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Technical Assistance Consultants Report

Project Number: 45341


January 2014

India: Maharashtra Solar Park and Green Grid


Development Investment Program
(Financed by the ADBs Technical Assistance Special Fund)

Prepared by:
Debasish Mishra
Shubranshu Patnaik
Tushar Sud
Deloitte Touche Tohmatsu Pvt. Ltd
Mumbai, India

For Maha Genco


Maha Transco

This consultants report does not necessarily reflect the views of ADB or the Government concerned, and
ADB and the Government cannot be held liable for its contents. (For project preparatory technical
assistance: All the views expressed herein may not be incorporated into the proposed projects design.
ADB TA-8062 IND: Maharashtra Solar
Park and Green Grid Development
Investment Program (45341-001)
Final Report
January 2014
Contents
Knowledge Summary __________________________________________________________ 8
1 Introduction ______________________________________________________________ 9
1.1 Background _________________________________________________________________ 9
1.2 Key objectives of the assignment _______________________________________________ 9
1.3 Project milestones __________________________________________________________ 10
1.4 Scope of work ______________________________________________________________ 10
1.5 Project team _______________________________________________________________ 10
1.6 Acknowledgements _________________________________________________________ 11
2 Project overview _________________________________________________________ 12
2.1 Project description __________________________________________________________ 12
2.2 About Executing Agencies ____________________________________________________ 15
2.3 Project costs and financing plan _______________________________________________ 27
2.4 Flow of funds ______________________________________________________________ 30
3 Solar generation projects __________________________________________________ 33
3.1 Kaudgaon phase-I ___________________________________________________________ 33
3.2 Gangakhed ________________________________________________________________ 34
4 Evacuation schemes for solar projects ________________________________________ 36
4.1 Kaudgaon phase-I ___________________________________________________________ 36
4.2 Gangakhed ________________________________________________________________ 39
4.3 Evacuation schemes for other solar projects _____________________________________ 43
4.4 Preparation of bid documents _________________________________________________ 43
5 Renewable Energy Management Centre (REMC) _______________________________ 47
5.1 Background ________________________________________________________________ 47
5.2 Maharashtra State Load Despatch Centre _______________________________________ 48
5.3 Renewable Energy Management Centre (REMC) __________________________________ 54
5.4 REMC concept Key requirements _____________________________________________ 55
5.5 REMC - Cost estimates _______________________________________________________ 59
6 Public Private Partnership (PPP) options for solar projects _______________________ 60
6.1 Legal, institutional and regulatory environment in Maharashtra _____________________ 60
6.2 PPP options for development of MSPGCLs proposed solar projects __________________ 62
6.3 Mahagenco - ADB consultative workshop _______________________________________ 65
7 Financial management assessment __________________________________________ 66
7.1 MSPGCL___________________________________________________________________ 66
7.2 MSETCL ___________________________________________________________________ 78
8 Financial analysis ________________________________________________________ 89
8.1 Methodology ______________________________________________________________ 89
8.2 Solar generation projects _____________________________________________________ 89
8.3 Transmission projects _______________________________________________________ 92
9 Economic analysis ________________________________________________________ 94
10 Past financial performance and projections _________________________________ 96
10.1 MSPGCL___________________________________________________________________ 96
10.2 MSETCL __________________________________________________________________ 103
Annexure
Annex 1 Terms of Reference ________________________________________________ 109
Annex 2 Detailed cost for evacuation system ___________________________________ 112
Annex 3 IEGC - Relevant extracts for renewable rnergy ___________________________ 122
Annex 4 REMC configuration as per POWERGRID report __________________________ 124
Annex 5 Cost details of REMC _______________________________________________ 125
Annex 6 Organisation structure of MSPGCL ____________________________________ 127
Annex 7 MSPGCL authorized signatories in the bank accounts _____________________ 128
Annex 8 Organisation Structure of MSETCL ____________________________________ 129
Annex 9 Existing PPP models in Maharashtra __________________________________ 130
Annex 10 Existing PPP models in solar energy _________________________________ 132
Annex 11 Participants of Mahagenco - ADB consultative workshop held on March 21, 2013
134
Annex 12 Minutes of Meeting Mahagenco-ADB consultative workshop ___________ 136
Annex 13 Comments on MSPGCLs PPP model for proposed solar projects___________ 140
Annex 14 FMA questionnaire MSPGCL ______________________________________ 148
Annex 15 MSPGCL authorized signatories in the bank accounts _______________ 159
Annex 16 FMA questionnaire MSETCL ______________________________________ 161
Annex 17 Procurement Capacity Assessment Questionnaire MSPGCL _____________ 172
Annex 18 Procurement Capacity Assessment MSETCL __________________________ 181
TA-8062 IND: Maharashtra Solar Park and Green Grid Development Investment Program (45341-001)

Abbreviations
Abbreviations Description
ACSR Aluminum conductor steel-reinforced
ADB Asian Development Bank
ALDC Area Load Dispatch Centre
APTEL Appellate Tribunal for Electricity
ARR Aggregate Revenue Requirement
BEST Brihanmumbai Electric Supply and Transportation Undertaking
BOI Bank of India
CAAA Controller of Aid Accounts & Audit Division
CAG Comptroller and Auditor General of India
CEA Central Electricity Authority
CIL Coal India Limited
COD Commercial Operation Date
CPRI Central Power Research Institute
CTF Clean Technology Fund
CUF Capacity Utilisation factor
DEA Department of Economic Affairs
DOE Department of Energy
DOP Delegation of Powers
DPR Detail Project Report
DTTIPL Deloitte Touche Tohmatsu India Private Limited
EA Executing Agency
EHV Extra High Voltage (132 kV and above)
EOI Expression of Interest
EPC Engineering Procurement and Construction
EPS Electric Power Survey
FSA Fuel Supply Agreement
GAAP Generally Accepted Accounting Principles
GCC Generation Control Centre
GOI Government of India
GOM Government of Maharashtra
GPS Global Positioning System
HMI Human Machine Interface
HV High Voltage (>=11 kV and <132 kV)
ICB International Competitive Bidding
ICCP Inter-Control Center Communications Protocol
IEC International Electrotechnical Commission
IEEMA Indian Electrical and Electronics Manufacturers Association
IEGC Indian Electricity Grid Code
IFC International Finance Corporation
INR Indian Rupee (Considered 1 USD = 60.03 INR)
JICA Japan International Cooperation Agency
JNNSM Jawaharlal Nehru National Solar Mission

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Abbreviations Description
JPTL Jaigad Powertransco Ltd
KfW Kreditanstalt fr Wiederaufbau
L&T Larsen & Toubro
LDC Load Dispatch Centre
LIC Life Insurance Corporation of India
LILO Line In Line Out
LOA Letter of Award
LOI Letter of Intent
LV Low Voltage (< 11 kV)
MEDA Maharashtra Energy Development Agency
MERC Maharashtra State Electricity Regulatory Commission
MIDC Maharashtra Industrial Development Corporation
MNRE Ministry of New and Renewable Energy
MOF Ministry of Finance
MOU Memorandum of Understanding
MPLS Multi-Protocol Label switch
MSEB Maharashtra State Electricity Board
MSEB Maharashtra State Electricity Board
MSEDCL Maharashtra State Electricity Distribution Company Ltd
MSETCL Maharashtra State Electricity Transmission Company Ltd
MSLDC/ SLDC Maharashtra State Load Despatch Centre
MSPGCL Maharashtra State Power Generation Company Ltd
MVAT Maharashtra Value Added Tax
MYT Multi Year Tariff
NLDC National Load Dispatch Centre
O&M Operations and Maintenance
PFC Power Finance Corporation Limited
PGCIL Power Grid Corporation of India Limited
PIU Project Implementation Unit
PLCC Plastic Leaded Chip Carrier
PMU Phasor Management Unit
PPA Power Purchase Agreement
PPP Public Private Partnership
PPTA Project Preparatory Technical Assistance
QCBS Quality Cost Based Selection
REC Rural Electrification Corporation Limited
REMC Renewable Energy Management Centre
RFP Request for Proposal
RLDC Regional Load Dispatch Centre
ROC Registrar of Companies
ROE Return on Equity
ROW Right of Way
RPC Regional Power Committee

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Abbreviations Description
RPO Renewable Purchase Obligation
RRF Renewable Regulatory Fund
RTU Remote Terminal Unit
SCADA Supervisory Control and Data Acquisition
SHR Station Heat Rate
SLDC State Load Despatch Centre
SPGD Solar Power Generation Department
SPV Special Purpose Vehicle
STU State Transmission Utility
UI Unscheduled Interchange
WRLDC Western Regional Load Despatch Centre

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Knowledge Summary
Maharashtra is the biggest state in the country in terms of electricity demand and installed generation
capacity. The state is very supportive of promoting renewable energy and has set out RPO target of 9%
including 0.5% solar RPO by FY 2015-16 to be met by Distribution Utilities, captive and open access
consumers. The state would require more than 600 MW of installed solar capacity by FY2015-16 to meet
its RPO targets.
In this context, MSPGCL is proposing to commission 650 MW of solar capacity during the 12th five year
plan period including 150 MW project under execution in Sakri, Dhule. MSPGCL is proposing to develop
500 MW of solar capacity under Performance-linked Revenue Sharing PPP Model which is based on the
concept of sharing of risk and return of the project with the successful bidder over the project life.
Under the proposed PPP Model, Capital cost will be incurred by both MSPGCL and the successful
developer in equal proportion. The developer will receive the rest of his payment as a share of revenue
over the life of the project. Apart from part financing the project the developer will be responsible for
EPC and operation and maintenance of the projects. MSPGCL will provide land and facilitate related
clearances. It will also sign the PPA with MSEDCL for power offtake from this project.
There is also need for strengthening the transmission network for evacuation of power from renewable
projects and Renewable Energy Management Center (REMC) for the state-wide management of
renewable energy. In this context, MSETCL is proposing to develop the associated transmission
infrastructure and the REMC for evacuation of power from these solar projects.
Capital cost of generation and transmission & REMC project is expected to be USD 610 million and USD
41.5 million respectively. Total debt requirement for generation and transmission project is around USD
273 million. ADB is considering providing loan to fund the proposed solar generation and evacuation
projects.
MSPGCL is in the process of signing PPAs with MSEDCL for the solar generation projects. The tariff will
be based on the applicable MERC tariff order for renewable energy project issued from time to time.
The financial analysis of the proposed projects has been carried out in accordance with ADBs Guidelines
for Financial Management and Analysis of Projects. The financial viability was assessed by comparing
WACC with FIRR at the subproject level and for the aggregated project. Overall nominal FIRR is expected
to be 11.33% and 10.48% which is higher than the nominal WACC of 6.83% and 7.51% for generation
project and transmission project respectively.
The economic analysis was undertaken to determine the economic viability of the project. The analysis
aims at (i) reduction in dependency on most costly source of power i.e. diesel based power generation
and, (ii) reduction in environmental impact of thermal power generation. Composite EIRR of projects is
expected to be 18.54%. Generation and transmission projects are considered to be financially and
economically viable as FIRR and EIRR are higher than their respective benchmarks.

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1 Introduction
1.1 Background
Maharashtra has the largest electricity system in India with total installed capacity of more than 30,0001
MW. It is the biggest state in the country in terms of electricity demand.
The state is very supportive of promoting renewable energy and has set out RPO target of 9% including
0.5% solar RPO by FY 2015-162 to be met by Distribution Utilities, captive and open access consumers.
Considering the existing demand and growth in demand the state would require more than 600 MW of
installed solar capacity by FY2015-16 to meet the RPO.
In this context, MSPGCL is proposing to commission 650 MW of solar capacity during the 12th five year
plan period including the 150 MW project under execution in Sakri, Dhule which is being funded by KfW.
Considering the amount of renewable capacity required for compliance and nature of renewable
sources there also need for strengthening the transmission network for evacuation of power from
renewable projects and Renewable Energy Management Center (REMC) for the state-wide management
of renewable energy. In this context, MSETCL is proposing to develop the associated transmission
infrastructure and the REMC for evacuation of power from these solar projects.

1.2 Key objectives of the assignment


ADB is considering providing loan of USD 500 Million to MSPGCL and MSETCL for setting up solar power
plants, evacuation network for upcoming solar plants and REMC for state-wide management of
renewable energy. Out of the USD 500 Million funding, USD 350 Million will be provided by ADB and for
remaining USD 150 Million, funding will be through Clean Technology Fund (CTF). For the first tranche,
ADB is considering funding of the two solar projects, Kaudgaon Phase 1 and Gangakhed, its associated
transmission infrastructure and the Renewable energy Management Centre (REMC).
The future MSPGCL solar projects and evacuation infrastructure for the future MSPGCL projects are
proposed to be undertaken as part of the second and third tranche of the ADB loan.
The specific focus of this PPTA is to assist ADB, MSPGCL and MSETCL to develop an overall investment
program for solar power and its evacuation. In this context, DTTIPL has:
Prepared bidding documents for procurement of equipment for developing transmission
network for evacuation of power from proposed solar projects
Estimated detailed component wise bill of quantities and prepared total cost estimates for
Kaudgaon Phase 1 and Gangakhed transmission infrastructure
Assist MSETCL to prepare a procurement plan for the transmission components
Assisted MSETCL in preparation of concept note for REMC. The concept note included the
technology requirement for hardware, software and communication equipment. It also included
the cost estimates for developing REMC
Performed economic and financial analysis of proposed solar generation and transmission
projects to determine its economic and financial rate of return in accordance with ADBs

1 st
Source: Central Electricity Authority (CEA) October monthly report, as on 31 October 2013
2
Source: MERC (RPO, its compliance and implementation of REC framework) Regulations, 2010; dated 7-June-2010

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Guidelines for the Economic Analysis of Projects and Guidelines for the Financial Governance
and Management of Investment Projects
Projected corporate financials of MSPGCL and MSETCL with and without-project scenarios
Assessed the financial management capacity of MSPGCL and MSETCL and prepared the
governance enhancement program
Assessed the procurement capacity of MSPGCL and MSETCL
Assessed the legal, institutional and regulatory environment in Maharashtra and prepared a
concept note on solar PPP model
Organised and conducted workshop on the PPP Model. Invited comments from the stakeholders
and PPP model was revised accordingly based on the received comments after discussing with
ADB and MSPGCL

1.3 Project milestones


The project work was initiated on 16th October 2012 with a kick-off meeting between ADB, MSPGCL,
MSETCL and DTTIPL. Key milestones were as follows:
Kick-off meeting between ADB, MSPGCL, MSETCL and DTTIPL on 16th October 2012.
Submission of Inception Report on 31st October 2012
Submission of Interim Report on 29th January 2013
ADB Fact-Finding Mission from 4th February to 7th February 2013
Stakeholder Consultation Workshop on the PPP Model on 21st March 2013
Submission of draft final report on 29th November 2013
This Final Report sets out the background and scope of work for the PPTA, summarizes the scope and
incorporates all of the key information prepared during the PPTA.

1.4 Scope of work


The scope includes assistance in procurement planning for developing evacuation network for the
proposed solar park, economic and financial analysis and evaluating PPP investments in the solar power
generation projects. The overall scope is reproduced in Annex 1.

1.5 Project team


The following key personnel and project team were involved during the assignment:
Asian Development Bank (ADB)
Mr. Srinivasan Janardanam Finance Specialist, Energy Division, South Asia Department
Mr. Len V. George Energy Specialist, Energy Division, South Asia Department
Mr. Mukhtor Khamudkhanov Principal Energy Specialist, Energy Division, South Asia Department
MSPGCL
Mr. Jaikumar Shriniwasan Executive Director (Finance & Commercial)
Mr. V. S. Patil Executive Director, Solar Power Generation Department Section
Mr. Ashok Khonde Chief Engineer, Solar Power Generation Department Section
MSETCL

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TA-8062 IND: Maharashtra Solar Park and Green Grid Development Investment Program (45341-001)

Mr. Subhash G. Kelkar Executive Director (Projects)


Mr. S.J. Amberkar Chief General Manager (Finance & Accounts)
Mr. R.D. Chavan Chief Engineer, (Contract & Monitoring)
Deloitte Touche Tohmatsu India Pvt Ltd
Mr. Debasish Mishra Economics and Financial Specialist
Mr. Shubhranshu Patnaik Public Private Partnership Specialist
Mr. Tushar Sud Transmission and System Operations Specialist

1.6 Acknowledgements
DTTIPL is grateful to MSPGCL and MSETCL management and officers for extending all possible
cooperation and in providing all necessary information and support resources.

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TA-8062 IND: Maharashtra Solar Park and Green Grid Development Investment Program (45341-001)

2 Project overview
2.1 Project description

2.1.1 Solar generation projects


MSPGCL is proposing to develop 500 MW of solar capacity in next 4 years to meet the RPO requirement
of the state as shown below:
Capacity
Sr. No Site Location Expected Date of COD
MW
Solar Photovoltaic Project, Kaudgaon, Dist. 48 March 2015 (Phase I)
1.
Osmanabad 250 December 2016 (Phase II)
Solar Photovoltaic Project at Gangakhed-
2. 30 August 2015
Pokharni, Dist. Parbhani
Mangladevi-Pimpri Nawbpur (I&II)
3. 100 December 2015
Malkhed, Ner, Dist. Yavatmal
4. Lohara MIDC, Dist. Yavatmal 75 December 2015
Total 503

Projects are proposed to be developed through a PPP model wherein the revenues generated will be
shared between MSPGCL and successful bidders.
Capital cost will be incurred by both MSPGCL and the successful developer in equal proportion. MSPGCL
will fund its portion of capital cost through equity and loans proposed to be provided by ADB. The
proposed funding pattern is as shown below:
Particulars Units All Projects
Debt from ADB % 40%
Equity from MSPGCL % 10%
Funding from successful developer % 50%

2.1.2 Transmission schemes for solar parks


The transmission projects are targeted for evacuation of solar power capacity planned by MSETCL.
MSETCL has already prepared DPR and estimated total cost for Kaudgaon Phase-I and Gangakhed
evacuation schemes proposed for 1st tranche of ADB funding.
Indicative locations of other solar projects proposed in 2nd and 3rd tranche of funding are identified.
MSPGCL has already identified the land for these projects. MSPGCL has to provide details of the exact
location of these plants to STU for system planning. Once the STU has included them in the network
plan, MSETCL will initiate the process of preparing DPR and estimating total cost.

2.1.3 Renewable Energy Management Centre (REMC)


MSETCL is proposing to develop REMC for state-wide management of renewable energy at their State
Load Dispatch Centre in Kalwa. REMC would perform the following functions
Forecasting of renewable energy generation in jurisdiction area on day-ahead, hour-ahead, week-
ahead, month-ahead basis

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Real time monitoring of the renewable generation


Monitor weather conditions in the locality
Information repository and coordination point for renewable energy penetration - maintaining
historical weather and generation data
Additional tools for maintaining grid security like Online Dynamic security Assessment tool,
renewable forecasting tools, smart dispatching solutions, etc.
Assist the generator in effectively scheduling of their generation sources
Coordination with other stakeholders like RLDC/ RPC on renewable related issues

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TA-8062 IND: Maharashtra Solar Park and Green Grid Development Investment Program (45341-001)

2.1.4 Project procurement process


Procurement of works, goods, and services will be carried out in accordance with ADB Standard Bid document for Plants. International
competitive bidding (ICB) procedures will be used for procurement packages.
The expected timelines for project procurement is as shown below:

1 1 1 1 1 1 1 1 1 1 2 2 2 2 2 2 2 2 2 2 3 3 3 3 3 3
Weeks 0 1 2 3 4 5 6 7 8 9
0 1 2 3 4 5 6 7 8 9 0 1 2 3 4 5 6 7 8 9 0 1 2 3 4 5
Timelines for preparing and review of bid documents
Revision in bid documents and review by
MSPGCL/MSETCL
ADB review of bid documents
Timelines for bidding process
Bid documents open for bidders
Opening of technical bid
Technical review of bid documents by MSPGCL/MSETCL
Technical review of bid documents by ADB
Opening of financial bid by MSPGCL/MSETCL
Review of financial bid by MSPGCL/MSETCL
Financial bid review by ADB
Timelines for signing of contract
Issue of LOA
Signing of contract

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2.2 About Executing Agencies

2.2.1 MSPGCL

2.2.1.1 Financial Management Assessment of Executing Agencies


Risk
Risk Risk Mitigation
Assessment*

Inherent Risk

The assets and liabilities of the company as on June 06, 2005


contain balances, which are transferred under The Maharashtra
Electricity Reforms Transfer Scheme, 2005 (Transfer Scheme).
Accordingly these balances are approved by MSEB Holding
Company Ltd. The Final Transfer Scheme is yet to be notified by
the Government of Maharashtra, which may have an impact on
the financial statements of the Company.
The performance of MSPGCL is governed by the normative
parameters approved by MERC and any deviation from the
norms leads to disallowances in recovery of actual expenses and
have an impact on the profitability of the company. MSPGCL has
been facing a precarious financial condition on account of delays
in truing up and disallowances of expenses for not meeting
normative performance parameters like SHR, auxiliary
consumption, availability, transit loss, specific oil consumption
Entity-Specific Risks M and O&M expense.
There are usually delays in recovery of payment from MSEDCL.
Due to non-recovery of dues MSPGCL has to rely on huge
working capital borrowings which are subject to normative
limits. Given this constraint it may lead to disallowance of actual
interest on working capital.
The quality of coal from subsidiaries of CIL is a major cause of
concern for MSPGCL. Such bad quality of domestic coal has led
to increased dependence on imported coal. Further, FSAs for
new plants have not been signed yet and CIL has been supplying
coal on MOU basis. The company thus faces risk of securing
adequate quantity and quality of fuel, which may lead to
disallowance of fixed cost for not meeting normative parameter
for plant availability.

PPAs for the proposed solar projects have not been signed. This
Project-Specific poses a risk for off-take of power. Further, Kaudgaon Phase-I
M project is proposed to be commissioned in FY2014-15. As per
Risks
MERC renewable tariff order, if the PPA is signed before 31st
March 2014 the project is proposed to get a tariff of Rs.

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Risk
Risk Risk Mitigation
Assessment*
8.98/kWh3. If PPA is not signed before 31st March 2014, tariff
realized on sale of power may be lower as capital cost of solar
project is expected to reduce. This would result in loss of
revenues throughout the term of the PPA. This could be
mitigated by signing the PPA before 31st March 2014.
The project faces risk of getting delayed and not achieving the
desired performance during operation. In case the project gets
delayed beyond the scheduled financial year there is a risk of
loss of revenue due to change in tariff. In case the project does
not meet the desired performance standards MSPGCL will lose
revenues on account of lower generation. Both the risks should
be adequately covered in the contract with the EPC player.
The Company faces risk of payment default from MSEDCL,
considering the worsening financial condition of MSEDCL.

Overall Inherent
M
Risk

Control Risk

Implementing Entity N

Funds Flow N

Finance and Accounts section does not have experience of


Staffing N handling ADB funds. This could be mitigated by providing
training to Finance and Accounts staff on ADB procedures.

Accounting Policies
N
and Procedures

Audit committee comprises of one independent director and


three whole time directors. This puts the corporate governance
of the Company at risk. This could be mitigated by increasing the
Internal Audit M number of independent directors. The Company is not complying
to Section 292A of the Companies Act 1956, wherein it is
required to have at least 2/3rd of the total number of audit
committee members to be non-whole time directors.

External Audit N SAP is implemented but system audit is not undertaken. This
could lead to understatement/overstatement of

3
Source: MERC order dated 22-March-2013on Determination of Renewable Energy Tariff for fourth year of first control period;
Case No. 6 of 2013

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Risk
Risk Risk Mitigation
Assessment*
expenses/revenues. This risk could be mitigated once system
audit is implemented.

Top management does not receive SAP reports as reporting


formats are getting finalized. This restricts the top management
Reporting and from accessing reports whenever required instead of relying on
N
Monitoring periodic manual reports. This also possesses risk of manual
errors. These risks would be mitigated when SAP reports formats
are finalized.

Parallel SAP and manual system could lead to error or


Information System N
manipulation.

Overall Control Risk N


* H = High, S = Substantial, M = Moderate, N = Negligible or Low

2.2.1.2 Procurement Capacity Assessment


Expected Procurement
MSPGCL plans to develop around 500 MW of solar capacity by FY2016-17 through PPP route.
Power will be sold to MSEDCL to meet the RPO obligation; any excess may be sold to other utilities and
consumers.
The project will be developed, operated and maintained by the selected bidder (developer) through the
term of the PPA (25 years). Developer will build the solar plant and transfer it to MSPGCL after
commissioning of the project. The project will be owned by MSPGCL. The developer will receive a part of
the project cost progressively during construction and the rest will be recovered through a revenue
share arrangement based on the tariff approved by MERC over the term of the PPA.
The developer will be selected through international competitive bidding in accordance with ADB
procurement guidelines 2010. The bid is proposed to be conducted in two stages. The bidders will be
evaluated based on the minimum technical and financial criteria set out in the bid documents. The
qualified meeting the technical and financial criteria will be evaluated based on the revenue model as
per the bid document. The bidder quoting the least share in the revenue will be awarded the contract.
The equipment required for developing the project will be procured only from ADB member countries.

