POWER GRID LTD

Power Grid Corporation of India Limited (POWERGRID), is a Schedule ‘A’, ‘Maharatna’ Public
Sector Enterprise of Govt. of India which was incorporated on 23rd Oct 1989 under the
Company Act, 1956. POWERGRID is a listed Company, with 51.34% holding of Government of
India and the balance is held by Institutional Investors and public.

Products: Transmission, Consultancy, Telecom, Solar system and etc

Chairman And M. D Shri K. Sreekant

Year Founded 1989

Origin Gurugram

No. of Employees 8500+ (2022)

Company Type Public

Market Cap ₹1.68 Trillion (2022)

Net Income ₹3.65Tr Crores (2022)

Share Price BSE: 240.30

NSE: 240.05

Vision:

World Class, Integrated, Global Transmission Company with Dominant Leadership in Emerging
Power Markets Ensuring Reliability, Safety and Economy.

Mission:

We will become a Global Transmission Company with Dominant Leadership in Emerging

Power Markets with World Class Capabilities.
INDUSTRY’S SWOT ANALYSIS

Strengths:

Power is undoubtedly a
key driver of human progress. A SWOT analysis of the power sector’s strengths identifies
features inside the industry that are a positive sign. These features need to be representative of
areas over which the industry has a high degree of control. Some of the strengths of the power
sector include:

 Rising rate of investment in renewable energy

 Established infrastructure
 Increased adoption of better and energy-efficient technology

Weakness:

In SWOT analysis, weaknesses help identify features inside the industry that are low-performing
or inefficient. The swelling of the global population and increasing rate of industrialization in
developing nations have fueled humanity’s hunger for energy to unprecedented levels. Some of
the common weaknesses of companies in the power sector include:

 Growing demand for energy

 Rising costs of electric grids
 Employee attrition
Opportunities:

Companies in the power sector can identify various goldmines for growth using the SWOT
analysis. The growing rate of data collection and exchange are opening new doors of
opportunities in the energy industry. Opportunities are present all along the power-industry value
chain, from generation to customer relationship management. Some of the key opportunities for
power sector companies include:

 Increased tax incentive for energy-efficient automobiles

 Seasonal increase in the number of days of sunlight
 Lifted bans on off-shore drilling

Threats

A SWOT analysis of the power industry’s threats shows features outside the industry that are
potentially hazardous to continued growth. They are often outside the control of the power sector
companies. Presently, due to the sector’s social and economic impact, companies in the industry
are under constant pressure to improve their efficiency and attain greater cost competitiveness.
The main threats facing power sector companies include:

 Compliance and regulatory risks

 Uncertainty in climate policy and carbon pricing
 Commodity price volatility
 External Factor Analysis Summary of Power Industry

SL.NO. OPPORTUNITIES WEIGHTS RATING WEIGHTED

SCORE
SL.NO. Increasing focus on renewable
THREATS 0.20
WEIGHTS 3.5
RATING 0.7
WEIGHTED
sources. S SCORE
1.
1. Threats in fuel challenges 0.1 1.5 0.15
including unequal contracts
inadequate supply and poor
2. Modernization
transportation. of the existing 0.10 1.5 0.15
district heating systems will
2. Financial challenges: Due to 0.1 2 0.2
promote the development of
high debt levels and low
combined heat and electricity
profitability.
production.
3. Environmental concerns: 0.2 3.5 0.7
3. Existing infrastructure and 0.10 1.5 0.15
Causing air pollution
experience are supportive for
greenhouse gas emission and
construction of new nuclear
other pollution.
power plant.
4. High transmission and 0.05 1.5 0.075
4. Timely Introduction of new 0.05 2.5 0.125
distribution losses
energy sources and technologies.
5. Inadequate fuel supply and 0.05 1.5 0.075
5. Improved distributionframework
complex regulatory of 0.05 1.5 0.075
infrastructure through central
schemes. 1 2.4

Internal Factor Analysis Summary of Power Grid

SL.NO. STRENGTH WEIGHT RATING WEIGHTED

S SCORE
1. Strong network in remote areas 0.05 2 0.1

2. Robust network across India 0.05 2.5 0.125

3. Efficient manpower 0.10 3 0.3

 4. Very few networks failure 0.20 1.5 0.3

5. Backing of Central Government 0.10 2 0.2

SL.NO. WEAKNESS WEIGHT RATINGS WEIGHTED

SCORE
1. Manual network needs to be 0.10 2 0.2
computerization.

