86.6)       (1.6)          (11.8)    (100.0)
Annual Average
Growth Rate       -           -              -           -            10.9%       (2.8%)          7.0%       10.0%        9.1%  t
1/ The investment price index is from the World Bank Economic Report on India (for 1978, Table 6.113 the                           1
index for 1978/79 is estimated assuming a 5 percent increase in prices over the previous year.
Source: Planning Commission



-  144  -                       ANNEX II.1.3
FINANCING THE PLANS: THE BURDEN ON THE CENTRE AND THE STATES
(Rs billion)
Fourth Plan                    Fifth Plan
Centre
Expenditure on Power                          5.1                           8.7-/
Total Resources for the Plan                 87.9 3/                      205.9 -/
Power as a Percentage of Total                5.8%                          4.2%
States
Expenditure on Power                         21.6 4/                       65.8 1/ 4/
Total Resources for the Plan                 73.7 3/                      187.2 2/
Power as a Percentage of Total               29.3%                         35.1%
Total
Expenditure on Power                         26.7                          74.5 -/
Total Resources for the Plan                161.6 3/                      393.0 2/
Power as a Percentage of Total               16.5%                         18.9%
1/ Including 1978/79, i.e. the first year of the Rolling Plan
2/ Provision in the Finalized Fifth Five Year Plan
3/ Estimated resources given in the Draft Fifth Five Year Plan
4/ Including Union Territories
Source: Planning Commission and World Bank Analysis



REVENUE AND OPERATING COSTS: 1969/70 - 1975/76
(Utilities Only: Rs Millions)
Revenue    Expenses      Depreciation       Interest 1          Total             Surplus
1969/70           5,930       3,650            825             1,368            5,843                 87
-Public          4,659       2,663           740             1,309            4,712                 -63
-Private         1,271         987            85                 59           1,131                 140
1970/71           7,640       4,419            930             1,412            6,760                880
-Public          6,228       3,297           841             1,353            5,491                 737
-Private         1,412       1,122            89                 59           1,269                 143
1971/72           7,671       4,880          1,084             1,461            7,425                246
-Public         6,139        3,666           993             1,400            6,059                  80
-Private        1, 533       1,214            91                 61            1,366                167
1972/73           8,951       5,801          1,252             1,652            8,705                246
-Public          7,248       4,436         1,161             1,587            7,184                  64
-Private         1,703       1,365            91                65            1, 521                182
1973/74          10,030       6,922         1,272              1,899           10, 093                63
-Public         8,249        5,410         1,185             1,834            8, 429              -220
-Private         1,821       1,512            87                 65           1,664                 157
1974/75          13,288       9,566          1,478             1,866           12,910                378
-Public        10,964        7,602         1,392             1,796           10,790                 174
-Private        2,324        1,964            86                 70           2,120                 204
1975/76          17,234      12,013          1,796             2,487           16,296                938
-Public        14,498        9,701         1,709             2,410           13,820                 678
-Private        2,736        2,312            87                 77           2,476                 260
1/ Interest paid rather than owed.
Source: GR



CONSOLIDATED CAPITAL ACCOUN¶I OF THiE POWER SECTOR: ALL UJTILITIES
(Rs Millions)
Fixed Assets I/                                             Net Fixed Asset Formation,
Trans-                                                            Trans-
Generation       mission       Distribution        Total          Generation        mission       Distribution        Total
196C/61          3675             806              2594           7075               221              44              167             4 32
1961/62          4349            1174              2940           8463               674             368              346            1388
1962/63          4734            1693              3051           9478               385             519              111            1015
1963/64          5490            1754              3556          10800               756              61              505            1322
1964/65          6015            2335              4500          12 850              525             581              944            2050
1965/66          7051             3045             5343          ]5439              1036             710              843            2589
1966/67          8941             3 379            6517          18837              1890             334             1174            3398
1967/68         10260            3727              7551          21538              1319             348             1034            2701 
1968/69         10583            4956              9211          24750               323            1229             1660            3212
1969/70         11776            5254             10002          27032              1193             298              791            2282
1970/71         12504            5458             11776          29738               728             204             1774            2706
1971/72         13796            6218             1 366 7        33681              1292             760             1891            3943
1972/73         17278            7111             15578          39967              3482             893             1911            6286
1973/74         18154             7508            17593          43255               876             397             2015            32 88
1974/75         20624            8267             19514          48405             2470              759             1921            5150
Source:    GR
1/   Leaving out general assets, intangible assets and special items from all assets.
'-n



