ntpc limited ion study

8/6/2019 NTPC LIMITED ion Study

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ORGANIZATIONAL STUDY OF NTPC LIMITED AND

STUDY ON DETERMINATION OF TARIFF OF COAL

BASED CENTRAL GENERATING UTILITIES

Submitted in partial fulfillment of the requirements of the

M.B.A Degree Course of Bangalore University

Submitted By

YASHWANT SINGH

(06XQCM6089)

Under the Guidance and Supervision of

Prof. Sumithra Sreenath Sh. Abhay K. SrivastavaFaculty Sr. Manager (comml)

MPBIM NTPC Ltd. Patna

M.P BIRLA INSTITUTE OF MANAGEMENT

Associate Bharatiya Vidya Bhavan

43, Race Course Road,

Bangalore-560001.


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EXECUTIVE SUMMARY

This report has two parts. The first part consists about NTPC LIMITED and Second part

consist the DETERMINATION OF TARIFF SETTING OF NEYVELI THERMAL

POWER STATION(2*210MW).

This internship report is an effort of mine for the fulfillment of the same. I have opted

NTPC LIMITED, PATNA for my Internship Training. Reason for selecting this

organization is to know more about the Strategy, structure and Function of the Company.

NTPC is a reputed electric power generation Company in India. It has a leading presence

in India. It has, over the years, acquired a strong reputation in the field of electric power

generation. First part of this report includes company Profile & Organizational structure

of NTPC & its various departments. Company profile includes its History of NTPC.

Rank among all electric generating company in the world in different years, Market

Capitalization, Net Profit earned in different years. Organizational structure includes

organization chart, vision, mission, and NTPC group & shareholding pattern of NTPC.

Various functional department like, Commercial, Finance, Human Resource, etc & there

operation, Microscopic study of Commercial department, Norms and terms for

determination of tariff setting of coal based central generating utilities.

Second part of this report contains determination of tariff setting of Neyveli Thermal

Power Station(2*210MW).

Need for the Study

The need to undergo this training for a MBA student of Bangalore University is

to fulfill the requirement of MBA Degree Course of Bangalore University. This training

is undertaken during August-September 2007 and the main purpose of the training is to

know the practical implication and policies of the company.

Objectives of the Study

The objective of undergoing this training is to get the practical exposure of the

functional departments of the organization. During training, we study how the theoretical

knowledge is practically applied in different departments in the organization. During my

training I was also offered a study titled, Determination of tariff setting of coal based

central generating utilities.

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STUDENT DECLARATION

I, YASHWANT SINGH hereby declare that this internship training report entitled

ORGANIZATIONAL STUDY OF NTPC LIMITED & STUDY ON

DETERMINATION OF TARIFF OF COAL BASED CENTRAL GENERATING

UTILITIES has been undertaken and completed by me under the valuable guidance of

Sh. A.K. SRIVASTAVA Sr. Manager,(comml)), NTPC/ ERHQ, Patna and Prof.

SUMITHRA SREENATH, faculty member, M.P BIRLA INSTITUTE OF

MANAGEMENT in partial fulfillment ofMaster of Business Administration (MBA)

program and it is my original work and not submitted for the award of any other degree,

diploma, fellowship or other similar title or prizes.

PLACE: BANGALORE YASHWANT SINGH

DATE: (06XQCM6089)

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PRINCIPALS CERTIFICATE

This is to certify that this dissertation entitled ORGANIZATIONAL STUDY OF

NTPC LIMITED AND DETERMINATION OF TARIFF SETTING OF COAL

BASED CENTRAL GENERATING UTILITIES at NTPC LIMITED is the result of

the work carried out by Mr. YASHWANT SINGH under the guidance and supervision

of Prof. SUMITHRA SREENATH, of M. P. Birla Institute of Management,

Bangalore as per the requirements of the Bangalore University, MBA syllabus. Thisreport has not formed the basis for the award of any other degree.

Place :Bangalore (Dr.Nagesh.S.Malavalli)

Date: Principal

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GUIDES CERTIFICATE

I hereby certify that this dissertation entitled ORGANIZATIONAL STUDY OF NTPC

LIMITED AND DETERMINATION OF TARIFF SETTING OF COAL BASED

CENTRAL GENERATING UTILITIES at NTPC LIMITED, is doneby Mr.

YASHWANT SINGH bearing registration number06XQCM6089, under my guidance

and supervision as per the requirements of the Bangalore University, MBA syllabus.Thisreport has not formed the basis for the award of any other degree.

Place: Bangalore (Prof. Sumithra Sreenath)

Date: Faculty (MPBIM)

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ACKNOWLEDGEMENT

Preparing a project report of this nature is an arduous task and I am fortunate enough to

get support form a large number of persons to whom I shall always remain grateful.

Firstly, I would like to thank Dr. N.S. MALAVALLI, Principal, M.P Birla Institute of

Management for his kind support and giving me the opportunity to present this project.

I also wish to express my sincere thanks to Sh. A.K. SRIVASTAVA, Sr. Manager

(Comml), NTPC/ Patna, my project guide, who provided his valuable guidance and

selfless involvement in preparing and simplifying this task for me.

I am very thankful to my guide Prof SUMITHRA SREENATH, faculty member, M.P

BIRLA INSTITUTE OF MANAGEMENT for the valuable advice, guidance, precious

time and support who motivated and supported me a lot in carrying out this project.

Last but not the least; I would like to thank all the respondents for giving me their

precious time and relevant information and experience I required without which this

project would have been a different story.

Place: Bangalore YASHWANT SINGH

Date: (06XQCM6089)

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6.4 Why was Availability Tariff Necessary? 32

6.5 How does it benefit everyone? 33

6.6. The Daily Scheduling Process 35

6.7 Deviation from Schedule 37

6.8 Terms and condition of tariff determination 40

Part-B: Determination of tariff order of NEYVELI THERMAL

POWER STATION

1. Introduction 54

Calculation of fixed cost, variable cost and total cost.

2. Findings 70

3. Suggestions 71

4. Conclusion 73

5. BIBLIOGRAPHY 74


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List of Tables/Chart

Particulars Page No.

1. Installed Capacity 5

2. Organization Chart of NTPC LIMITED 7

3. Shareholding pattern of NTPC 9

4. NTPCS Sources of Finance 10

5. Profit after Tax 13

6. Organization Chart of Commercial Department 28

7. Scheduling Process 36

8. Deviation from Schedule 37


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PART- A

ORGANIZATIONAL STUDY

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1. INTRODUCTION

1.1 Industry Profile:

Although electric power generation in India on a commercial basis is almost a century

old, substantial power development efforts began only after independence. At the launchof the First Five-Year plan in 1951, power generation was recognized as a major input for

the country's economic development and was accorded high priority. Power sector outlays

have been among the highest in successive five-Year Plans ever since. The first two Plans

focused on hydro power (as component of multi-purpose projects). Subsequent plans

emphasized on rapid installations of thermal power stations.

As a result of Plan efforts, India's installed power generation capacity grew to 16,664

MW in 1974. However, assessment of the planned growth since 1951 indicated that with

the uneven distribution of resources, power development with only States as spatial units,

would result in large inter-state imbalances.

This, and the need for quicker and greater capacity addition, led the Government of India

to assume a leading role in large scale power generation as a matter of policy and,

through an amendment of the Electricity (Supply) Act, National Thermal Power

Corporation Ltd. (NTPC) and National Hydroelectric Power Corporation Ltd.

(NHPC) were set up in the central sector to supplement the efforts of the States.

The year 1975 witnessed the birth of an organizational that went on to achieve great feats

in performance in a sector that was, until then, characterized largely by lack of

investment, severe supply shortage and operational practices that made the commercial

viability of the sector unsustainable. On November 7, 1975, NTPC came into being and

with it came a bold way of looking at the power infrastructure that could support the

economy, then reeling under the oil crisis. Since then, NTPC has led the power sector

with creation of an immensely efficient and reliable power generation infrastructure

which was till then largely in the hands of State Electricity Boards.

NTPC was set up in the central sector to build, own and operate large thermal power

stations with unit sizes of 200 MW and 500MW. Capacity addition by NTPC was meant

to supplement the efforts of State Electricity Boards (SEBs). The first four projects,

namely, Singrauli, korba, Ramagundam and Farakka, in four different regions of the

country were already on the drawing board and were to be set up as pit-head stations.

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There were challenges aplenty. The expectations were high and so were the risks. NTPC

symbolized hope of the country suffering from crippling power black-outs,

the Government of India, which was trying to put an ailing, economy back on track and

the World Bank, which was supporting the country in many development initiatives.