2. Slow decision-making process. 0.05 1 0.05

3. Centralized authority. 0.20 1.5 0.3

4. Intense competition from other 0.05 2 0.1

major players and international
players.
5. Poor cash generated from core 0.01 3 0.03
business
1 2.5 1.65

Strategic Factor Analysis Summary of Power Grid

SL.NO FACTORS WEIGHTS RATING WEIGHTED
SCORE
1. Increasing focus on 0.05 2.5 .125
renewable sources.
2. Timely Introduction of new 0.05 3 .15
energy sources and
technologies
3. Environmental concerns: 0.08 4 .32
Causing air pollution
greenhouse gas
 emission and other
pollution.
4. Financial challenges: Due 0.09 3.5 .315
to high debt levels and low
profitability.
5. Very few network failure 0.05 2.5 .125
6. Efficient manpower 0.33 2 .66
7. Centralized authority. 0.22 2.5 .55
8. Manual network needs to be 0.14 3 .42
computerization.
1 2.66

BCG Growth-Share Matrix

The Boston Consulting Group (BCG) growth-share matrix is a planning tool that uses
graphical representations of a company’s products and services to help the company
decide what it should keep, sell, or invest more in.

The matrix plots a company’s offerings in a four-square matrix, with the y-axis
representing the rate of market growth and the x-axis representing market share. It was
introduced by the Boston Consulting Group in 1970.
BCG Matrix of Power Grid:

Cash Cows:

The cash cow businesses are the one that has high market share but low growth rate. These are
often established businesses in their segment. As these segments are mature, the marginal effects
of new investment or resource allocation is relatively small. So, Power Grid should continue to
use the revenues from these businesses to reinvest into the faster growing segments.

Stars:
Stars are the businesses that have high growth rate and high market share in the industry they
operate in. The star businesses represent not only present cash flow but also have huge potential
for future growth. Power Grid should continue to invest in these businesses to not only defend
the present market share but also to increase market share and profitability.

Question:

Question Marks are the businesses that have low market share in industries that have high
growth rate. Questions Marks often represent the lack of skills that are required by the
companies to excel in the booming industries. Power Grid needs to figure out whether Question
Marks represent a potential Star or a potential Dog. If Power Grid have resources to turnaround
the business by either by procuring new technology, hiring skilled human resources, or building
better processes then it should invest in the question mark. If the organization after analysis
concludes that investing into a question mark is not feasible with resources at hand, then Power
Grid should divest from the segment and employ those resources in star businesses.

Dogs:

Dogs are businesses that have low market share and are operating in industries that have
low growth rate. If the profitability in the industry is also low then Power Grid should
just exit from those businesses. But if the margins are healthy then a firm can choose to
continue doing that business. Secondly if the business is critical to other businesses of
Power Grid, then it needs to continue that business even though it is a low profit-making
business.

Emerging Top Trends for Indian Power Sector:

One of the complicated engineering systems is the interconnected electric power grid.

Historically, high voltage transmission lines were used to transport electricity over long distances
from centrally located power plants, and transformers were used to lower the voltage at
distribution lines. After that, residential, commercial, and industrial users received electricity. 
Decarbonization, decentralization, and digitization have long been the three main trends in the
world, and these trends are continuing today.
Large-Scale Adoption of Renewable Energy Sources

As Wind and Solar become more integrated into the grid, the level of uncertainty resulting from
the erratic nature of these sources rises. It is necessary to develop new quick-acting load
balancing techniques and methods for controlling the dynamic stability of the grid.

Explosion of EVs

As more EVs are incorporated into the system, it is essential to carefully evaluate how they will
affect the distribution grid. Because charging can take place anywhere, it is necessary to
anticipate load behaviour and take proactive steps to maintain grid stability and ensure power
quality. Technologies for V2G would probably develop.