Assessment of the National Environment


Procurement in India by Government companies/organizations happens through competitive bidding
route. For large value contracts utilities are mandated to follow an open tender process which includes
planning, tendering, contracting, and reporting. Procurement by Government companies/organizations
is also subjected to external audits by Comptroller and Auditor General of India (CAG). Currently, there is
no overarching legislation governing public procurement. The General Financial Rules, 20054, govern
procurements made by the Centre. Similarly different states have also framed its procurement policy for

4
General Financial Rules, 2005 dated 1-July-2005; Govt. of India, Ministry of Finance, Department of Expenditure

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TA-8062 IND: Maharashtra Solar Park and Green Grid Development Investment Program (45341-001)

state units. Government of India has also framed guidelines for Public private partnership project
related to Formulation, appraisal, and approval, financial support and monitoring of PPP project5. While
there are some concerns on the legal and regulatory framework in the country, the most significant risks
in procurement is found in the institutional environment. Tender evaluation committees are perceived
as particularly vulnerable to corruption. The selection and appointment of evaluation committee
members are vulnerable to political interference and conflict of interest. With the enactment of the
Public Procurement Bill 2012 there could some major change in the practice in the coming years.
General Agency Resource Assessment
The bidding process will be managed by the Project Management Unit (PMU) established for this
project. The PMU is headed by CE (SPGD). CE (SPGD) has more than 25 years of experience in
procurement. The team members of the PMU team are also from Solar Power Generation Department
(SPGD).
The role of the SPGD is obtaining clearances, land acquisition, development, procurement, monitoring,
maintenance, etc. for existing and upcoming projects. The SPGD is currently developing a 125 MW solar
power project at Sakhri. This project is funded by Kreditanstalt fr Wiederaufbau (KfW). The
procurement was for this project was also done by the same department.
The SPGD is adequately staff with seven full time officials and also hire consultation on deputation basis
for specific requirements like preparation of DPR, preparation of bid documents, evaluation and
management of bid process. The officials of the SPGD are adequately qualified with bachelors degree
in engineering. The officials are proficient in English and local language. SPGD does not have experience
in procurement of equipment for ADB funded projects and hence are not aware of the ADB
procurement guidelines. ADB therefore has conducted a procurement related training program which
was attended by SPGD officials. The team has experience of managing bid process for projects funded by
other multilateral development agencies like KfW. In the past also KfW had organized similar training
programs for the SPGD officials on the procurement guidelines.

Agency Procurement Processes: Goods and Works


MSPGCL follows e-tendering procedure. The Company already has an experience of developing solar
power projects. The 125 MW solar power project in Sakri under execution is developed under EPC cum
O&M model. The EPC contracts were invited through international competitive bidding process.
MSPGCL proposes to follow similar procurement procedure for upcoming solar power projects proposed
to be funded by ADB.
MSPGCL conducts bid process in two stages technical bids and financial bids. Consultants are hired to
draft the procurement specifications and bid documents. Preparation of bid process and management
of bid process is done by SPGD and appointed consultants. It usually takes around 90 days for
preparation of bid documents. The sale of bids is managed by SPGD and the bidders are charged
nominal fees for the bid documents. The bid documents are verified by procurement committee and
approved by Board of Directors and Managing Director before it is made open to the bidders.
Procurement committee generally is headed by a member Board of Directors with adequate
representation from different departments like finance, legal, commercial etc. In case of large value
procurement process external independent individuals are also engaged.
The bid process usually takes 120 days from the day of issue of bid documents to the day of issue of LOI.
The bidders are usually given 60 days for submission of bids from the first day of issue of bid documents.
Pre-bid meetings are arranged for the bidders before submission of bids. The queries raised during the

5
Guidelines for Formulation, Appraisal and Approval of Public Private Partnership Projects dated May 2009; published by The
Secretariat for the Committee on Infrastructure Planning Commission, Government of India

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pre-bid meetings are answered in writing. The bidders are required to submit technical and financial
bids in two separate envelopes and on due date and time. Late bids are not accepted. Technical bids are
opened in public on the day of submission of bids. The minutes of technical bid opening are documents
and distributed to the bidders. The technical bids are evaluated by SPGD and appointed consultants,
reviewed and recommended by procurement committee and approved by board of directors. It takes
around 30 days for evaluation of technical bids. The bidders have to meet the minimum technical and
financial criteria as set out in the bid documents in order to quality for opening of financial bids.
Financial bids remain sealed until technical evaluation is completed. The bidders who are technically
qualified are invited for opening of the financial bids and financial bids of only those bidders who are
technically qualified are opened. The financial bids are evaluated by SPGD and appointed consultants,
reviewed and recommended by procurement committee and approved by board of directors. It takes
around 30 days for evaluation of financial bids and issuance of LOI.
MSPGCL does not have experience of developing projects under a PPP model. The upcoming solar
projects are proposed to be developed through a unique PPP model, where MSPGCL will share part of
its revenues with the developers, so that the developers could recover their portion of their investment
to develop the project. The bid documents therefore have to be designed keeping in view of this unique
PPP model. The bid specifications like technical and financial evaluation criteria and criteria for selection
of successful bidder will be different from the standard bid documents. In order to mitigate this risk ADB
and MSPGCL have conducted workshop inviting stakeholders (interested bidders and financial
institutions) for their comments on the PPP model developed by ADB and MSPGCL. The PPP model was
shared with the stakeholders 30 days prior to the workshop to make the workshop more interactive and
invite comments on the model and bid specifications. The stakeholders were given 15 more days to
submit their comments in writing. MSPGCL and ADB along with their appointed consultants will be
preparing the bid documents based on the comments received from the stakeholders.

Agency Procurement Processes: Consulting Services


MSPGCL follows QCBS method for selection of consultants. The EOI for consulting services are
advertised on the website and invitation letter is also send to the consultants/consulting firms with
whom MSPGCL has worked before. Consultants are not required to pay for the RFP documents. The
appointed of consultants is done by selection committee. The consultants selection committee consists
of Department Heads with representatives from Finance and audit team.
MSPGCL usually conducts bid process in two stages technical bids and financial bids. Pre-bid meetings
are arranged for the interest consultants before submission of bids. The queries raised during the pre-
bid meetings are answered in writing. The consultants are required to submit technical and financial
bids in two separate envelopes and on due date and time. Late bids are not accepted. Technical bids are
opened in public on the day of submission of bids. The minutes of technical bid opening are documents
and distributed to the interested consultants. The technical bids are evaluated by consultants selection
committee. The consultants that have scored the minimum required points are invited for opening of
financial bids. The technical points scored by the consultants are not made public. Financial bids remain
sealed until technical evaluation is completed. Financial bids of only those consultants who are
technically qualified are opened. The financial bids are evaluated by consultants selection committee.
Although the consultants are supposed to be evaluated based on QCBS method, MSPGCL does not
purely follow QCBS method and the consultants with the lowest financial bid are selected.
Payment to the consultants is based on the milestone as per the RFP. No advance payment is made to
the consultant. Most of the payments are made in stipulated time of 30 days from the day of submission
of invoice. However there are some delays in payment.

Process Control and Oversight

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Procurement contract till Rs. 20 Million can be approved and modified by the Head of SPGD. Contract till
Rs. 90 Million are approved by Executive Director and Director. Managing Director can approve contract
till Rs. 100 Million. Board of Directors approves contracts over Rs. 100 Million. Considering the value of
the project executed by MSPGCL most of the procurement process are approved and monitored by
MSPGCL Board. The EPC contractors are required to submit monthly report on project progress. Bidding
document are prepared by SGPD through reputed consultancy firm which is then sent to the board of
directors and managing director for further approval. The bid documents are published and are available
to the prospective vendor for a fee. Comments are received from the bidders and the same is evaluated
for further changes. After approval of the Board the documents are re-circulated. The bid process is
monitored by the procurement unit and the evaluation report is submitted to the procurement
committee. The procurement process is audited by the MSPGCL audit department who checks the
fairness and the competitive bidding principles adapted by procurement units.
The procurement manual by MSPGCL is old and would need to be updated with detailed control and
monitoring framework. Currently there are no standard procedure to guard the system from any conflict
of interest issues and no check and balance to prevent the same from happening.

Records Keeping and Audit


Like all public sector unit in India record keep is fairly robust in MSPGCL. All documents are retained for
10 years and can be retrieved easily if required. The record keeping department is fairly staffed and the
document identification is streamlined. Procurement related documents are stored safely which
included the published bid documents, advertisements, comments received during the pre-bid, bid
submitted, progress reports, payments invoice and receipts etc.

Summary Assessment and Recommendations


Based on the assessment of individual components the overall procurement capacity of MSPGCL is
deemed adequate.
Particular strengths include: specific department (SPGD) for procurement of equipment for solar power
projects, experienced and adequately qualified staff, very recent experience of bid management for
solar power project through international competitive bidding and experience of working with bi-lateral
and multi-lateral funding agency.
However, there are also some weaknesses. SPGD does not have experience in procurement of
equipment for ADB funded projects, MSPGCL does not purely follow QCBS method and the consultants
with the lowest financial bid are selected and currently there are no standard procedure to guard the
system from any conflict of interest issues and no check and balance to prevent the same from
happening.

General Recommendations, Resource assessment


Capacity Constraint Recommended Action Responsibility and comment
SPGD does not have experience ADB has already conducted a It is the responsibility of the
in procurement of equipment for procurement related training SPGD and its appointed
ADB funded projects as this is program which was attended by consultants to prepare the bid
the first ADB funded project SPGD officials documents in accordance ADB
procurement guidelines 2010.
It is the responsibility of ADB and
top management and board of
directors of MSPGCL to review
and approve the bid documents

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General Recommendations, Procurement process for goods and works


Capacity Constraint Recommended Action Responsibility and comment
MSPGCL does not have ADB and MSPGCL have It is the responsibility of SPGD
experience of developing conducted workshop inviting and its appointed consultant to
projects under a PPP model. This stakeholders (interested bidders prepare the bid documents
is a unique PPP model developed and financial institutions) for based on the comments received
by MSPGCL where MSPGCL will their comments on the PPP from the stakeholders.
share part of its revenues with model developed. The It is the responsibility of ADB and
the developers, so that the stakeholders have submitted top management and board of
developers could recover their their comments. directors of MSPGCL to review
portion of their investment to and approve the bid documents.
develop the project. The bid
documents therefore have to be
designed keeping in view of this
unique PPP model.
General Recommendations, Process control and oversight
Capacity Constraint Recommended Action Responsibility and comment
Currently there are no standard There should be a defined MSPGCL should formulate a
procedure to guard the system procedure to evaluate conflict of procedure for identifying
from any conflict of interest interest issues which should be members of the procurement
issues and no check and balance in line with the ethical practices. committee. The members should
to prevent the same from not have any conflict of interest
happening. and hold on to high ethical
standards.
MSPGCL should take declaration
from the committee members
that they are free from any
personal interest for this
procurement process.
The questionnaire is reproduced in Annex 17

2.2.2 MSETCL

2.2.2.1 Financial Management Assessment of Executing Agencies

Risk
Risk Risk Mitigation
Assessment*

Inherent Risk

The assets and liabilities of the company as on June 06, 2005


contain balances, which are transferred under The Maharashtra
Electricity Reforms Transfer Scheme, 2005 (Transfer Scheme).
Entity-Specific Risks N Accordingly these balances are approved by MSEB Holding
Company Ltd. The Final Transfer Scheme is yet to be notified by
the Government of Maharashtra, which may have an impact on
the financial statements of the Company.

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Risk
Risk Risk Mitigation
Assessment*

Availability of land could be an issue. If the land is not made


Project-Specific available within the premises of the proposed solar power plant,
N
Risks MSETCL will have to evaluate other options. This may increase
the cost and might delay commissioning

Overall Inherent
N
Risk

Control Risk

Implementing Entity N

Funds Flow N

Finance and Accounts section is not adequately staffed. New


candidates have been recruited and expected to join in two
months, but there will be still need for further recruitment.
MSETCL has formed a committee to assess the staffing
requirements of different sections and based on the findings of
Staffing M the committee the vacant posts will be filled through internal
promotions and external hiring.
Finance and Accounts section does not have experience of
handling ADB funds. This could be mitigated by providing
training to Finance and Accounts staff on ADB procedures.

Fixed assets registers need to be updated to show full and


proper particulars, including quantitative details and situation, of
Accounting Policies the fixed assets. Internal control procedures need to be
M strengthened in respect of accounting of purchase of fixed assets
and Procedures
and materials & Inter Unit.
These issues will be resolved once the SAP is fully implemented.

There is no audit committee. The internal audit team reports to


Board of Directors. There is only one independent director. This
puts the corporate governance of the Company at risk. This
could be mitigated by forming the audit committee and
Internal Audit M increasing the number of independent directors. However, the
Company is not obligated to form the audit committee.
The coverage and extent of procedures for internal audit is not
adequate. MSETCL is in the process of modification of
procedures.

External Audit N SAP is implemented but system audit is not undertaken. This
could lead to understatement/overstatement of

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Risk
Risk Risk Mitigation
Assessment*
expenses/revenues. This risk could be mitigated once system
audit is implemented.

Top management does not receive SAP reports as reporting


formats are getting finalized. This restricts the top management
Reporting and from accessing reports whenever required instead of relying on
N
Monitoring periodic manual reports. This also possesses risk of manual
errors. These risks would be mitigated when SAP reports formats
are finalized.

Parallel SAP and manual system could lead to error or


Information System N
manipulation.

Overall Control Risk M

* H = High, S = Substantial, M = Moderate, N = Negligible or Low

2.2.2.2 Procurement Capacity Assessment


Proposed Project Name: TA-8062 IND: Proposed Amount US$: 40 million
Maharashtra Solar Park and Green Grid
Development Investment
Program (45341-001)
Executing Agency: Maharashtra State Source of Funding: ADB and CTF
Electricity Transmission Co. Ltd. (MSETCL)
Assessor: Date: 15 May 2013

Expected Procurement
MSPGCL plans to develop around 500 MW of solar capacity by FY2016-17. Power will be sold to MSEDCL
to meet the RPO. MSETCL plans to develop the evacuation infrastructure for these proposed solar
power projects. In addition to the solar park transmission network, MSETCL proposes to develop
Renewable Energy Management Centre (REMC) for management of existing and upcoming renewable
projects in Maharashtra.
The developer will be selected through international competitive bidding in accordance with ADB
procurement guidelines 2010. The bid is proposed to be conducted in two stages. The bidders will be
evaluated based on the minimum technical and financial criteria set out in the bid documents. The
qualified bidders meeting the technical and financial criteria will be evaluated based on the financial
bids submitted by the bidders. The bidder quoting the least amount for supply and installation of
equipment will be awarded the contract. The equipment required for developing the project will be
procured only from ADB member countries.

Assessment of the National Environment


Procurement in India by Government companies/organizations happens through competitive bidding
route. For large value contracts utilities are mandated to follow an open tender process which includes
planning, tendering, contracting, and reporting. Procurement by Government companies/organizations

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is also subjected to external audits by Comptroller and Auditor General of India (CAG). Currently, there is
no overarching legislation governing public procurement. The General Financial Rules, 20056, govern
procurements made by the Centre. Similarly different states have also framed its procurement policy for
state units. While there are some concerns on the legal and regulatory framework in the country, the
most significant risks in procurement is found in the institutional environment. Tender evaluation
committees are perceived as particularly vulnerable to corruption. The selection and appointment of
evaluation committee members are vulnerable to political interference and conflict of interest. With the
enactment of the Public Procurement Bill 2012 there could some major change in the practice in the
coming years.
General Agency Resource Assessment
The bidding process will be managed by the Contract & Monitoring (C&M) department. The department
is headed by CE (C&M), CE (C&M) further reports to ED (Projects). CE (C&M) has 17 years of experience
including 4 years in procurement. The minimum qualification of each team member of the C&M
department is BE (Electrical).
The role of the CE (C&M) department is preparing bid documents, invitation of bids, bid process
management, evaluation and issue of LOA/contracts. Procurement specifications are designed by Design
and Engineering Department.
The C&M department is adequately staff with 17 full time officials. The officials are proficient in English
and local language. Each procurement positions in the agency have job descriptions and are in line with
the ISO standards. C&M department does not have experience in procurement of equipment for ADB
funded projects and hence are not aware of the ADB procurement guidelines. ADB has appointed PPTA
consultants who have prepared the draft standard bid documents in accordance to ADB procurement
guidelines 2010. This bid documents will be approved by ADB and shared with ED (Projects) and C&M
department for their approval. C&M department proposed to use the bid documents approved by ADB
and ED (Projects).

Agency Procurement Processes: Goods and Works


MSETCL follows e-tendering procedure. The Company already has an experience of developing similar
evacuation projects. The evacuation for 125 MW solar power project in Sakri under execution. The EPC
contracts were invited through competitive bidding process. MSETCL proposes to follow similar
procurement procedure for upcoming solar power projects which will be in-line with ADB procurement
guideline.
MSETCL conducts two envelop single stage bid process. Design and Engineering department prepares
the procurement specifications. Preparation of bid documents and management of bid process is done
by C&M department. It usually takes around 8 days for preparation of bid documents after finalization
of estimates if substantial changes to the standard documents and procedures are not envisaged. In
some cases it would take around 30 days if major changes required in standard document and
procedures. It takes around 7 days for preparing estimates. The sale of bids is managed by C&M and the
bidders are charged nominal fees for the bid documents. The bid documents are verified by CE (C&M)
and approved by ED/Director (Projects).
The bid process usually takes 180 days from the day of issue of bid documents to the day of issue of
LOA. The bidders are usually given 60 days for submission of bids from the first day of issue of bid
documents. Pre-bid meetings are arranged for the bidders before submission of bids. The queries raised
during the pre-bid meetings are answered in writing. The bidders are required to submit technical and

6
General Financial Rules, 2005 dated 1-July-2005; Govt. of India, Ministry of Finance, Department of Expenditure

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financial bids in two separate envelopes and on due date and time. Late bids are not accepted. Technical
bids are opened in public on the day of submission of bids. The minutes of technical bid opening are
documented and distributed to the department head of respective department for which procurement
is undertaken. The technical bids are evaluated by C&M, reviewed and recommended by CE (C&M) and
audit team and approved by ED/Director (Projects). It takes around 60 days for evaluation of technical
bids. The bidders have to meet the minimum technical and financial criteria as set out in the bid
documents in order to quality for opening of financial bids. Financial bids remain sealed until technical
evaluation is completed. The bidders who are technically qualified are invited for opening of the
financial bids and financial bids of only those bidders who are technically qualified are opened. The
financial bids are evaluated by C&M department, reviewed and recommended by CE(C&M) and audit
team and approved by board of directors. It takes around 60 days for evaluation of financial bids and
issuance of LOI.
C&M department does not have experience in procurement of equipment for ADB funded projects and
hence are not aware of the ADB procurement guidelines. ADB has appointed PPTA consultants who
have prepared the draft standard bid documents in accordance to ADB procurement guidelines 2010.
This bid documents will be approved by ADB and shared with ED (Projects) and C&M department for
their approval. C&M department proposed to use the bid documents approved by ADB and ED
(Projects).

Agency Procurement Processes: Consulting Services


C&M department does not procure any consulting services.

Process Control and Oversight


Procurement specifications are designed by Design and Engineering Department and approved by
Director (Projects) or Board of Directors. C&M department prepares bid documents, invites bids and
manages bid process, evaluates and issues LOA/contracts.
Bidding document is sent to the board of directors and managing director for further approval. The bid
documents are published and are available to the prospective vendor for a fee. Comments are received
from the bidders and the same is evaluated for further changes. After approval of the Board the
documents are re-circulated. The bid process is monitored by CE (C&M) and the evaluation report is
submitted to the ED/Director (Projects). The procurement process is audited by the MSETCL audit
department who checks the fairness and the competitive bidding principles adapted by procurement
units.
MSETCL does not have a procurement manual, but they follow a defined internal process. Currently
there are no standard procedure to guard the system from any conflict of interest issues and no check
and balance to prevent the same from happening.

Records Keeping and Audit


Like all public sector unit in India record keep is fairly robust in MSETCL. All documents are retained for
10-15 years and can be retrieved easily if required. The record keeping department is fairly staffed and
the document identification is streamlined. Procurement related documents are stored safely which
included the published bid documents, advertisements, comments received during the pre-bid, bid
submitted, progress reports, payments invoice and receipts etc.

Summary Assessment and Recommendations


Based on the assessment of individual components the overall procurement capacity of MSETCL is
deemed adequate.
Particular strengths include: specific department (C&M) for procurement of equipment of turnkey

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projects, experienced and adequately qualified staff.


However, there are also some weaknesses. C&M does not have experience in procurement of
equipment for ADB funded projects, there do not have procurement committee. MSETCL do not have a
standard procedure to guard the system from any conflict of interest issues and no check and balance to
prevent the same from happening. Moreover the C&M department does not have any experience in
procure any consulting services leading to high dependence on only on the internal staffs.
General Recommendations, Resource assessment
Capacity Constraint Recommended Action Responsibility and comment
C&M does not have experience ADB has appointed PPTA It is the responsibility of ADB and
in procurement of equipment for consultants who have prepared top management and board of
ADB funded projects as this is the draft standard bid directors of MSETCL to review
the first ADB funded project. documents in accordance to ADB and approve the bid documents.
procurement guidelines 2010.
General Recommendations, Procurement process for goods and works
Capacity Constraint Recommended Action Responsibility and comment
MSETCL does not have MSETCL should form a It is the responsibility of ADB to
procurement committee and procurement committee. discuss formation of
C&M department does not hire Procurement committee should procurement committee with CE
services of consultants headed by a member Board of (C&M) and ED/Director
Directors with adequate (Projects).
representation from different
departments like finance, legal,
commercial, design and
engineering and members from
project team.
General Recommendations, Process control and oversight
Capacity Constraint Recommended Action Responsibility and comment
Currently there are no standard There should be a defined MSETCL should formulate a
procedure to guard the system procedure to evaluate conflict of procedure for identifying
from any conflict of interest interest issues which should be members of the procurement
issues and no check and balance in line with the ethical practices. committee. The members should
to prevent the same from not have any conflict of interest
happening. and hold on to high ethical
standards.
MSETCL should take declaration
from the committee members
that they are free from any
personal interest for this
procurement process.
The questionnaire is reproduced in Annex 18

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2.3 Project costs and financing plan


Cost estimates for generation, transmission and REMC projects are projected based on existing
proposed capacity of MSPGCL. The basis for cost estimates is as provided below:
MSPGCL generation projects: We have assumed benchmark capital cost of USD 1.33 Mn./MW (INR
80 Mn/MW7 as approved by MERC in its renewable tariff order) for tranche-1 projects (Kaudgaon
Phase-I and Gangakhed). For other projects, reduction of 10% is assumed in the capital cost i.e.
capital cost assumed is USD 1.20 Mn./MW (INR 72 Mn/MW).
MSETCL transmission projects: MSETCL have undertaken a broad evaluation of the proposed
evacuation projects for Kaudgaon Phase-I and Gangakhed and estimated the total capital cost. We
have considered this capital cost as the benchmark i.e. USD 0.06 Mn/MW for FY2012-13 and
projected the capital cost for transmission projects proposed in tranche-2 or tranche-3 by
considering price contingency of 3.5% (as per steel index for last 6 years) and physical contingency
of 3% (as per MSETCL standard practice).
Renewable Energy Management Centre (REMC): REMC capital cost has been worked out in
consultation with SLDC and unit costs have been assumed based on the PGCIL cost estimates
provided in Green Corridor Report (Jul 2012). We have also considered physical contingency of 3%.
Based on the above assumptions the total capital cost works out as follows:

Capital cost (USD Mn.) FY2013-14 FY2014-15 FY2015-16 FY2016-17 Total


Proposed capacity addition
48 30 175 250 503
(MW)
Generation projects
Capital cost for generation
64 36 210 300 610
projects
Transmission projects
Base capital cost for
2.88 1.80 10.50 15.00 30.18
transmission projects
Price contingency 0.10 0.13 1.14 2.21 3.58
Physical contingency 0.09 0.06 0.35 0.52 1.01
Total capital cost for
3.07 1.99 11.99 17.73 34.78
transmission projects
REMC
Capital cost of REMC 6.72 6.72
Total capital cost 74 38 222 318 651

The capital cost for generation projects is assumed to be funded at debt-equity ratio of 80:20 and for
transmission project at debt-equity ratio of 70:30. Further, the generation projects are proposed to be

7
Source: MERC order dated 22-March-2013on Determination of Renewable Energy Tariff for fourth year of first control period;
Case No. 6 of 2013

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developed under PPP model wherein 50% of the payment to the private developer is proposed to be
paid on COD and rest 50% is proposed to be paid over the period of next 10 years through revenue
sharing model.