Thus, NTPC was created not only to redraw the power map of India but also to excel in

its performance and set benchmarks for others to follow. It succeeded on both counts.

On 7th November, 1975 the company came into existence. Shri D.V. Kapoor was the first Director of NTPC. On 8th December Government of India, had shown green signal to first Pit Head

Super Thermal Power Project at Singrauli in Uttar Pradesh and work on the said

project started in February, 1978.

In 1976, company capital was 125 corers. In March, 1979 Government of India, had accepted the project FARAKKA. In 1979, share capital of company increased to 300 corers from 125 corers. In 1982, company acquired capacity of producing 200MW. In 1985, Director of The World Bank Shri A.W. Kalwasen visited the Singrauli

project.

In 1986, the company earned net profit of 182.95 corers. NTPC issued its first Public Issue Bond and earned 163.95 corers. This issue was

over subscribed by 63%.

In 1994, company gave a profit of 65 corers to the government and the successstory continued and still going on till today.

Pursuant to special resolution passed by the Shareholders at the CompanysAnnual General Meeting held on September 23, 2005 and the approval of the

Central Government under section 21 of the Companies Act, 1956, the name of

the Company "National Thermal Power Corporation Limited" has been

changed to "NTPC Limited" with effect from October 28, 2005. The primary

reason being the company's foray into hydro and nuclear based power generation

along with backward integration by coal mining.

NTPC Ltd is the largest thermal power generating company of India. Within a span of 27

years since inception, NTPC has emerged as a truly national power company, with power

generating facilities in all the major regions of the country.

Based on 1998 data, carried out by Data monitor UK, NTPC is the 6th largest in terms of

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thermal power generation and the second most efficient in terms of capacity utilization

amongst the thermal utilities in the world. The Forbes Global 2000 ranking for 2005

ranks it as the 5th leading company in India and the 486th leading company in the world.

NTPCs share on 31 Mar 2007 in the total installed capacity of the country was 20.18%

and it contributed 28.5% of the total power generation of the country during 2006- 07.

Thus, every fourth home in India is lighted by NTPC.

NTPC was among the first Public Sector Enterprises to enter into a Memorandum of

Understanding (MOU) with the Government in 1987-88. NTPC has been Placed under

the 'Excellent category' (the best category) every year since the MOU system became

operative.

Recognizing its excellent performance and vast potential, Government of the India has

identified NTPC as one of the jewels of Public Sector 'Navratnas'- a potential global

giant. Inspired by its glorious past and vibrant present, NTPC is well on its way to realize

its vision of being "one of the world's largest and best power utilities, powering India's

growth".

1.2 Growth In The Early YearsThe first few years were marked by the ambitious task of setting up several generation

and transmission projects. Work began at a fast pace on constructing 3X200 MW units at

Singrauli, which were eventually commissioned in 1982-83. Till today, the project

continues to occupy the pride of place not only amongst NTPC projects but also amongst

the consistently top performing stations in the country. The proliferation of several 200

MW units continued with the rapid commissioning of Korba, Ramagundam and Farakka

projects in the early/ mid eighties.

In addition, NTPC also built transmission lines associated with its generating projects.

NTPC quickly upgraded the power system to 500 MW units by synchronizing its first 500

MW unit at Singrauli in 1986.

Through the eighties, NTPC continued to add capacity at a frenetic pace. Rihand (2X 500

MW) and Vindhyachal (6X 210 MW), which were both collaborative efforts with the

governments of UK and the erstwhile USSR, were added to the expanding list of projects.

The company grew in stature, both literally and figuratively. In sixth five year plan period

(1980-85), it added 2200 MW of generation capacity, which was 15.6% of the countrys

addition of 14226 MW. In seventh five year plan period (1985-90), it added 7613 MW.

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5

Until today, this remains the best plan performance in the current tenth plan (2002-07) by

adding over 9000 MW.

1.3 Challenges of the Nineties.

The late eighties and nineties found NTPC grappling with some difficult environmental

conditions. One of the challenges, which NTPC had to negotiate, was the mounting out

standings on the payments by state electricity boards. As more and more stations went on

stream, NTPC found that state electricity board were unable to pay for the electricity

purchased by them because of their poor financial health. The funding of project by the

WORLD BANK too came under a cloud when the latter signaled that unless the

receivables were brought down to a maximum level of two months of billing, it would

have to reconsider continuing its assistance to NTPCs projects.

The year 1991 saw a major shift on the policy front as well. For the first time,

Government of India invited private participation in power generation sector to increase

investments in the sector in order to present a conductive environment to the private

developers or Independent Power Producers (IPPs).

1.4 Installed Capacity

As on 31.03.2007, NTPCs total installed capacity is 27904 MW, which includes gas

power stations & JV with SAIL & MSEB. The details of the station are as under:

Coal Based Power Station:

Coal based StateCommissioned Capacity

(MW)

1. Singrauli Uttar Pradesh 2,000

2. Korba Chattisgarh 2,100

3. Ramagundam Andhra Pradesh 2,600

4. Farakka West Bengal 1,600

5. Vindhyachal Madhya Pradesh 3,260

6. Rihand Uttar Pradesh 2,0007. Kahalgaon Bihar 1,340

8. NTCPP Uttar Pradesh 840

9. Talcher Kaniha Orissa 3,000

10. Unchahar Uttar Pradesh 1,050

11. Talcher Thermal Orissa 460


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12. Simhadri Andhra Pradesh 1,000

13. Tanda Uttar Pradesh 440

14. Badarpur Delhi 705

15. Sipat Chattisgarh 500

Total (Coal) 22,895

Gas/ Liquid Fuel Based Power Station

Gas based StateCommissioned

Capacity (MW)

1. Anta Rajasthan 413

2. Auraiya Uttar Pradesh 652

3. Kawas Gujarat 6454. Dadri Uttar Pradesh 817

5. Jhanor-Gandhar Gujarat 648

6.Rajiv Gandhi CCPPKayamkulam

Kerala 350

7. Faridabad Haryana 430

Total (Gas) 3,955

Owned under Joint Venture

Coal 3 314*

Gas/LIQ. FUEL 1 740**

* Captive Power Plant under JVs with SAIL** Power Plant under JV with GAIL, FIs & MSEB

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2. ORGANIZATION STRUCTURE

2.1 ORGANISATION CHART

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2.2 COMPANY VISION & MISSION

NTPC's vision:

"A WORLD CLASS INTEGRATED POWER MAJOR, POWERING INDIAS

GROWTH, WITH INCREASING GLOBAL PRESENCE.

To realize this vision, NTPC has drawn up a detailed Corporate Plan for the period 1997-

2012 which represents the company's collective optimism and enthusiasm, inspired by a

glorious past, a vibrant present and a brilliant future. The Plan has been prepared in-house

in consultation with the committed, competent and confident members of the NTPC

family. The road map that has been charted out was after a thorough scan of the strengths

and weaknesses within the organization as well as opportunities and threats in the

environment.NTPCs Mission:

DEVLOP AND PROVIDE RELIABLE POWER, RELATED PRODUCTS AND

SERVICES AT COMPETITIVE PRICES, INTERGRATING MULTIPLE

ENERGY SOURCES WITH INNOVATIVE AND ECO-FRIENDLY

TECHNOLOGIES AND CONTRIBUTE TO SOCIETY.

To create a role model in the electricity distribution business by setting newbenchmarks.

To provide transparent, ethical and prompt services for enhancing customerdelight.

To adopt creative and innovative techniques for demand-side management andfinancial viability of the distribution businesses.

To speedily plan and implement distribution networks using state-of-the-arttechnologies.

To provide reliable, uninterrupted and quality power at appropriate tariffs. To achieve effective energy accounting by ensuring accurate metering, timely

billing and collection of revenues.

To create competent and committed human resource by nurturing technological &commercial competence for organisational growth and excellence.

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NTPC's Source of Financ e

As on 31/ 3/2007

29%

9%

19%

14%

6%

23%

IR

Bonds

Dom estic

Borrowings

Pa id upcapital

GOI Loans

Total investment Rs. 592.4 Billion

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3. NTPC PERFORMANCE

3.1 OPERATIONAL EXCELLENCE

NTPC recorded a Generation of 188.74 Billion Units (BU) during FY 2006-07- anincrease of 10.41 per cent over the previous year (FY 2005-06).

Seven coal based stations (Dadri, Unchahar, Vindhyachal, Simhadri, Rihand,Tanda and Talcher-Kaniha) have achieved more than 90 per cent PLF.