Integration of Grid-level Energy Storage

Energy storage appears to be a godsend for managing the intermittent nature of renewable
energy sources and assisting in grid stabilization. It is anticipated that new standards will
develop, necessitating the creation of new ancillary services-related policies.

Microgrids

There is an impending opportunity for distributed power to explode in India due to the falling
solar and battery storage costs.

Future regulations governing the purchase of excess power may change, and retail power trading
may also occur. Since LVDC grids are more effective, more activity is also anticipated there.

Distribution Deregulation

The content/carrier separation at the distribution level will eventually come to pass due to
mounting losses for power distribution utilities. This will guarantee that utilities strive to become
competitive and innovative to maintain their customer base.

MARKET SIZE:
  India is the third-largest producer and consumer of electricity worldwide, with an
installed power capacity of 411.64 GW as of January 31, 2023.
 As of January 31, 2023, India’s installed renewable energy capacity (including hydro)
stood at 168.4 GW, representing 40.9% of the overall installed power capacity. Solar
energy is estimated to contribute 63.3 GW, followed by 41.9 GW from wind power, 10.2
GW from biomass, 4.92 GW from small hydropower, 0.52 from waste to energy, and
46.85 GW from hydropower.
 The non-hydro renewable energy capacity addition stood at 4.2 GW for the first three
months of FY23 against 2.6 GW for the first three months of FY22.
 With electricity generation (including renewable sources) of 1,359.21 BU in India up to
January, 2023 in the current fiscal year FY23, the country witnessed a growth of 10.08%
YoY. According to data from the Ministry of Power, India's power consumption increased
11% YoY in December, 2022 to 121.19 BU.
 The peak power demand in the country stood at 205.03 GW in December, 2022. The coal
plants registered a PLF of 73.7% for the first nine-months period in FY23 compared to
68.5% in FY22 for the same period.

DEVELOPMENTS / INVESTMENTS:

Total FDI inflows in the power sector reached US$ 16.57 billion between April 2000-December
2022.

Some major investments and developments in the Indian power sector are as follows:

 In February 2023, Tata Power inaugurated ‘Divyang’ a managed customer relations

centre in Mumbai, which is a first among Indian power utilities.
  In January 2023, the Union Cabinet (CCEA) approved investment of US$ 315 million
(Rs. 2,614 crores) for SJVN’s 382 MW Sunni Dam Hydro Project.

 In January 2023, President of India laid foundation stone of SJVN’s 1000 MW Bikaner
Solar Power Project in Rajasthan.

 In January 2023, the President of India dedicated transmission system built by Powergrid
for 8.9 GW of solar power in Rajasthan.

 In August 2022, Tata Power Green Energy Limited (TPGEL), a wholly-owned subsidiary
of Tata Power, commissioned a 225MW hybrid power project in Rajasthan.

 Mumbai headquartered Essar Group has formed the Essar Energy Transition (EET) with
the objective to invest a total of US$ 3.6 billion in developing a range of low carbon
energy transition projects over the next five years.

 In November 2022, the Maharashtra State Electricity Distribution Corporation Limited

(MSEDCL) granted the "Letter of Award" (LoA) to Tata Power Renewable Energy
Limited (TPREL), a Tata Power subsidiary, to build a 150 MW solar project in Solapur,
Maharashtra.

 In October 2022, SJVN started commissioning its 75 MW Solar Power Project in Parasan
Solar Park which is located at Tehsil Kalpi, District Jalaun near Kanpur, Uttar Pradesh.

 In August 2022, NHPC Limited and the Government of Himachal Pradesh inked an
implementation agreement for the 500 MW Dugar Hydroelectric Project in the Chamba
District of Himachal Pradesh.

 In August 2022, Norfund, who manage the Norwegian Climate Investment Fund, and
KLP, Norway’s biggest pension company, signed an agreement to buy a 49% share of a
420 MW solar power plant in Rajasthan for Rs. 2.8 billion (US$ 35.05 million).

 In November 2021, NTPC announced that its 80 MW solar power-generation capacity in

Jetsar (Rajasthan) has started commercial operations from October 22, 2021. The total
capacity of the project is 160 MW.

 In November 2021, SJVN began the second unit work of the 1,320 MW Buxar thermal
power plant in Bihar.