Funding (USD Mn.) FY2013-14 FY2014-15 FY2015-16 FY2016-17 Total


Generation projects
MSPGCL equity 6.40 3.60 20.99 29.99 60.97
ADB funding 25.59 14.39 83.96 119.94 243.88
Suppliers credit 31.98 17.99 104.95 149.93 304.85
Transmission projects
MSETCL equity 0.92 0.60 3.60 5.32 10.43
ADB funding 2.15 1.39 8.39 12.41 24.34
REMC
MSETCL equity 2.02 0.00 0.00 0.00 2.02
ADB funding 4.70 0.00 0.00 0.00 4.70
Total
MSPGCL equity 6.40 3.60 20.99 29.99 60.97
MSETCL Equity 2.94 0.60 3.60 5.32 12.45
ADB funding 32.44 15.78 92.35 132.35 272.92
Suppliers credit 31.98 17.99 104.95 149.93 304.85
Total funding 73.76 37.97 221.89 317.58 651.19
Financial & Economic Analysis

Financial Internal Rate of Return (FIRR) for the proposed generation, transmission and REMC projects
has been computed in accordance with ADBs Financial Management and Analysis of Projects.
The weighted average cost of capital (WACC) was calculated for each generation subprojects,
transmission subprojects and REMC. WACC was also calculated for the overall Generation project and
transmission & REMC project.
The financial viability was assessed by comparing WACC to FIRR at the subproject level and for the
aggregated project. The nominal WACC works out to 6.83% and 7.51% for generation project and
transmission project respectively. FIRR exceeds nominal WACC for all the projects and at composite
level. Following table illustrates FIRR for different projects:
Project Nominal FIRR
Generation projects
Kaudgaon - Phase 1 10.75%
Gangakhed 11.24%
Ner 11.36%
Lohara 11.36%
Kaudgaon - Phase 2 11.48%

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Generation - composite 11.33%


Transmission and REMC projects
Kaudgaon - Phase 1 10.25%
Gangakhed 10.51%
Ner 10.62%
Lohara 10.62%
Kaudgaon - Phase 2 10.60%
REMC 10.12%
Transmission and REMC - composite 10.48%
Note: Nominal FIRR is compared with the nominal WACC for determining financial viability of the
project, as the tariff estimated is as per MERC norms which take into account escalation in O&M over
life of the plant and nominal interest rate
The economic analysis was undertaken to determine the economic viability of project components. The
analysis aims at the following
reduction in dependency on most costly source of power i.e. diesel based power generation
and,
reduction in environmental impact of thermal power generation
Following table illustrates the EIRR for different projects:
Project EIRR
Kaudgaon - Phase 1 11.45%
Gangakhed 19.22%
Ner 19.65%
Lohara 19.65%
Kaudgaon - Phase 2 19.05%
Composite 18.54%

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2.4 Flow of funds

2.4.1 Loan disbursement approval process


Loan disbursement approval timelines is majorly depended on time take for GOI approval. The expected timelines for loan disbursement
approval discussed during ADB Fact-Finding Mission is as shown below:
1 1 1 1 1 1 1 1 1 1 2 2 2 2 2 2 2 2 2
Weeks 0 1 2 3 4 5 6 7 8 9
0 1 2 3 4 5 6 7 8 9 0 1 2 3 4 5 6 7 8
Timelines for workshop
Posting of concept paper on the MSPGCL website
Review of concept paper by developers
Workshop between MSPGCL and developers
Timelines for fact finding mission
Time between fact finding mission and workshop
Start of fact finding mission
Fact finding process 2.4.1.1.1.1.1.1
Issue of Aide Memoire to MSPGCL, MSETCL, GOM, DEA
Timelines for GOI approval
FRBM approval
Discussions between MSETCL and MSPGCL with Energy
Secretary
Approval of Energy Secretary
Discussions between Energy Secretary and Finance
Secretary
Approval of Finance Secretary
Discussions between Finance Secretary and DOE
Approval of DOE
MNRE/MOP approval
Approval of Aide Memoire from MSPGCL, MSETCL,
GOM, DEA
Timelines for Management Review Meeting (MRM)
Preparing of ADB RRP

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1 1 1 1 1 1 1 1 1 1 2 2 2 2 2 2 2 2 2
Weeks 0 1 2 3 4 5 6 7 8 9
0 1 2 3 4 5 6 7 8 9 0 1 2 3 4 5 6 7 8
MRM
Timelines for Negotiation with Govt. of India
Negotiation with GOI
Timelines for approval of CTF funding
DEA approval for CTF funding
Approval process for CTF funding
Timelines for ADB board approval
Preparing board package
Approval from the board of ADB

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2.4.2 Fund Flow Mechanism


Procedures for withdrawal of loan proceeds are standardized to facilitate disbursements under most
loans. There are three major types of disbursement procedure, described briefly as follows:
Reimbursement procedure After MSPGCL/MSETCL makes payment to supplier,
MSPGCL/MSETCL submits reimbursement request through CAAA to ADB. ADB pays to CAAA in
USD, CAAA certifies receipt of USD and rupee equivalent to the Plan Finance I Division of the
Department of Expenditure, MoF, GOI. PF-I Division authorizes RBI to release rupee equivalent
to the Finance Department of GoM. GOM Finance Department then authorizes Energy
Department to withdraw funds. Energy Department can be allowed under the Government
Budget mechanism to withdraw funds even before ADB funds are received, and may release
advance loans to MSPGCL/MSETCL for project funding.
Direct payment procedure - After incurring expenditure, MSPGCL/MSETCL authorizes invoices,
and submits a request through CAAA to ADB for directly paying the contractor. ADB will pay the
contractor within five business days of having received a valid claim (complete in all respects).
Commitment procedure - If the contract is covered by LC, ADB can issue a commitment letter to
the negotiating bank based on a request from MSPGCL/MSETCL through CAAA. When a
payment is due; at the request of MSPGCL/MSETCL, ADB will directly pay the negotiating bank
and debit the loan account. This also will happen within five business days of receiving a valid
claim under the Commitment Letter (CL). The full value of the CL will be blocked from the loan
account, and the CL will be irrevocable even if the loan were to be cancelled.
There are two agreements entered into by ADB:
Loan agreement: Signed between ADB and Department of Economic Affairs (DEA): Ministry of
Finance, Government of India
Project agreement: Tripartite agreement signed between ADB, Energy Department: Government
of Maharashtra and MSPGCL/MSETCL

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3 Solar generation projects


MSPGCL is proposing to commission around 500 MW of solar capacity in next four years to meet the
RPO requirement of the state as shown below:
Proposed capacity
Capacity
Sr. No Site Location Date of COD
MW
Solar Photovoltaic Project, Kaudgaon, Dist. 48 March 2015 (Phase I)
1.
Osmanabad 250 December 2016 (Phase II)
Solar Photovoltaic Project at Gangakhed-
2. 300 August 2015
Pokharni, Dist. Parbhani
Mangladevi-Pimpri Nawbpur (I&II)
3. 100 December 2015
Malkhed, Ner, Dist. Yavatmal
4. Lohara MIDC, Dist. Yavatmal 75 December 2015
Total 503

ADB is considering funding the above solar power projects of MSPGCL. The details of the generation
projects are as provided below:

3.1 Kaudgaon phase-I


Description Summary
50 MW as per draft DPR
Proposed capacity
Mahagenco was earlier proposing 75 MW
Proposed technology Multi crystalline PV
Expected CUF 18.25%
Kaudgaon, Osmanabad district. (Latitude 18.1804o N, Longitude
75.9384o E, Altitude 543 m)
Location
Approximately 14 kms from Osmanabad city and 349 kms from Mumbai
city
118.3 Hectares (289.8 Acres) acquired by Mahagenco.
Land availability
Site area is divided in 3 plots i.e. A-1/1, A-1/2 A-1/3
1.5 km from state highway no. 67
Proposed site is well connected with 30 meter wide village road from
Osmanabad city
Road connectivity
30 meter wide MIDC road is proposed in between plot no. A-1/1 & A-
1/2 which will make all the sites accessible during construction and
operation
Water pipeline is 1 km away from the site location
Water availability Option of bore well as groundwater is available at 25-30 feet below
ground level
220 kV substation of 100 MVA capacity at Osmanabad approximately 14
Nearest substation kms from the site
The substation is average loaded up to 40 MW
Proposed evacuation Common switchyard proposed at A-1/2 plot. Power from each plot

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Description Summary
proposed to be combined to common switchyard through 33 kV
underground cables
33 kV overhead transmission line around 14 kms length is proposed
from the switchyard to the nearest 220 kV substation at Osmanabad
Capital cost of the project is assumed to be equal to the normative cost
of Rs. 80 Mn/MW8 as approved by MERC in its tariff order for solar
Project cost
projects expected to be commissioned in FY14 or solar projects
expected to be commissioned in FY15, but PPA signed in FY14.
Environmental clearance not require for solar projects as Ministry of
Power
No forest in the proposed site
Environmental aspects
No endangered species near to the project area
No major environmental impact on air and water quality during
construction and operation of the project
No human settlement or human activity within the project boundary
apart from grazing.
Social impact
The complete project land is government land, as a result there is no
compensation required in any way.

3.2 Gangakhed
Description Summary
30 MW as per draft DPR
Proposed capacity
Mahagenco was earlier proposing 50 MW
Proposed technology Multi crystalline PV
Expected CUF 18.70%
Gangakhed, Parbhani district. (Latitude 18.882o N, Longitude 76.695o E,
Location Altitude 512 m)
Approximately 12.6 kms from Gangakhed and 51.6 kms from Parbhani
159 Hectares identified. The transferring/handing over of project land
to Mahagenco is under process. All government land.
Land availability
Site area is divided in 2 plots i.e. Pokharni village (76 Hectares) and
Dongargaon village (83 Hectares)
Not well connected through road; nearby approach road (5-8 m wide) is
Road connectivity available about 2.5 km from the project site
Internal roads can be developed by the developer
Godavari River is around 10.5 km from the proposed site
Masoli Reservoir is 2 km away from the site
Water availability
Another option is dug well and bore wells as groundwater is available at
8 to 10 m below ground level
Nearest substation 132 kV substation of 100 MVA capacity at Gangakhed approximately 13

8
Source: MERC order dated 22-March-2013on Determination of Renewable Energy Tariff for fourth year of first control period;
Case No. 6 of 2013

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kms from the site


The substation is average loaded up to 45 MW
Common switchyard proposed at Pokharni plot. Power from each plot
proposed to be combined to common switchyard through 33 kV
Proposed evacuation underground cables
33 kV overhead transmission line around 13 kms length is proposed
from the switchyard to the nearest 132 kV substation at Gangakhed
MERC has approved capital cost of Rs. 80 Mn/MW in its tariff order for
solar projects expected to be commissioned in FY14 or solar projects
expected to be commissioned in FY15, but PPA signed in FY14. MERC
has approved. Normative capital cost of solar PV project approved by
Project cost
MERC for tariff determination has been declining since notification of
first suo-moto generic tariff order. Therefore, reduction of 10% is
assumed in the capital cost for projects expected to be commissioned
beyond FY15 i.e. Rs. 72 Mn/ MW.
Environmental clearance not require for solar projects as Ministry of
Power
No forest in the proposed site
Environmental aspects
No endangered species near to the project area
No major environmental impact on air and water quality during
construction and operation of the project
No human settlement or human activity apart from grazing.
Social impact The complete project land is government land, as a result there is no
compensation required in any way.

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4 Evacuation schemes for solar projects


MSETCL plans the projects in accordance to the MERC Open Access regulation9. Following are the key
highlights of the same:
Open access application is received by STU Department from any developer or proposed user of
the transmission system
STU department requests for the feasibility report from the concerned Chief Engineer of the
zonal office.
STU received feasibility report from the field office and undertakes the Load flow studies.
STU request for submission of Survey & other necessary technical data by respective EHV- O&M
Zone
Based on the report submitted project department prepares the cost estimate for the scheme
The proposed scheme is submitted to Board of Director for approval.
Based on the above outlined planning process the evacuation arrangements of Kaudgaon and
Gangakhed were approved by the MSETCLs Board on 20th September 2012. The two schemes
have been reviewed in the following section

4.1 Kaudgaon phase-I


MSPGCL is planning to setup a Grid Interactive Solar Photovoltaic Power Station at Kaudgaon,
Osmanabad district. To evaluate the possibility MSPGCL has appointed technical consultants for
preparation of a Detailed Project Report. The project was initially planned for 100 MW, however after
detailed evaluation and survey, the proposed capacity has been revised to 50 MW.
Based on the open access application of MSPGCL, MSETCL has planned the evacuation arrangement for
100 MW through a 220 kV/ 33kV substation at Kaudgaon MIDC.

4.1.1 Evacuation arrangements


The capacity of solar power generating station at Kaudgaon is expected to reach upto 50 MW.
Therefore, power evacuation system proposed shall have minimum power transmission capacity of 50
MW. Two possible evacuation arrangements are evaluated.
Evacuation through 220/33 kV Osmanabad Substation
Evacuation through 220/ 33 kV Kaudgaon MIDC Substation
Option 1: Evacuation through 220/33 kV Osmanabad Substation
Power evacuated from each main control room of each block is proposed to be fed to one common bus
through 3 nos 33kV feeder bays at main pooling station or switchyard. Power will then be transmitted to
220 KV Osmanabad sub-station owned and operated by MSETCL through transmission line on 33kV
level. The transmission line proposed is along with the internal road (MIDC road) and state highway (SH
67) as shown in below image. The substation (220/33 kV) is located approximately 14 km from the
proposed site.

9
MERC Transmission Open Access Regulations 2005 dated 21-April-2005

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Proposed Evacuation through 220 kV Osmanabad Substation

Source: Detailed Project Report, Solar PV Power Plant, Kaudgaon, Osmanabad, MSPGCL

The Schematic for the proposed transmission evacuation scheme is as shown in the diagram below.

Plot A-1/1
33 kV
36.65 Hect underground
13 MW cable

Plot A-1/2 33 kV 220 kV, 250 MVA


underground 33 kV overhead MSETCL
15.60 Hect cable
Switchyard
transmission line of Osmanabad
9 MW approx. 14 km substation

Plot A-1/1 33 kV
underground
73.10 Hect cable
28 MW

Option 2: Evacuation through 220 kV Kaudgaon MIDC Substation


A 220 kV MSETCL transmission line runs through the vicinity of the solar plant. MSETCL has proposed to
develop an LILO substation at site in Kaudgaon MIDC area and evacuate the power through this line.
Existing 220 kV transmission line Osmanabad - Paranda

Solar Plant
site

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MSETCL has conducted detailed load flow studies of the proposed scheme considering an injection of
125 MW from the plant location. Based on the field survey and the system studies reports, MSETCL has
confirmed the scheme to be feasible and will not disturb the overall stability of the grid.
Load flow analysis and Single line Diagram of Load flow analysis and Single line Diagram of 220
220 kV Paranda- Osmanabad transmission line kV Paranda- Osmanabad transmission line (with
(without Kaudgaon LILO) Kaudgaon LILO)

It may be seen that the existing power flow on this line is around 30 MW which increases to 62 MW
after the LILO substation is connected on this line. This is within the stability limit of the line.
Considering the above, the 2nd option has been finalized due to following reasons.
Spare 33 kV bay at Osmanabad substation is not available and would require construction of
additional bays.
There is more scope for expansion in near future if a new substation is developed in Kaudgaon.
Construction of 14 km of 33 kV line may not be recommended considering issues of right-of-way
which can delay the project.

4.1.2 Project Scope


The overall scope will include:
Component Quantity
220 kV D/C line and D/C tower LILO on 220 kV
Osmanabad- Paranda line the conductor proposed to be 1 KM
used is 0.4 square inch ACSR Zebra
25 MVA transformation with bays 2 Numbers
220 kV bays at Kaudgaon Substation 2 Numbers
33 kV bays evacuation bays 4 Numbers
HV Bus 2 Numbers
LV Bus 1 Number
220 kV PLCC Station Equipment set 1 Number
220 kV PLCC Line Equipment 2 Numbers
Equipment Spares 3% Equipment Cost
Transportation Cost 5% of the Equipment cost
Insurance 1% of the Equipment cost

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Erection Charge 7.5% of the cost


Service Tax on Erection Charges 12.36% of the erection charges
Contingencies 3% of total project cost
Administrative expense 10.75% of Project Cost
Substation Land To be provided by MSPGCL

4.1.3 Cost Estimates for Kaudgaon Evacuation scheme


MSETCL has prepared the cost estimates of this scheme on 8th October 2012. The project cost is
prepared based on last conducted bid process of similar equipment. The cost estimate does not include
the cost of land for the substation as the same is proposed to be allocated to MSETCL by MSPGCL.

Components Units Amount


Cost of 1 KM ACSR Zebra Transmission Lines Million INR 4.94
2*25 MVA Substation Cost Million INR 144.15
Metering system Million INR 1.94
Power line Communication Carrier (PLCC) system Million INR 4.67
SCADA system Million INR 7.00
Miscellaneous Cost Million INR 1.30
Sub-total Million INR 163.99
Administrative expense Million INR 18.158
Total Project Cost Million INR 182.18
Total Project Cost in USD Million USD 3.03

4.2 Gangakhed

4.2.1 Evacuation arrangements


The capacity of solar power generating station at Gangakhed is expected to reach maximum up to 30
MW. Therefore, power evacuation system proposed shall have minimum power transmission capacity of
30 MW. Three possible evacuation arrangements are evaluated.
Option 1: Evacuation through 132/33 kV Gangakhed Substation
Power evacuated from the each main control room of each block is proposed to be fed to one common
bus through 2 nos. 33kV feeder bays at main pooling station or switchyard. Power will then be
transmitted to 132 KV Gangakhed sub-station owned and operated by MSETCL through transmission
line on 33kV level. The transmission line proposed is along with district road which is approx. 13 km.
The proposed transmission line will cover two 400 kV and one 220 kV and two 132 kV transmission line.
Railways, highway or forest crossing is not envisaged for this line. The proposed line will not have any
crossing of railway line or highway. Gangakhed Substation has been recently upgraded and has 2*50
MVA transformer capacity. It has spare space for two line bays. However as this substation is located in
the newly developed MIDC residential area RoW problem could be expected during laying of the
transmission line.
Proposed Evacuation through 132 kV Gangakhed substation

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Source: Detailed Project Report, Solar PV Power Plant, Gangakhed, MSPGCL

The schematic for the proposed transmission evacuation scheme is as shown in the diagram below.

Pokharni
33 kV underground
76 Hect cable
15 MW
Common
switchyard 132 kV, 250 MVA
33 kV or 132 kV MSETCL
within at
overhead Gangakhed
Pokharni
transmission line of substation
approx. 13 km
Dongargaon
33 kV underground
83 Hect cable
15 MW

Option 2: Evacuation through 132/ 33 kV Parbhani Substation & LILO on Gangakhed Parli 132 kV Line
MSETCL proposes to develop 2*25 MVA 132/33 kV substation at Parbhani at the site of the Solar
Project. A 132 kV line is proposed to be developed from this substation for LILO of Gangakhed Parli
line which is around 7 KM.
Existing 132 kV transmission line Gangakhed-Parli

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Gangakhed 132/
33 kV Substation

Solar Plant
Parli site
Substation

In this option the proposed transmission line will cross two 400 kV and one 220 kV transmission line.
Further no highway or railway or forest crossing is envisaged for this line.
Option 3: Evacuation through 132/33 kV Parbhani Substation & LILO on GangakhedSonepeth 132 kV
line
MSETCL proposes to develop 2*25 MVA 132/33 KV substation at Parbhani at the site of the Solar
Project. A 132 kV line is also proposed to be developed from this substation for LILO of Gangakhed
Sonepeth line which is around 10 KM from the proposed Parbhani substation. Land is expected to be
handed over by MSPGCL for construction of the substation.
Existing 132 kV transmission line Ganakhed-Sonepeth

Sonepeth
Substation

Gangakhed 132/
33 kV Substation

Solar Plant
site

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In this option, the proposed transmission line will cross two 400 kV and one 132 kV transmission lines.
Further no highway, railway or forest crossing is envisaged for this line.
MSETCL has conducted detailed load flow studies of the proposed scheme considering an injection of 50
MW from the plant location. Based on the field survey and the system studies reports, MSETCL has
confirmed the scheme to be feasible and will not disturb the overall stability of the grid.
Load flow analysis and Single line Diagram of Load flow analysis and Single line Diagram of 132
132 kV Gangakhed-Sonepeth transmission line kV Gangakhed-Sonepeth transmission line (with
(without Pokharni LILO) Pokharni LILO)

It may be seen that the existing power flow on this line is around 19 MW which increases to 43 MW
after the LILO substation is connected on this line. This is within the stability limit of the line.
Considering the above, the third option has been finalized due to following reasons.
Unlike Parli both Sonepeth and Gangakhed are demand centers hence power from the solar
project can be consumed locally reducing loading on the grid.
MSETCL will have lesser right of way issues as the LILO line will not go through any residential
area.

4.2.2 Project Scope


The overall scope will include:
Component Quantity
132 kV Double Circuit line, LILO on Gangakhed Sonepeth
10 KM
using 0.2 sq Inch ACSR Panther Conductor
25 MVA transformation with bays 2 Numbers
132 kV bays at Pokharni Substation 2 Numbers
33 kV bays evacuation bays 4 Numbers
HV Bus 2 Numbers
LV Bus 1 Number
132 kV PLCC Station Equipment set 1 Number
132 kV PLCC Line Equipment 2 Numbers
Equipment Spares 3% Equipment Cost
Transportation Cost 5% of the Equipment cost
Insurance 1% of the Equipment cost

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Erection Charge 7.5% of the cost


Service Tax on Erection Charges 12.36% of the erection charges
Contingencies 3% of total project cost
Administrative Cost 10.75% of Project cost
Substation Land To be provided by MSPGCL

4.2.3 Cost Estimates for Gangakhed Evacuation scheme


MSETCL has prepared the cost estimates of this scheme on 8th October 2012. The project cost is
prepared based on last conducted bid process of similar equipment.
The cost estimate does not include the cost of land for the substation as the same is proposed to be
allocated to MSETCL by MSPGCL.

Components Units Amount


Cost of 10 KM Transmission Lines Million INR 31.21
2*25 MVA Substation Cost Million INR 104.76
Metering system Million INR 1.94
Power line Communication Carrier (PLCC) system Million INR 4.31
SCADA system Million INR 7.00
Miscellaneous Cost Million INR 1.30
Sub-total Million INR 150.51
Administrative expense Million INR 16.67
Total Project Cost Million INR 167.17
Total Project Cost Million USD 2.78

4.3 Evacuation schemes for other solar projects


Location and capacity of other solar projects proposed in 2nd and 3rd tranche of funding were discussed
during the joint meeting held on 1st January 2013. Indicative locations at the district level of the
upcoming plants were provided by MSPGCL.
MSPGCL has already identified the land for these projects. However, it has not initiated the process for
acquisition or ascertaining the availability of the land. MSPGCL has to provide details of the exact
location of these plants to STU for system planning. Once the STU has included them in the network
plan, MSETCL will initiate the process of preparing DPR and estimating total cost.

4.4 Preparation of bid documents


The proposed bid document is based on the ADB Standard Bid document for Plants and has been
customized for MSETCL evacuation project for Kaudgaon. Detailed discussion was undertaken with
MSETCL on packaging of this project. The salient features of the documents are as below:

4.4.1 Summary of Transmission Bid Documents


It is understood that MSETCL executes substations and transmission lines as different packages.
However in some cases where the package size is small two or more substation or lines are combined

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together for bidding. This is only done when the execution timeline is more or less similar. Based on the
same 3 possible alternatives were evaluated;
Single package for each evacuation schemes consisting of substation and lines considered for
ADB funding
Consider two packages one for all the substations and other for all the lines under ADB funding
Consider one package for all the lines and substation under the ADB funded solar evacuation
project
However considering separate timeline for execution on the next 5 years it is difficult to package more
than one evacuation together. For example, MSETCL has finalized two projects Kaudgaon and
Gangakhed evacuation project for tranche one. However as the land for the Gangakhed project is still to
be allocated this will still take some time to materialize. Considering this the present package can only
include the Kaudgaon project.
A single package for substation and line has been considered as separate packages will be too small to
attract reputed contractor for this project.
To validate the packaging for this project a discussion was also undertaken with expert from PGCIL. It is
understood that PGCIL regularly engages single turnkey contractor for lines and substation. Hence this
model will be workable.
Following key changes has been proposed in the ADB standard bid document for this project;
Qualification requirement
Financial
o Bidder need to demonstrate financial soundness
o Minimum average annual turnover of US$ 2 million in last 3 years consider 60% of the
project cost
o The contractor should have 5 years of experience and should have executed projects of
atleast Rs. 20 Crs (Assumed project cost)
Experience for transmission line
o The bidder should be a manufacturer of EHV Transmission line towers having adequate
infrastructure for in-house design, manufacturing, galvanising and supply of transmission
line towers and should have at least 5 years of experience in manufacturing & supply of
galvanised Transmission line towers of voltage class of 220 kV and above
o The bidder should have installed capacity for manufacturing of at least 10,000 MT of tower
material per year and should have fabricated and supplied at least 1000 MT of EHV
transmission line towers of voltage class 220 kV & above. The bidder should submit the
users certificate in support of such supplies executed in last 3 years.
o The bidder should have experience of line erection S/C or D/C or M/C Length of Line (Route
Length) = 1KM in last five years cumulatively
Experience for Substation
o The bidder should have basic infrastructures for construction of EHV substation of voltage
class 100 KV or above along with two number of transformer bays with 25 MVA or above.