Coal based Stations performed at the highest ever Plan Load Factor (PLF) of89.43 per cent compared to 87.67 per cent last year.

Contributed 28.50 per cent of the total electricity generated in the country during2006-07 with 20.18 per cent share of the total installed capacity of the nation.

All the taken over stations (Badarpur, Talcher, Tanda & Unchahar) operating atmore than 85 per cent PLF.

Commendable turnaround at Unchahar project. From PLF of 18 per cent at thetime of takeover to present PLF of 95.59 per cent. Feroze Gandhi Unchahar

Thermal Power Station won Asian Power Plant of the Year Award 2006

instituted by Asian Power Magazine, Hong Kong for overall plant performance.

Singrauli, the flagship station of NTPC completes 25 years of generation. Unit I ofSingrauli, a unit of 1982 vintage, registered more than 91 per cent average PLF

during the last decade.

3.2 ROBUST FINANCIALS

Provisional and unaudited profit after tax for the year 2006-07 is Rs 67,264Million as compared to Rs. 58,202 million during the year 2005-06, an increase of

15.57 per cent.

Provisional and unaudited Net sales of Rs. 306,387 million during 2006-07 asagainst Rs. 261,429 million registering an increase of 17.20 per cent. The

provisional unaudited gross revenue is Rs. 332,997 million, during 2006-07 as

against Russ. 287,530 million for the year 2005-06, an increase of 15.81 per cent.

Highest interim dividend @24 per cent amounting to Rs. 19789 million during theyear. 11


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Highest ever capital expenditure of Rs. 78206 million during 2006-07. High investor confidence: Standard and Poors Ratings Services raised the

corporate credit rating of NTPC to Investment Grade on the basis of its stand

alone credit profile and dominant market share.

Latest market capitalization of the company is Rs. 1327 billion (US$30.75 billion)making it the fourth largest company.

100 per cent realization of the billing over the fourth year in succession. Loan agreement of US$300 million (approximately Rs. 13.15 billion) with ADB-

first loan syndication deal for an Indian Corporate under the Asian Development

Banks Complementary Finance Scheme for Sipat and Kahalgaon Stage II.

Loan agreement of US$ 100 million (Approximately Rs. 4.4 billion) signed withKfW to part finance the expenditure on Renovation and Modernization of NTPC

Power Plants.

Term-loan of Rs. 20 billion disbursed by LIC in addition to Bonds of Rs. 15billion placed with them to finance the capital expenditure of on-going projects.

Term loan of Rs. 15 billion signed with SBI in addition to term loan of Rs. 13billion signed with various other banks to part finance on-going capacity addition

programmes.

In the process of concluding financial tie-ups for about US $ 1.5 billion withinternational banks and multilateral institutions.

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Profit after Tax (Rs. Crore)

3607.5

5807 5820.2

6864.7

0

1000

2000

3000

4000

5000

6000

7000

8000

2002-03 2004-05 2005-06 2006-07

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4. OPERATIONAL ASPECTS OF DIFFERENT

FUNCTIONAL DEPARTMENTS

4.1 FINANCE DEPARTMENT

Finance department is very essential for any organization to be set up. It is the backbone

of any organization. Similarly the finance department plays a vital role in the set up and

running of NTPC.

Chief accountant manager and chief finance manager work under the direct control of

finance Director at NTPC. Other top executives in the finance department are senior

executive (finance), divisional officer (finance), accounts officers; assistant accounts

officers, senior assistants (Accounts) and assistant (accounts).

The chief finance manager and accounts manager handle various activities in the finance

department. Each of them has their tasks cut out systematically in these areas.

In NTPC, finance and accounting department is subdivided into 12 sub

departments. They are-

_ Salary department

_ Bills department

_ Budget & costing department

_ Provident fund department

_ Quarterly and annual accounts department

_ Debt servicing department

_ On going project department

Its brief explanation as follows:

SALARY DEPARTMENT

In NTPC salary deportment looks after the advances to employees salary payable to the

employees. Salary department calculates the salary of employees, on the basis of

information given by the human resource department regarding the employees

attendance, leave, leave not sanctioned, under salary amount deduction made in respect of provident fund, tax, and remittance charges, recoveries for advance. Salary department

credit net salary amount and reimbursement of Medical and electricity charges amount to

employees bank account by issuing cheques.

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CASH DEPARTMENT

The cash section is responsible for all receipts and payments of cash, cheques, etc., and

accounting the same in the books of accounts.

The functions of cash section are-

1. Operation of bank accounts.

2. Withdrawal of cash from bank, to cater for daily needs.

3. Payment of vouchers by cheques/cash.

4. Cash disbursement to salary department for payment of salaries and wages & other

Payments.

5. Computerized of cash entry books.

6. Preparation of bank reconciliation statement

7. Safe custody of cash, cheque book, revenue stamps & other documents like Bank

guarantees, fixed deposit receipts and other investment etc.

8. Reconciliation of inter transfer of funds transaction.

PROVIDENT FUND DEPARTMENT

NTPC LIMITED contributory provident rules:

These rules shall come in to force W.E from 20th July 1970. The fund shall be deemed to

have been established on and from 20th July 1970. The regional provident fund

commissioner decision is final regarding interpretation of any rules and it must be carried

out by both the trustees and the member of the fund.

MEMBERSHIP OF THE FUND

Every employee employed in the company, shall become member of the fund, by

subscribing from the beginning of the month following that in which he completes 60

days continuous service or has actually worked for not less than 60 days during a period

of 3 months or less in the company. The trainees and apprentices after completion of

training period shall become members of the fund (even though they are not worked for

60 days). The company contribution shall commence from the day on which, employees

subscribing the funds. Every employee, on becoming a member, shall remain a memberuntil he withdraws his provident fund accumulation. Member must abide by all rules and

regulations of the fund from time to time in force.

CONTRIBUTION: The compulsory contribution of a member shall be 12% of the

qualifying emoluments. Qualifying emoluments includes basic pay plus dearness

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allowance. The companys contribution for a member shall be equal to same 12% of the

qualifying emoluments. The members contribution shall be deducted from the salary bill

or from wage bill, as the case may be, and made available to the trustees along with the

companys contributions for credit to the individual account of the member before the

15th of the following month.

QUARTERLY / ANNUAL A/Cs DEPARTMENT

Under this department all accounts of the corporation and various project units are

compiled, that is accounts in the form of trading accounts, P & L A/C, B/S are collected

from all the project trough V-sat on computer and later are processed. The usual steps

followed are trial balance grouping-schedules-P&L A/c, B/S. An accounts officer is in

charge of this section that is under the control of divisional officer. A consolidated

trading, P&L A/C and B/s is drawn for NTPC of whole monthly and annually. All these

accounts are subject to audit by all auditors, i.e. internal auditor, statutory auditors, and

accounting general.

INDEPENDENT INTERNAL AUDIT DEPARTMENT

Independent Internal audit cell in NTPC is based on regional headquarter. Auditors at the

headquarter move to all units of region and submit their report to corporate centre for

compliances. This department is not controlled by respective regional headquarter but by

corporate centre.

BUDGET AND COSTING DEPARTMENT

Budgeting is a planning and forecasting exercise that matches resources available and

resources to be raised by business, for planned expenditure requirements for a give year.

Budgetary control is a process of management and cost control that functions by

comparing actual results with budgeted results and reviews feedback obtained for input

purposes for preparing new or revised estimates, and take steps for controlling and

correcting deviations if any.

The budget and budgetary control exercise at NTPC is comprised of the following

steps.

1. Obtaining budget proposal from constituent departments/divisions/units.

2. Reviewing and analyzing budget proposal with historical situations and ground

situations at the time of preparing the budget.

3. Preliminary screening and discussion.

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4. Drafting proposal to be put up before audit committee.

5. Approval by board of directors.

6. Publication of approved proposals in budget book form.

7. Periodical correction by comparing actual and budgeted results and initiating suitable

correction.

8. Preparing revised estimates on a quarterly basis and comparing the same with actual.

9. Generation of monthly capital and revenue expenditure statements.

10. Historical data of current year used as the comparison base for the next year budget

exercise.

BUDGET & BUDGETARY CONTROL

Budget is prepared under 2 heads at NTPC:

Revenue Budget

Capital Budget

Effectiveness of Budgetary Controls depends on:-

a) Support from the Divisions cover under the Budgetary Plan.

b) Implementation in letter and Spirit of the Budget Plan

c) Thoroughness of review and feedback to the Budget Department.

d) Presence of a Good Management Information System for obtaining prompt

information to monitor the Budgetary Plan in Operation.

e) Quick follow through on feedback Obtained.