INDUSTRY ANALYSIS:
The Michel Porter's Five Forces model:

It is a framework used to analyse the competitive dynamics of an industry. It helps assess the
attractiveness and profitability of an industry by examining five key forces that shape its
competitive environment. Let us apply the Porter's Five Forces model to the power sector:

Threat of New Entrants:

The power sector generally requires significant capital investments, regulatory approvals, and
infrastructure development. These barriers to entry can discourage new entrants. However, the
rise of renewable energy technologies and policy changes promoting market liberalization and
competition may attract new players. Overall, the threat of new entrants in the power sector can
vary depending on the specific market and its regulations.

Bargaining Power of Suppliers:

In the power sector, suppliers refer to fuel providers, equipment manufacturers, and other input
providers. The bargaining power of suppliers can vary based on factors such as the availability
and uniqueness of resources, contractual agreements, and the presence of substitute inputs. For
example, if there are limited fuel suppliers or equipment manufacturers, they may have greater
bargaining power.

Bargaining Power of Buyers:

The buyers in the power sector are primarily electricity consumers such as residential,
commercial, and industrial customers. Their bargaining power can be influenced by factors like
the availability of alternative power sources, regulatory environment, and the concentration of
buyers. In regulated markets, where customers have limited choices, their bargaining power may
be low. However, in deregulated markets or with the rise of distributed generation options,
buyers can have more power to negotiate prices and terms.

Threat of Substitute Products or Services:

The power sector faces a potential threat from substitute energy sources or technologies. This
includes renewable energy options like solar, wind, and hydro, as well as emerging technologies
such as energy storage and decentralized energy systems. The availability, cost-effectiveness,
and environmental considerations of substitute products or services can significantly impact the
power sector's competitiveness.

Intensity of Competitive Rivalry:

The power sector is highly competitive, although the level of competition may vary across
markets. In deregulated markets, multiple players compete to sell electricity, which can lead to
price competition and innovation. However, in regulated markets with limited competition,
rivalry may be less intense. The competitive intensity can also depend on factors like market
concentration, regulatory framework, and access to transmission and distribution infrastructure.

Growth Of Industry:
The power sector industry in India has experienced significant growth over the years and
continues to be a crucial sector for the country's economic development. Here are some key
points highlighting the growth of the power sector industry in India:

Capacity Expansion: India has witnessed a substantial increase in power generation capacity.
The installed capacity has grown from around 136 GW in 2000 to over 383 GW as of 2021. This
growth has been driven by various sources, including thermal, hydro, renewable, and nuclear
energy.

Renewable Energy: India has placed a strong emphasis on renewable energy sources. The
country has set ambitious targets for renewable energy capacity addition, including 175 GW by
2022 and 450 GW by 2030. Solar and wind energy have been the primary focus areas, with
significant growth in capacity installation and declining costs.

Government Initiatives: The Indian government has implemented several policies and
initiatives to support the growth of the power sector industry. These include the National Solar
Mission, Wind Energy Mission, Ujwal DISCOM Assurance Yojana (UDAY), and the
Saubhagya scheme for universal electrification. These initiatives have provided a conducive
environment for investment and development in the sector.

Private Sector Participation: The power sector in India has witnessed increased participation
from the private sector. Private companies have invested in power generation projects, both
conventional and renewable, through various models such as public-private partnerships (PPPs)
and independent power producers (IPPs). This private sector involvement has contributed to the
growth and diversification of the power sector.

Rural Electrification: The government's efforts towards rural electrification have been
significant. The Saubhagya scheme aimed to provide electricity connections to all households in
rural and urban areas, which has helped improve access to electricity and enhance the quality of
life in rural areas.

Transmission and Distribution Infrastructure: Alongside capacity expansion, the power

transmission and distribution infrastructure has undergone considerable development. Initiatives
such as the Green Energy Corridors have been launched to strengthen transmission infrastructure
for renewable energy evacuation.

Nature of the Product:

Capacity Addition: The power sector in India has been witnessing substantial capacity
additions to meet the increasing demand for electricity. Both renewable and conventional sources
of energy have contributed to this growth. The government has set ambitious targets to increase
the installed capacity of renewable energy, particularly solar and wind power.