PLAN PROVISIONS AND EXPENDITURE ON POWER (Utilities Only)
(Rs Millions)
Percentage Distribution
Transmis-                                            Transmis-
sion and    Rural                                    sion and    Rural
Genera-  Distribu-  Electri-                         Genera-  Distribu-  Electri-
tion      tion      fication    Other       Total   tion        tion      fication       Other       Total
First Plan
- Provision           n.a.       n.a.         200          -      2,600        -         -          7.7           -        100.0
- Actual              1,050    1,320           80        150      2,600    40.4       50.8          3.1          5.8       100.0
- Percentage           n.a.      n.a.       n.a.       n.a.          0.0
Excess
Second Plan
- Provision            2,350    1,170          750          -      4,270    55.0       27.4         17.6           -        100.0
- Actual               2,500    1,150          750        200      4,600    54.3       25.0         16.3          4.3       100.0
- Percentage             6.4     -1.7          0.0      n.a.          7.7
Excess
Third Plan
- Provision            7,120    2,220        1,050          -     10,390    68.5        21.4        10.1           -        100.0
- Actual               7,740    3,010        1,530        240     12,520    61.8        24.0        12.2          1.9       100.0
- Percentage            8.7       35.6        45.7      n.a.         20.5
Excess
Annual Plans
- Provision            6,440    2,730        1,480          -     10,650    60.5        25.6        13.9           -        100.0    '
- Actual               6,760    2,910        2,370        190     12,230    55.3        23.8        19.4          1.6       100.0
- Percentage             5.0       6.6        60.1      n.a.         14.8
Excess
Fonrth Plan
- Provision           12,550    7,210        4,450        260     24,470    51.3        29.5        18.2          1.1       100.0
- Actual              15,050    7,680        6,170        410      29,310    51.3       26.2        21.1          1.4       100.0
- Percentage            19.9       6.5        38.7       57.7        19.8
Excess
Fifth Plan   3/
- Provision-          43,950   20,810       6,850       1,330     72,940    60.3       28.5          9.4          1.8       100.0
- Actuali'            35,770   15,080       5,240       1,070     57,160    62.6        26.4         9.2          1.9       100.0
- Percentage2/           1.7    -32.7        -4.4         0.6        -2.0
Excess
Rolling Plan
- Provision           87,500   53,000      14,500       2,330    157,500    55.6        33.7         9.2         14.6       100.0
1/ Anticipated Expenditure for first four years.
2/ Five-fourth of anticipated expenditure over planned expenditure.
3/ From the Finalized Fifth Five Year Plan.
n.a. = not available
- = negligible.
Source:  Planning Commission



ACTUAL PLAN EXPENDITURE ON THE POWER SECTOR
(Rs millions)
Absolute Amounts                                                         Percentage Distribution
Trans-                         Investi-                                           Trans-                          Investi-
mission &        Rural          gations &                                         mission &          Rural         gations &
Five Year Plan and                            Distribu-        Electri-        Miscel-                                          Distribut-        Electri-         Miscel-
Annual Plans             Generation          tion          fication         laneous         Total          Generation          tion            fication         laneous
I Plan (1951/56)               1050.0           1320.0            80.0           150.0        2600.0             40.4              50.8              3.1             5.8
II Plan (1956/61)              2500.0           1150.0           750.0           200.0        4600.0             54.3              25.0             16.3             4.3
III Plan (1961/66)             7740.0           3013.0          1530.0           240.0      12523.0               61.8              24.0            12.2             1.9
1966/67                        2400.0            832.0           734.0             72.0      4038.0              59.4              20.6             18.4             1.8
1967/68                        2212.7           1032.2           747.9             66.0       4058.8              54.5              25.4            18.4             1.6
1968/69                        2149.5           1042.4           887.1            47.3       4126.3              52.1              25.3             21.5             1.1
1969/70                        2472.6           1330.9           853.4            46.5        4703.4             52.7               28.3            18.1             1.0
1970/71                        2536.7           1258.9          1354.1            44.3       5194.0              48.8              24.2             26.1             0.9
1971/72                        2864.3           1614.7          1466.4             97.5       6042.9             47.4              26.7             24.3             1.6      1
1972/73                        3018.3           1640.0          1280.0             90.0       6028.3             50.1               27.2            21.2             1.5
1973/74                        3900.0           2110.0          1210.0           120.0        7340.0             53.1               28.7            16.5             1.6     X
1974/75                        5581.9           2353.7          1177.9           112.4        9225.9             60.5              25.5             12.8             1.2
1975/76                        7688.5           3238.4          1196.4           188.6       12311.9             62.4              26.3              9.6             1.5
1976/77                        9047.1           4238.4          1662.1           224.7      15172.3               9.6               27.9            11.0             1.5
1977/78 (anticipated)        10911.1            5164.1          1771.3           280.9      18127.4              60.2              28.5              9.8             1.5
Source: Planning Commission, Power and Energy Division



THE DISTRIBUTION OF PLAN PROVISIONS IN THE FOURTH, FIFTH AND ROLLING PLANS
(Rs Millions)
Transmission             Rural                   1/                    Percentage
Generation       & Distribution        Electrification        Other-       Total         Distribution
Fourth Plan
(1969/70-1973/74)
States                    9741                6455                  2852                144       19191              78.4
(50.8)             (33.6)                (14.9)             (0.8)      (100.0)
lnion Territories           255                443                    95                 25         818               3.3
(31.2)             (54.2)                (11.6)             (3.1)      (100.0)
Centre                     2551                318 4/               1500                 98        4467              18.3
(57.1)              (7.1)                (33.6)             (2.2)      (100.0)
Total                    12546                7216                  4447                267       24476             100.0
(51.3)             (29.5)                (18.2)             (1.1)      (100.0)
Fifth Plan
(1974/75-1978/79)
States                    37227              18977                  6746                749       63699              87.3
(58.4)             (29.8)                (10.6)             (1.2)      (100.0)                       '
Union Territories            65                788                   107                 27         988               1.4
(6.6)             (79.8)                (10.8)             (2.7)      (100.0)
Centre                    6652                1047                     0                552        8252              11.3
(80.6)             (12.7)                 (0.0)             (6.7)      (100.0)
Total                    43945               20813                  6853               1329       72939             100.0
2R               (60.2)             (28.5)                 (9.4)              (1.8)      (100.0)
Rolling PlIan -
(1978/79-1982/83)
States                                                                                    -      125800              79.9
Union Territories                                                                          -        200               0.1
Centre                       -                  -                      -                   -      31500              20.0       4
Total                    87500 -/            53000                 14500               2500      157500             100.0
(55.6)             (33.7)                 (9.2)             (1.6)      (100.0)
1/ Surveys and Investigations
2/ Provisional
3/  Excludes investment in non-utilities        4/  Includes Rs 220 million of centrally sponsored schemes
5/  Including REC                               6/  Excludes Rs 3000 million of institutional finance
-  =  not available
Source:  PJanning Commission