INSURANCE DEPARTMENT

Insurance is a service of an undertaking taken in order to over come or setoff the losses or

damages while operating the business. In order to cover the risk and maintenance NTPC

has taken out insurance policy with many companies. The risky projects among all power

generating projects are Raichur Thermal Power Plants in order to cover all those risks

while operating all those insurance policies covered under Raichur Thermal Power Plants

can be classified as:

The policy covered under maintenance involves the following aspects:

1. Standard fire and special perils

2. Boiler explosion Policy

3. Terrorism

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The policy covered under construction involves the following aspects:

1. Marin Policy

2. Storage and Erection

3. Contractors all risk policy

Any fire break outs and any hazardous moments causing damage to the infrastructure of

the plant and damages to the people working over there are covered in this category.

Technical failures, Machine mal functioning, primary power breakups will be covered

under same category. The chances for the explosion of the boiler are expected eve though

it is very rare and unfortunate, this certainty of happening also stipulated in the policy.

The terrorism activity of any land of damaging the plant,

explosions, and hijack also stated under the policy. At the time of constructing the plant

the transported hazards while getting goods from one place to the procurement place for

ex: risk of transportation, accidents, delay on transportation, sticks, everything will be

covered under the Marine Policy.

At the time of starting and erecting the goods for construction, all risks of warehousing,

godowns, and fire emergences are included in the storage and erection clause. All the

risks faced by the contractor at the time of building the plant will be covered under

contractors all Risk policy. Ex: Theft of material, Destruction of work progress etc.

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IT DEPARTMENT

In NTPC, whole organization is computerized. LAN is established at offices in and at all

project sites. LAN is used for e-mail, file sharing, and printing of document, internet, and

application software. The computerization includes latest software like auto cad, oracle,developed 2000, windows NT, server etc. The software developed with in NTPC

deals withfinance, administration, design, MIS, public deposit, provident fund. During

the year following additional expanses take place for the computerization.

Management information systems (MIS) play a vital role in NTPC, as information is

required for any company to set up and also to work. In 1996, NTPC started a full-fledged

computer services so, in order to cater to all of them systems department was organized.

There are 13 systems engineers. There are 8 computer engineers catering according to

NTPC. Wide Area Network (WAN) is been installed connecting 9 projects with the use

of V-SAT at. Local Area Network (LAN) is also been installed at all project locations at

Bangalore. The whole organization is computerized. All the projects are automated and

they go online to rectify the problems in the project. They train the staff whenever

required, i.e., when the technology is being updated.

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Human Resource Department

Human resource department concerned with managing /developing people. As the

organization is made up of people, they should be managed /developed to attain higher

level of performance this can be done by developing their skills and motivating them.

This helps the organization to achieve its objective.

The HRD department took several initiatives for updating technical /professional skills of

employees and improving work culture. For this company organized several training

programmes.

Functions of the human resource department:

Recruitment

It is the process of finding and attracting capable applicants for employment. It is the

process of searching for and obtaining applicants for jobs, from among whom the right

people can be selected.

Training and development

Training is one of the most important interventions for developing human resource.

Hence, identification of training competency profile in terms of vision, mission of the

company would be the strategic point of the training and development strategy of the

company. The following objective has been set in this regard:-

To provide training to all employees at regular interval. Training to become an integral component of individual

Professional evolution by:

Updating knowledge to avoid obsolescence. Enhancing professional creativity. Enabling employees to shoulder higher responsibility.

To create a business bias and strategic thinking to take up.

IN-HOUSE TRAINING PROGRAMMES

Corporate excellence through co-operation and collaboration.

Company a/cs and accounting standard

Performance management.

Managing conflict for organizational excellence.

Total quality management

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Motivation and goal setting.

BPR and bench marking

Attitudinal shift through self development

EXTERNAL TRAINING PROGRAMMES

National seminar on utilization of fly ash.

Earthquake resistance designs of plants.

Renewable energy sources and energy audit.

National seminar views of the future civil engineering in 21st century.

Role of energy efficiency in the Indian energy sector.

Seminar on instrumentation engineering practice, team and research

Conference on the condition monitoring of plant and equipment.

International conference on civil engineering.Performance Appraisal

To ensure greater objectivity in appraising the performance of employees and also taking

in to account the present day practices in professionally managed organizations, NTPC

decided to introduce a new system called Performance Appraisal and Development

System (PADS) in the corporation. The PADS will apply to all the employees in the

Corporation cadre. In NTPC once in year the performance appraisal will be sent to all the

departments in order to know the appraisal of employees. It will be measured by

immediate supervision, reveal authority and accepting authority.

Retirement

The corporation has multiple schemes of retirement benefits of its employees, majority of

employees retiring under the pension and allied schemes, few employees retiring under

contributory provident fund schemes, a scheme exempted.

Transfer

Transfer of an employee from one place of work to another place of work or one job

to another job is ordered primarily in the interest of the service of the corporation.

Request of an employee for transfer is given consideration and acted upon if it is in

consonance with the interest of the service of the corporation. Transfer also aims at

rotation of employees among related jobs of the discipline to which the employee

belongs, thereby enabling the employee to acquire wider knowledge and experience in the

discipline. Transfer and non-transfer; however is not a matter of right for any employee.

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Welfare Activities:

The HR dept. is in charge of all the welfare activities in the organization.

The welfare activities undertaken by NTPC are:

1) School, recreation club.

2) House journal

3) Libra

4) Sports and games

5) Consumer cooperative society

6) Literacy programmes

7) Canteen

8) Medical facilities

9) Salary and allowance

10) General administration

11) Time office

12) Security

13) Leave

14) Election

15) Cultural activity

16) Uniform

17) Festival allowance

Reward system

Focus of the reward system in the company would be to promote team work and culture

of achievement and excellence in the organization. In addition to the mechanism of

individual reward for making exemplary contribution in the key thrust area of the

company for overall excellence and for desirable attributes like creativity and innovation.

Coupled with above, schemes like .Inter division competition. and proposed .Profit

sharing schemes. etc has been institutionalized in the company for the team reward.

Safety MeasuresProviding conveyance and other facilities to the employees involved in the accident while

on duty/service:

1) Accidents resulting in minor injuries/services injuries

2) Fatal accidents while on duty

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3) Death of employee while on service.

4) Last homage

5) Free conveyance

6) Retention of corporation accommodation

7) Special leave for attending court in accident cases.

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NEW PROJECT MANAGEMENT

The prime objective of project management is to execute the project within the scheduled

period and budgeted cost. Hence, the project has to be planned meticulously,

implemented effectively and managed professionally to achieve those objectives by

maintaining high quality standards. Scientific methods of effective project management

and construction/erection techniques are adopted by NTPC to achieve the desired results.

Because of high stakes involved, following innovative and effective project management

practices were evolved to essentially succeed in the venture.

It mainly works for the eastern zone, i.e. Bihar, Orissa, West Bengal, etc..

The selected goes to the spot where the project is to be set up for checking various

availability. Team checks for various factors are:

1. Nature of land: They check for the land which is barren, where farming can not be

done. They check the quality of soil. This is done in order to prevent for using fertile land

where there can be possibility of doing farming. So, it looks for the unfertile land. They

use to study the land in order to check whether it can bear the weight of plant.

2. Availability of factor of production:

Coal: How this factor of production can be made available for the plant. Are there

any possibilities of coal mine there or they have to import from somewhere else?

Transportation can be possible there or not.

Water: It is a very useful factor of production, which is needed in plenty. It is

checked whether there is a river or lake nearby or not.

3. Other than this they also check how many people and in what way they are affected. It

is very important to check whether the people present there is co-operative or not.

The project team after this has to interact with state government and get the approval

from them also. They have to take various clearance certificates for the project from

Pollution control board, Ministry of environment and forest, defense etc.

After all things are fulfilled a feasibility report are prepared and put to the board. The

expenses occurred on this is given by board. The estimate cost of the project is calculated

and it is then sent to the government of India where it gets the final approval.

There is one more department working under this, which is known as PROJECT

MONITORING. Its main work is to monitor the ongoing project whether it is working

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5. SWOT ANALYSIS

STRENGTHS:

NTPC is an existing profit making corporation with considerable reputation fortheir technical competence.

Premier Power Company owned by government. Maximum holding of market share(28%). Experience man power and managerial ability to implement the project. It has international competitiveness.