Renewable Energy: India has been placing significant emphasis on the development of
renewable energy sources, such as solar, wind, biomass, and hydroelectric power. The
government has implemented various policies and incentives to promote renewable energy
generation and attract investments in the sector.

Solar Power: Solar power capacity has seen remarkable growth in recent years. India has
become one of the world's largest solar energy markets, with several large-scale solar projects
and initiatives. The government has set a target to achieve 100 GW of solar power capacity by
2022.

Wind Power: Wind power has also witnessed considerable growth in India. The country has a
significant wind energy potential, and various states have been actively promoting wind power
projects. India aims to achieve 60 GW of wind power capacity by 2022.

Thermal Power: While renewable energy has been a focus, thermal power, primarily coal-
based, still plays a vital role in meeting India's electricity demand. However, there has been a
gradual shift towards cleaner and more efficient technologies to reduce the environmental impact
of thermal power plants.

Distribution and Transmission: The government has taken initiatives to improve the
distribution and transmission infrastructure to ensure efficient and reliable power supply across
the country. The implementation of smart grids and the integration of renewable energy sources
into the grid have been among the focus areas.

Electrification Initiatives: The Indian government has been working towards achieving
universal electrification, particularly in rural areas. Programs like "Saubhagya" aim to provide
electricity connections to all households, contributing to the growth of the power sector.

Nature of the Competition:

Generation Sector: In the generation sector, there is competition among different types of
power generation sources, including thermal (coal, gas), hydroelectric, nuclear, and renewable
energy sources (solar, wind, biomass). Both public sector companies like NTPC (National
Thermal Power Corporation) and private sector players operate power plants and compete for
contracts to supply electricity to distribution companies (DISCOMs) or engage in power
purchase agreements (PPAs) with industrial and commercial consumers.

Renewable Energy Sector: The renewable energy sector has witnessed increased competition in
recent years. The government's focus on renewable energy development has attracted various
domestic and international players to invest in solar, wind, and other renewable energy projects.
Competitive bidding processes, such as reverse auctions, are often used to award contracts and
determine tariffs for renewable energy projects.

Transmission Sector: The transmission segment of the power industry in India is primarily
regulated and operated by Power Grid Corporation of India Limited (PGCIL), a government-
owned enterprise. While private players can participate in specific transmission projects through
competitive bidding, the sector is relatively less competitive compared to generation and
distribution.

Distribution Sector: The distribution segment of the power industry in India often involves a
mix of public and private players. Distribution companies (DISCOMs) are responsible for the
last-mile delivery of electricity to consumers. Competition in this sector can vary depending on
the state and its regulatory framework. Some states have implemented reforms to introduce
competition, allowing multiple distribution licensees to operate in a particular area, while others
still follow a single-licensee model.

Retail Electricity Supply: In certain areas or states where retail electricity supply has been
opened to competition, consumers have the option to choose their electricity supplier. This
allows different companies to compete for residential, commercial, and industrial customers by
offering competitive tariffs, better customer service, or value-added services.

Cross-Border Electricity Trade: India also engages in cross-border electricity trade with
neighboring countries such as Bhutan, Bangladesh, and Nepal. This trade involves both imports
and exports of electricity, and competition can exist among different players for cross-border
transmission infrastructure and supply agreements.

Governments Policies & Initiatives:

  In the Union Budget 2022-23, the government allocated US$ 885 million (Rs. 7,327
crore) for the solar power sector including grid, off-grid, and PM-KUSUM projects.
 Under the Union Budget 2022-23, the government announced the issuance of sovereign
green bonds, as well as conferring infrastructure status to energy storage systems,
including grid-scale battery systems.
 The Green Energy Corridor projects have been initiated to facilitate renewable power
evacuation and reshaping the grid for future requirements. As on October 2022, 8651
ckm of intra-state transmission lines have been constructed and 19,558 MVA intra-state
substations have been charged.
 Electrification in the country is increasing with support from schemes like Deen Dayal
Upadhyay Gram Jyoti Yojana (DDUGJY), Ujwal DISCOM Assurance Yojana (UDAY),
and Integrated Power Development Scheme (IPDS).
 In February 2022, a parliamentary standing committee recommended the
 In green projects and renewable energy in India to support the latter’s target of 450 GW
of renewable energy by 2030.
 The Pradhan Mantri Sahaj Bijli Har Ghar Yojana, “Saubhagya”, was launched by the
Government of India with an aim of achieving universal household electrification. As of
March 2021, 2.82 crore households have been electrified under this scheme.
 According to the S&P Global Platts Top 250 Global Energy Rankings 2021, Reliance
Industries Ltd. and Indian Oil Corp. Ltd. ranked 3rd and 6th, respectively.