POWER GENERATION -- TARGETS AND ACHIEVEMENTS
_ _ _  _     _Installed Gene ratiny _aRa4cit
Financial Outlays (Utilities Only)             Capacitv at                 Additions during Period
Plan         Actual      Percentage      _     eriod Ei.ti                                    Percentage          Investment
Allocation    Expanditure    Excess         Target    Achievement    Target    Achievement   _Shortfall              Price Index
(Rs Million)  (Rs Million)                    (MW)         (MW)          (MW)         (MW)                       (1970/71=100; Mid
Year of Plan Period)
First Plan (1951/52-1955/56)              -           1,050          -         3,600         3,400        1,300          1,100         15.4                49.9
Second Plan (1956/57-1960/61)         2,350          2,500         6.4         6,900         5,650        3,500         2,250          35.7                55.7
Third Plan (1961/62-1965/66)           7,120          7,739         8.7       12,690         10,170       7,040         4,520          35.8                68.9
Annual Plans (1966/67-1968/69)         6,438          6,762         5.0        15,600        14,300       5,430          4,130         23.9                 85.6
Fourth Plan (1969/70-1973/74)         12,546        15,050        20.0        23,000         18,880       9,260         4,590          50.4                109.0
2/            1/          5/      35402/        208          16502/         724/            5 7.05/           183
Fifth Plan (1974/75-1978/79)         33,238-        35,770-       34.5-       35,420        26,080       16,540-        7,120-         57.0-              183.3
Rolling Plan (1978/79-1932/83)       87,500              -           -        44,630             -       18,550 6--                                       220.0-
1/ Expenditure anticipated for the first four years of the plan.
2/ As shown in the Draft Fi6th Five Year Plan.  These figures were respectively revised upwards to Rs. 43,954 million and doxrwwards to 12,500 MW
in the finalized Five Year Plan.
3/ Installed capacity at end of 1977/78.
4/ Achievement for 1974/75-1977/78.
5/ Percentage shortfall/excess of five-fourths of the achievement (1974/75-1977/7t) behind/ahead the original target (1974/75-1978/79).
6/ The Draft Rolling Plan gives a target end-period capacity of 44,626 MW and target additions of 18,500 MW; these figures are slightly
inconsistent; the figure shown of 18,630 MW is the target additions required to meet the target capacity by the end of 1982/83.
7/ Assuming 5% inflation per annum after 1976/77.
- Not available or not applicabl,3.
Source: Various Plan Documents



- 151 -
ANNEX II,2.1
Page 1 of 7
POWER INVESTMENT PLANNING MODELS IN INDIA
This annex briefly reviews four power investment planning models
that have been produced for India.
Investment planning models for electric power systems can be used to
optimize: 1) generation and transmission expansion plans, 2) operating schedules,
3) plant maintenance schedules, 4) the utilization of a fixed amount of hydro
energy potential, or 5) the allocation of coal from various mines to alternative
thermal plants. Such models are set up as constrained optimization problems.
The objective is to minimize system costs, i.e., the present worth of energy
and capacity costs over the relevant time horizon, subject to various constraints
on capacity and energy generated (both total and plant specific), transmission
capacity and energy transmitted, and the reliability of supply.- Solutions are
obtained through either marginal, simulation, or global analysis and rely heavily
on linear, non-linear, or dynamic programming techniques.
At the theoretical level, several attempts have been made to use formal
planning models to determine optimal power system expansion plants for various
1/ See Ralph Turvey and Dennis Anderson, Electricity Economics, ch. 13,
Baltimore: John Hopkins University Press, 1977 for a more complete
discussion of investment planning models.



152  -             ANNEX II.2.1
Page 2 of 7
regions in India- . These studies have a number of similarities. First, they
all specify a model which minimizes power system costs for either some future
time period -- 1971-85 for Gately -- or a future year -- 1979 or 1980 in the
other studies -- subject to various system constraints. Second, all of the
studies use linear programming techniques to determine solutions. Third, three
of the four studies reviewed here are concerned with determining the optimal in-
vestment plan for the Northern Region of India in 1979 or 1980 (only Gately's
study is an exception). Finally, none of these studies explicitly consider the
level of reliability at which electricity is to be supplied.
From the point of view of this review, however, it is more interesting
to consider the differences which exist between these studies. Some of these
differences are found in : (1) the level of disaggregation of the study, (2)
whether or not optimal operating schedules are determined, (3) the methods of
dealing with dichotomous variables and non-constant costs, (4) their use of sen-
sitivity analysis, (5) the extent to which the problem of assuring states' coop-
eration within a region is addressed, and (6) the results obtained.
1/   M.V. Chakravarti, et. al., Optimization Techniques in Power System Planning
in Northern Electricity Region, AEC monograph No. 2. 1971; Francis Gately,
Investment Planning for the Electric Power Industry: A Mixed Integer Pro-
gramming Approach, with Application to Southern India, Ph.D. dissertation,
Princeton University, May 1971; Shishir K. Mukherjee, A Network Programming
Approach for Investment Planning in Electric Power Systems: Case Study for
Northern Region of India, Indian Institute of Management, Ahmedabad, Decem-
ber 1974; and Supriya Lahiri, An Investment Programming Model for the Elec-
tric Power Industry of Northern India, Ph.D. dissertation, University of
Delhi, December 1975.