WEAKNESS:

No advertisement strategy has adopted. Decision-making power doesnt vests completely in NTPC management people

but Government interference is to a great extent.

NTPC is a public sector organization and hence profit making is not the motive. Insuch a condition, private sectors make benefit.

As NTPC is a public company, formation of new policies is a complicatedprocedure.

OPPORTUNITIES:

As per the plan of central government, electricity is to be provided to all by2012. Therefore, NTPC have a great opportunity to invest in new power plant

project.

A positive growth in the profits made by NTPC indicates a bright future.

THREATS:

An imbalance created because of increasing raw materials costs and of lowquality.

Coming of independent power producers, ex: Tata power, Reliance, Lanco,etc.

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MICROSCOPIC STUDY OF COMMERCIAL

DEPARTMENT

AND

NORMS &TERMS OF

DETERMINATION OF TARIFF OF COAL BASED

CENTRAL GENERATING UTILITIES

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28

6. COMMERCIAL DEPARTMENT

Organization Chart of ERHQ Commercial, Patna

It is a part of financial department. Its main work is to determine the tariff of electricity

generated and getting clearance of the bill. Determination of tariff is the main work of this

department. Other than this it is engaged in various other work also. Followings are the

work done by the commercial department.

A). Bill realization:

This is another very important department which runs under finance department but it has

got its own important. It uses to collect revenue for electric sold to their customer.

It is engaged in preparing the bills and collecting the payment. In eastern region the main

customer is state electricity board. It makes the bill by itself. The bill includes fixed

charges, fuel charges, etc.

Billing is done in two steps:

1. Provisional billing: It is done on every 25th

of the month.

2. Final billing: It is done in 1st week of month.

B). Customer relationship management: Maintain the data about its customer say SEB.

This data contains the past record of the customer about their payment duration, financial

S.K. SinhaDGM Commercial

N.DebnathSr.Manager (finance)Disha Inititative

Alok MahendraSr.Manager (comml.)Bihar PGCIL

A.K. SrivastavaSr.ManagerRe ulator Initative

T.K.BangalEngr.(comml.)MIS, Billing, UI with

ERLDC

Faisal AhmadSr.Engr. (comml.)MIS, Billing

Debasis PalSr.Engr.(comml.)ASEB, SIKKIM

A.K. Paswan

Mana er CRM


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health in order to know the capability of making payment. It keeps records ofthe annualconsumption, annual revenue requirement, etc. This has gained NTPC, as there is past

record of 3 year of 95% realization of the bill.

In spite of this they give their valuable suggestion to their customer to excel in every

filed, which give return to them only. They have introduced the benefits of

MANAGEMENT INFORMATION SYSTEM to their customers. All of this type of

guidance given is free of cost.

C). Arrangement for power purchase agreement with customer:

Commercial department is only engaged in selling of electricity produced. It determines

how much electricity is to be distributed among their customers. For this the customers

have to give prior notice the amount of electricity they need for next 24 hours.

D). Assurance of payment of security mechanism:

On the sale of electricity, a letter of credit is taken from the customer. On the default of

payment of any customer it cash the letter of credit from the bank.

E). Facilities and rebate given to the customer:

As commercial department is engaged with the preparation or billing of the electricity

sold, it also determines about the various facilities and rebate to be given to the customers

who pays their on the time. Presently 2% rebate is given if the payment is made on the

time.

F). Monitoring of share allocation to different customers:

This situation arises when the electricity produced is less than demand by the customers.

It is the responsibility of commercial department to allocate the share of electricity

produced to the customer according to the need.

G). Settlement of various issues with other electricity producers:

There are various issues which is to be solved with the help of other electricity producers.

Commercial department`s representative solves any issue with other states, agencies, etc

at regional level through regional committee meetings.

The main rule of commercial department is to sale of each and every unit generated and

getting billed as per norms, and money is collected.

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I). Determination of generating utilities:There are various fixed costs and variable costs

in generating electricity. Commercial department determine the tariff of it. There are

various norms given by central government on which tariff is to be determined. Below

each points are explained and there is also step by step calculation of tariff.

First of all see what this determination of tariff is and various related topic to it:

The determination of tariff of central generating station is always remain a prime concern

for the generator, the customer & regulatory authority since beginning as this affects the

financial position of SEBs & finally the consumer. A system of single-part tariff was in

vogue in India for pricing of thermal power prior to 1992. The single-part tariff for a

station was calculated so as to cover both the fixed cost as well as the variable (energy)

cost. The system of single-part tariff, particularly for Central generating stations, was

conducive neither to economic generation of power as per merit-order, nor to satisfactory

operation of the regional grids, the Government of India adopted a two-part tariff formula

in 1992 for Central generating stations based on the recommendations of the KP Rao

Committee. The serious problems of regional grid operation however continued even

after 1992. This was because the K.P. Rao Committee had been able to tackle only one

end, the Central generation side. Over drawls by some SEBs during peak-load hours and

under-drawls during off-peak hours continued unabated, causing serious frequency

excursions and perpetual operational/ commercial disputes. These forced the Government

of India to consider further structural reforms in the bulk power and transmission tariff to

induce better system operation and grid discipline through a mechanism of commercial

incentives and disincentives. Based on deliberations between 1995 and 1998, Ministry of

Power had crystallized the formulation for the so-called Availability Based Tariff (ABT).

6.1 What is Availability Tariff?

The term Availability Tariff, particularly in the Indian context, stands for a rational tariff

structure for power supply from generating stations, on a contracted basis. The power

plants have fixed and variable costs. The fixed cost elements are interest on loan, return

on equity, depreciation, O&M expenses, insurance, taxes and interest on working capital.

The variable cost comprises of the fuel cost, i.e., coal and oil in case of thermal plants and

nuclear fuel in case of nuclear plants. In the Availability Tariff mechanism, the fixed and

variable cost components are treated separately. The payment of fixed cost to the

generating company is linked to availability of the plant, that is, its capability to deliver

MWs on a day-by-day basis. The total amount payable to the generating company over a

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year towards the fixed cost depends on the average availability (MW delivering

capability) of the plant over the year. In case the average actually achieved over the year

is higher than the specified norm for plant availability, the generating company gets a

higher payment. In case the average availability achieved is lower, the payment is also

lower. The first component of Availability Tariff, is termed as capacity charge & the

second component of Availability Tariff is the energy charge, which comprises of the

variable cost (i.e., fuel cost) of the power plant for generating energy as per the given

schedule for the day. It may specifically be noted that energy charge (at the specified

plant-specific rate) is not based on actual generation and plant output, but on scheduled

generation. In case there are deviations from the schedule (e.g., if a power plant delivers

600 MW while it was scheduled to supply only 500 MW), the energy charge payment

would still be for the scheduled generation (500 MW), and the excess generation (100

MW) would get paid for at a rate dependent on the system conditions prevailing at the

time. If the grid has surplus power at the time and frequency is above 50.0 cycles, the rate

would be lower. If the excess generation takes place at the time of generation shortage in

the system (in which condition the frequency would be below 50.0 cycles), the payment

for extra generation would be at a higher rate.

6.2 How do the beneficiaries share the payments?

The Central generating stations in different regions of the country have various States of

the Region as their specified beneficiaries or bulk consumers. The latter have shares inthese plants calculated according to Gadgil formula, and duly notified by the Ministry of

Power. The beneficiaries have to pay the capacity charge for these plants in proportion to

their share in the respective plants. This payment is dependent on the declared output

capability of the plant for the day and the beneficiary's percentage share in that plant and

not on power / energy intended to be drawn or actually drawn by the beneficiary from the

Central station.The energy charge to be paid by a beneficiary to a Central station for a

particular day would be the fuel cost for the energy scheduled to be supplied from the

power plant to the beneficiary during the day. In addition, if a beneficiary draws more

power from the regional grid than what is totally scheduled to be supplied to him from the

various Central generating stations at a particular time, he has to pay for the excess

drawal at a rate dependent on the system conditions, the rate being lower if the frequency

is high, and being higher if the frequency is low.

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6.3 How does the mechanism work?