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The bidder should technical knowhow, adequate tools and plant, machineries, testing
equipment, skilled erection staff and experienced technical staff for design / Engineering of
EHV sub-stations, erection/testing & commissioning of Sub-station equipment.
o The substation bays as above constructed by bidder should be working satisfactory for
atleast two years as on date of bid opening. The bidder should submit the user's certificate
for satisfactory performance of substations/transformers/bays constructed indicating date
of starting the works and its commissioning (duly notarised).
o The owner reserves the right to review the bidders performance in MSETCL during last five
years and may accept / reject the offer accordingly.
Personnel required in the team
Total Work Experience Experience In Similar
No. Position
[years] Work [years]
1 Project Manager 10 3
2 Project Engineer (Electrical) / Site engineer 5 3
3 Surveyor 5 3
4 Design Engineers 10 3

Equipment required
No. Equipment Type and Characteristics Min. Number Required
1 Equipment for civil construction Adequate
2 Equipment for electrical construction Adequate
3 Equipment for testing and commissioning Adequate

The Bidder need to have following valid certificates


a. Valid Electrical Contractors License
b. Registration under Maharashtra Value Added Tax (MVAT) Act / Central Sales Tax Act and Service
Tax Act under GOI as well as for other various taxes in force.
c. Registration under P.F. Act.
No alternate bid is can be submitted.
Bid security of 10% of contract value will be submitted by the contractor on signing of contract.
The tendering is proposed to follow the e-tendering route.
Scope for the project
Transmission line
o Check survey of line.
o Fabrication and supply of towers as per owner supplied tower designs
o Tower foundation design and construction including special towers
o Supply of all material including of towers, conductors, insulators, earth-wires
o Obtain all clearances including right of way

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o Construction and testing


Substations
o Design, engineering, testing at the manufacturers works and supply of all materials as
specified in Bill of Material required for the Substations
o Supply of materials and execution of civil works
o Erection, Testing and commissioning of all equipment
o Land Development and facilities at site
o Type Tests
Defect Liability: Critical component and workmanship to be covered for defect liability for two years
Payment terms: As per ADB standard document
Price escalation: As per IEEMA standard formula for different component
Insurance
The Contractor need to take all insurances to protect itself from all liabilities during the project
execution. This includes but not limited to the following;
o Cargo Insurance
o Installation All Risks Insurance
o Third Party Liability Insurance
o Automobile Liability Insurance
o Workers Compensation

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5 Renewable Energy Management Centre (REMC)


5.1 Background
India today has an installed capacity of over 29 GW10 of grid interactive RE generators which is around
13%11 of the nations installed capacity. Wind constitutes around 68%12 (20 GW) of the total and is the
5th highest in the world. Maharashtra is one of seven states which have high potential for renewable
power generation in the country. Around 3,600 MW13 of solar and wind capacity have been installed in
the state (as on Sep-13) which is expected to increase it to 12,400 MW14 by 2017. The solar projects will
be primarily concentrated in the districts of Osmanabad, Yavatmal, Nandurbar and Chandrapur. Wind
projects will be concentrated in the districts of Sangli, Satara, Ahmadnagar, Kolhapur, Dhule, Solapur,
Pune, Amravati, Sindhudurg and Beed.
Wind and Solar Potential in Maharashtra

1500 MW 200 MW

150 MW

400 MW
150MW

150 MW

1450 MW 350 MW

550 MW 200 MW

1700 MW 360 MW
900 MW

2100 MW

1100 MW

450 MW

Source: PGCILs Green Corridor Report

The share of renewable energy in the system is expected to increase over the years to meet the
increasing demand for states Renewable Purchase Obligation (RPO). However, integrating the

10
Source: MNRE as on 31-Oct-2013
11
Source: CEA and MNRE as on 31-Oct-2013
12
Source: MNRE as on 31-Oct-2013
13
Source: MEDA as on 30-Sep-2013
14
Source: Transmission plan for envisaged renewable capacity Report (Green corridor report), PGCIL dated July-2012

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renewable energy in the electrical system, while maintaining the overall reliability and security, is an
important challenge to system operators.
The key issue in integrating renewable energy sources like wind and solar, is the dependence on the
local climatic conditions. Variations in speed and direction of wind, ambient temperature, cloud
conditions, rainfall etc. greatly impact the energy output from these power plants disrupting the
schedule of the entire gird. Moreover, due to the changing dynamics, nonlinearities, and uncertainties in
generation, these kinds of energy sources require advanced control strategies so as not to affect the
stability and security of the power grid. With increasing penetration of renewable resources in the grid,
integration and control of these generation sources will be critical going forward.
Till recently, all renewable energy generations were exempted from scheduling their generation. As a
result, most renewable generators do not have any day ahead scheduling requirements and are also not
controlled by the State Load Dispatch Centre (like MSLDC) on real time basis due to lack of visibility of RE
generator connected within the state gird.
The Indian Electricity Grid Code (IEGC) 201015 has however mandated scheduling of all kinds of
renewable sources which have installed capacity of more than 10 MW. The wind generators would also
come under the ambit of UI and in case these generators deviate by more than 30% of their generation
schedule, UI charges would be applicable on them. The deviations upto 30% is proposed to be settled
through the Renewable Regulatory Fund (RRF). These provisions are still to be implemented in the state
of Maharashtra as the renewable generators, MSLDC and state transmission licensee need to implement
a workable mechanism for schedule and settlement of the RRF.

5.2 Maharashtra State Load Despatch Centre

5.2.1 Overview
Maharashtra State Load Dispatch Centre (MSLDC) is the apex body to exercise supervision and control
over the intra-state transmission system within Maharashtra. It was constituted in the year 1975 under
the erstwhile MSEB to perform the System Operation and Load dispatch for the whole of Maharashtra
state. Consequent to the unbundling of MSEB, MSLDC is functioning under Maharashtra State Electricity
Transmission Company Ltd. (MSETCL), the State Transmission Utility for Maharashtra.
Currently, SLDC Kalwa operates through two regional Area Load dispatch Centres (ALDC) at Ambazari
and Mumbai. These regional ALDCs are used to maintain the load generation balance of Vidarbha region
and the Mumbai region respectively.
Configuration of System Operation

15
CERC Indian Electricity Grid Code Regulations, 2010 dated 28-Apr-2010

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SLDC ALDC
Kalwa
ALDC
Mumbai SLDC

5.2.2 Key Functions


The State Load Despatch Centre is the apex body to ensure integrated operation of the power system in
a State. The State Load Despatch Centre performs the following functions
It is responsible for optimum scheduling and despatch of electricity within a State, in accordance
with the contracts entered into with the licensees or the generating companies operating in that
State monitor grid operations
Keep accounts of the quantity of electricity transmitted through the State grid
Exercise supervision and control over the intra-state transmission system; and
Carry out real time operations for grid control and despatch of electricity within the State through
secure and economic operation of the State grid in accordance with the Grid Standards and the
State Grid Code

5.2.3 Infrastructure

5.2.3.1 Physical Infrastructure


Maharashtra SLDC is located inside the 400 KV Kalwa sub-station at Airoli. It manages closes to 15,000
MW of power on a regular basis and has employee strength of over 100 employees at two locations
(Kalwa and Ambazari) put together. The current set up at Kalwa is being upgraded and shifting to a new
building which has been constructed to house the entire operations of MSLDC. This is a state of the art
facility designed and constructed considering the present and future requirement of MSLDC.
Map of SLDC Kalwa

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SLDC
Compound

400 KV Circle
Administrative
Block

400 kV Substation

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Proposed Layout of New SLDC Building

Energy Accounting Cell and Chief


Engineer Cabin
Third Floor

Control Room
Second Floor

First Floor Data Centre

Ground Floor
Main Entrance and Lobby

The new setup has been designed with adequate margin for future expansion.

5.2.3.2 SCADA system


MSLDC currently has visibility of all the generating station with capacities 50 MW and above. It is also
receiving information and has visibility of all 400 kV substations and most of the 220 kV and 132 kV
substations of MSETCL. The SCADA System at SLDC Kalwa and ALDC Ambazari is acquiring data from
Sinaut make RTUs working on internationally accepted protocol. Data is received through SLDC
communication network of MSETCL. This system currently has 30 days of data storage facility.
All metering information is received through M/s Tulip data network. The two ALDCs at Ambazari and
Trombay are connected through high speed data connection for real-time sharing of the information.
Apart from this, MSETCL has recently installed 15 PMUs on a pilot basis. The data from these 15 PMUs is
also being received at MSLDC Control Centre. A separate console is provided for monitoring the
information received from the PMUs.

5.2.3.3 Communication System


SLDC Kalwa is connected to all RTU installed in MSETCL substation over the PLCC network. It is also
connected to Ambazari and WRLDC over a 64kbps ICCP link.

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SLDC is in the process of upgrading the communication system. The schematic of the same is described
in the diagram below:

TPC Rinfra WRLDC


WRLDC

10 MBPS Link
SLDC KALWA ALDC AMBAZARI

10 Mbps lease line 10 Mbps lease line


10 Mbps back-up 10 Mbps back-up

MPLS NETWORK IEC60870-5-104

IEC 104 256 Kbps


IEC 104 256 Kbps

DC DC DC DC

MPLS NETWORK IEC60870-5-104

IEC 104 128 Kbps IEC 104 128 Kbps

RTU RTU RTU RTU

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The communication system will now link the control centre at Kalwa and Ambazari (to act as the backup
control centre for SLDC). It will also provide visibility to Tata Power, Rinfra, Bandra Office, WRLDC etc.
This will be connected over a 2 MBPS lease line connection. Presently there are 140 RTUs in the system
which will be connected through data concentrators over a Multi-Protocol Label switch (MPLS) network.
A typical an RTU configuration is as described in the diagram below:

5.2.3.4 Hardware and Software


The main hardware and the software system available with SLDC are as below;
Hardware SUN Microsystems SUN NETRA 240 and Ultra-25 servers
Monitors 24" LCD
Operating System Solaris-10
Sinaut Spectrum latest version 4.5.1
Application Software Intelligent Alarm Processor, Power system Restoration and Bus
Scheduler Software packages
Database Administration JAVA based user friendly database administration
Spectrum (Siemens Propriety RDMS system), 30 days storage
Database backend
facility
Video Projection system BARCO 67" 4x2 Video Projection Cubes
Energy Accounting System Custom made system provided by L&T

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5.2.3.5 SLDC Control room


The new control room at MSLDC is the state of the art facility with all required systems for real time
monitoring and decision making.
Configuration of the Control Centre

Spare control
Assistance Desk

Desk 1

Video Projection Unit


Main Control Desk
Control Desk
Renewable
Proposed

Observatory and Conference Room

5.3 Renewable Energy Management Centre (REMC)


POWERGRIDs Report on the Transmission Plan for Renewables Capacity Addition in 12th Plan16 (Jul
2012) has proposed setting up of a separate hierarchy of Renewable Energy Management Centre
(REMC) in the states. These will work in tandem with SLDC / RLDC / NLDC for maximization of
Renewable Energy generation and integration with main grid without compromising security and
stability of power system. The REMCs are proposed to be co-located with respective Load dispatch
centers (LDC) and coordinate with designated agencies for the management of renewable energy
generation.
The establishment of Renewable Energy Management Centre is one of the key functions to be
undertaken by SLDC for advancement of renewable energy development in the state. In this regard,
following tasks needs to be undertaken:
Policy formulation for setting up REMC
Regulations and guidelines for coordinating with stakeholders
Implementation plan for setting up and operationalizing the REMC

5.3.1 Need for REMC in Maharashtra


Currently, the RE Generators in Maharashtra are in general not predicting the day ahead energy
schedule and providing the forecast data to MSLDC. At best, the total energy generation forecast is
being provided which is of little help to the system operator. There is no visibility to monitor the actual

16
Transmission plan for envisaged renewable capacity Report (Green corridor report), PGCIL dated July-2012

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generation from these RE sources on real time basis. This results in day to day issues in managing the
demand supply balance in the system.
In addition, renewables, especially wind, has characteristics of intermittency and variability, connectivity
to distribution voltages as well as transmission system. These characteristics need to be carefully
factored to ensure grid security and stability.
Given the high renewable potential available in the state, the penetration of renewable in the
generation mix is likely to increase in medium term and this could aggravate the problems of managing
grid security and demand supply balance in the state grid. Hence, there is a need to provide additional
tools for real time monitoring of renewable generators and associated components to address these
issues.
The setting up of Renewable Energy Management Centre (REMC) within MSLDC would help in
developing the requisite infrastructure and necessary skills for renewable energy forecasting and
monitoring system in the state. All Renewable Energy Management Centres (REMCs) at State and
Regional level are proposed to be co-located with respective Load dispatch centers (LDC) integrated
with real time measurement and information flow. MSLDCs current facility is already being expanded
and there is scope for addition of REMC desk in the new set up.

5.3.2 Salient features of REMC


REMC would perform the following functions
Forecasting of RE generation in jurisdiction area on day-ahead, hour-ahead, week-ahead,
month-ahead basis
Real time monitoring of the renewable generation
Monitor weather conditions in the locality
Information repository and coordination point for RE penetration - maintaining historical
weather and generation data
Additional tools for maintaining grid security like Online Dynamic security Assessment tool,
renewable forecasting tools, smart dispatching solutions, etc
Assist the generator in effectively scheduling of their generation sources
Coordination with other stakeholders like RLDC/ RPC on renewable related issues

5.4 REMC concept Key requirements

5.4.1 Weather Monitoring Stations


For the purpose of renewable forecasting, in addition to existing weather stations of various agencies,
deployment of specialized weather stations in wind producing / Solar park areas of India would be
necessary.
All stations will be deployed in strategically selected areas so as to maximize the impact on the
wind/solar power forecasting models.
MSLDC has planned to install around 50 weather stations for real time visibility of the weather
condition in the locality. MSLDC has identified approximately 50 MSETCL substations for
achieving maximum visibility of the RE station.

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In addition REMC will also be connected to the Metrological department to assess the future
weather condition of the state and the locality in particular.
The actual number of weather stations as per the requirement of the state needs to be evaluated and
finalized.

5.4.2 Hardware and Software


Forecasting Tools
Local weather data is critical input for forecasting of renewable generation output for the coming
day/days. Wind Turbines are deployed with inbuilt wind measuring devices which continuously monitor
wind speed, wind direction and ambient temperature. This information is fed to Wind Generator
controller for adjusting pitch of blades and direction for optimum power generation. This data can be
sent to REMC through the communication channels for forecasting. In Solar Power Plants also local
weather monitoring sensors are to be installed. This would regularly monitor ambient temperature,
luminosity, sun timings and humidity. This data can also be telemetered to REMC as input to Solar
Energy forecasting module.
Communication System and system integration
Following communication system will be essential for regular data exchange between RE generators /
Pooling substation, REMC, ALDC and WRLDC.
Communication system between RE Generators / Pooling Substation and REMC
Existing Data channel provided by Tulip Communication can be used to exchange data from
pooling substation to REMC. However considering the unreliability and existing load on the
system this channel may not be the preferred mode.
Alternatively a separate dedicate 64 kbps data link network may be used for real time
monitoring of the system.
Energy Accounting Cell separately obtains all metering data at SLDC. This can be used by REMC
as and when needed.
Communication system between REMC and WRLDC
SLDC is connected to WRLDC through a dedicated high speed link. Data pertaining to RE-
generators can be easily transferred through the existing system.
Communication system between REMC and ALDC Ambazari
Apart from controlling and monitoring the power system of Vidharba region, ALDC Ambazari
acts as a data backup Centre for Disaster management and recovery centre. Both the LDCs are
connected via hi-speed ICCP link. Data back-up and recovery system is also planned for REMC
and will be done through the existing communication system.

5.4.3 Information flow and storage


Data Flow
The typical data flow for various functionalities envisaged at the Renewable Energy Management Centre
is given in the figure below:

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Indicative Schematic of REMC

Weather SLDC KALWA


station
WRLDC
Weather
Forecasting Scheduling
Metrological
Department

REMC SCADA/
EMS

Real time monitoring and


Data Backup at ALDC
Ambazari

Configuration options for information flow


Real time communication, visibility of generation parameter of the renewable plant is critical for
integrating them with the transmission grid of the state. SLDC has evaluated two models for obtaining
the visibility of these plants.
Option 1: Connection with Renewable Generation Control Centre
This would be an ideal model to connect all the renewable sources. RE generators are generally installed
in clusters which are then connected to the Generation Control Centre (GCC) through fibre optic cable.
Communication through Generation control centre

GCC
Communication channel

GCC REMC

GCC
SLDC KALWA

GCC

SLDC has evaluated this model and intimated all renewable generators to create control centers for all
assets. However, as most of these assets are old and there are no clear regulatory mandates, the data
collation and transfer to MSLDC is not happening. Moreover, for generators with standalone assets,
such large investment may not be financially feasible.

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Option 2: Connect MSETCL / MSEDCL substation primarily connected to Renewable sources


As connectivity with the GCC is not a feasible option in the state, SLDC has planned an alternate model
for obtaining the visibility of these plants. It is planning to connect the pooling substations which are
primarily connected to renewable generators. SLDC will obtain the real time data of different RE
generators in clusters. SLDC has identified a total of 37 substations to act as nodal centre for obtaining
the visibility and monitoring RE generation in the state.
One possible drawback of this method is with substations which have mixed generation sources and
LILO for load tapping in that area. As power flow will be through displacement real time data obtaining
at this pooling substation will be the net of load and generation. This will a wrong indication of actual
generation obtained RE generators. SLDC is evaluating issue and propose to come up with solution
during implementation phase.
Communication through grid pooling station

Pooling S/S

Communication channel
REMC

Pooling S/S

Load

Data Storage
A centralized data repository will be maintained which will store the following information:
Renewable Energy Generation details like location, voltage level, transformer details &
parameters, machine type and details
Shunt compensation details at plant level
Dedicated connectivity line details/parameters
Details about size & commissioning schedule of each renewable generation unit
Details of metering arrangement
Machine model related information for system studies (dynamic/steady state)
Data Integration with existing system
SLDC proposes to integrate the data obtained from RE Generators with the existing SCADA
system of SLDC. This will involve procurement of data integrators software licenses from
Siemens (existing SCADA vendor for SLDC).
SLDC also proposes to procure additional data storage system including data miming and
analytics software

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The weather forecasting system will also be integrated with the main control system of SLDC
SLDC also proposes to install cyber security system including firewall and intrusion prevention
system.

5.5 REMC - Cost estimates


Considering the above configuration for setting renewable energy management centre at SLDC Kalwa
and the detailed discussion with SLDC and Power Grid following are the cost estimates. The cost
estimates are based on indicative rates provided by individual vendors to SLDC Kalwa and Power Grid.

5.5.1 Key Assumptions


Numbers
400 kV/ 220 kV/ 132 kV Substations for telemetering
27
and data collection Wind
400 kV/ 220 kV/ 132 kV No of Substations for
10
telemetering and data collection Solar
Communication link required to connect REMC to
37
telemetering points
Weather Monitoring stations in the state 50
Wind/ Solar Forecasting system Software 1 License
Hardware requirement
- Server 1
- Computers 3
Based on the above, the following cost estimates have been worked out for REMC in MSLDC
Cost Estimates for REMC

Estimated Cost
Sl. No. Component
(INR Million)
1 Data integration at MSETCL/ MSEDCL substation 27 wind and 10 solar 173.2
2 Communication between pooling Substation and REMC annual rental 2.35
3 Weather station at 50 RTU locations 24.73
Wind/Solar Power Forecasting System including Site Survey, Delivery, setup,
4 60
installation, testing and tuning and Software license
5 Services from Weather monitoring Agencies per annum 30
6 Data integration with existing SCADA system 31.9
7 Data storage facility including data miming software 37.4
8 Security software 12.1
9 Analytical software and integration with SCADA, ABT and ERP system 19.8
Total 391.475
The detail cost estimate are described in Annex 5

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6 Public Private Partnership (PPP) options for solar projects


6.1 Legal, institutional and regulatory environment in Maharashtra
Maharashtra state electricity sector was unbundled in 2005 under the state government resolution as
per provisions of the Electricity Act 2003. Under this process, the erstwhile Maharashtra State Electricity
Board (MSEB) was unbundled into MSPGCL, MSETCL and MSEDCL for carrying our generation,
transmission and distribution operations respectively. Apart from the state owned power utilities there
are some incumbent private and municipal utilities which have been operating in Mumbai for a long
time. This includes;
Tata Power Company
Reliance Infrastructure
Brihanmumbai Electric Supply and Transportation Undertaking (BEST).
The generation, transmission and distribution utilities in the state operate and maintain approximately a
30,000 MW17 system which is the highest among all the states in the country.

Generation Transmission Distribution

MSPGCL MSETCL MSEDCL


Central Reliance Reliance
generating Infra Infra
stations Tata Power Tata Power
Independent JPTL BEST
power
producers

MSLDC
Maharashtra Electricity Regulatory Commission (MERC) was established in 1999 under the Electricity
Regulatory Commission Act, 1998, which was superseded by Electricity Act, 2003.
MERC functions in accordance with the Section 86 of the Electricity Act, 2003. It regulates the sector in
Maharashtra in accordance with the powers vested to it under Section 86, including determining tariff
on periodic basis for generation, transmission and distribution utilities in Maharashtra, regulating
electricity purchase and procurement process of distribution licensees and specifying the Grid Code and
Standards of Performance for licensees.
MERC has been very supportive in promoting generation of electricity from renewable sources. MERC
has specified renewable purchase obligation for distribution licensees, captive consumers and open

17 st
Source: Central Electricity Authority (CEA) October monthly report, as on 31 October 2013

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access consumers in accordance to Section 86 (1) (e) of the Electricity Act, 2003. MERC issues tariff
orders every year for different type of renewable sources including solar in accordance to Section 61 (h)
of the Electricity Act, 2003.

6.1.1 Renewable Purchase Obligation


Section 86 (1) (e) of the Electricity Act 2003 and National Tariff Policy mandates the Regulatory
Commissions to fix RPO levels in the states. In accordance with the Acts and Policies, MERC has issued
Renewable Purchase Obligation, its compliance and REC framework Implementation Regulations, 2010.
The RPO have been made applicable to the following obligated entities in the states:
Distribution Licensee(s)
Captive User(s) with installed capacity of 1 MW and above
Open Access Consumer(s) with contract demand of 1 MVA and above
In order to promote solar energy in the state, MERC has specified separate RPO for solar energy. The
RPO specified by MERC is as shown below:
Year FY11 FY12 FY13 FY14-FY16
Solar 0.25% 0.25% 0.25% 0.50%
Mini hydro 0.1% 0.1% 0.1% 0.2%
Other technology 5.65% 6.65% 7.65% 8.30%
Total 6.0% 7.0% 8.0% 9.0%
Source: MERC RPO-REC Regulations 2010

Year FY12 FY13 FY14 FY15 FY16


Projected Electricity Demand of
Maharashtra (Draft 18th EPS 141,382 151,024 161,430 172,681 184,890
Actuals as per FY12) (MUs)
Solar RPO 0.25% 0.5% 0.5% 0.5%
Solar Capacity Required at 17%
254 542 580 621
CUF (MW)
* Considering MSEDCL share of demand at 87% of the total Maharashtra demand based on FY12,
MSEDCL will require 540 MW of solar power in FY16.

6.1.2 Renewable Tariff


MERC issues tariff every year for different renewable sources in accordance with Section 61 (h) of the EA
2003 and MERC Terms and Conditions for determination of RE Tariff Regulations, 2010. As per the 3rd
year and 4th year suo-moto generic tariff order of MERC for the first control period following are the
tariff approved for upcoming solar projects in the state getting commissioning in FY14.