_  153  -               ANNEX II.2.1
Page 3 of 7
Of the four studies reviewed here, those by Chakravarti, et. al., and
Gately appear to be the least disaggregated.   That is, these studies are con-
cerned with determining power system investment plans that meet total regional
demands. Thus there is no consideration given to meeting demands at various
load centers within the region. In contrast, the studies by Mukherjee and
Lahiri disaggregate regional demand into the demand at a number of load centers
-- 43 in the former and 10 in the latter.  Similarly, transmission of electricity
is dealt with only on a very aggregate basis, if at all, in the study by Gately.
Specifically, Gately considers only total transmission between states in a region
(implicitly assuming there is only one transmission line), rather than considering
various transmission units from supply centers to load centers as is done by
Mukherjee and Lahiri.
These studies also differ in terms of the consideration they give to deter-
mining optimum operating schedules. The studies by Chakravarti and Mukherjee do
not address this issue. Rather, they merely optimize the capacity investments
necessary to meet peak demand in the target year. The models specified by Lahiri
and Gately do allow optimum operating schedules to be determined. This is accom-
plished by defining operating decision variables for each new or existing plant
and for each mode of operation -- (1) base load, (2) normal peak and (3) super
peak. The values of these operation variables, which are determined in the model
1/   In a number of ways, however, the analysis carried out in these studies is
at a disaggregate level. For example, Chakravarti considers 8 categories
of power plants, and 4 seasons of the year. Similarly, Gately considers
(in his single state model) 3 possible hydrological years (normal, wet, and
dry), 4 types of plants and 2 seasons (wet and dry).



-  154  -               ANNEX II.2.1
Page 4 of 7
indicate the MW output to be sustained by a particular type of plant in a
given mode of operation. In addition, the Lahiri study determines the least
cost method of transporting seven grades of coal from six mines (in Bihar, West
Bengal, and Madhya Pradesh) to the various thermal plants in the Northern Region.
Gately's model includes two innovations not found in the other models.
First, hydro investment decision variables are dichotomous, i.e., zero-one rather
than continuous. This is indicative of the fact that due to the natural limits to
hydro resources, hydro plants cannot be duplicated at close to constant costs as
to some extent thermal plants can be. In effect, this modification recognizes the
fact that the actual decision to be made is which of a fixed number of potential
hydro sites to develop, rather than how much hydro capacity should be developed.
Second, this study allows for the fact that per unit capacity costs are likely to
decrease over time as capacity increases, rather than remain constant as is typically
assumed. This is accomplished by using a "fixed-charge" cost function. Such a
function represents capacity cost as being the sum of a fixed cost component plus
a variable cost component, which increases at a constant rate with capacity. The
result is a capacity cost function characterized by decreasing average costs.
Three of the planning studies attempt sensitivity analysis. That is, they
investigate how the findings of their model (the optimal power system design) are
affected by changes in key system parameters. For example, Gately allows the
estimated growth rate of demand over the planning period to vary between 7.5% to
12.5% per year. In a similar fashion, he varies the discount rate between 10%-
15%, and considers three possible kinds of hydrological years (dry, normal, and
wet). Mukherjee determines optimal investment plans when actual hydro capacity



- 155 -
ANNEX II.2.1
Page 5 of 7
is reduced to 50% of installed capacity (thus allowing for the possibility of
a dry year). Lahiri analyzes how her results change when the prices of coal
and nuclear investment costs vary. Specifically, she allows coal prices to in-
crease by as much as 100% and nuclear construction costs to decrease by 20%. In
addition, she analyzes the effects on her results of correcting market prices
for distortions, i.e., using shadow or efficiency prices. Shadow wage rates
for unskilled labor are varied between 0%-100% of market wages and the shadow
exchange rate is varied between 110%-150% of the market exchange rate.
Out of the four studies considered here, Gately's is the only one to
explicitly consider the issue of regional cooperation between various states.
His approach is game-theoretic and clearly this is one of his most interesting
contributions.-/ The problem of how to ensure regional cooperation is appro-
priately modeled as a n-person non-constant-sum game. Gately uses two game-
theoretic concepts, the core and the von Neumann-Morgenste±n solution, to de-
termine a set of side payments that would redistribute the benefits of cooperation
between states in the Southern Region in such a way that all states are net gainers.
Neither of these solution concepts determines one unique set of side payments that
is in any sense optimal; but, they do indicate a range of values which might
1/ If tariffs for interstate transfers of electricity were set equal to appro-
priately defined long run marginal costs, then this issue would, in principle,
be largely resolved. However, the process of negotiating tariffs for the ex-
change of power has been protracted; the positions the states have taken have
reflected the net gains they expect from the resolution of the tariff problem;
this process could itself be analyzed using game-theoretic concepts.