The process starts with the Central generating stations in the region declaring their

expected output capability for the next day to the Regional Load Dispatch Centre

(RLDC). The RLDC breaks up and tabulates these output capability declarations as per

the beneficiaries' plant-wise shares and conveys their entitlements to State Load Dispatch

Centres (SLDCs). The latter then carry out an exercise to see how best they can meet the

load of their consumers over the day, from their own generating stations, along with their

entitlement in the Central stations. They also take into account the irrigation release

requirements and load curtailment etc. that they propose in their respective areas. The

SLDCs then convey to the RLDC their schedule of power drawal from the Central

stations (limited to their entitlement for the day). The RLDC aggregates these requisitions

and determines the dispatch schedules for the Central generating stations and the drawal

schedules for the beneficiaries duly incorporating any bilateral agreements and adjusting

for transmission losses. These schedules are then issued by the RLDC to all concerned

and become the operational as well as commercial datum. However, in case of

contingencies, Central stations can prospectively revise the output capability declaration,

beneficiaries can prospectively revise requisitions, and the schedules are correspondingly

revised by RLDC.

While the schedules so finalized become the operational datum, and the regional

constituents are expected to regulate their generation and consumer load in a way that theactual generation and drawls generally follow these schedules, deviations are allowed as

long as they do not endanger the system security. The schedules are also used for

determination of the amounts payable as energy charges, as described earlier. Deviations

from schedules are determined in 15-minute time blocks through special metering, and

these deviations are priced depending on frequency. As long as the actual

generation/drawal is equal to the given schedule, payment on account of the third

component of Availability Tariff is zero. In case of under-drawal, a beneficiary is paid

back to that extent according to the frequency dependent rate specified for deviations

from schedule.

6.4 Why was Availability Tariff Necessary?

Prior to the introduction of Availability Tariff, the regional grids had been operating in a

very undisciplined and haphazard manner. There were large deviations in frequency from

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the rated frequency of 50.0 cycles per second (Hz). Low frequency situations result when

the total generation available in the grid is less than the total consumer load. These can be

curtailed by enhancing generation and/or curtailing consumer load. High frequency is a

result of insufficient backing down of generation when the total consumer load has fallen

during off-peak hours. The earlier tariff mechanisms did not provide any incentive for

either backing down generation during off-peak hours or for reducing consumer load /

enhancing generation during peak-load hours. In fact, it was profitable to go on

generating at a high level even when the consumer demand had

come down. In other words, The Availability Tariff directly addresses these issues.

Firstly, by giving incentives for enhancing output capability of power plants, it enables

more consumer load to be met during peak load hours. Secondly, backing down during

off-peak hours no longer results in financial loss to generating stations, and the earlier

incentive for not backing down is neutralized. Thirdly, the shares of beneficiaries in the

Central generating stations acquire a meaning, which was previously missing. The

beneficiaries now have well-defined entitlements, and are able to draw power up to the

specified limits at normal rates of the respective power plants. In case of over-drawal,

they have to pay at a higher rate during peak load hours, which discourages them from

over-drawing further. This payment then goes to beneficiaries who received less energy

than was scheduled, and acts as an incentive/compensation for them.

6.5 How does it benefit everyone?

The mechanism has dramatically streamlined the operation of regional grids in India.

Firstly, through the system and procedure in place, constituents schedules get determined

as per their shares in Central stations, and they clearly know the implications of deviating

from these schedules. Any constituent which helps others by under-drawal from the

regional grid in a deficit situation, gets compensated at a good price for the quantum of

energy under-drawn. Secondly, the grid parameters, i.e. frequency and voltage, have

improved, and equipment damage correspondingly reduced. During peak load hours, the

frequency can be improved only by reducing drawls, and necessary incentives are

provided in the mechanism for the same. High frequency situation on the other hand, is

being checked by encouraging reduction in generation during off-peak hours. Thirdly,

because of clear separation between fixed and variable charges, generation according to

merit-order is encouraged and pithead stations do not have to back down normally. The

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overall generation cost accordingly comes down. Fourthly, a mechanism is established for

harnessing captive and co-generation and for bilateral trading between the constituents.

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SCHEDULING

Now lets see how the scheduling is done to the various customers. How each one is

allocated their share.

6.6 THE DAILY SCHEDULING PROCESSSuppose a 1000 MW Central coal-fired power station has three beneficiaries (States A,

B and C) with allocated shares of 30, 30 and 40% respectively. Suppose the station

foresees a capability to deliver 900 MW (ex-bus) on the next day, and advises the same to

the RLDC by 9 AM. The RLDC would break it up, and advise the three SLDCs by 10

AM that their entitlements in the Central station are 270, 270 and 360 MW respectively,

for the next day. Entitlements in the other Central stations would also be advised by

RLDC to the SLDCs similarly.

Simultaneously, the SLDCs would receive availability status from their intra - State

stations as well. They would then carry out a detailed exercise as to how best to meet the

expected consumer demand in their respective States over the 24 hours. For this, they

would compare the variable costs of various intra - State power stations inter-se, and with

energy charge rates of the Central stations, and also consider the irrigation release

requirements vs. energy availability of the hydro-electric stations. After this exercise, the

SLDCs will issue the dispatch schedules for the intra - State stations, and their requisition

from the Central stations (restricted to the States respective entitlements). Suppose States

A and B fully requisition their shares from the Central station under consideration (270

MW each, throughout the 24-hour period), while State C requisitions 360 MW during

the day time, but only 200 MW during the night hours.

Summation of the three requisitions would thus produce, for the Central generating

station, the total dispatch schedule of 900 MW during the day time and 740 MW during

the night hours, as illustrated in figure - 1. This would be issued by the RLDC by 5 PM,

and would be effective from the following midnight (unless modified in the intervening

hours). States A, B and C shall pay capacity charge for the whole day corresponding to

plant availability of 270, 270 and 360 MW, and the generating station would get capacity

charge corresponding to 900 MW. Energy charge payments by the three States would be

for 270 x 24 MWh, 270 x 24 MWh, and (200 x 24 + 160 x 16) MWh of energy

respectively, at the specified energy charge rate of the generating station.

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On the other hand, when frequency goes down, the UI rate (for both over-supply and

under-supply) ramps up, reaching a ceiling level of Rs. 5.70 per kWh at a frequency of

49.0 Hz. At a frequency of 49.5 Hz, the UI rate is Rs. 3.45 per kWh presently. Under this

condition, any extra energy sent into the grid would get the generating station a UI

payment at the rate of Rs. 3.45 per kWh. For any shortfall, the generating station shall

have to pay back at the same rate. It would thus have a strong commercial incentive to

maximize its generation during periods of such low frequency.

A similar scheme operates for the States (beneficiaries) as well. Any State drawing power

in excess of its schedule has to pay for the excess energy at the same frequency -

dependant rate. The high UI rate during low-frequency conditions would induce all States

to reduce their drawal from the grid, by maximizing their own generation and/or by

curtailing their consumer load. If a State draws less power than scheduled, it pays for

scheduled energy quantum at the normal rate and gets paid back for energy not drawn at a

much higher UI rate. On the other hand, during high-frequency conditions, a State can

draw extra power at a low rate, and is thus encouraged to back down its own costlier

generating stations. An under-drawal during high-frequency conditions means that the

State pays for the scheduled power quantum unnecessarily. It should either reduce its

schedule, or increase its drawal.

For the above purpose, the energy is metered in 15-minute time blocks, since frequency

keeps changing (and the UI rate with it). The metered energy is then compared with the

scheduled energy for that 15-minute time block, and the difference (+ or -) becomes the

UI energy, as illustrated in figure - 3. The corresponding UI rate is determined by taking

the average frequency for the same 15-minute time block into account.

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Also, for each Central generating station and State, the actual energy has to be metered on

a net basis, i.e., algebraic sum of energy metered on all its peripheral interconnection

points, for every 15-minute time block. All UI payments are made into and from a

regional UI pool account, operated by the concerned RLDC.

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6.8 TERMS & CONDITION OF TARIFF DETERMINATION

On 26th

March2004 Central Electricity Regulatory Commission issued a regulation on

terms & condition of tariff setting for central generating station which deals with the

norms & various conditions for tariff determination. The salient points of the said

regulation are as under:

Components of Tariff:

Tariff for sale of electricity from a thermal power generating station shall comprise of two

parts, namely, the recovery of annual capacity (fixed) charges and energy (variable)

charges.

(1) The annual capacity (fixed) charges shall consist of

(a) Interest on loan capital;

(b) Depreciation, including Advance against Depreciation;

(c) Return on equity;

(d) Operation and maintenance expenses; and

(e) Interest on working capital.

(2) The energy (variable) charges shall cover fuel cost.