Research and Development:

Renewable Energy Technologies: India has been focusing on the development and deployment
of renewable energy technologies to reduce reliance on fossil fuels and mitigate environmental
impacts. R&D efforts have been directed towards solar power, wind energy, biomass, and small
hydropower projects. This includes improving the efficiency of solar panels, wind turbines, and
exploring innovative storage solutions for intermittent renewable energy sources.

Smart Grids and Grid Integration: R&D has been directed towards the development of smart
grids, which incorporate advanced communication, control, and automation technologies. These
grids enable efficient monitoring and management of power generation, transmission, and
distribution systems. Research is also focused on integrating renewable energy sources into the
grid, managing grid stability, and exploring energy storage options.

Energy Efficiency and Demand-Side Management: R&D efforts have been aimed at
promoting energy efficiency measures and demand-side management techniques. This involves
developing energy-efficient appliances, building designs, and industrial processes. R&D is also
focused on creating awareness and implementing demand response programs to optimize energy
consumption and reduce peak load demands.

Advanced Power Generation Technologies: Research is being carried out to improve the
efficiency, reliability, and environmental performance of conventional power generation
technologies. This includes advanced coal-based power plants with technologies like ultra-
supercritical combustion and integrated gasification combined cycle (IGCC). Additionally,
research is being conducted on nuclear power, with the development of next-generation reactors
and nuclear fuel technologies.

Energy Storage: R&D efforts are being directed towards developing efficient and cost-effective
energy storage technologies. This includes research on advanced batteries, such as lithium-ion
and flow batteries, as well as exploring emerging technologies like hydrogen fuel cells and
compressed air energy storage. Energy storage is crucial for managing the intermittent nature of
renewable energy sources and providing grid stability.

ECONOMIC ANALYSIS:
Inflation and interest rate of power sector in India in economy analysis

The power sector in India is an important component of the country's economy and plays a
critical role in supporting various industries and sectors. Inflation and interest rates are two
important economic indicators that can impact the power sector in India in different ways.

Inflation refers to the rate at which prices of goods and services are increasing over time. When
inflation is high, it can lead to an increase in the cost of production for power generation
companies, as they may have to pay higher prices for inputs such as fuel and raw materials. This,
in turn, can lead to higher electricity prices for consumers. In addition, high inflation can also
lead to a decrease in the purchasing power of consumers, which can impact their ability to pay
for electricity bills.

Interest rates, on the other hand, refer to the cost of borrowing money. When interest rates are
high, it can make it more expensive for power generation companies to finance new projects or
expand their operations. This can lead to a slowdown in investment in the power sector, which
can impact the growth of the industry. In addition, high interest rates can also impact the ability
of consumers to access financing for purchasing electricity, as they may have to pay higher
interest rates on loans.

Tax Structure:
The tax structure in the power sector in India is governed by various tax laws and regulations.
Here are the primary taxes applicable to the power industry:

Goods and Services Tax (GST): GST is a comprehensive indirect tax that replaced multiple
indirect taxes in India. In the power sector, the supply of electricity is exempt from GST.
However, goods and services procured by power companies attract GST, which can be claimed
as input tax credit.

Income Tax: Power companies are liable to pay income tax on their profits earned during the
financial year. The income tax rate varies based on the type of entity, such as a domestic
company, foreign company, or partnership firm. Power companies may also be eligible for tax
incentives or exemptions for specific activities, such as power generation from renewable
sources.

Custom Duty: Import of certain equipment and components used in the power sector may
attract customs duty. The rate of customs duty depends on the specific items being imported and
can vary from zero to several percentages of the import value.