_ 156 -
ANNEX II.2.1
Page 6 of 7
facilitate regional cooperation. It is likely that such payments could be
integrated with an appropriately defined tariff structure for interstate
transfers of electricity.
The actual results obtained in these studies are of interest because they
provide an indication of the cost saving-/ that can result from regional inte-
gration of power systems and because they demonstrate how widely optimal
solutions can vary according to the specific planning model that is used. The
Gately study provides some evidence on this first issue. He determines the
optimal investment program for each state in the Southern Region assuming self-
sufficiency and when there is regional cooperation. Two of the states, Tamil
Nadu and Andhra Pradesh, realize cost savings through regional cooperation,
while one "state" Kerala-Karnataka-/, incurs greater costs. Overall, system
costs for the Southern Region between 1971-85 could be reduced by Rs 1530 million
(or approximately 19%) by regional cooperation.-/ However, as discussed above,
for this solution to be completed -- i.e., for each state to be a net gainer --
some type of side payment from Tamil Nadu and Andhra Pradesh to Kerala-Karnataka
must be included.
1/   In all studies other than Gately's interest and depreciation costs are in-
cluded among economic costs. Such costs actually represent a transfer of
payment and thus really should not be included as economic costs.
2/    In his analysis, Gately treats Kerala-Karnataka as one state.
3/    Of course, the cost savings resulting from regional cooperation as  compared
to state self-sufficiency without a formalized planning program would be
even greater.



- 157 -
ANNEX II.2.1
Page 7 of 7
The three models for the Northern Region produce different solutions for
an optimal, least cost investment program. Lahiri's model, using market prices,
suggests the capacity expansion program should be predominantly conventional
thermal; using shadow prices, it suggests the program should be mostly hydro.
Mukerjee's optimal investment program emphasizes nuclear development and hydro
exploitation, with conventional thermal development coming much later on. The
study by Chakravarti suggests roughly half the program should be conventional
thermal, one quarter hydro and one quarter nuclear. That three studies may
have such diverse results does not imply that modelling is futile. It reflects
to some extent differences in analytical approach and no doubt differences in
the data bases used. In practice, to apply any methodology to investment planning
will undoubtedly require a major effort to ensure the realism of the data and a
careful choice of methodology towards identifying the one most appropriate to the
problems of the Indian situation.



ELECTRICITY SUPPLY - rNSTALLED CAPACITY
(MW)
Dec. Dec. March    March    March    March    March    Ma rch    March  March  Mlarch  March  M arch
1950  1955  1961        1966       1969       1971      1972       1973        1974      1975   1976   1977    1978
UlJtilities                                                                                                                       - --_-      -
(a) By ownership
-Public                     628  1518   3297        7288      11335      13222      13769      14812    15253   16989   18815  20179   22596
-Private                   1085  1177   1356        1739       1622       1487       1485       1469      1411      1327     1302    1290    1288
(b) By type of stations
-Hydro                      559    940   1917       4124       5907       6383       5612       6785      6965    7529    8464    9025    9977
-Conventional Thermal  1005  1547   2436            4417       6640       7508       7818       8468      8652      9753   10579   11433   12924
Nucl1e                       -      -      -         -           -          420       420        620        640      640      640      640      640
-Other-                     149    208    300        486         410       398        404        428       407       394      434    :371      343
Utilities total                1713  2695   4653        9027      12957      14709      15'254     16281    16664   18316   20117   21469  23884
Non-Utilities                   588    723   1001       1146        1339       1562       1635      1708      1792    2029    2132    2287   2200
Total                          2301   3418   5654    10173        14296       16271      16889      17990    18456   20345   22249   23756  26084
1/ Diesel and gas turbine.
Z/ The March 1978 figures refer to sets which have been rolled and are operational by that date.  Data for previous years
refer to sets which have been rolled, are operational and are commercially commissioned -- i.e., deemed to be revenue
earning.  The March t978 figure for all commercially commissioned sets is l',531° MW as opposed to the 26,084 MW shown
here.  Rolled and operational but not commercially commissioned sets in March 1977 had a capacity totalling 24,127 MW
as opposed to the 23,756 MW shown. Thus the increase in capacity over 1977/78 may be reckoned as either 1,763 MW
(rolled, operational and commercially commissioned) or 1,957 MW (rolled and operational).
Source: GR



LENCTIE: OF TRANSMISSION AND DISTRIBUTION LINES CONSTRUCTED
(circuit km)
Period                              400 KV           220 KV          132/110 KV      66 KV & Below -/              Total
Beginning First Plan (3/1951)         -                 -                2708              26593                   29271
End of First Plan (3/1956)            -                 -                7376              59045                   66421
End of Second Plan (3/1961)           -               1099              12802             143986                  157887
End of Third Plan (3/1966)            -                3772             24718             262556                  291046
End of Annual Plans (3/1969)          -              10225              34056             372639                  416920
End of Fourth Plan (3/1974)           -              13932              45041             631604                  690577
End of 1977/78 (3/1978)
(Anticipated)                       718            27881              80175            998708                  1107482            L
End of Rolling Plan 2/ (3/1983)
(Planned)                        16363             51355             127028           1269857                  1464603
Annual Growth Rates
Since the beginning of the
First Plan (1951-1978)              -                -                 13.47             14.4%                   14.4%
Since the end of the Second
Plan (1961-1978)                    -               21.0%              11.4%             12.1%                   12.1%
As envisaged in the Working
Group Report (1978-1982)           86.9%            13.0%               9.6%              4.9%                    5.8%
1/  Excludes L.T. Lines
2/ T'hese figures reflect the physical targets set out in the working group report; corresponding figures are not
available for the Draft Plan.
Source: CR