Norms of Operation:

The norms of operation as given hereunder shall apply:

(i) Target Availability for recovery of full Capacity (Fixed) charges:(a) All thermal power generating stations, except those covered under clauses (b) and (c)

below --- 80%

(b) Thermal power generating stations of Neyveli Lignite Corporation Ltd (TPS-I, TPS-

II, Stage I&II and TPS-I Expansion) and Talcher Thermal Power Station of National

Thermal Power Corporation Ltd. --- 75%

(c) Tanda Thermal Power Station of National Thermal Power Corporation Ltd. - 60%

Note

Recovery of capacity (fixed) charges below the level of target availability shall be onpro

ratabasis. At zero availability, no capacity charges shall be payable.

(ii) Target Plant Load Factor for Incentive

(a) All thermal power generating stations, except those covered under clauses (b) and (c)

below - 80%

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(b) Thermal power generating stations of Neyveli Lignite Corporation Ltd (TPS-I, TPS-

II, Stage I&II and TPS I Expansion) and Talcher Thermal Power Station of National

Thermal Power Corporation Ltd. - 75%

(c) Tanda Thermal Power Station of National Thermal Power Corporation Ltd. - 60

(iii) Gross Station Heat Rate

(a) Coal-based thermal power generating stations, other than those covered under clauses

(b) and (c) below:

Note 1

In respect of 500 MW and above units where the boiler feed pumps are electrically

operated, the gross station heat rate shall be 40 kCal/kWh lower than the station heat rate

indicated above.

Note 2

For generating stations having combination of 200/210/250 MW sets and 500 MW and

above sets, the normative gross station heat rate shall be the weighted average station heat

rate.

(b) Talcher Thermal Power Station 3100 kCal/kWh

(c) Tanda Thermal Power Station 3000 kCal/kWh

(d) Lignite-fired thermal power generating stations

(1) For lignite-fired generating stations except for TPS-I and TPS-II (Stage I & II) of

Neyveli Lignite Corporation Ltd, the gross station heat rates specified under clause (a)

above for coal-based thermal power generating stations shall be corrected, using

multiplying factors as given below:

(i) For lignite having 50% moisture: Multiplying factor of 1.10

(ii) For lignite having 40% moisture: Multiplying factor of 1.07

(iii) For lignite having 30% moisture: Multiplying factor of 1.04

(iv) For other values of moisture content, multiplying factor shall be pro-rated for

moisture content between 30-40 and 40-50 depending upon the rated values of

41

200/210/250 MW sets 500 MW and above sets

During

stabilization period2600 KCal/kWh 2550 KCal/kWh

Subsequent period 2500 KCal/kWh 2450 KCal/kWh


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multiplying factor for the respective range given under sub-clauses (i) to (iii)

above.

(2) TPS-I and TPS-II (Stage I & II) of Neveli Lignite Corporation Ltd:

(iv) Secondary fuel oil consumption

(a) Coal-based generating stations:

(i) All coal-based thermal power generating stations except those covered under sub-

clauses (ii) and (iii) below:

(b) Lignite-fired generating stations:

During Stabilization period Subsequent period

5.0 ml/kWh 3.0 ml/kWh

(v) Auxiliary Energy Consumption:

(a) Coal-based generating stations:

(c) Lignite-fired thermal power generating stations:

(i) All generating stations, except TPS-I and TPS-II (Stage I & II) of Neyveli Lignite

Corporation Ltd:

42

TPS-I 3900 kCal/kWh

TPS-II 2850 kCal/kWh

During Stabilization period Subsequent period

4.5 ml/kWh 2.0 ml/kWh

Talcher Thermal Power Station 3.5 ml/kWh

Tanda Thermal Power Station 3.5 ml/kWh

With cooling Tower Without cooling Tower

(i) 200 MW series 9.0% 8.5%

(ii) 500 MW series

Steam driven boiler feed pumps 7.5% 7.0%

Electrically driven boiler feedpumps

9.0% 8.5%

iii) Talcher Thermal PowerStation

11.0%


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The auxiliary energy consumption norms shall be 0.5 percentage point more than the

above auxiliary energy consumption norms of coal-based generating stations at (v) (a) (i)

& (ii) above.

(ii) TPS-I & TPS-II Stage-I&II of Neyveli Lignite Corporation Ltd.:

TPS-I 12.0%

TPS-II 10.0%

Note

During stabilization period, normative auxiliary consumption shall be reckoned at 0.5

percentage points more than the norms indicated at (a), (b) and (c) above.

Capital Cost:

Subject to prudence check by the Commission, the actual expenditure incurred on

completion of the project shall form the basis for determination of final tariff. The final

tariff shall be determined based on the admitted capital expenditure actually incurred up

to the date of commercial operation of the generating station and shall include capitalized

initial spares subject to following ceiling norms as a percentage of the original project

cost as on the cut off date:

(i) Coal-based/lignite-fired generating stations -- 2.5%

Provided that where the power purchase agreement entered into between the generating

company and the beneficiaries provides a ceiling of actual expenditure, the capital

expenditure shall not exceed such ceiling for determination of tariff; Provided further that

in case of the existing generating stations, the capital cost admitted by the Commission

prior to 1.4.2004 shall form the basis for determination of tariff.

Note

Scrutiny of the project cost estimates by the Commission shall be limited to the

reasonableness of the capital cost, financing plan, interest during construction, use of

efficient technology, and such other matters for determination of tariff.

Additional capitalizations: (1) The following capital expenditure within the original

scope of work actually incurred after the date of commercial operation and up to the cut

off date may be admitted by the Commission, subject to prudence check:

(i) Deferred liabilities;

(ii) Works deferred for execution

(iii) Procurement of initial capital spares in the original scope of work, subject to

ceiling specified in regulation 17;

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(iv) Liabilities to meet award of arbitration or for compliance of the order or decree of

a court; and

(v) On account of change in law.

Provided that original scope of work along with estimates of expenditure shall be

submitted along with the application for provisional tariff.

(2) Subject to the provisions of clause (3) of this regulation, the capital expenditure of the

following nature actually incurred after the cut off date may be admitted by the

Commission, subject to prudence check:

(i) Deferred liabilities relating to works/services within the original scope of work;

(ii) Liabilities to meet award of arbitration or for compliance of the order or decree of

a court

(iii) On account of change in law;

(iv) Any additional works/services which have become necessary for efficient and

successful operation of the generating station, but not included in the original project

cost; and

(v) Deferred works relating to ash pond or ash handling system in the original scope of

work.

(3) Any expenditure on minor items/assets like normal tools and tackles, personal

computers, furniture, air-conditioners, voltage stabilizers, refrigerators, fans, coolers, TV,

washing machines, heat-convectors, carpets, mattresses etc. brought after the cut off date

shall not be considered for additional capitalisation for determination of tariff with effect

from 1.4.2004.

Note

The list of items is illustrative and not exhaustive

(4) Impact of additional capitalisation in tariff revision may be considered by the

Commission twice in a tariff period, including revision of tariff after the cut off date.

Note 1

Any expenditure admitted on account of committed liabilities within the original scope of

work and the expenditure deferred on techno-economic grounds but falling within the

original scope of work shall be serviced in the normative debt-equity ratio specified in

regulation 20.

Note 2

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Any expenditure on replacement of old assets shall be considered after writing off the

gross value of the original assets from the original project cost, except such items as are

listed in clause (3) of this regulation.

Note 3

Any expenditure admitted by the Commission for determination of tariff on account of

new works not in the original scope of work shall be serviced in the normative debt-

equity ratio specified in regulation 20.

Note 4

Any expenditure admitted by the Commission for determination of tariff on renovation

and modernization and life extension shall be serviced on normative debt equity ratio

specified in regulation 20 after writing off the original amount of the replaced assets from

the original project cost.

Sale of Infirm Power:

Any revenue (other than the recovery of fuel cost) earned by the generating company

from sale of infirm power, shall be taken as reduction in capital cost and shall not be

treated as revenue.

Debt-Equity Ratio:

(1) In case of all generating stations, debtequity ratio as on the date of commercial

operation shall be 70:30 for determination of tariff. Where equity employed is more than

30%, the amount of equity for determination of tariff shall be limited to 30% and the

balance amount shall be considered as the normative loan.

Provided that in case of a generating station where actual equity employed is less than

30%, the actual debt and equity shall be considered for determination of tariff.

(2) The debt and equity amount arrived at in accordance with clause (1) shall be used for

calculating interest on loan, return on equity, Advance Against Depreciation and Foreign

Exchange Rate Variation.

Computation of Capacity (Fixed) Charges:

(1) The capacity charges shall be computed on the following basis and their recovery

shall be related to target availability.

(i) Interest on loan capital

(a) Interest on loan capital shall be computed loan wise on the loans arrived at in the

manner indicated in regulation 20.