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Tariff if Accelerated
Tariff for projects commissioned Tariff if Accelerated Depreciation not
Depreciation availed (Rs.
in FY1418 availed (Rs. /kWh)
/kWh)
PPA signed after 31 March 2013 8.98 7.69
PPA signed on or before 31 March
11.16 9.51
2013
Source: MERC Renewable Energy Tariff Order for FY2014

The above tariffs are applicable for projects achieving COD in FY14. Tariffs for projects achieving COD
post FY14 will be as determined by MERC through separate tariff order.

6.2 PPP options for development of MSPGCLs proposed solar projects


MSPGCL adopted an EPC cum O&M route for developing its first Solar Park at Sakri, Dhule. The following
section describes this model and presents three alternatives, which could be considered for the future
projects proposed to be financed by ADB.

6.2.1 EPC cum Operation & Maintenance (O&M) model (Existing Structure)
This is the existing EPC cum O&M model adopted by the Maharashtra State Power Generation Company
Ltd. (MSPGCL) for setting up 125 MW solar PV facility in Sakri, Dhule. The scope of work of the EPC
player includes design, engineering, manufacture, supply, erection, testing and commissioning of 75 MW
of Crystalline Solar PV technology and/or 50 MW of Thin film solar PV technology including 10 years of
operation & maintenance of the same on turnkey basis.
The key parameters of the existing EPC selection structure are detailed below:
1. Scope of work: Scope will include design, engineering, manufacture, supply, erection, testing and
commissioning as well as undertaking the O&M of the solar power project.
2. Selection Criteria: The EPC players were selected on the lowest quoted Capital Cost per MW for
undertaking the proposed scope of work.
3. Payment: The EPC players to get 85% of the contract value up to the successful issue of Final
Acceptance Test" certificate and remaining 15% of contract value spread over next 10 years after
successful completion of O&M period of the contract (with 2% paid every year).
4. Performance requirement: The EPC player has to adhere to provisions regarding a minimum
electricity generation from the solar power project. These provisions provide for revenue sharing

18
As per MERC Suo-Motu Order Determination of Generic Tariff for the fourth year of the first Control Period under Regulation
8 of the Maharashtra Electricity Regulatory Commission (Terms and Conditions for Determination of Renewable Energy Tariff)
Regulations, 2010 .. Tariff shall be applicable for Solar PV Projects wherein PPA are signed after March 31, 2013 and
projects are commissioned during FY 2013-14, and shall be valid for a tariff period of 25 years from the Commercial Operation
Date (COD).
The Tariff for Solar PV Projects to be commissioned during FY 2013-14, wherein PPA are signed on or before March 31, 2013,
shall be as stipulated in the Commissions Generic RE Tariff Order (Case No. 10 of 2012) for RE technologies for the third year of
the Control Period, issued on 30 March, 2012.

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mechanism in case the electricity generated (Capacity Utilization Factor (CUF) of the solar plant) is
more than a specified limit and penalty in case the electricity generation is below certain limit.
If CUF is more than 20% for a year, EPC player shall be entitled to receive incentive to
the extent of 20% of the additional revenue.
If the CUF is less than 18%, EPC player shall be liable to a penalty to the extent of 100%
of the loss in revenue
5. Security : The EPC contractor shall have to furnish 10 bank guarantees each of 1.5% of the contract
value towards contract performance guarantee during the O&M tenure of 10 years
This model combines both the EPC as well as the O&M for the solar power project and is well aligned to
current industry practice in India. It suffers however from the following drawbacks, common to EPC
contracts of this nature.
Up to 85% of the contract value is paid out on successful commissioning. This creates insufficient
long-term or carried interest of the Contractor in the Project
O&M payment is 1.5% with performance security of 1.5% per year, thus leaving no security for
performance & warranty related shortfalls.

6.2.2 Performance-linked Revenue Sharing Model (Proposed Model)


The Performance-linked Revenue Sharing Model is based on the concept of sharing of risk and return of
the project with the EPC player over the project life. The project developer receives a portion of his EPC
cost on achieving successful commercial operation. The bidder will receive the rest of his payment as a
share of revenue over the life of the project.

1. The scope of work for the Project developer: will include design, engineering, manufacture, supply,
erection, testing and commissioning as well as undertaking the O&M of the solar power project.
2. Scope of Work for MSPGCL: MSPGCL has signed or will sign the Power Purchase Agreement with
MSEDCL for off take of the entire quantum generated from the project. MSPGCL will also acquire
land and obtain necessary clearance for this project. MSPGCL will also coordinate with MSETCL for
evacuation of power from the project site to the state grid.

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3. Selection: Technically qualified bidders to be evaluated for the financial bid. Bidder with lowest
revenue share to be awarded the contract. EPC player will commit to a specific MW output from this
project and deviation will be linked to the performance security of the bidder.
4. Payments: The developer will be paid a fixed amount on the successful commissioning of the solar
project, at an estimated 50% of the capital cost of the project. The Bidder will also receive the
quoted share of the revenue / kWh based on the tariff approved by MERC for solar project in the
state. This revenue share will be spread over the entire life of the project. This model directly links
the performance of the bidder to the generation from the project creating a natural incentive
mechanism. This model has a natural bias for quality and performance.
5. Performance requirement: The project developer will have to adhere to provisions regarding a
minimum electricity generation from the solar power project. The project needs to be developed
within the timeline specified. Project delays will attract strict penalty as MSPGCL will suffer
substantial loss and will not be eligible for the MERC approved feed-in tariff for a particular year.
The project developer will also receive a revenue share from this project over its operating life. This
will naturally incentivize and penalize the developer based on actual power generation.
6. Security: Given the fact that a substantial payment of the project developer is proposed to be
recovered through revenue share over the operating life of the project, the model needs to provide
for default step-in rights for the project developer or its lender in case of default by MSPGCL. In
order to streamline this, the bid documents can contain a direct agreement providing for such
provisions on a pari-passu basis with MSPGCLs lenders for the project. Alternatively the revenue
from this project could also be escrowed to the developer for his share of the revenue. This will
facilitate the project developer to raise finances for participating in such projects.
This model combines both the EPC work as well as the O&M work for the solar power project. The table
below details the pros and cons for this model:
Details
MSPGCL financial commitment comes down over the construction period
Much greater commitment from the project developer as substantial recovery will
Pros happen over the life of the project
Security backing in the bid documents/contractual agreements to assist project
developer to raise lending
There should be enough competition to prevent project developer padding up cost
Cons Most project developer have thinly capitalized business operations will require
parent support to raise such financing

Example: Considering that MSPGCL proposes to develop 1 MW Solar power project at an estimated
capital cost of Rs. 100 Million. MSPGCL has signed a PPA with MSEDCL and is eligible for a tariff Rs.
11/unit. It identifies a project developer based on lowest quoted revenue share of 30%.
On successful commercial operation of the project the project developer will receive Rs. 50 Million
(assumed at 50% of the estimated project cost in this example), which is specified upfront in the bid
documents. Of MSPGCLs share of Rs. 50 Million 30% will be through equity infusion by MSPGCL and
balance 70% (i.e 35 Million) will be funded by ADB. Further the EPC developer will also receive a revenue
share of 30% from the project. If the developer achieves a 18% CUF in a particular year, he will be
entitled to receive an annual revenue share of Rs. 5.2 Million.

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6.3 Mahagenco - ADB consultative workshop


Stakeholder Consultation Workshop on the PPP Model to be adopted for the development of upcoming
solar projects of Mahagenco was conducted on March 21, 2013. The workshop was attended by 59
participants representing various stakeholders including 3 from the press. The table below indicates the
category wise representation.
Category No. of participants
Financial Institutions 8
Developer 24
External Consultants 3
ADB, Mahagenco, Consultants 21
Press 3
The full participant list is enclosed as Annex 11
The meeting was addressed by:
Mr. Ajoy Mehta, Principal Secretary Energy, Govt. of Maharashtra;
Mr. Asheesh Sharma, Managing Director, Mahagenco;
Mr. J Srinivasan and Antonio Lopez Martinez from ADB.
This half day stakeholder workshop was organized by Mahagenco and ADB to discuss the proposed
performance linked revenue sharing model for implementing the future solar projects of Mahagenco.
Minutes of Meeting of the consultative workshop is enclosed as Annex 12
The presentations were hosted on Mahagencos website and the participants were requested to submit
written comments within next 15 days. The comments and response to comments are reproduced in
Annex 13

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7 Financial management assessment


7.1 MSPGCL
Maharashtra State Generation Company Limited (MSPGCL) is a company registered under the
Companies Act 1956. MSPGCL has started independent functioning w.e.f. 6th June, 2005 under the
Government of Maharashtra General Resolution No. ELA- 003/P.K.8588/Bhag-2/Urja-5 dated January
24, 2005 after the unbundling of its erstwhile MSEB. It is 100% owned by Government of Maharashtra.
MSPGCL has an installed capacity of over 10,000 MW19. MSPGCL is currently implementing projects of
total capacity of around 4,200 MW20. The company in the past has not availed any funding from ADB.
The funding for the existing and under construction projects are from World Bank, KfW, Power Finance
Corporation (PFC), Rural Electricity Company (REC), Bank of India (BoI), Canara Bank.
The Company prepares annual accounts duly audited by statutory auditors in accordance to the
Companies Act 1956 as per the statutory requirement. The Company also submits quarterly reports to
the banks about the progress of the project being funded by the bank during the construction period.
MSPGCL is currently operating under a regulated regime. The performance is governed by the normative
parameters approved by MERC. The power generated from the stations is sold to MSEDCL at regulated
rates wherein MSPGCL will be allowed to recover a return of 15.5% on equity investment from the start
of the control period (FY2013-14). Till FY2012-13 the Return on Equity (ROE) allowed by MERC was 14%.
MSPGCL has been able to book profits despite severe disallowances on a year to year basis. One of the
vital factors leading to the positive financial result of the company had been the award of judgments by
the Appellate Tribunal for Electricity (APTEL) which provided partial reliefs on the performance
parameters. With the booking of such additional true-up amount on accrual basis, MSPGCL had been
able to reflect profits in its books of accounts.

INR Million
140,000 122,313 129,234
120,000 111,865
94,806
100,000 82,487
74,406
80,000
60,000
40,000
20,000 2,335 3,000 841 2,034 3,095 2,003
0
FY2006-07 FY2007-08 FY2008-09 FY2009-10 FY2010-11 FY2011-12

Total Income Net Profit

Source: MSPGCL audited annual accounts

The overall financial issues of the company are elaborated below:

19
MSPGCL business plan dated Nov 2012
20
MSPGCL business plan dated Nov 2012 and discussions with MSPGCL

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Timely availability of tariff orders: Tariff orders are not issued at the start of the financial year.
The tariff orders are implemented on a prospective basis. MSPGCL is not allowed to recover the
differential cost during the year and the same is only recovered in the subsequent truing up. The
trued-up amount is again spread over a twelve month period without any carrying cost.
Non-recovery of bills from Maharashtra State Electricity Distribution Company Limited
(MSEDCL): Due to delay in recovery of dues from MSEDCL, it has to rely on huge working capital
borrowings which are again subject to normative limits. Given this constraint together with the
normative disallowances, it may lead to disallowance of normative interest on working capital in
the future. This aspect needs to be considered by the Commission while estimating the working
capital requirement of the company.

7.1.1 Risk Analysis


Risk
Risk Risk Mitigation
Assessment*

Inherent Risk

The assets and liabilities of the company as on June 06, 2005


contain balances, which are transferred under The Maharashtra
Electricity Reforms Transfer Scheme, 2005 (Transfer Scheme).
Accordingly these balances are approved by MSEB Holding
Company Ltd. The Final Transfer Scheme is yet to be notified by
the Government of Maharashtra, which may have an impact on
the financial statements of the Company.
The performance of MSPGCL is governed by the normative
parameters approved by MERC and any deviation from the
norms leads to disallowances in recovery of actual expenses and
have an impact on the profitability of the company. MSPGCL has
been facing a precarious financial condition on account of delays
in truing up and disallowances of expenses for not meeting
normative performance parameters like SHR, auxiliary
Entity-Specific Risks M consumption, availability, transit loss, specific oil consumption
and O&M expense.
There are usually delays in recovery of payment from MSEDCL.
Due to non-recovery of dues MSPGCL has to rely on huge
working capital borrowings which are subject to normative
limits. Given this constraint it may lead to disallowance of actual
interest on working capital.
The quality of coal from subsidiaries of CIL is a major cause of
concern for MSPGCL. Such bad quality of domestic coal has led
to increased dependence on imported coal. Further, FSAs for
new plants have not been signed yet and CIL has been supplying
coal on MOU basis. The company thus faces risk of securing
adequate quantity and quality of fuel, which may lead to
disallowance of fixed cost for not meeting normative parameter

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Risk
Risk Risk Mitigation
Assessment*
for plant availability.

PPAs for the proposed solar projects have not been signed. This
poses a risk for off-take of power. Further, Kaudgaon Phase-I
project is proposed to be commissioned in FY2014-15. As per
MERC renewable tariff order, if the PPA is signed before 31st
March 2014 the project is proposed to get a tariff of Rs.
8.98/kWh21. If PPA is not signed before 31st March 2014, tariff
realized on sale of power may be lower as capital cost of solar
project is expected to reduce. This would result in loss of
revenues throughout the term of the PPA. This could be
Project-Specific mitigated by signing the PPA before 31st March 2014.
M
Risks
The project faces risk of getting delayed and not achieving the
desired performance during operation. In case the project gets
delayed beyond the scheduled financial year there is a risk of
loss of revenue due to change in tariff. In case the project does
not meet the desired performance standards MSPGCL will lose
revenues on account of lower generation. Both the risks should
be adequately covered in the contract with the EPC player.
The Company faces risk of payment default from MSEDCL,
considering the worsening financial condition of MSEDCL.

Overall Inherent
M
Risk

Control Risk

Implementing Entity N

Funds Flow N

Finance and Accounts section does not have experience of


Staffing N handling ADB funds. This could be mitigated by providing
training to Finance and Accounts staff on ADB procedures.

Accounting Policies
N
and Procedures

Audit committee comprises of one independent director and


Internal Audit M three whole time directors. This puts the corporate governance
of the Company at risk. This could be mitigated by increasing the

21
Source: MERC order dated 22-March-2013on Determination of Renewable Energy Tariff for fourth year of first control period;
Case No. 6 of 2013

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Risk
Risk Risk Mitigation
Assessment*
number of independent directors. The Company is not complying
to Section 292A of the Companies Act 1956, wherein it is
required to have at least 2/3rd of the total number of audit
committee members to be non-whole time directors.

SAP is implemented but system audit is not undertaken. This


could lead to understatement/overstatement of
External Audit N
expenses/revenues. This risk could be mitigated once system
audit is implemented.

Top management does not receive SAP reports as reporting


formats are getting finalized. This restricts the top management
Reporting and from accessing reports whenever required instead of relying on
N
Monitoring periodic manual reports. This also possesses risk of manual
errors. These risks would be mitigated when SAP reports formats
are finalized.

Parallel SAP and manual system could lead to error or


Information System N
manipulation.

Overall Control Risk N


* H = High, S = Substantial, M = Moderate, N = Negligible or Low

The questionnaire is reproduced in Annex 14

7.1.2 Project FM System: Strengths and Weaknesses


Strengths
MSPGCL has been booking profits since its inception. MSPGCL operates under regulatory regime facing
low market risk and has most of its present capacity tied up through long term PPAs with the MSEDCL.
The power generated from the stations is sold to MSEDCL at regulated rates wherein MSPGCL will be
allowed to recover a return of 15.5% on equity investment. This is considered to be a positive parameter
by lenders who would be funding these projects.
The Finance and Accounts function is adequately staff. The Finance and Accounts staff are adequately
qualified and experienced. They have experience of handling funds from international funding agencies
like World Bank and KfW.
The Company has not defaulted in repayment of dues to any financial institution, bank or debenture
holders. The company has not granted loans and advances on the basis of security by way of pledge of
shares, debentures and other securities. The company does not deal or trade in shares, securities,
debentures and other investments. The Company has not given any guarantee for loans taken by others
from banks and / or financial institutions. The term loans availed are applied for the purposes for which
they were obtained by the Company. No funds raised on short term basis have been used for long term
investment.

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The Company prepares annual accounts duly audited by statutory auditors in accordance to the
Companies Act 1956. The audit is done by Statutory Auditors appointed by the Comptroller and Auditor
General of India. Comptroller and Auditor General of India also conducts supplementary audit. The
supplementary audit is carried out independently without access to the working papers of the statutory
auditors.
The company follows e-tendering procedure thereby increasing the transparency in procurement.
MSPGCL has implemented SAP-ERP Implementation throughout the organization in 2011-12. The
platform provides a robust platform for integration of operational activities.
Weaknesses
Significant Weakness Resolution

There are usually delays in recovery of


payment from MSEDCL. Due to non-recovery
of dues MSPGCL has to rely on huge working MSPGCL could claim late payment surcharge from
capital borrowings which are subject to MSEDCL, which in turn could be utilized to fund the
normative limits. Given this constraint it may working capital requirements.
lead to disallowance of normative interest on
working capital.

CPRI has recommended various schemes and timelines


for meeting these norms. MERC has approved the
capital expenditure for some of the CPRI schemes for
MSPGCL is not able to meet the performance
which DPRs have been submitted. MSPGCL has initiated
parameters like SHR, auxiliary consumption,
most of these schemes but not able to meet the
availability, transit loss, specific oil
timelines. MSPGCL has to implement these schemes as
consumption in accordance to the norms
per the timelines to meet the normative performance
specified by MERC
parameters. MSPGCL also has to submit DPRs for other
CPRI schemes for which capital expenditure approval is
pending from MERC.
The quality of coal from subsidiaries of CIL is a
major cause of concern for MSPGCL. Such bad MSPGCL needs to undertake study of future coal
quality of domestic coal has led to increased requirement and enter into new FSA with CIL/imported
dependence on imported coal. The company coal supplying companies for meeting the coal
thus faces risk of securing adequate quantity requirements. Further, MSPGCL have been allocated
and quality of fuel, which may lead to coal mines for upcoming plants which need to be
disallowance of fixed cost for not meeting developed on time to meet the future coal
normative parameter for plant availability. requirements of upcoming plants.

PPAs for the proposed solar projects have not


This could be mitigated by signing the PPA before 31st
been signed posing risk of off-take and loss of
March 2014.
revenues due to revision in tariff if PPAs not
signed before 31st March 2014.
Finance and Accounts section does not have This could be mitigated by providing training to Finance
experience of handling ADB funds and Accounts staff on ADB procedures.
This could be mitigated by increasing the number of
The Company has only one independent independent directors. However, the Company is not

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director risking the corporate governance of obligated to increase the number of independent
the Company. directors.

7.1.3 Funds Flow Mechanisms


Procedures for withdrawal of loan proceeds are standardized to facilitate disbursements under most
loans. There are three major types of disbursement procedure, described briefly as follows:
Reimbursement procedure After MSPGCL makes payment to supplier, MSPGCL submits
reimbursement request through CAAA to ADB. ADB pays to CAAA in USD, CAAA certifies receipt
of USD and rupee equivalent to the Plan Finance I Division of the Department of Expenditure,
MoF, GOI. PF-I Division authorizes RBI to release rupee equivalent to the Finance Department of
GoM. GOM Finance Department then authorizes Energy Department to withdraw funds. Energy
Department can be allowed under the Government Budget mechanism to withdraw funds even
before ADB funds are received, and may release advance loans to MSPGCL for project funding.
Direct payment procedure - After incurring expenditure, MSPGCL authorizes invoices, and
submits a request through CAAA to ADB for directly paying the contractor. ADB will pay the
contractor within five business days of having received a valid claim (complete in all respects).
Commitment procedure - If the contract is covered by LC, ADB can issue a commitment letter to
the negotiating bank based on a request from MSPGCL through CAAA. When a payment is due;
at the request of MSPGCL, ADB will directly pay the negotiating bank and debit the loan account.
This also will happen within five business days of receiving a valid claim under the Commitment
Letter (CL). The full value of the CL will be blocked from the loan account, and the CL will be
irrevocable even if the loan were to be cancelled.
There are two agreements entered into by ADB:
Loan agreement: Signed between ADB and Department of Economic Affairs (DEA): Ministry of
Finance, Government of India
Project agreement: Tripartite agreement signed between ADB, Energy Department: Government
of Maharashtra and MSPGCL
The Project Implementation Unit (PIU) does not have experience in the management of disbursement
from ADB. But, they have experience of management of disbursement of funds from other international
funding agencies like World Bank and KfW. The PIU in the past have faced issues relating to compliance
requirement of these funding agencies and requirement of Bank Guarantee and therefore are proposing
for such an arrangement where funds are routed from ADB directly to the contractor.
The Company does not have a capacity to manage foreign exchange risks. The Company feels that the
cost of hedging in most of the cases is higher than the fluctuation in the price of currency and proposes
to absorb the gains or loss arising out of variation in the currency. At the Balance Sheet date, foreign
currency monetary items are reported using the closing rate. Gain or loss, if any, is recognized in the
Profit and Loss Account for the year.

7.1.4 Staffing
Director (Finance) is responsible for finance, accounts, treasury, audits and overall payments to
suppliers and employees. The project finance and accounting function are staffed adequately and
adequately qualified.

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Appointment for permanent post is either made by promotion or by direct recruitment. The entry post
appointment is always through direct recruitment. Senior staffs i.e. Sr. Managers and above is atleast
graduates with minimum 5 years of experience. For all the new recruitment, the minimum qualification
requirement is a Chartered Accountant /Cost Accountant /Masters in Commerce /MBA (Finance).
Most of the staff are on permanent roles and remain with the company for more than 30 years. The
Company also outsources some of the data crunching to support staff which is contracted for 1-2 years
with possible extension.
Staffs from regional office are generally transferred once in 3 years. Staffs from head office are very
unlikely to be transferred but it depends on the competency and performance of the employee.
MSPGCL imparts Induction training at the time of joining the Organization. Refresher training is provided
on regular basis to junior staff till the Manager level at periodic intervals.
The Organisation structure for the finance and accounting function is as shown below:

Director
(Finance)

Executive
Director
(F&A)

CGM (F) CGM (A/cs)

GM (HO
CM (IF) GM (F) GM (CA)
A/cs)

Sr. Manager Sr. Manager


(WM & Cash) (HO A/cs) Sr. Manager
CM (CA)
(SB)

Sr. Manager Sr. Manager Sr. Manager


CM (F)
(F) (Loan) (LIF)

Managers/Dy. Managers reporting to Sr. Manager/CM

The identified finance and accounts staff are as shown below:

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Name Designation
Mr. J. K. Srinivasan Director (F)-(On charge) and ED (F&A)
Mr. S. M. Madan CGM (F)
Mr. S.K. Labde CGM (Accounts)
Mr. D. C. Patil GM (F)
Mr. V.S. Chitlange GM (HO A/cs)
Mr. G.M. Uikey GM (CA)
Ms. Siji Jose CM (F)
Ms. D. K. Gaimar CM (IF)
Mr. V.V. Kulkarni CM (CA)
Ms. Smita Chowdhary Sr. Manager (F)
Mr. R. G. Vaspe Sr. Manager (Loan)
Mr. R. Lanjewar Sr. Manager (LIF)
Mr. Nitin Suryawanshi Sr. Manager (WM & Cash)
Mr. S.G. Naik Sr. Manager (SB)
Mr. S.N. Dhotarkar Sr. Manager (HO A/cs)

The Organisation Structure of MSPGCL is as in Annex 6.