NUMBER OF VILLAGES ELECTRIFIED & IRRIGATION PUMPSETS/TUBEWELLS  ENERGISED    /
1950/51 1955/56 1960/61 1965/66 1968/69 1970171  1971/72 1972/73 1973 74 1974 75 1975/76  1976/ 77  1977/78 1 t)
(Antici- (Target)
Number of villages                                                                                                               pated)
electrified        3,100   7,300   21,700  45,100   73,700  104,900  122,100 139,200  156,900 173,500 185,800  202,800  222,900   320,000
Percentage of total
villages electrified   0.5      1.3      3.8      8.0     13.0      18.7      21.6    24.5    27.2    30.1    32.3          35.2   38.7       55'6
Number of irrigation
pumpsets/ tubewells
(thousands) energized 21       56      199      513    1,089    1.629    1,901    21,85    2,426    2,614    2,792    3,029    3,341        5,300
1/ Numbers are as at the end of each year, e. g. the figure for 1950/51 is for March 31, 1951. The figures in the first row are rounded to the
nearest hundred, while (as stated in the table) the number of irrigation pumpsets and tubewells energised is given to the nearest thousand.
2/ The targets in the Draft Plan are the electrification of one hundred thousand villages and two million pumpsets
between April 1978 and March 1983.
Source: GR



-  161  -
ANNEX II.3.4
Installed Generating Capacity at March 31, 1978
(MW)
Conventional
Region                    Thermal        Nuclear      Hydro      Total
Northern                   3,359            220       3,243      6,822
Western                    4,112            420       1,662      6,194
Southern                   1,985             -        4,118      6,103
Eastern                    3,601             -          885      4,486
North Eastern                204             -           69        273
Andaman and Nicobar
Lakshadweep                  6             -         -             6
Non-Utility Capacity       2,200                                 2,200
15,467           640        9,977    26,084
Source: Ministry of Energy, Central Electricity Authority.



-  162  -                      ANNEX II.3.5
TRANSMISSION AND DISTRIBUTION -   1974/75  -  1976/77
1974/75         1975/76          1976/77
----- Circuit Kms at Year End -------
Northern Region
- 33 KV and above                            55516            56270            59251
- below 33 KV and above 500 V               179318           188459          247860
- at 500 V and below                        213748           228870          244791
Western Region
- 33 KV and above                            47567            50582            55107
- below 33 KV and above 500 V               129506           135540           148231
- at 500 V and below                        192135           21685-          238022
Southern Region
- 33 KV and above                            40922            42621            47240
- below 33 KV and above 500 V               162889           169196           179433
- at 500 V and below                        411305           429429          456251
Eastern Region
- 33 KV and above                            31578            30763            32015
- below 33 KV and above 500 V                66722            73253            79965
- at 500 V and below                         68632            73512            82208
North-Eastern Region
- 33 KV and above                             8121             8729             7328
- below 33 KV and above 500 V                 6991             7731             7390
- at 500 V and below                          6898             7135             8181
Total
- 33 KV and above                           183704           188965           200241
- below 33 KV and above 500 V               545426           574179           663579
- at 500 V and below                        892716           955798          1029453
Source: CR



-  163  -              ANNEX II.3.6
THE INVESTMENT PROGRAM IN
THE WORKING GROUP REPORT AND THE DRAFT PLAN: A COMPARISON: 1978/79-1982/83'
Working Group            Draft             Percentage Reduction
Report                 Plan             Between  (1) and (2)
(1)                  (2)
Proposed Outlays (Rs billions)
-  Generation                          105.9                 87.5                     17.4
-  Transmission and Distribution    78.3                     53.0                      32.3
-  Rural Electrification                23.2                 14.5                      37.5
- Surveys, Investigation and
Research                           5.0                  2.5                      50.0
Total                              212.4                157.5                      25.8
Targets for Capacityj- (MW)
-  Hydro                                5067                4680                        7.6
-  Conventional Thermal                16397               12935                      21.1
-  Nuclear                              1160                 925                      20.3
Total                              22624               18555                       ]8.0
1/   Includes 325 MU' of additional capacity in non-utilities.
Source: WGR