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(b) The loan outstanding as on 1.4.2004 shall be worked out as the gross loan as per

regulation 20 minus cumulative repayment as admitted by the Commission up to

31.3.2004. The repayment for the period 2004-09 shall be worked out on a normative

basis.

(c) The generating company shall make every effort to swap the loan as long as it results

in net benefit to the beneficiaries. The costs associated with such swapping shall be borne

by the beneficiaries.

(d) The changes to the loan terms and conditions shall be reflected from the date of such

swapping and benefit passed on to the beneficiaries.

(e) The generating company shall not make any profit on account of swapping of loan and

interest on loan.

(ii) Depreciation, including Advance against Depreciation

(a) Depreciation

For the purpose of tariff, depreciation shall be computed in the following manner,

namely:

(i) The value base for the purpose of depreciation shall be the historical cost of the asset;

(ii) Depreciation shall be calculated annually, based on straight line method over the

useful life of the asset and at the rates prescribed in Appendix II to these regulations.

The residual life of the asset shall be considered as 10% and depreciation shall be allowed

up to maximum of 90% of the historical capital cost of the asset. Land is not a depreciable

asset and its cost shall be excluded from the capital cost while computing 90% of the

historical cost of the asset. The historical capital cost of the asset shall include additional

capitalization on account of Foreign Exchange Rate Variation up to 31.3.2004 already

allowed by the Central Government /Commission.

(iii) On repayment of entire loan, the remaining depreciable value shall be spread over the

balance useful life of the asset.

(iv) Depreciation shall be chargeable from the first year of operation. In case of operationof the asset for part of the year, depreciation shall be charged onpro ratabasis.

(b) Advance Against Depreciation

In addition to allowable depreciation, the generating company shall be entitled to

Advance against Depreciation, computed in the manner given hereunder:

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Note

For the generating stations having combination of 200/210/250 MW sets and 500 MW

and above set, the weighted average value for operation and maintenance expenses shall

be adopted.

(b) (i) Talcher Thermal Power Station

The base operation and maintenance expenses including insurance, for the year 2000-01

shall be derived by averaging the actual operation and maintenance expenses for the years

1998-99 to 2002-03 based on the audited balance sheets and by excluding abnormal

operation and maintenance expenses, if any, after a prudence check by the Commission.

The average of such normalized operation and maintenance expenses, after prudence

check, for the years 1998-99 to 2002-03 considered as operation and maintenance

expenses for the year 2000-01 shall be escalated at the rate of 4% per annum to arrive atoperation and maintenance expenses for the base year 2003-04.

The operation and maintenance expenses for the base year 2003-04 shall be escalated

further at the rate of 4% per annum to arrive at permissible operation and maintenance

expenses for the relevant year of tariff period.

(ii) Tanda Thermal Power Station

The base operation and maintenance expenses including insurance, for the year 2001-02

shall be derived by averaging the actual operation and maintenance expenses for the years

2000-01 to 2002-03 based on the audited balance sheets and by excluding abnormal

operation and maintenance expenses, if any, after a prudence check by the Commission.

The average of such normalized operation and maintenance expenses, after prudence

check, for the years 2000-01 to 2002-03 considered as operation and maintenance

expenses for the year 2001-02 shall be escalated at the rate of 4% per annum to arrive at

operation and maintenance expenses for the base year 2003-04.

The operation and maintenance expenses for the base year 2003-04 shall be escalated

further at the rate of 4% per annum to arrive at permissible operation and maintenance

expenses for the relevant year of tariff period.

(v) Interest on Working Capital

(a) Working capital shall cover:

Coal based/Lignite-fired generating stations

(i) Cost of coal or lignite for 1 months for pit-head generating stations and two months

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for non-pit-head generating stations, corresponding to the target availability;

(ii) Cost of secondary fuel oil for two months corresponding to the target availability;

(iii) Operation and Maintenance expenses for one month;

(iv) Maintenance spares @ 1% of the historical cost escalated @ 6% per annum from the

date of commercial operation; and

(v) Receivables equivalent to two months of fixed and variable charges for sale of

electricity calculated on the target availability.

(b)(1) Rate of interest on working capital shall be on normative basis and shall be equal to

the short-term Prime Lending Rate of State Bank of India as on 1.4.2004 or on 1st April

of the year in which the generating station or a unit thereof is declared under commercial

operation, whichever is later. Interest on working capital shall be payable on normative

basis Not withstanding that the generating company has not taken working capital loan

from any outside agency.

(2) Full capacity charges shall be recoverable at target availability specified in regulation

16. Recovery of capacity (fixed) charges below the level of target availability shall be on

pro ratabasis. At zero availability, no capacity charges shall be payable.

(3) The payment of capacity charges shall be on monthly basis in proportion to the

allocated capacity.

Energy Charges:

(i) Generating stations covered under ABT

Energy (variable) Charges shall cover fuel costs and shall be worked out on the basis of

ex-bus energy scheduled to be sent out from the generating station as per the following

formula:

Energy Charges (Rs) = Rate of Energy Charges in Rs/kWh X Scheduled Energy (ex-bus)

for the month in kWh corresponding to scheduled generation.

(ii) Generating stations other than those covered under ABT

Energy (variable) charges shall cover fuel costs and shall be worked out on the basis of

ex-bus energy delivered / sent out from the generating station as per the following

formula:

Energy Charges (Rs) = Rate of Energy Charges in Rs/kWh X Energy delivered (ex-bus)

for the month in kWh

Where,

Rate of Energy Charges (REC) shall be the sum of the cost of normative quantities of

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primary and secondary fuel for delivering ex-bus one kWh of electricity in Rs/kWh and

shall be computed as under:

Pp = Price of primary fuel namely coal or lignite or gas or liquid fuel in Rs/Kg or Rs/cumor Rs./litre, as the case may be.

(Qp)n = Quantity of primary fuel required for generation of one kWh of electricity atgenerator terminals in Kg or litre or cum, as the case may be, and shall be computedfuel oil for coal/lignite based generating stations) and gross calorific value of coal/ligniteor gas or liquid fuel as fired.

Ps = Price of Secondary fuel oil in Rs./ml

(Qs)n = Normative Quantity of Secondary fuel oil in ml/kWh as per clause 16 (iv), as the

case may be, and

AUXn= Normative Auxiliary Energy Consumption as % of gross generation as per clause16 (v), as the case may be.

(iii) Adjustment of rate of energy charge (REC) on account of variation in price or

heat value of fuels:

Initially, Gross Calorific Value of coal/lignite or gas or liquid fuel shall be taken as per

actuals of the preceding three months. Any variation shall be adjusted on month to month

basis on the basis of Gross Calorific Value of coal/lignite or gas or liquid fuel received

and burnt and landed cost incurred by the generating company for procurement of

coal/lignite, oil, or gas or liquid fuel, as the case may be. No separate petition need to be

filed with the Commission for fuel price adjustment. In case of any dispute, an

appropriate application in accordance with Central Electricity Regulatory Commission

(Conduct of Business Regulations), 1999, as amended from time to time or any statutory

re-enactment thereof, shall be made before the Commission.

(iv) Landed Cost of Coal:

The landed cost of coal shall include price of coal corresponding to the grade/quality of

coal inclusive of royalty, taxes and duties as applicable, transportation cost by rail/road or

any other means, and, for the purpose of computation of energy charges, shall be arrived

at after considering normative transit and handling losses as percentage of the quantity of

coal dispatched by the coal supply company during the month as given below:

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Pit head generating stations : 0.3%

Non-Pit head generating stations: 0.8%

Incentive: Incentive shall be payable at a flat rate of 25.0 paisa/kWh for ex-bus

scheduled energy corresponding to scheduled generation in excess of ex-bus energy

corresponding to target Plant Load Factor.

Unscheduled Interchange (UI) Charges: (1) Variation between actual generation or

actual drawl and scheduled generation or scheduled drawl shall be accounted for

through Unscheduled Interchange (UI) Charges. UI for a generating station shall be equal

to its actual generation minus its scheduled generation. UI for a beneficiary shall be equal

to its total actual drawal minus its total scheduled drawal. UI shall be worked out for each

15 minute time block. Charges for all UI transactions shall be based on average frequency

of the time block and the following rates shall apply with effect from 1.4.2004:Average Frequency of time block UI Rate (Paisa per kWh)

50.5 Hz and above 0.0

Below 50.5 Hz and up to 50.48 Hz 8.0

Below 49.04 Hz and up to 49.02 Hz 592.0

Below 49.02 Hz 600.0

Between 50.5 Hz and 4

ntpc limited ion study

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