7.1.5 Accounting policies and procedures


The Company is a Public Limited Company registered under the Provisions of Companies Act, 1956. The
Company is governed by the Electricity Act, 2003. The provisions of the Electricity Act, 2003 read with
the rules made there under prevails wherever the same are inconsistent with the provisions of the
Companies Act, 1956 in terms of section 174 of the Electricity Act, 2003.
The accounts are prepared on the basis of going concern concept and under the historical cost
convention. The company adopts accrual basis in preparation of its accounts to comply in all material
aspects with Generally Accepted Accounting Principles (GAAP) and the accounting standards issued by
the Companies (Accounting Standards) Rules, 2006 as per notification no. G.S.R.739 (E) dated 7 th
December, 2006.
The Company maintains proper books of account as required by law. The Balance Sheet, Profit & Loss
Account and Cash Flow Statement comply with the requirements of the Accounting Standards referred
to in sub-section (3C) of section 211 of the Companies Act, 1956.
The company maintains cash/payment related documents permanently; balance records are maintained
as per statutory requirements. All documents are maintained in hard copy in a systematic manner
properly segregated into folders. General ledger and subsidiary ledgers are reconciled and in balance are
maintained in Excel sheet.
The Company prepares annual budget on perpetual basis and includes both physical and financial
targets. The budgets are prepared for different projects and are prepared item-wise, section wise and
department wise. The progress of the schemes is monitored through the Operation committee meeting
(OCM) meeting on a monthly basis. The budget is reviewed and revised after 6 months based on the
actual expenses/progress achieved. CGM (F) along with ED (F&A) and Director (Finance) are responsible
for preparation of budget. All the processes and formats are in place and each department/function
along with field officials provides their estimates in the prescribed format to CGM (F). The budget is

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approved by the Board of Directors. The company has started using the SAP system for preparation of
budget and all these provisions are available in the SAP system.
All invoices submitted are audited and verified for any inconsistency or violation of terms of contract.
Payments are released only after receiving the confirmation or work completion report from the user.
The Company follows State Government pay scale. Any change in the pay scale is notified through a
circular and changes are made in the payroll system and also placed on the website with approval from
HR department.
Bank balance and cash are reconciled on monthly basis. Reconciliation is undertaken by the Divisional
Accountant Cash and the Authorization is done by the section in charge. All receipts are deposited on
the next working day. Please refer to Annex 15 for names and positions of authorized signatories in the
bank accounts.
The Company maintains proper records showing full particulars, including quantitative details and
situation of fixed asset except in case of few assets at certain locations where item wise particulars and
codification of fixed assets are in the process of matching with the fixed asset register. The Company has
a policy of conducting physical verification of fixed assets once in three years. The fixed assets of the
Company are physically verified with the help of an external firm of Chartered Accountants. Based on its
report necessary adjustments are been made in the books of account at Head Office.
The Company maintains proper records of inventory. Physical verification of inventory is conducted at
reasonable intervals by the management.
There is an adequate internal control system commensurate, for the purchase of inventory and fixed
assets and for the sale of goods and services.
The Company has not defaulted in repayment of dues to any financial institution, bank or debenture
holders. The company has not granted loans and advances on the basis of security by way of pledge of
shares, debentures and other securities. The company does not deal or trade in shares, securities,
debentures and other investments. The Company has not given any guarantee for loans taken by others
from banks and / or financial institutions. The term loans availed are applied for the purposes for which
they were obtained by the Company. No funds raised on short term basis have been used for long term
investment.

7.1.6 Internal audit


The Company has internal audit department which is headed by CGM (Internal audit). The internal audit
team reports to Director (Finance) and audit committee. The audit committee comprises of one
Independent Director, Director (Finance), Director (Operations) and Director (Projects). The Company
currently does not comply with Section 292A of the Companies Act 1956, wherein it is required to have
at least 2/3rd of the total number of audit committee members to be non-whole time directors22.
The Company has appointed external firms of Chartered Accountants to carry out the internal audit of
the Company at Head office and other locations. The MSPGCL staff mainly monitors the functions of the
external firm appointed by the Company. The reports from the external firm appointed by the Company

22
Every public company having paid-up capital of not less than 50 million of rupees shall constitute a committee of the Board
knows as "Audit Committee" which shall consist of not less than three directors and such number of other directors as the
Board may determine of which two thirds of the total number of members shall be directors, other than managing or whole-
time directors.

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are not received timely. Subject to this, internal audit system prevailing in the Company is adequate and
commensurate with the size and nature of its business.
Audit committee meeting is held every month, where the internal audit team submits its compliance
report.
The senior staff i.e. Sr. Manager and above are graduates with experience in power sector. For all the
new recruitment, the minimum qualification requirement is either a Chartered Accountant/Cost
Accountant/Post graduate in Commerce/MBA (Finance).

7.1.7 External Audit


For all Government companies Statutory Auditors are appointed by the Comptroller and Auditor
General of India under Section 619(2) of the Companies Act, 1956. M/s G.M. Kapadia & Co, Mumbai,
M/s CVK & Associates, Mumbai and M/s K.S. Aiyar & Co, Mumbai were appointed as Joint Statutory
Auditors for the Financial Year 2011-12. The Accounts were audited by the Statutory Auditors on 21st
September 2012.
The statutory auditors are responsible for expressing opinion on the financial statements under Section
227 of the Companies Act, 1956 based on independent audit in accordance with the Auditing and
Assurance Standards prescribed by Institute of Chartered Accounts of India.
The audit is conducted in accordance with the auditing Standards generally accepted in India. Those
Standards require that auditors plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.
Comptroller and Auditor General of India also conducts a supplementary audit under Section 619(3)(b)
of the Companies Act, 1956. The supplementary audit is carried out independently without access to the
working papers of the statutory auditors and is limited primarily to inquiries of the statutory auditors
and company personnel and a selective examination of some of the accounting records.

7.1.8 Reporting and Monitoring


The company adopts accrual basis in preparation of its accounts to comply in all material aspects with
Generally Accepted Accounting Principles (GAAP) and the accounting standards issued by the
Companies (Accounting Standards) Rules, 2006 as per notification no. G.S.R.739 (E) dated 7 th December,
2006.
The company prepares project wise financial statement every month and is presented to the
management in their monthly review meeting. The Company has started using the SAP system for
preparation of financial statements.

7.1.9 Information Systems


MSPGCL has implemented SAP-ERP Implementation throughout the organisation in 2011-12.
The SAP implementation project (including supplying of SAP licenses, implementation, interfacing with
legacy systems, testing , training, data migration, documentation at Pilot & Rollout and advice on
requirements for hardware, networking etc.) was completed in two phase:

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Pilot Implementation ( June 1, 2010 September 30, 2011): Pilot Go-Live completed on 30th
September, 2011 for Head office, Mumbai, Nagpur Coal Office, Pophali Hydro Plant, Uran Gas Plant,
Khaperkheda Thermal Power Plant, Bhusawal Thermal Power Plant, Chandrapur Thermal Power
Plant, Nasik Thermal Power Plant and Project office at Bhusawal and Chandrapur.
The key milestones achieved during Pilot Implementation are:
Project Preparation from 1st June, 2010 on 25th June, 2010
Business Blue Print from 26th June, 2010 to 9th December, 2010
Power user Training from 25th July, 2011 to 30th July, 2011 for 171 Power users
User Acceptance Test by 171 Power user from 1st August, 2011 to 20th August, 2011
Realization phase from 10th December, 2010 to 26th August, 2011
Completion of Go Live for all Pilot location on 30th September, 2011
End User training for 1111 End User of Pilot Locations
Go Live for all Pilot Location on 30th September, 2011
Rollout Implementation (October 1, 2011 November 30, 2011): Rollout Go-Live completed on 30th
November, 2011 for Parli Thermal Power Plant, Paras Thermal Power Plant, Koradi Thermal Power
Plant, Nasik Hydro circle with respective Division and Plants and Pune Hydro circle with respective
Division and Plants.
The key milestones achieved during Rollout Implementation are:
Power User Training from 31st Oct, 2011 to 5th November, 2011
User Acceptance Test by Power user from 7th November, 2011 to 16th November, 2011
End User Training of Rollout Locations
Go-Live for all Rollout Locations on 30th November, 2011
Process Areas Implemented for all the locations of MAHAGENCO are as follows:
Posting to Finance (PTF)
Plan to control (PTC)
Recruit to Retire (RTR)
Procure to Pay (PTP)
Fuel Management Process (FMP)
Enterprise Asset Management (EAM)
Project Management and Control (PMC)
Order to Cash (OTC)
Quality Assurance and control (QAC)
Plan to Supply (PTS)
Environment Health and Safety (EHS)

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Document Management System (DMS)


The platform provides a robust platform for integration of operational activities.

7.1.10 Procurement Arrangements


MSPGCL follows e-tendering procedure. The Company already has an experience of developing solar
power projects. The 125 MW solar power project in Sakri under execution is developed under EPC cum
O&M model. The EPC contracts were invited through tendering process. The proposed procurement
arrangement is similar to procurement procedure for Sakri.

7.1.11 Disbursement Arrangements


The disbursement will be through any of the already existing current account with Bank of Maharashtra,
Bank of India and Canara Bank.
The PIU team does not have experience in the management of disbursement from ADB. Usually in case
of funding from other international financial institutions and multilateral development agencies, the
invoice is raised by the contractor and is sent to the regional office. The invoice is verified by the project
execution team and accounts team at the regional office before it is sent to the Head Office. On further
verification from the Head Office it is sent to the funding agency through CAAA, the funding agency
releases the fund to the bank account of the GOI, and the DEA gives the instruction to transfer the fund
directly to the suppliers bank account.
At present the Company has customized software termed FABC for recording of project financial
transactions and company is in process of implementing SAP. To ensure that the transactions are
correctly prepared the company has proper financial scrutiny of order i.e. pre auditing, internal auditing
and also auditing of bills. Recording of Statement of Expenditure, reporting and monitoring for this
project would be through SAP system. The Companys Delegation of Powers (DoP) clearly lists down the
Delegation of Power for different officials at different levels.
Please refer to Annex 7 for names and positions of authorized signatories in the bank accounts.

7.1.12 Agreed Action Plan


Agreed Action Responsible Person Agreed Completion Date
Signing of PPA for Kaudgaon Phase-I project ED (CP) and CE (RCD) 31st March 2014
Training to Finance and Accounts staff on ADB, ED (Finance &
ADB procedures. Commercial)
The assets and liabilities of the company as
on June 06, 2005 contain balances, which are
transferred under The Maharashtra Electricity
Reforms Transfer Scheme, 2005 (Transfer GOM
Scheme). The Final Transfer Scheme is yet to
be notified by the Government of
Maharashtra
Finalization of reporting and controlling ED (Finance and
formats for SAP Commercial)

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7.2 MSETCL
MSETCL is a state owned public utility registered under the Companies Act 1956. The Registrar of
Companies (ROC) registration no. is 153646.
MSETCL is a Company formed under the Government of Maharashtra General Resolution No. ELA-
003/P.K.8588/Bhag-2/Urja-5 dated 24th January 2005 with effect from 6th June 2005, according to the
provisions envisaged in the Electricity Act 2003 (EA 2003).
MSETCL is in the business of transmission of electricity within the State of Maharashtra, and has also
been notified as the State Transmission Utility (STU) as per Section 39 of the EA 2003. It is responsible to
manage the Intra-state transmission planning, development and maintenance of the state transmission
network in order to provide safe and secure energy transaction in the state of Maharashtra. The
Company currently has transformation capacity of around 89,000 MVA with total line length of around
40,000 Ckt KM.
The company in the past has not availed any funding from ADB. The funding for the existing and under
construction projects are from Rural Electrification Corporation Limited (REC), Power Finance
Corporation Limited (PFC), International Finance Corporation (IFC), Life Insurance Corporation of India
(LIC), Union Bank of India, Bank of Baroda, Bank of Maharashtra, Japan International Cooperation
Agency (JICA).
The Company prepares annual accounts duly audited by statutory auditors in accordance to the
Companies Act 1956 as per the statutory requirement.
MSETCL is currently operating under a regulated regime. The performance is governed by the normative
parameters approved by MERC and allowed to recover a return of 15.5% on equity investment from the
start of the control period (FY2013-14). Till FY2012-13 the Return on Equity (ROE) allowed by MERC was
14%.
MSETCL has been booking profits since its inception. The revenue from Transmission charges is
dependent on the Transmission Pricing Order issued by the Honorable Commission on yearly basis.

INR Million
25,000 21,482
19,313
20,000 16,534 17,081
14,628
15,000
10,000
5,000 2,582 2,450 3,293
1,689 1,375
0
FY2006-07 FY2007-08 FY2008-09 FY2009-10 FY2010-11

Total Income Net Profit


.
Source: MSETCL audited annual accounts

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7.2.1 Risk Analysis

Risk
Risk Risk Mitigation
Assessment*

Inherent Risk

The assets and liabilities of the company as on June 06, 2005


contain balances, which are transferred under The Maharashtra
Electricity Reforms Transfer Scheme, 2005 (Transfer Scheme).
Entity-Specific Risks N Accordingly these balances are approved by MSEB Holding
Company Ltd. The Final Transfer Scheme is yet to be notified by
the Government of Maharashtra, which may have an impact on
the financial statements of the Company.

Availability of land could be an issue. If the land is not made


Project-Specific available within the premises of the proposed solar power plant,
N
Risks MSETCL will have to evaluate other options. This may increase
the cost and might delay commissioning

Overall Inherent
N
Risk

Control Risk

Implementing Entity N

Funds Flow N

Finance and Accounts section is not adequately staffed. New


candidates have been recruited and expected to join in two
months, but there will be still need for further recruitment.
MSETCL has formed a committee to assess the staffing
requirements of different sections and based on the findings of
Staffing M the committee the vacant posts will be filled through internal
promotions and external hiring.
Finance and Accounts section does not have experience of
handling ADB funds. This could be mitigated by providing
training to Finance and Accounts staff on ADB procedures.

Fixed assets registers need to be updated to show full and


proper particulars, including quantitative details and situation, of
Accounting Policies the fixed assets. Internal control procedures need to be
M strengthened in respect of accounting of purchase of fixed assets
and Procedures
and materials & Inter Unit.
These issues will be resolved once the SAP is fully implemented.

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Risk
Risk Risk Mitigation
Assessment*

There is no audit committee. The internal audit team reports to


Board of Directors. There is only one independent director. This
puts the corporate governance of the Company at risk. This
could be mitigated by forming the audit committee and
Internal Audit M increasing the number of independent directors. However, the
Company is not obligated to form the audit committee.
The coverage and extent of procedures for internal audit is not
adequate. MSETCL is in the process of modification of
procedures.

SAP is implemented but system audit is not undertaken. This


could lead to understatement/overstatement of
External Audit N
expenses/revenues. This risk could be mitigated once system
audit is implemented.

Top management does not receive SAP reports as reporting


formats are getting finalized. This restricts the top management
Reporting and from accessing reports whenever required instead of relying on
N
Monitoring periodic manual reports. This also possesses risk of manual
errors. These risks would be mitigated when SAP reports formats
are finalized.

Parallel SAP and manual system could lead to error or


Information System N
manipulation.

Overall Control Risk M

* H = High, S = Substantial, M = Moderate, N = Negligible or Low


The questionnaire is reproduced in Annex 16

7.2.2 Project FM System: Strengths and Weaknesses


Strengths
MSETCL has been booking profits since its inception. MSETCL operates under regulatory regime facing
low market risk. MSETCL is allowed to recover a return of 15.5% on equity investment. This is considered
to be a positive parameter by lenders who would be funding these projects.
The Company has not defaulted in repayment of dues to any financial institution, bank or debenture
holders. The company has not granted loans and advances on the basis of security by way of pledge of
shares, debentures and other securities. The company does not deal or trade in shares, securities,
debentures and other investments. The Company has not given any guarantee for loans taken by others
from banks and / or financial institutions. The term loans availed are applied for the purposes for which

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they were obtained by the Company. No funds raised on short term basis have been used for long term
investment.
The Company prepares annual accounts duly audited by statutory auditor in accordance to the
Companies Act 1956. The audit is done by Statutory Auditor appointed by the Comptroller and Auditor
General of India. Comptroller and Auditor General of India also conducts supplementary audit. The
supplementary audit is carried out independently without access to the working papers of the statutory
auditors.
The company follows e-tendering procedure thereby increasing the transparency in procurement.
MSETCL has implemented SAP-ERP Implementation throughout the organisation in 2011-12. This has
resulted in better reporting and monitoring. The platform provides a robust platform for integration of
operational activities.
Weaknesses

Significant Weakness Resolution

Finance and Accounts section is not This could be resolved by filling the vacant positions by
adequately staffed. promotions and recruiting new people

Finance and Accounts section does not have This could be mitigated by providing training to Finance
experience of handling ADB funds and Accounts staff on ADB procedures.

Fixed assets registers need to be updated to


show full and proper particulars, including
quantitative details and situation, of the fixed
These issues will be resolved once the SAP is fully
assets. Internal control procedures need to
implemented.
be strengthened in respect of accounting of
purchase of fixed assets and materials & Inter
Unit.

There is no audit committee. The internal This could be mitigated by forming the audit committee
audit committee reports to Board of and increasing the number of independent directors.
Directors. There is only one independent However, the Company is not obligated to form the
director. This puts the corporate governance audit committee and increase the number of
of the Company at risk. independent directors.

The coverage and extent of procedures for


MSETCL is in the process of modification of procedures.
internal audit is not adequate.

7.2.3 Funds Flow Arrangements


Procedures for withdrawal of loan proceeds are standardized to facilitate disbursements under most
loans. There are three major types of disbursement procedure, described briefly as follows:
Reimbursement procedure After MSETCL makes payment to supplier, MSETCL submits
reimbursement request through CAAA to ADB. ADB pays to CAAA in USD, CAAA certifies receipt
of USD and rupee equivalent to the Plan Finance I Division of the Department of Expenditure,
MoF, GOI. PF-I Division authorizes RBI to release rupee equivalent to the Finance Department of

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GoM. GOM Finance Department then authorizes Energy Department to withdraw funds. Energy
Department can be allowed under the Government Budget mechanism to withdraw funds even
before ADB funds are received, and may release advance loans to MSETCL for project funding.
Direct payment procedure - After incurring expenditure, MSETCL authorizes invoices, and
submits a request through CAAA to ADB for directly paying the contractor. ADB will pay the
contractor within five business days of having received a valid claim (complete in all respects).
Commitment procedure - If the contract is covered by LC, ADB can issue a commitment letter to
the negotiating bank based on a request from MSETCL through CAAA. When a payment is due;
at the request of MSETCL, ADB will directly pay the negotiating bank and debit the loan account.
This also will happen within five business days of receiving a valid claim under the Commitment
Letter (CL). The full value of the CL will be blocked from the loan account, and the CL will be
irrevocable even if the loan were to be cancelled.
The Project Implementation Unit (PIU) does not have experience in the management of disbursement of
funds. It neither has experience of management of disbursement of funds from other international
funding agencies. The Company currently has counterpart funding only from JICA, where the amount is
paid by JICA directly to the contractor under the direct payment method. MSETCL in turn repays the
installment on loan amount to GOM, which in turn pays to GOI and which is paid to JICA.
There are two agreements entered into by ADB:
Loan agreement: Signed between ADB and Department of Economic Affairs (DEA): Ministry of
Finance, Government of India
Project agreement: Tripartite agreement signed between ADB, Energy Department: Government
of Maharashtra and MSETCL
The invoice raised by the contractor would be sent to the regional office. The invoice would be verified
by the project execution team and accounts team at the regional office before it would be sent to the
Head Office. On further verification from the Head Office it would be sent to the GOM which would be
sent to ADB for processing.
The Company does not have a capacity to manage foreign exchange risks.

7.2.4 Staffing
Director (Finance) is responsible for finance, accounts, treasury, audits, statutory & regulatory reporting
and overall payments to suppliers and employees. The project finance and accounting functions are not
adequately staffed and there are some vacancies to be filed for which new candidates have been
recruited and expected to join in 2 months.
Appointment for permanent post is either made by promotion or by direct recruitment. The entry post
appointment is always through direct recruitment, but direct recruitment to higher post are in the
proportion to 1/3rd of the vacancies. Senior staffs i.e. Sr. Managers and above is atleast graduates with
minimum 5 years of experience. For all the new recruitment, the minimum qualification requirement is
a Chartered Accountant /Cost Accountant /Masters in Commerce
Most of the staff are on permanent roles and remain with the company for more than 30 years. The
Company also outsources some of the data crunching to support staff which is contracted for 1-2 years
with possible extension.

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Staffs from regional office are generally transferred once in 3 years. Staffs from head office are very
unlikely to be transferred but it depends on the competency and performance of the employee.
MSETCL imparts Induction training at the time of joining the Organization. Refresher training is provided
on regular basis to junior staff till the Manager level at periodic intervals.
The Organisation structure for the finance and accounting function is as shown below:

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Director
(Finance)

CGM (F&A)

GM (CA) GM (F)

AGM (F) AGM (CF) AGM (IF)

Sr. Manager Sr. Manager


(F&A) (F&A) Sr. Manager
(IT/RB/MERC) (Acs/MERC) (F&A)

Manager Manager Manager Manager Manager Manager


Manager (F&A) (FEG)
(F&A) (SB) (HO A/c) (FMS) (Capex)

Dy. Managers reporting to Manager

The Organisation Structure of MSETCL is as in Annex 8.

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7.2.5 Accounting policies and procedures


The Company is a Public Limited Company registered under the Provisions of Companies Act, 1956. The
Company is governed by the Electricity Act, 2003. The provisions of the Electricity Act, 2003 read with
the rules made there under prevails wherever the same are inconsistent with the provisions of the
Companies Act, 1956 in terms of section 174 of the Electricity Act, 2003.
The financial statements have been prepared on the basis of going concern concept and under the
historical cost convention. The company adopts accrual basis in preparation of its accounts to comply in
all material aspects with Generally Accepted Accounting Principles (GAAP) and the accounting standards
issued by the Companies (Accounting Standards) Rules, 2006 as per notification no. G.S.R.739 (E) dated
7th December, 2006.
The Company records the project financial transactions in SAP.
The Company maintains proper books of account as required by law. The Balance Sheet, Profit & Loss
Account and Cash Flow Statement comply with the requirements of the Accounting Standards referred
to in sub-section (3C) of section 211 of the Companies Act, 1956.
The company maintains cash/payment related documents permanently; balance records are maintained
as per statutory requirements. All documents are maintained in hard copy in a systematic manner
properly segregated into folders. General ledger and subsidiary ledgers are reconciled and in balance are
maintained in excel sheet.
The Company prepares annual budget on perpetual basis and includes both physical and financial
targets. The budgets are prepared for different projects and are prepared item-wise, section wise and
department wise. F&A section is responsible for preparation of budget. All the processes and formats
are in place and each department/function along with field officials provides their estimates in the
prescribed format to F&A section. The budget is approved by the Board of Directors. The budget is
reviewed and revised after 6 months based on the actual expenses/progress achieved. Any variation
above +/-5% requires board approval. The budget is also reviewed by MERC and suitable changes are
made in the budget based on the approval of MERC. The company has started using the SAP system for
preparation of budget and all these provisions are available in the SAP system.
All invoices submitted are audited and verified for any inconsistency or violation of terms of contract.
Payments are released only after receiving the confirmation or work completion report from the user.
The Company follows State Government pay scale. Any change in the pay scale is notified through a
circular and changes are made in the payroll system.
Bank balance and cash are reconciled on monthly basis. Reconciliation is undertaken by the Divisional
Accountant Cash and the Authorization is done by the section in charge. All receipts are deposited on
the next working day. CGM (F&A), AGM (F&A), Senior Manager (F&A) and Manager (F&A) are the
authorized signatories in the bank accounts.
The Company has a proper and adequate system of internal controls to ensure that all assets are
safeguarded and protected against loss from unauthorized use or disposition and that transactions are
authorized, recorded, and reported correctly.
The statutory auditors have made the following observations in the annual report for FY2010-11:
The Company maintains fixed assets registers at each location, however, need to be updated to
show full and proper particulars, including quantitative details and situation, of the fixed assets.

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The Company maintains proper records of inventory. Inventory audit is done every 6 months.
However, the procedure of physical verification of inventory followed by the management
needs to be strengthened commensurate with the size of the company and the nature of its
business.
Internal control procedures need to be strengthened in respect of accounting of purchase of
fixed assets and materials & Inter Unit Transactions as to commensurate with the size of the
company and nature of its business.
The current status of the above observations could not be verified as annual report for FY2011-12 was
not shared as GOM approval is pending.
The Company has not defaulted in repayment of dues to any financial institution, bank or debenture
holders. The company has not granted loans and advances on the basis of security by way of pledge of
shares, debentures and other securities. The company does not deal or trade in shares, securities,
debentures and other investments. The Company has not given any guarantee for loans taken by others
from banks and / or financial institutions. The term loans availed are applied for the purposes for which
they were obtained by the Company. No funds raised on short term basis have been used for long term
investment.

7.2.6 Internal audit


The Company has internal audit department which is headed by GM (Internal audit). The internal audit
team reports to Board of Directors. The Company does not have audit committee as it is not obligated
under the Companies Act 195623. Currently there is only one independent Director.
The Company has outsourced the internal audit function to external Chartered Accountants. The
Company appoints external firms of Chartered Accountants every 2 years to carry out the internal audit
of the Company at Head office and other locations. MSETCL staff mainly monitors the functions of the
external firm appointed by the Company. The external firm appointed by the Company submits reports
of their finding every 6 months. The coverage and extent of procedures for internal audit is not
adequate. MSETCL is in the process of modification of procedures.
The senior staff i.e. Sr. Manager and above are graduates with experience in power sector/audit. For all
the new recruitment, the minimum qualification requirement is either a Chartered Accountant/Cost
Accountant/Post graduate in Commerce.