Central Excise Duty: Excise duty is not applicable on the supply of electricity. However, excise
duty may be levied on the manufacturing or production of goods used in the power sector, such
as generators, transformers, and electrical equipment.

State Electricity Duty (SED): SED is a state-level tax levied on the consumption of electricity.
The rate of SED varies across states and is generally a percentage of the electricity consumption
bill.

Cross-subsidy Surcharge: Cross-subsidy surcharge is a charge levied by state electricity

regulatory commissions to compensate for the subsidy provided to specific consumer categories.
It is typically applicable to high-end consumers or industrial consumers to subsidize electricity
tariffs for agricultural or domestic consumers.

Other Local Taxes: Local bodies and municipalities may impose additional taxes or cess on
power companies, such as property tax, octroi, or entry tax, depending on the local regulations.

Power Sector Contribution to Indian GDP:

The power industry plays a crucial role in India's economy and has a significant contribution to
the country's Gross Domestic Product (GDP). The industry's contribution can be assessed from
both the direct and indirect perspectives.

Direct Contribution: The direct contribution of the power industry includes the value added by
power generation, transmission, and distribution activities. This involves the revenue generated
by power companies through the sale of electricity. The exact contribution of the power industry
to India's GDP can vary based on factors such as electricity demand, fuel prices, and generation
capacity.

In September 2021, the direct contribution of the power industry to India's GDP was estimated to
be around 2-3%. However, it's important to note that this can vary over time and is subject to
changes in the overall economic conditions and power sector performance.

Indirect Contribution: The power industry has significant indirect contributions to the Indian
economy. Reliable and affordable electricity is a critical input for various sectors, including
manufacturing, agriculture, services, and infrastructure development. Access to power enables
productivity improvements, stimulates economic growth, and supports the overall development
of the country.

The indirect contributions of the power industry to the Indian GDP are much larger than the
direct contributions. It fuels industrial production, facilitates business operations, and enhances
the quality of life for citizens.

It's essential to consider that the power industry's overall contribution to India's GDP is dynamic
and subject to changes in factors such as electricity demand, policy reforms, investment in
infrastructure, and the overall economic growth of the country.

Bills of Payment:
To analyze the Balance of Payments (BOP) of the power sector in India, we need to consider the
financial transactions related to the sector in the country's BOP statement. The BOP statement
tracks the economic transactions between residents of one country and residents of the rest of the
world over a specific period. Here are some key aspects to consider for analyzing the BOP of the
power sector in India:

Export and Import of Electricity: The BOP accounts for the export and import of electricity
between India and other countries. If India exports electricity to other nations, it contributes
positively to the current account of the BOP, as it represents an inflow of foreign exchange.
Conversely, if India imports electricity, it has a negative impact on the current account, as it
involves outflow of foreign exchange.

Investment in Power Sector: The BOP also takes into account foreign direct investment (FDI)
and foreign portfolio investment (FPI) in the power sector. FDI refers to long-term investments
made by foreign entities in Indian power projects or companies, while FPI includes short-term
investments in stocks or bonds related to the power sector. Inflows of FDI and FPI contribute
positively to the capital and financial account of the BP.

Technology and Equipment Imports: The power sector in India may import technology,
equipment, and components for power generation, transmission, and distribution purposes. These
imports are recorded in the BOP under the goods and services account, and they have an impact
on the current account, affecting the trade balance.

Energy-related Services: The BOP also considers the provision of energy-related services by
Indian power companies to foreign entities. For example, Indian companies involved in power
generation, consultancy, or engineering services may export their expertise to other countries,
generating revenue and contributing positively to the current account.

Analyzing the BOP of the power sector allows policymakers and economists to assess the
sector's impact on India's external accounts, trade balance, capital flows, and overall economic
performance. It helps identify trends, strengths, and areas of concern related to international
transactions in the power sector.

Savings and Investment:

Savings in the Power Sector:

Retained Earnings: Power companies generate savings through retained earnings, which are the
profits reinvested back into the company for expansion, modernization, or debt repayment.

Debt Servicing: Savings can also result from efficient debt servicing by power companies,
where they allocate funds from their revenue to repay outstanding loans or interest payments.