-  164  -                  ANNEX II.3.7
Page 1 of 3
CAPACITY MARGINS AND OTHER PLANNING NORMS
1.        In moving from a forecast of energy demand for a power system
to the increments in capacity needed to meet the build up in power
requirements, allowances must be made for transmission and distribution
losses, the overall load factor, the incidence of planned, forced and
partial outages, a margin for spinning reserve, the consumption of power
station auxilliaries and the retirement and derating of existing capacity.
In the last stage of actually planning the investment program project
by project, it is also necessary to allow for the gradual build up in
the load that can be met by new generation equipment.
2.        While losses in India are between 19 and 20%, there is reason
to expect these to fall because of higher voltage transmission, distribu-
tion system reinforcement and efforts to curb theft in the next five
years. Increased rural electrification may involve additional losses,
offsetting these gains to some extent, but for planning purposes the
Draft Rolling Plan assumes losses will be about 18% by 1982/83. This
is fractionally lower than the 18.5% in the Tenth APS, and reaching the
lower figure will involve a strong commitment to the physical targets in
the transmission and distribution program.
1/
3.        The average load factor throughout India is about 61%.  In the
Tenth APS, this is assumed to improve to 63.5% because of measures designed
to encourage off peak consumption. The margin for spinning reserve is taken
as 5%, and auxiliaries for thermal power stations are assumed to be 10% as
against 1/2% for hydro stations. The thermal figure is set so high to
reflect the electricity used to handle and crush coal, and supply the power
1/ This is the average of load factors in different States and does not take into
account the effects of interstate diversity.



-  165  -             ANNEX II.3.7
Page 2 of 3
station colonies. These two figures correspond roughly to the 6.35%
margin for auxillaries -- both hydro and thermal -- assumed in the
Draft Rolling Plan.
4.        Outages are mainly a problem for thermal plants.  Monitoring of
past performance by the CEA suggests margins on thermal plant of 3.5% for
planned outages, 18.5% for forced outages and 10% for partial outages may
be appropriate for planning purposes. The Tenth APS argues for 10% for forced
outages and 10% for planned outages without making any separate assumption
about partial outages; though different in composition, the total allowances
for forced and planned outages is about the same. It is generally agreed
however that hydro availability during system peak can be much higher, the
margin falling between say 10 and 15%, depending on the characteristics of
the particular schemes in question. The Draft Plan makes no specific
assumptions about either thermal or hydro availability during peak
periods, but,assuming a 5% spinning reserve and a load factor of 63.5%, the
Plan forecasts of capacity (42101 MW) and energy generated (160220.5 Gwh)
by utilities in 1982/83, imply an overall margin for outages for both
hydro and thermal of 28%. The ratio of installed capacity to peak load
in the Tenth APS is 33.1%, which implies their margin for outages in hydro
and thermal plant averages is 29.5%. This difference may be explained in
part by different views about the efficiency of station operation and system
management in the future, but this is not necessarily so; the APS assumed
higher overall capacity by 1982/83 than the Planning Commission, and therefore
a higher proportion of thermal plant, so the average level of efficiency might



-  166  -                     ANNEX 11.3.7
Page 3 of 3
be lower for the Tenth APS than the Planning Commission anyway.
5.        The rate assumed for retirement and derating of old capacity is
also critical for forecasting the need for new capacity. The CEA has
observed generally that 1% of capacity throughout the system is lost
annually through retirement and derating. The Planning Commission argues
that 0.5% should be retired each year,-! but makes no explicit allowance for
derating capacity, which could well be between 0.3 and 0.5% of capacity.
1/ This is about 10%. So in 30 years the system capacity should increase
about 17 times, and assuming plant has a 30 year life the 10% added
in year 1 will have to be retired in year 31; it will then constitute
one one-hundred-and-seventieth of total capacity or about 0.6%.



-  167  -             Annex II.3,8
INSTALLED CAPACITY THROUGHOUT INDIA - THE DRAFT PLAN FOR POWER
(MW)
Installed             Planned           Addition Between
March 1978          March 1983            1978 and 1983
Hydro                   9,977              14,655                 4,678
Thermal               13,267               25,881                12,614
Nuclear                   640               1,565                   925
Total Utilities        23,884              42,101                18,217
Non-Utilities           2,200               2,525                   325
All India              26,084              44,626                18,542
Source: The Draft Plan p. 166, and the Central Electricity Authority.



-  168  -                ANNEX II.3.9
ENERGY AND CAPACITY REQUIREMENTS (UTILITIES ONLY):1982/83
The Working          The Draft      Regression
1982/83                                 Group Report             Plan          Analysis
Requirement at the Bus-bar (Gwh)           168392 2/           150046 1/        155615
Capacity Requiremnt (MW)                    50500 2-/           42100 V          46300
1987/88
Requirement at the Bus-bar (Gwh)           272055 2/           239282           260839
Capacity Requirement (MW)                   82600 -/            64600 -          77600 4/
1/    Taken equal to the Planning Commission/CEA Exercise that elaborated on forecast
power requirements after the Draft Plan was published.
2/    As in the Tenth APS
3/    The test of the Plan refers to the need for between 20,000 and 25,000 MW of
additional capacity between 1982/83 and 1987/88; the table uses 22500 MW.
4/    Applying the same load factor and margins as in 1982/83.
5/    Applying the same load factor and margins as in the Draft Plan.
Sources: The Draft Plan and WGR



-  169  -                      ANNEX II.3.10
The Shift Away From Hydro Electric Development
(MW)
1/
Hydro          Thermal        Total
Actual
December 1950                   559            1742            2301
(24.3)         (75.7)         (100.0)
March 1969                      5907           8389            14296
(41.3)         (58.7)         (100.0)
March 1971                      6383           9888            16271
(39.2)         (60.8)         (100.0)
March 1978                      9977           16107           26084
(38.2)         (61.8)         (100.0)
Forecast: Draft Plan
March 1983                      14655           29975          44630
(32.8)         (67.2)         (100.0)
1/ Including nuclear
Sources: WGR and the Draft Plan