7.2.7 External Audit


For all Government companies Statutory Auditors are appointed by the Comptroller and Auditor
General of India under Section 619(2) of the Companies Act, 1956. M/s Shah & Taparia were appointed

23
As per Section 292A of the Companies Act. 1956 it is mandatory for every public company having paid-up capital of not less
than INR. 50 million to constitute an audit committee. MSETCL has paid up capital of INR. 0.5 million only and hence it is not
obligated to form an audit committee.
As per Maharashtra Electricity Reforms Transfer Scheme, 2005 of the Government of Maharashtra notified
on 4 June 2005, the Undertakings forming part of the Transmission Undertakings of the erstwhile Maharashtra State Electricity
Board as set out in Schedule 'A' of the said notification were transferred and vested with effect from 6 June 2005 in MSETCL. On
account of such transfer, equity shares of the value of INR 26,95,99,20,455 (being the excess of assets over liabilities) were to
be allotted to MSEB Holding Company Limited (hereinafter referred to as the Holding Company). Pending such allotment, this
amount is shown as Share Suspense Account and hence not been transferred under paid up capital.

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as Statutory Auditors for the Financial Year 2010-11. The Accounts for FY 2011-12 have been audited,
submitted to ROC but waiting for parliamentary approval.
The statutory auditors are responsible for expressing opinion on the financial statements under Section
227 of the Companies Act, 1956 based on independent audit in accordance with the Auditing and
Assurance Standards prescribed by Institute of Chartered Accounts of India.
The audit is conducted in accordance with the auditing Standards generally accepted in India. Those
Standards require that auditors plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.
Comptroller and Auditor General of India also conducts a supplementary audit under Section 619(3)(b)
of the Companies Act, 1956. The supplementary audit is carried out independently without access to the
working papers of the statutory auditors and is limited primarily to inquiries of the statutory auditors
and company personnel and a selective examination of some of the accounting records.

7.2.8 Reporting and Monitoring


The company adopts accrual basis in preparation of its accounts to comply in all material aspects with
Generally Accepted Accounting Principles (GAAP) and the accounting standards issued by the
Companies (Accounting Standards) Rules, 2006 as per notification no. G.S.R.739 (E) dated 7 th December,
2006.
The company prepares project wise financial statement every month and is presented to the
management in their monthly review meeting. The Company has started using the SAP system for
preparation of financial statements.

7.2.9 Information Systems


MSETCL has implemented SAP-ERP Implementation throughout the organisation in 2011-12. The
Company has started using the SAP system for preparation of financial reports.

7.2.10 Procurement Arrangements


MSETCL follows e-tendering procedure. The procurement for the solar evacuation projects will be
through e-tendering process.

7.2.11 Disbursement Arrangements


MSETCL already has current account opened with Bank of India and propose to use this account for
disbursement of ADB funds. The PIU team does not have experience in the management of
disbursement from ADB.
Usually in case of funding from other international financial institutions and multilateral development
agencies, the invoice is raised by the contractor and is sent to the regional office. The invoice is verified
by the project execution team and accounts team at the regional office before it is sent to the Head
Office. On further verification from the Head Office it is sent to the funding agency through CAAA, the
funding agency releases the fund to the bank account of the GOI, and the DEA gives the instruction to
transfer the fund directly to the suppliers bank account.

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To ensure that the transactions are correctly prepared the company has proper financial scrutiny of
order i.e. pre auditing, internal auditing and also auditing of bills. Recording of Statement of
Expenditure, reporting and monitoring for this project would be through SAP system. The Companys
Delegation of Powers (DoP) clearly lists down the Delegation of Power for different officials at different
levels.

7.2.12 Agreed Action Plan


Agreed Action Responsible Person Agreed Completion Date
Finance and Accounts section is not adequately
staffed. The vacant posts will be filled through CGM (Finance)
internal promotions and external hiring.
Training to Finance and Accounts staff on ADB
ADB, CGM (Finance)
procedures.
The coverage and extent of procedures for
internal audit is not adequate. MSETCL is in the Internal Audit team
process of modification of procedures.
The assets and liabilities of the company as on
June 06, 2005 contain balances, which are
transferred under The Maharashtra Electricity
GOM
Reforms Transfer Scheme, 2005 (Transfer
Scheme). The Final Transfer Scheme is yet to be
notified by the Government of Maharashtra
Finalization of reporting and controlling formats
CGM (Finance)
for SAP

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8 Financial analysis
8.1 Methodology
The financial analysis of the proposed projects has been carried out in accordance with ADBs Financial
Management and Analysis of Projects. Financial viability of generation and transmission projects was
accessed by taking into consideration the benefits and costs incurred for setting up each project.
The weighted average cost of capital (WACC) to MSPGCL & MSETCL was calculated as prescribed by
ADBs Guidelines for each project and the financial viability was assessed by comparing WACC to FIRR at
the project. The sensitivity of the FIRR to adverse movements in the underlying assumptions was also
assessed.

8.2 Solar generation projects

8.2.1 Key Assumptions


MSPGCL is planning to setup Grid Interactive Solar Photovoltaic Power Stations at Kaudgaon,
Gangakhed, Ner and Lohara regions in Maharashtra. Several industry specific and MSPGCL specific
assumptions have been considered for computation of FIRR.
Projects are proposed to be developed based on the revenue sharing model, wherein 50% of the capital
cost is proposed to be funded by ADB loans and MSPGCL equity and rest 50% will be funded by the
successful developer. Responsibility of developer would be to build, operate & maintain solar power
plant. In return, developer will be entitled to receive percentage share of the revenue generated from
sale of power.
Following table illustrates various key assumptions considered:
Kaudgaon - Kaudgaon -
Particulars Units Gangakhed Ner Lohara
Phase 1 Phase 2
Capacity MW 48 30 100 75 250
Construction
1-Jul-14 1-Dec-14 1-Apr-15 1-Apr-15 1-Apr-16
Start date
Construction
Months 9 9 9 9 9
months
Life Years 25 25 25 25 25
Upfront
capital cost Rs. Mn per
40 36 36 36 36
paid to EPC MW
developer

Following table illustrates financial assumptions related to solar generation projects:


Particulars Units All Projects
Debt from ADB % 40%
Equity from MSPGCL % 10%
Funding from successful developer % 50%

Following financial assumptions have been considered for proposed funding from ADB.

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Particulars Units All Projects


Moratorium Period* Years 5
Repayment in years Years 20
Repayment option 0 Amortizing
Interest rate inclusive of hedging cost % 8.29%
Commitment charge % 0.15%
*Moratorium period starts from construction start date

Following table illustrates the assumptions considered for computing revenue share retained by
MSPGCL:
Kaudgaon - Kaudgaon
Particulars Units Gangakhed Ner Lohara
Phase 1 - Phase 2
CUF % 18.0% 18.0% 18.0% 18.0% 18.0%
Derating of CUF % 0.5% 0.5% 0.5% 0.5% 0.5%
PPA Signed in FY FY 2014 FY 2015 FY 2015 FY 2015 FY 2016

Tariff* Rs/kwh 8.98 8.24 8.24 8.24 8.31


Revenue shared
with developer for % 63% 63% 63% 63% 63%
first 5 years
Revenue shared
with developer for
% 65% 65% 65% 65% 65%
6th year to 10th
year
Revenue shared
with developer for % 50% 50% 50% 50% 50%
remaining life
*Tariff as computed for projects not claiming accelerated depreciation

8.2.2 Computation of Weighted Average Cost of Capital (WACC)


To compute WACC, it is assumed that capital expenditure will be funded by debt from ADB and equity
infusion from MSPGCL. ADB is assumed to finance 80 % (i.e. 40% of total project cost) of the upfront fee
paid to successful developer for building solar plant. Interest rate charged by ADB is computed after
considering 5 year swap rate of 0.785%24, ADB spread of 0.4%, maturity margin of 0.1% and hedging cost
of 6%. Domestic inflation of 9.31% and international inflation rate of 1.79% are assumed for computing
real interest rate. Estimated cost of borrowing and equity capital is then adjusted for respective inflation
rates to determine real WACC.
Following table illustrates applicable nominal and real WACC for all projects:
Weighted
Weighted
component
Particulars Weight Nominal cost Real cost component
of nominal
of real WACC
WACC

24
ADB Indicative Lending Rates for Loans under the LIBOR-Based Loan Facility dated 27-Dec-2013

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Weighted
Weighted
component
Particulars Weight Nominal cost Real cost component
of nominal
of real WACC
WACC
ADB 80.0% 8.29% 3.62% 4.38% 2.90%
Equity 20.0% 12.25% 2.69% 2.45% 0.54%
Total 100.0% 6.83% 3.43%

8.2.3 Calculation of Financial Internal Rate of Return (FIRR)


Financial Internal Rate of Return (FIRR) for the proposed projects has been computed in accordance with
ADBs Financial Management and Analysis of Projects. ADB is assumed to finance 80 % (i.e. 40% of total
project cost) of the upfront fee paid to successful developer for building solar plant. Nominal cash flows
at project level are determined based on the above mentioned assumptions and methodology. Overall
nominal FIRR of all the projects is supposed to be 11.33%. Following table illustrates FIRR for different
projects under consideration:

Project Nominal FIRR

Kaudgaon - Phase 1 10.75%


Gangakhed 11.24%
Ner 11.36%
Lohara 11.36%
Kaudgaon - Phase 2 11.48%
Composite 11.33%

8.2.4 Sensitivity analysis


Analysis has been carried out to examine the sensitivity of the FIRR to adverse changes in key variables.
The variables considered for the sensitivity of FIRR are 1% decrease in CUF, 1% increase in revenue
sharing with EPC developer and 0.5% increase in de-rating of capacity.
Following table shows that the financial performance of the overall Project is robust for the scenarios
tested, with FIRR exceeding the aggregate nominal WACC in all cases. On this basis, the investment is
considered financially viable and offers acceptable returns under most likely scenarios.

Sr. Change from


Scenario FIRR
No. base case
Base case 11.33%
1 CUF -1% 10.64%
2 Revenue sharing with EPC developer +1% 11.02%
3 Derating +0.5% 10.83%
4 Combined (1,2,3) 9.83%

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*- Nominal FIRR is compared with the nominal WACC for determining financial viability of the project, as
the tariff estimated is as per MERC norms which takes into account escalation in O&M over life of the
plant and nominal interest rate

8.3 Transmission projects

8.3.1 Key Assumptions


MSETCL will setup the requisite evacuation system for the proposed solar power plants. Additionally,
MSETCL will also setup REMC for predicting energy schedule on day ahead basis. Following table shows
the assumptions considered regarding evacuation system and REMC:
Kaudgaon Kaudgaon
Particulars Units Gangakhed Ner Lohara REMC
- Phase 1 - Phase 2
Construction
1-Jul-14 1-Dec-14 1-Apr-15 1-Apr-15 1-Apr-16 1-Jun-14
Start date
Construction
Months 9 9 9 9 9 9
months
Life Years 25 25 25 25 25 25
Capital cost
USD Mn 3.18 1.99 6.62 4.97 17.13 6.72
(Hard cost)

Requisite capital cost will be funded by ADB loan and equity infused by MSETCL. Following table
illustrates financial assumptions related to transmission project and REMC:
Particulars Units All Projects
Debt from ADB % 70%
Equity % 30%
Moratorium Period* Years 5
Repayment in years Years 20
Repayment option 0 Amortizing
Interest rate inclusive of hedging cost % 8.29%
Commitment charge % 0.15%

Revenue stream for the projects is determined on the basis of Maharashtra Electricity Regulatory
Commission (MERC) Multi Year Tariff (MYT) Regulations, 2011. O&M cost is in line with the regulations
for voltage level between 66kv and 400kv.

8.3.2 Computation of WACC


To compute WACC, it is assumed that capital expenditure will be funded by debt from ADB and equity
infusion from MSPGCL. ADB is assumed to finance 70 % of the total capital expenditure for evacuation
system and REMC. Interest rate charged by ADB is computed after considering 5 year swap rate of
1.78525%, ADB spread of 0.4%, maturity margin of 0.1% and hedging cost of 6%. Domestic inflation of

25
ADB Indicative Lending Rates for Loans under the LIBOR-Based Loan Facility dated 27-Dec-2013

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9.31% and international inflation rate of 1.79% are assumed for computing real interest rate. Estimated
cost of borrowing and equity capital is then adjusted for respective inflation rates to determine real
WACC.
Following table illustrates applicable nominal and real WACC for all projects:
Weighted
Weighted
component
Particulars Weight Nominal cost Real cost component
of nominal
of real WACC
WACC
ADB 70.00% 8.29% 3.62% 3.83% 2.53%
Equity 30.00% 12.25% 2.69% 3.68% 0.81%
Total 100.00% 7.51% 3.34%

8.3.3 Calculation of Financial Internal Rate of Return


Financial Internal Rate of Return (FIRR) for the proposed projects has been computed in accordance with
ADBs Financial Management and Analysis of Projects. Revenues for each project are determined as per
MERC MYT Regulations, 2011. Overall nominal FIRR of all the projects is expected to be 10.48%.
Following table illustrates FIRR for different projects under consideration:

Project FIRR

Kaudgaon - Phase 1 10.25%


Gangakhed 10.51%
Ner 10.62%
Lohara 10.62%
Kaudgaon - Phase 2 10.60%
REMC 10.12%
Composite 10.48%

FIRR exceeds nominal WACC for all the projects and at composite level. On this basis, the investment is
considered to be financially viable as it offers acceptable returns.

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9 Economic analysis
9.1.1 Background and approach
Fossil fuel based power generation technology releases harmful gases in the atmosphere. Environmental
threat is much more acute for India where fossil fuel amounts around 80% of total power generation. To
encourage non fossil fuel based power generation, Ministry of New and Renewable Energy (MNRE) has
introduced several schemes like Renewable Purchase Obligation (RPO), Renewable Energy Certificate
(REC), etc.
Installation of solar photovoltaic power stations will reduce carbon footprint and dependence on fossil
fuel based technology. Main economic benefits would include, (i) reduction in dependency on most
costly source of power i.e. diesel based power generation and, (ii) reduction in environmental impact of
thermal power generation.
Economic analysis has been undertaken to evaluate the economic viability of the projects. A 25-year
period was used for the evaluation with no terminal value considered for the investment at the end of
the period. Economic revenue have been estimated by projecting per unit cost savings by using solar
generation instead of diesel based generation and reduction in morbidity and mortality impact of
thermal power generation. Economic cost has been projected based on the cost for installing and
running solar power plants. The economic internal rate of return (EIRR) is considered to be the most
suitable indicator of economic viability.

9.1.2 Key Assumptions


Economic revenue consists of savings in terms of incremental cost of diesel power generation and
reduction in environmental impact. Incremental cost of diesel power is computed by multiplying net
generation with difference in per unit cost of diesel based generation and solar based generation.
Economic benefit in terms of reduced impact on environment is based on the paper titled Valuation of
Health Impacts of Air Pollution from Power Plants by Mr. Herath and Mr. Karthik. Study had quantified
the environmental impact of thermal power generation. Aforementioned study suggests that the impact
of thermal power generation on environment is in range of 0.7 to 7 c/kwh. Per unit environmental
impact of thermal generation considered for calculation of EIRR is 2.25 c/kwh.
Economic costs considered for calculation of EIRR are capital expenditure for setting up the plant and
O&M cost and tax. Total cost is reduced by the cost reduction factor as considered in case of Gujarat
Solar Project. Net Economic Benefit (NEB) is considered for calculation of EIRR.
Following table shows the assumptions considered for calculation of net economic benefit:
Parameter Unit Value
Cost of diesel based generation
Efficiency % 32%
Calorific value kcal/kg 10800
Fuel density 0.85
Cost of diesel in FY 14 Rs/litre 52.47
Escalation in diesel price % 0%
Capacity charge Rs/kwh 1.00
Environment impact
Assumed environmental impact of thermal generation c/kwh 2.25

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Exchange rate for 25 years USD:INR 60.03*


Economic cost
Cost reduction factor as considered in Gujarat Solar
% 96%
Project
* - Average exchange rate in FY 14 (from 1 Apr 2014 to 23 Dec 2014)

9.1.3 Economic Internal Rate of Return (EIRR)


Net economic benefit computed on the basis of above mentioned assumptions is used to compute EIRR.
Benchmark of 12% is considered for evaluating economic viability of projects. Economic IRR of each unit
is greater than the benchmark. Composite EIRR of all projects is 18.54%. Following table illustrates the
EIRR for different projects:
Project EIRR
Kaudgaon - Phase 1 11.45%
Gangakhed 19.22%
Ner 19.65%
Lohara 19.65%
Kaudgaon - Phase 2 19.05%
Composite 18.54%

9.1.4 Sensitivity analysis


The risks that the projects may not achieve satisfactory economic returns were identified. For each such
risk, economic IRR was compared with the benchmark to assess sensitivity to these risk factors. The risks
considered for the sensitivity of EIRR are 1% decrease in CUF, 1% increase in revenue sharing with EPC
developer, 0.5% increase in de-rating of capacity and 10% decrease in per unit environmental impact of
thermal based power plants. For each of the risks identified, the sensitivity of EIRR was tested and the
results are shown in table below:

Sr. Change from


Scenario EIRR
No. base case
Base case 18.54%
1 CUF -1% 17.48%
2 Revenue sharing with EPC developer +1% 18.23%
3 Derating +0.5% 17.98%
4 Per unit environmental impact of thermal generation -10% 17.86%
5 Combined (1,2,3,4) 15.97%

An economic return of the overall project is robust for the scenarios tested, with EIRR exceeding the
benchmark in all cases. On this basis, the investment is considered to be economically viable.

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10 Past financial performance and projections


10.1 MSPGCL

10.1.1 Historical performance


MSPGCL is currently operating under a regulated regime. The performance of thermal and hydro power
plants of MSPGCL is governed by the normative parameters approved by MERC. MSPGCL is allowed to
recover return of 15.5% on equity investment from FY2013-14 as per MYT Regulations 2011. Till FY2012-
13 the Return on Equity (ROE) allowed by MERC was 14% as per MERC Terms and Conditions of Tariff
Regulations 2005.
Historical P&L statement and balance sheet of MSPGCL are as shown below:
P&L (INR Mn.) FY07 FY08 FY09 FY10 FY11 FY12
Total Income
Net Revenue from
73,450 80,820 93,465 110,833 121,150 127,428
Operations
Other Income 957 1,668 1,341 1,033 1,052 1,806
Expenditure
Variable expense 54,443 59,981 71,562 83,130 82,817 95,282
O&M expense 10,654 13,241 15,065 16,891 20,939 19,375
Depreciation &
3,488 2,065 3,075 3,009 3,981 4,039
Amortization
Interest & Finance
1,963 1,206 4,483 4,699 6,574 8,537
Charges
Prior period
318 1,203 -108 192 -111 0
(credits)/charges
PBT 3,541 4,791 728 3,944 8,000 2,001
Tax 1,205 1,791 -113 1,910 4,906 -2
PAT 2,335 3,000 841 2,034 3,095 2,003
Source: MSPGCL audited annual accounts

Balance sheet (INR Mn) FY07 FY08 FY09 FY10 FY11 FY12
Fixed Assets
Gross Block 100,009 114,784 132,701 134,250 162,722 165,088
Depreciation (-) 66,726 68,824 71,715 74,661 75,723 79,616
Net Block 33,283 45,960 60,986 59,589 86,999 85,471
Capital Work in Progress 29,590 36,909 61,136 103,532 119,299 160,824
Assets not in use 0 0 0 0 1,095 977
Net Fixed Assets 62,873 82,869 122,122 163,122 207,392 247,272
Current Assets 57,610 74,272 95,511 109,658 103,183 113,521
Total assets 120,483 157,141 217,633 272,780 310,575 360,793

Shareholder's funds 33,224 34,887 39,868 48,574 57,687 68,911


Equity 29,634 31,134 35,274 41,947 47,966 57,186
Reserves and surplus 3,590 3,752 4,593 6,627 9,722 11,725

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Balance sheet (INR Mn) FY07 FY08 FY09 FY10 FY11 FY12
Loans 34,185 52,812 87,602 129,880 163,730 195,166
Deferred tax liabilities 0 4,074 3,839 5,008 8,189 7,779
Current Liabilities 53,075 65,369 86,324 89,318 80,968 88,936
Total liabilities 120,483 157,141 217,633 272,780 310,575 360,793
Source: MSPGCL audited annual accounts

10.1.2 Assumptions for the financial analysis


Thermal and Hydro power plants
Thermal and Hydro power plants of MSPGCL are governed by MERC norms. MSPGCL submitted the
Multi Year Tariff (MYT) business plan for its generation business to MERC for the second control period
from FY 2013-14 to FY 2015-16 including the estimates for FY 2012-13. MERC issued order on the
business plan on 12-February-2013 approving the Aggregate Revenue Requirement (ARR) including the
variable expenses, capital expenditure and O&M expense for the control period.
Financials including P&L statement, balance sheet and cash flow statements have been projected for 10
years i.e. FY 2012-13 to FY 2021-22. The projections are based on the performance parameters, fuel
expense, calorific value of fuel, capital expenditure and capitalization plan of MSPGCL, O&M expenses,
etc. We have referred the following documents for the projections:
MSPGCL annual reports FY07 to FY12.
MYT business plan petition and order for 2nd control period i.e. FY14 to FY16 including FY13
projections26
Variable expense
Variable expense depends on performance parameters like PLF, auxiliary consumption, SHR and specific
fuel consumption and price and calorific value of fuel.
MSPGCL till FY12 has total installed capacity of 9,737 MW including 2,585 MW of hydro capacity.
MSPGCL in the past has not been able to meet the performance parameters as approved by MERC. This
has affected the profitability of MSPGCL in the past. MSPGCL has projected variable expenses for FY13
to FY16 for its existing stations (thermal generation stations commissioned till 31-March-2012) based on
the historical performance of the plants and expected improvement in the performance parameters due
to proposed capital expenditure schemes as recommended by CPRI27. However, the performance
parameters are not in-line with the norms specified by CPRI. MERC has approved the variable expenses
for existing plants based on the CPRI norms and quality and price of fuel as submitted by MSPGCL. This is
therefore going to affect the profitability of MSPGCL in the future years too. Variable expenses for
existing stations for FY13 to FY16 are assumed as submitted by MSPGCL.
Variable expenses for existing stations beyond FY16 have been projected by assuming:
Same performance parameters as submitted by MSPGCL for FY16.
The coal and liquid fuel price has been escalated at the rate of 4.98% and 3.90% respectively.
This is as per the growth rate of fuel prices assumed by MSPGCL for FY13 to FY16.

26
MERC Case No. 91 of 2012, Order dated 12-Feb-2013
27
CPRI was appointed by MERC pursuant to ATE Order to carry out energy audit of MSPGCLs thermal power stations and to
recommend schemes for the improvement of their performance.

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MSPGCL plans to add 12,260 MW of thermal capacity by FY22. The variable expense for new plants is
projected by considering normative performance parameters as approved by MERC and same fuel price
as considered for existing plants.

FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22
Existing plants
Gross
generation 44,881 44,973 44,581 46,012 46,012 46,012 46,012 46,012 46,012 46,012
(MUs)
Auxiliary
consumption 4,405 4,493 4,404 4,566 4,566 4,566 4,566 4,566 4,566 4,566
(MUs)
Net generation
40,476 40,480 40,176 41,445 41,445 41,445 41,445 41,445 41,445 41,445
(MUs)
Fuel cost (INR
100,217 108,124 111,430 122,793 128,857 135,221 141,899 148,908 156,264 163,984
Mn.)
New plants
Gross
generation 6,106 20,869 30,548 35,316 46,054 74,088 91,288 91,288 91,288 91,288
(MUs)
Auxiliary
consumption 531 1,286 1,879 2,166 2,763 4,445 5,477 5,477 5,477 5,477
(MUs)
Net generation
5,575 19,583 28,668 33,150 43,290 69,642 85,811 85,811 85,811 85,811
(MUs)
Fuel cost (INR
18,681 56,389 88,531 99,227 135,818 229,340 296,609 311,332 326,786 343,008
Mn.)