Efficiency Improvements: Implementation of energy efficiency measures and cost-saving

initiatives within the power sector can lead to savings. This includes optimizing fuel usage,
reducing transmission and distribution losses, and improving operational efficiencies.

Investment in the Power Sector:

Capital Expenditure: Investment in the power sector involves capital expenditure on

infrastructure development, such as setting up new power plants, upgrading transmission and
distribution networks, and investing in renewable energy projects.

Research and Development (R&D): Investment in R&D activities within the power sector
promotes technological advancements, improves efficiency, and supports the development of
clean energy technologies.

Foreign Direct Investment (FDI): Foreign entities may invest in the Indian power sector,
bringing in capital and expertise. FDI contributes to investment in power projects and helps
bridge the funding gap in the sector.

Implications for the Economy:

Economic Growth: Higher savings and investment in the power sector contribute to economic
growth by expanding power generation capacity, improving energy access, and supporting
industrial development. Adequate power supply is crucial for driving economic activities across
sectors.

Employment Generation: Increased investment in the power sector can create employment
opportunities, both directly and indirectly. Direct employment is generated through construction,
operation, and maintenance of power plants, while indirect employment arises from the
development of related industries and supply chains.
Infrastructure Development: Investment in the power sector helps develop the necessary
infrastructure for a robust and reliable electricity supply. This supports the growth of other
sectors, such as manufacturing, agriculture, and services, which depend on a stable and
affordable power supply.

Sustainable Development: Investment in renewable energy projects within the power sector
promotes sustainable development by reducing dependence on fossil fuels, mitigating
environmental impacts, and supporting India's commitments to global climate change goals.

Analyzing the savings and investment patterns in the power sector provides insights into the
sector's financial health, growth potential, and its impact on the broader economy. This analysis
helps policymakers, investors, and stakeholders identify areas for improvement, policy
interventions, and strategic decision-making to promote sustainable and inclusive growth in the
power sector and the economy as a whole.
 Cash Flow Statements of PowerGrid

Particulars 2023 2022 2021 2020 2019

1,51,390.3
Net Income/Starting Line 1,54,171.20 1,68,240.70 1,29,067.50 1,16,740.40
0
2,91,316.4
Cash From Operating Activities 3,80,047.40 2,61,235.20 3,07,386.30 2,32,711.60
0
1,20,391.9
Depreciation/Depletion 1,33,333.80 1,28,716.60 1,16,070.40 1,05,409.50
0
Non-Cash Items 86,355.30 27,787.10 68,254.40 83,595.20 87,794.70
Cash Taxes Paid 28,530.40 37,193.80 21,865 25,687.10 22,807.50
Cash Interest Paid 97,099.80 88,206.80 91,137.10 1,17,301.40 1,02,923.50
Changes in Working Capital 6,187.10 -63,509.20 -48,720.20 -21,346.80 -77,233
- -
 Cash From Investing Activities -61,257 7,527.90 -89,729.50
1,07,334.90 1,87,274.50
- -
Capital Expenditures -69,025.70 -79,662.20 -93,635.50
1,13,671.20 2,24,506.60
Other Investing Cash Flow Items,
7,768.70 87,190.10 3,906 6,336.30 37,232.10
Total
- - - -
 Cash From Financing Activities -24,307.80
2,92,639.80 2,89,669.40 2,05,210.50 1,88,058.40
- - -
Financing Cash Flow Items -97,099.80 -90,727.80
1,09,133.17 1,26,354.20 1,12,098.90
Total Cash Dividends Paid -85,449.30 -87,193.23 -68,219.90 -44,259.20 -45,148.70
Issuance (Retirement) of Debt, Net -1,10,090.70 -93,343 -46,262.80 -17,445 1,32,939.80
Foreign Exchange Effects -66.9 - - - -
Net Change in Cash 26,150.60 -20,906.30 -3,623.60 11,993 21,129.30
Beginning Cash Balance 47,695.20 46,677.40 15,348 - -
Ending Cash Balance 73,845.80 25,771.10 36,477.30 - -
Free Cash Flow 1,74,110.06 1,63,765.38 9,300.10 - -
Free Cash Flow Growth 6.32 282.75 126.80% - -
Free Cash Flow Yield 19.75 12.01 0% -