-  170  -                ANNEX II.3-L1
TRANSMISSION AND DISTRIBUTION LOSSES FOR ALL INDIA: 1965/66-1975/76
(Gwh)
1965/66                      1975/76
Net Generation                           31355                        74772
Total Consumption 2t                     26735                        60246
-  Agricultural                       1892                          8721
-  Other                             24843                         51525
Total Losses                              4621                        14526
Percentage Losses                        14.7%                        19.4%
Memo Items
Agricultural Generation                   3846                        17726
Other Generation                         27509                        57046
Agricultural Percentage Losses-t         50.8%                        50.8%
Other Percentage Losses-                  9.7X                         9.7%
Agricultural Losses                       1954                         9005
Other Losses                              2666                         5521
1/   Utilities only (including energy purchased from non-utilities).
2/   Excludes self-generated electricity.
3/   These items show the level of losses for agriculture and other types of
consumer that would have had to be realized, for the increase in agricultural
load to be the only factor explaining the increase in overall losses (see text).
Sources: GR and World Bank Analysis



INTERNATIONAL COMPARISON OF TRANSMISSION AND DISTRIBUTION LOSSES
AND OTHER SYSTEM CHARACTERISTICS: 1970
Investment in
Transmission
and Distribution
Consumption  Consumption    as a Percentage
1/                              l/Percentage        per          per            of All Invest-
Population-      Area          Consumption-   Losses         Capita         Sq. Km          ment in Power
(Millions)  ('000 80, Kms)        (Twh)                       (Kwh)        (Kwh)
Belgium                    9.7             31              27.7          5.6         2856           894                   62.1
Federal Republic          61.2            248            220.7           5.9         3606           890                   76.3
of Germany
France                    50.7            547             130.2          7.1         2568           238                   43.3
Italy                     53.6            301            107.0           8.5         1996           355                  53.7
Norway                      3.9           324              51.0          9.6        13077           157                   33.3
Sweden                     8.0            450              57.7         12.4         7213           128                  35.3
Switzerland                6.2             41              28.6         10.1         4129           624                  50.0
U. K.                     55.4            244            215.4           7.6          3888          883                   46.5
U.S.A.                   205.1           9363           1510.4           7.9         7364           161                   41.4
Canada                    21.3           9976             176.2         11.3         8272            18                   40.04-/
Japan                    104.6            372             324.2          6.4         3099           872                   49.9 
India                    548.1           3280             48.5-/        17.3-/          88           15                  36.7-/       H
1/ yet of losses       2/  1970/71
3/ Transmission and distribution expenditures in the Fourth Plan Period were 26.2% of all Plan expenditures on
power   including rural electrification, the figure was 47.2%; the tabulated figure is the arithmetic average
of these two.
4/ Estimated
Sources: Various Plans and "The Electricity Supply Industry',' OECD, Various Volumes.



1: ANNUAL PERCENTAGE CHANGES IN NDP AND TOTAL
ELECTRICITY CONSUMED
20%
*n/ I 
* S4it    
15% 
10%
.05%
1961/62        1964/65                         1969/70                       1974/75          1976/77
Years
= NDP
.............. = Total Electricity Consumed
World Bank -19922



II: ANNUAL PERCENTAGE CHANGES IN AGRICULTURAL
AND INDUSTRIAL VALUE ADDED
20%                                                     __
10%
4~~~~~~~~~~~~~~~~~~~~~~~~
0
-2%
1961/62           1964/65                         1969/70                         1974/75         1976/77
Years
Agricultrual Value Added
*  -   - - - - - - =  Industrial Value Added                                    VVorld Bank-19923



III: ANNUAL PERCENTAGE CHANGES IN INDUSTRIAL VALUE
ADDED AND ELECTRICITY CONSUMED
BY INDUSTRY
25%
20% -
15% ~ ~ : 
*.      .    .
.    *      S
*       a                                      a *
15%
1961/62            1964/65                          1969/70                           1974/75         1976/77
Years
=Industrial Value Added
.-.-....------  = Electricity Consumed by Industry (Utiiities Only)
World Bank-19924



INDIA - PRINCIPAL ORGANIZATIONS IN THE POWER SECTOR
Governmenit                     Government of Itndia                               [  State Government  |                    State Government
linistries         Department of              Ministry of Energy,                      Departmnent of                         Department of
and Departments        Atomic Energy                Department of                         Power/I rrigation                      Powver/Irrigation
of Government          (Policy and                     Power                                                                      and Power
Construction)                   (Policy)                              (Pclcy)                               (Policy)
r   E  {Central Electricity|                                              1E
Rural Arahoditycti
Electrification D tPwtityngyt
Corporatior p   Monitoring and
(Finance)           Appraisal)
Note; Thee ar 5RegionalElectricityBoardsand18StatRegeonal
etrmicit          National B dNatonal                                                                                          l Btn    21  1 
Operating              Atovver              Thermal             Hydro-Electric           Electricity.                           Electricijty
Agencies             Authority              P ovvrprto              Pov\rer               Board                                  Board
Note: Thee are 5 Regional Electricity Boards and 18 State
Electricity Boards.                                                                                                        World Batik -2011 1









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