O&M expense
O&M expenses include employee expenses, administration, repairs and maintenance expenses. MERC in
its MYT Regulation 2011 has specified norms for O&M expenses for existing and new stations on per
MW basis. MERC has specified O&M expense of INR 1.92 Mn/MW and INR 1.41 Mn/MW in FY13 for
existing and new plants respectively based on actual O&M expense incurred during FY08 to FY10. These
norms for existing and new plants have been escalated by 5.72% every year to arrive at the O&M norms
for the control period.
MSPGCL has estimated O&M expense of INR 2.22 Mn/MW and INR 1.63 Mn/MW in FY13 based on
actual expense incurred during FY10 to FY12 and considering the likely effect of pay revision. This is
further escalated by 8.31% considering the expected increase in O&M expenses.
It has been observed that in the past MSPGCL has not been able to meet the MERC approved O&M
expenses and the disallowance in O&M expense have increased over a period of years. Therefore, the
O&M expenses have been projected under realistic scenario, i.e., MSPGCLs estimates based on
historical actuals and escalation rate of 8.31%. The projected O&M expense is as below:
FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22
Existing plants
Norms (INR
2.22 2.41 2.61 2.83 3.06 3.31 3.59 3.89 4.21 4.56
Mn./MW)
Capacity 9,737 9,737 9,737 9,737 9,737 9,737 9,737 9,737 9,737 9,737

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(MW)
O&M
expense -
existing 21,653 23,452 25,401 27,512 29,798 32,275 34,957 37,862 41,008 44,416
plants (INR
Mn.)
New plants
Norms (INR
1.63 1.76 1.91 2.06 2.24 2.42 2.62 2.84 3.08 3.33
Mn./MW)
Opening
capacity 0 1,500 4,730 4,730 4,730 7,640 12,260 12,260 12,260 12,260
(MW)
Additions
1,500 3,230 0 0 2,910 4,620 0 0 0 0
(MW)
Closing
capacity 1,500 4,730 4,730 4,730 7,640 12,260 12,260 12,260 12,260 12,260
(MW)
Average
capacity 750 3,115 4,730 4,730 6,185 9,950 12,260 12,260 12,260 12,260
(MW)
O&M
expense -
1,219 5,483 9,017 9,766 13,832 24,100 32,163 34,836 37,731 40,866
new plants
(INR Mn.)
Total O&M
expense 22,872 28,935 34,418 37,278 43,630 56,375 67,120 72,698 78,739 85,282
(INR Mn.)

Capital expenditure
MSPGCL has estimated the capital expenditure for FY13 to FY16 based on different schemes like
capacity additions, R&M capital expenditure and other capital expenditure (CPRI and non-CPRI
schemes).
MERC after detailed scrutiny approved the capitalization for FY13 to FY16 based on the following
methodology:
Capital expenditure of only those DPR schemes28 for which in-principal approval has been
granted was considered.
In regard to the Non-DPR schemes, where there are DPR schemes capitalized in the said
financial year, upto 20% cost of capitalized DPR schemes has been considered towards
capitalization of Non DPR schemes. Where there has been no capitalization of any DPR scheme
in the said financial year, 50% cost of capitalized non-DPR schemes has been considered by the
Commission.
Capital expenditure beyond FY17 is estimated based on the projected schedule of commissioning of the
upcoming projects and anticipated expenditure during the MYT control period. Capitalization is assumed

28
Capital expenditure schemes with value of equal to or more than INR 100 million are termed as DPR schemes. For such
schemes MSPGCL has to submit a DPR to MERC for in-principal approval.

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to be 100% in the year of capitalization of the scheme and COD of the upcoming project; capital
expenditure till capitalization of the scheme and COD of the upcoming project is booked as CWIP.
Based on the above assumptions the projected capital expenditure and capitalization for MSPGCL is as
follows:
All figures in
FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22
INR Mn.
Capital
71,349 208,990 162,825 86,416 64,635 55,861 0 0 0 0
expenditure
Net
115,305 206,460 2,480 6,252 157,752 322,650 0 0 0 0
Capitalization

Depreciation
Depreciation expense for existing units for control period FY13 to FY16 is as submitted by MSPGCL in its
business plan and this is in line with the MERC norms. Depreciation expense for existing units beyond
FY17 is calculated at the weighted average rate of depreciation for FY16. Depreciation expense for new
units is calculated at a weighted average rate of 5.00% considering the asset classification for Paras 3
& 4 and Parli 6 & 7 units commissioned in FY 2010-11 and asset wise depreciation rates as per MERC
MYT Regulations 2011.
Interest expense
Debt-equity ratio for capital expenditure has been assumed to be 80:20. Loans including repayments
and additions for control period FY13 to FY16 are as per existing loan terms filed by MSPGCL in its
business plan. Rest of the loans required to fund the remaining capital during the MYT 2nd control period
are assumed to be funded through REC and thereafter from FY17 onwards through new loans, loan
tenure for such loans is assumed as 10 years with moratorium period of 1 year.
The interest expense for existing loans is as per the loan agreements while interest expense for new
loans is calculated at 12.50% interest rate.
Interest on working capital is in accordance to MERC norms.
Revenues
Total revenue from FY13 to FY16 is as per business plan order, beyond FY16 it is estimated by adding
pre-tax return on regulated equity to total expenses.
For estimating revenues the base case fuel cost and the base case O&M expense projected as per the
norms has been considered. The additional fuel cost and O&M expense under the realistic scenario is
considered to be disapproved by MERC. However, in accordance to the Regulations 1/3rd of the
disapproved fuel cost and O&M expense is considered to be passed on to the consumers after true-up
i.e. after 2 years (usually it takes 2 years for true-up).
Post tax Return on regulated equity is taken as 14.00% for FY13 as per MERC Tariff Regulations 2005 and
15.50% from FY14 in accordance with MERC MYT Regulations 2011. Tax rate is considered as per the
applicable MAT rate (i.e. 20.01% in FY 13 and 20.96% in FY14 and onwards).
Chandrapur and Sakhri solar power plants
MSPGCL has an existing solar capacity of 5 MW in Chandrapur and is developing a 150 MW solar plant in
Sakhri. Revenues have been projected considering approved tariff and CUF.

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Chandrapur-1 Chandrapur-2 Sakhri


Capacity (MW) 1 4 150
Tariff (Rs./kWh) 15.00 17.91 15.61
CUF (%) 18% 18% 18%

Expenses for Chandrapur solar plant is assumed to be Rs. 13.47/kWh as submitted by MSPGCL in its
business plan. Expenses for Sakhri solar plant is as per norms approved by MERC.
Parameters Sakhri
Capital cost (Rs. Mn./MW) 144.2
FY14 O&M expense (Rs. Mn./MW) 1.19
Escalation in O&M 5.72%
Debt:Equity ratio for long term loans 70:30
Interest rate 13.73%
Interest rate for working capital 13.23%

10.1.3 Projected P&L statement, balance sheet and cash flow statement
The business plan submitted by MSPGCL does not consider the capital expenditure and expenses for
proposed solar projects. Therefore, the cumulative financial statements for MSPGCL have also been
projected by adding up the financial statement of solar projects to the projected financial statements
estimated as per the above assumptions and methodology.
The table below shows the projected cumulative P&L statement, balance sheet and cash flows for
MSPGCL:
P&L (All
figures in INR FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22
Mn.)
Income
Net Revenue
from 181,099 274,586 338,421 375,332 437,813 576,343 671,170 692,121 714,253 737,360
Operations
Other
2,407 3,602 4,412 4,866 5,666 7,471 8,743 9,004 9,282 9,578
Income
Expenditure
Variable
118,898 164,513 199,963 222,788 266,827 367,972 441,894 463,624 486,433 510,397
expense
O&M
22,978 29,220 34,713 37,584 43,947 56,704 67,462 73,053 79,108 85,666
expense
Depreciation
& 10,697 21,807 21,968 21,999 26,863 39,595 47,662 47,662 47,662 47,662
Amortization
Interest &
Finance 28,800 48,365 63,798 73,431 69,682 78,484 78,120 71,684 65,291 58,930
Charges
PBT 2,133 14,282 22,391 24,396 36,161 41,057 44,775 45,102 45,041 44,283
Tax 427 2,994 4,693 5,119 7,599 8,643 9,425 9,494 9,490 9,344
PAT 1,706 11,289 17,698 19,277 28,562 32,415 35,349 35,608 35,552 34,938

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Cash flow
(All figures FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22
in INR Mn.)
Cash BF 47,230 12,984 0 0 0 10,045 0 0 18,592 36,771
Project
41,203 81,462 103,463 114,398 125,009 150,496 161,133 154,953 148,511 141,543
Cash Flows
Investment
-75,449 -94,445 -103,463 -114,398 -114,965 -160,541 -161,133 -136,361 -130,332 -124,340
Cash Flows
Cash CF 12,984 0 0 0 10,045 0 0 18,592 36,771 53,974

Balance sheet
(All figures in FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22
INR Mn.)
Fixed Assets
Gross Block 302,023 508,483 514,853 536,057 712,044 1,034,694 1,034,694 1,034,694 1,034,694 1,034,694
Depreciation 90,313 112,121 134,089 156,088 182,951 222,546 270,208 317,870 365,531 413,193
Net Block 211,709 396,362 380,763 379,969 529,093 812,147 764,486 716,824 669,162 621,501
Capital Work in
116,867 119,397 280,705 359,906 266,789 0 0 0 0 0
Progress
Assets not in
977 977 977 977 977 977 977 977 977 977
use
Net Fixed
329,553 516,736 662,446 740,852 796,859 813,125 765,463 717,801 670,139 622,478
Assets
Total Current
94,771 121,117 121,847 135,240 131,853 162,713 194,070 219,774 245,442 270,489
Assets
Total assets 424,325 637,853 784,292 876,092 928,712 975,838 959,532 937,575 915,581 892,967

Shareholder's
funds
Equity 57,186 100,759 121,031 151,685 153,231 169,210 170,310 170,310 170,310 170,310
Reserves and
13,431 24,720 42,418 61,695 90,257 122,672 158,021 193,629 229,181 264,119
surplus
Loans 254,994 409,340 511,997 544,217 553,843 543,925 484,850 425,740 366,529 307,175
Deferred tax
7,779 7,779 7,779 7,779 7,779 7,779 7,779 7,779 7,779 7,779
liabilities
Current
90,934 95,255 101,067 110,716 123,602 132,252 138,573 140,117 141,782 143,585
Liabilities

Total liabilities 424,325 637,853 784,292 876,092 928,712 975,838 959,532 937,575 915,581 892,967

10.1.4 Key ratios


Ratios FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22
Operating Indicators
Return on Equity 2.4% 9.0% 10.8% 9.0% 11.7% 11.1% 10.8% 9.8% 8.9% 8.0%
Operating Ratio 83.4% 78.6% 76.2% 75.6% 77.8% 81.0% 83.3% 84.7% 86.1% 87.4%
Net profit margin 0.9% 4.1% 5.2% 5.1% 6.4% 5.6% 5.2% 5.1% 4.9% 4.7%
Capital Adequacy Indicators

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Ratios FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22
Debt-to-Equity Ratio 3.6 3.3 3.1 2.6 2.3 1.9 1.5 1.2 0.9 0.7
DSCR 1.0 1.3 1.1 1.0 1.0 1.1 1.2 1.2 1.2 1.2
Liquidity Indicators
Accounts receivable
122 121 90 90 60 60 60 60 60 60
days
Self-Financing Ratio 0.4 0.5 0.7 1.0 1.7 3.4 8.3 211.7 202.9 290.0
Current Ratio 1.0 1.3 1.2 1.2 1.1 1.2 1.4 1.6 1.7 1.9

10.2 MSETCL

10.2.1 Historical performance


MSETCL is currently operating under a regulated regime. The performance is governed by the normative
parameters approved by MERC. MSETCL is allowed to recover return of 15.5% on equity investment
from FY2013-14 as per MYT Regulation 2011. Till FY2012-13 the Return on Equity (ROE) allowed by
MERC was 14%.
Historical P&L statement, balance sheet and key ratios of MSETCL are as shown below:
P&L (All figures
FY07 FY08 FY09 FY10 FY11 FY12
in INR Mn.)
Income
Net Revenue
from 14,229 15,711 18,699 15,997 20,978 23,147
Operations
Other Income 398 810 674 1,084 505 3,063
Expenditure
O&M expense 6,764 6,690 11,403 8,017 9,535 10,212
Depreciation
& 4,745 4,955 3,217 2,996 3,686 4,221
Amortization
Interest &
Finance 1,980 2,212 2,561 2,100 2,830 4,191
Charges
Other
-879 -1,242 0 0 229 -1,240
expenses
PBT 2,017 3,906 2,191 3,967 5,202 8,826
Tax 328 1,324 790 1,230 1,908 3,123
PAT 1,699 2,596 1,415 2,737 3,293 5,703
Source: MSETCL audited annual accounts

Balance sheet (All


FY07 FY08 FY09 FY10 FY11 FY12
figures in INR Mn.)
Fixed Assets
Gross Block 90,158 98,853 104,455 115,697 139,186 161,184
Depreciation (-) 48,006 53,181 56,140 58,694 61,721 65,892

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Balance sheet (All


FY07 FY08 FY09 FY10 FY11 FY12
figures in INR Mn.)
Net Block 42,153 45,672 48,315 57,003 77,465 95,292
Capital Work in
9,304 11,749 18,559 30,951 36,840 39,211
Progress
Assets not in use +
Deferred costs + 396 38 51 128 397 538
Intangible Assets
Net Fixed Assets 51,852 57,459 66,924 88,082 114,702 135,041
Total current assets 10,462 18,004 17,763 13,973 12,565 18,253
Total assets 62,314 75,463 84,687 102,055 127,267 153,294

Shareholder's funds
Equity 26,960 26,960 26,960 26,960 26,960 26,960
Reserves and
4,770 7,134 1,405 3,856 7,149 12,853
surplus
Loans 19,412 24,869 28,095 39,664 59,438 78,054
Deferred tax liabilities 0 0 6,580 7,170 8,042 9,399
Current Liabilities 11,172 16,499 21,646 24,405 25,678 26,028
Total liabilities 62,314 75,463 84,687 102,055 127,267 153,294
Source: MSETCL audited annual accounts

10.2.2 Assumptions for the financial analysis


MSETCL submitted the Multi Year Tariff (MYT) business plan for its transmission business to MERC for
the second control period from FY 2011-12 to FY 2015-16. MERC issued order on the business plan on
11-January-2013 approving the Aggregate Revenue Requirement (ARR) including the capital expenditure
and O&M expense for the control period.
Financials including P&L statement, Balance sheet and cash flow statements have been projected for 10
years i.e. FY 2012-13 to FY 2021-22. The projections are based on the estimated peak demand for
Maharashtra, capital expenditure plan of MSETCL, O&M expenses, etc. We have referred the following
documents for the projections:
MSETCL annual reports FY07 to FY12
MYT business plan petition and order for 2nd control period i.e. FY12 to FY1629
STU five year transmission plan for FY13 to FY17
Draft 18th EPS report
O&M expense
MERC in its MYT Regulation 2011 has specified norms for O&M expenses. The norms have been
stipulated on the basis of length of the transmission lines in circuit kilometer and number of bays in the
sub-station.

29
MERC Case No. 137 of 2011, Order dated 11-Jan-2013

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O&M expense for control period FY13-FY16 is as per the approved MERC norms, length of the
transmission lines and number of bays. O&M expense beyond FY16 is projected based on the following
assumptions:
Norms have been escalated at 5.72% in accordance to MERC escalation rates based on WPI and
CPI
Line length has been increased at a rate of 5.44% every year. This is as per five year CAGR for
increase in line length from FY11 to FY16
Number of bays has been projected as 0.45 bays/MW of peak demand. The requirement of 0.45
bays/MW is based on the average requirement for five years i.e. FY12 to FY16.
Based on the above assumptions the base case O&M expense has been projected for 10 years i.e. FY13
to FY22. It has been observed that the disallowance in O&M expense have decreased over a period of
years with MSETCL matching the approved numbers with actual O&M expenses matching the approved
expenses in last 2 years. Therefore, we have considered a scenario where in the future years actual
O&M expenses will be 5% higher than the norms. The projected O&M expense is as below:
FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22
Norms
Lines
(INR/Ck. 32,062 33,518 34,858 36,851 38,959 41,188 43,544 46,034 48,668
Km.)
Bays (INR
1.04 1.12 1.23 1.30 1.38 1.46 1.54 1.63 1.72
Mn./Bay)
Distance of lines & number of bays
Lines (Ck.
43012 46339 49619 52319 55167 58169 61335 64674 68194
Km.)
Bays
11487 12150 12844 14462 15176 16175 17248 18403 19645
(Nos.)
Expense as per norms (INR Mn.)
Lines 1,379 1,553 1,730 1,928 2,149 2,396 2,671 2,977 3,319
Bays 11,919 13,612 15,844 18,860 20,923 23,576 26,579 29,980 33,833
Total 13,298 15,165 17,573 20,788 23,072 25,971 29,249 32,957 37,152
Expense as
per
realistic 13,963 15,923 18,452 21,828 24,226 27,270 30,712 34,605 39,010
scenario
(INR Mn.)

Capital expenditure
MSETCL has estimated the capital expenditure for FY13 to FY16 based on different schemes like
Evacuation (EV), Transformer Additions (TA), Transformer Replacement (TR), Sub-Stations (SS), Life
Extension (LE), Link Lines (LL) and Ancillaries (AN).
MERC after detailed scrutiny approved the capitalization for FY13 to FY16 based on the following
methodology:

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Capital expenditure of only those DPR schemes30 for which in-principal approval has been
granted and the schemes for which in-principal approval request has been submitted was
considered.
The Commission disallowed the schemes for which information regarding project cost was not
provided by MSETCL as well as the consumer funded schemes.
Commission has deducted capital expenditure and capitalization pertaining to the JV schemes
i.e. JPTL and MEGPTCL
In regard to the Non-DPR schemes for which the project cost exceeded INR 10 million were
disallowed. The balances Non-DPR scheme cost was found to be within 20% of the cost of the
DPR schemes, which were approved by the commission.
Capital expenditure beyond FY17 was estimated based on the projected year on year increase in peak
demand. The peak demand was projected for FY18 to FY22 considering EPS growth rate for Maharashtra
on the FY17 peak demand as estimated by STU. Capital expenditure is projected at INR 30 Mn/MW for
FY17 as per as per working group paper for 12th five year plan, which is escalated at 3.5% beyond FY17
as per historical steel index. Capitalization is assumed to be 100% of the last year CWIP and 20% of the
capital expenditure for current year; rest of the 80% capital expenditure for current year is booked as
CWIP.
Based on the above assumptions the projected capital expenditure and capitalization for MSETCL is as
follows:
All figures in
FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22
INR Mn.
Capital
48,950 41,402 39,040 25,475 33,930 48,804 70,686 78,647 87,509 97,420
expenditure
Net
36,505 32,220 37,163 28,775 66,203 36,905 53,180 72,278 80,419 89,491
Capitalization

Depreciation
Depreciation expense for control period FY13 to FY16 is as submitted by MSETCL in its business plan.
Depreciation expense beyond FY16 is calculated at the weighted average rate of depreciation for FY16.
Interest expense
Debt-equity ratio for capital expenditure has been assumed to be 80:20. Loans including repayments
and additions for control period FY13 to FY16 are as per existing loan terms filed by MSETCL in its
business plan. Rest of the loans required to fund the remaining capital are assumed to be funded
through PFC / REC (as assumed by MSETCL in its business plan), loan tenure for such loans is assumed as
10 years.
The interest expense for existing loans is as per the loan agreements while interest expense for new
loans is calculated at 12.25% interest rate as considered by MSETCL.
Interest on working capital is in accordance to MERC norms.

30
Capital expenditure schemes with value of equal to more than INR 100 million are termed as DPR schemes.
For such schemes the licensees have to submit a DPR to MERC for in-principal approval

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Revenues
Total revenue from FY13 to FY16 is as per business plan order, beyond FY16 it is estimated by adding
pre-tax return on regulated equity to total expenses.
For estimating revenues the base case O&M expense projected as per the norms has been considered.
The additional 5% O&M expense is considered to be disapproved by MERC. However, in accordance to
the Regulations 1/3rd of the disapproved O&M expense is considered to be passed on to the consumers
after true-up i.e. after 2 years (usually it takes 2 years for true-up).
Post tax Return on regulated equity is taken as 15.50% in accordance to Regulations. Tax rate is
considered as per the applicable MAT rate (i.e. 20.01% in FY 13 and 20.96% in FY 14 and onwards).
Revenue as per business plan is increased for increase in MAT rate.

10.2.3 Project P&L statement, balance sheet and cash flow statement
The business plan submitted by MSETCL does not consider the capital expenditure and expenses for
proposed solar projects. Therefore, the cumulative financial statements for MSETCL have been
projected by adding up the financial statement of solar projects to the projected financial statements
estimated as per the above assumptions and methodology.
The table below shows the projected cumulative P&L statement, balance sheet and cash flows for
MSETCL:
P&L (All figures in
FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22
INR Mn.
Income
Net Revenue
from 29,556 42,755 50,124 58,333 66,969 74,312 84,615 97,798 112,887 129,536
Operations
Other Income 1,987 2,185 2,262 2,348 3,488 3,871 4,412 5,104 5,897 6,771
Expenditure
O&M expense 11,760 13,963 15,924 18,485 21,895 24,308 27,356 30,803 34,700 39,111
Depreciation &
5,042 11,053 12,872 14,653 17,163 19,881 22,219 25,474 29,437 33,846
Amortization
Interest &
6,389 9,080 11,618 13,843 16,984 18,175 22,426 27,613 32,935 38,397
Finance Charges
PBT 8,352 10,843 11,973 13,699 14,416 15,820 17,026 19,012 21,712 24,953
Tax 1,671 2,273 2,509 2,871 3,022 3,316 3,569 3,985 4,551 5,230
PAT 6,681 8,570 9,463 10,828 11,394 12,504 13,457 15,027 17,161 19,723

Cash flow
(All figures FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22
in INR Mn.)
Cash BF 8,650 0 0 2,756 8,389 13,770 17,673 16,278 12,112 5,751
Project
18,112 28,704 33,953 39,324 45,541 50,560 58,102 68,114 79,533 91,966
Cash Flows
Investment
-26,761 -28,704 -31,197 -33,690 -40,161 -46,657 -59,497 -72,281 -85,893 -97,717
Cash Flows
Cash CF 0 0 2,756 8,389 13,770 17,673 16,278 12,112 5,751 0

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Balance sheet
(All figures in FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22
INR Mn.)
Fixed Assets
Gross Block 197,689 229,909 267,682 297,297 364,566 401,471 454,651 526,929 607,348 696,839
Depreciation 70,934 81,988 94,860 109,513 126,676 146,557 168,776 194,250 223,687 257,532
Net Block 126,755 147,921 172,822 187,784 237,890 254,914 285,875 332,679 383,662 439,307
Capital Work
51,656 60,839 62,769 59,417 27,144 39,043 56,549 62,917 70,007 77,936
in Progress
Assets not in
538 538 538 538 538 538 538 538 538 538
use
Net Fixed
178,949 209,298 236,129 247,739 265,572 294,495 342,962 396,135 454,207 517,781
Assets
Total Current
7,577 9,103 11,329 15,908 22,419 27,286 27,216 24,748 20,341 16,744
Assets
Total assets 186,526 218,401 247,458 263,647 287,991 321,781 370,178 420,883 474,547 534,525

Shareholder's
funds
Equity 29,631 30,982 31,181 31,181 31,181 31,181 31,181 31,181 31,181 33,976
Reserves and
19,533 28,104 37,567 48,395 59,789 72,293 85,750 100,777 117,938 137,661
surplus
Loans 107,426 129,196 148,406 153,535 166,178 187,263 221,950 257,341 293,521 330,614
Deferred tax
9,399 9,399 9,399 9,399 9,399 9,399 9,399 9,399 9,399 9,399
liabilities
Current
20,537 20,721 20,905 21,137 21,444 21,644 21,898 22,184 22,508 22,875
Liabilities
Total liabilities 186,526 218,401 247,458 263,647 287,991 321,781 370,178 420,883 474,547 534,525

10.2.4 Key ratios


Ratios FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22
Operating Indicators
Return on Equity 13.6% 14.5% 13.8% 13.6% 12.5% 12.1% 11.5% 11.4% 11.5% 11.5%
Operating Ratio 62.5% 63.8% 62.5% 61.7% 62.8% 63.9% 62.8% 61.6% 60.8% 60.4%
Net profit margin 21.2% 19.1% 18.1% 17.8% 16.2% 16.0% 15.1% 14.6% 14.4% 14.5%
Capital Adequacy Indicators
Debt-to-Equity
2.0 2.2 2.2 2.2 1.9 1.8 1.8 1.9 2.0 2.0
Ratio
DSCR 1.1 1.4 1.4 1.3 1.4 1.4 1.3 1.2 1.2 1.2
Liquidity Indicators
Accounts
91 76 61 46 46 46 46 46 46 46
receivable days
Self-Financing
0.5 0.7 0.9 1.2 1.2 1.0 0.9 0.9 0.9 1.0
Ratio
Current Ratio 0.4 0.4 0.5 0.8 1.0 1.3 1.2 1.1 0.9 0.7

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Annex 1 Terms of Reference


Consulting Firm
1. An international consulting firm that can supply a team with expertise in power sector engineering
in the transmission subsectors; and economic and financial analysis of power projectswill be
recruited for the PPTA. The firm will also engage a specialist in public-private partnerships in the
power sector. The consulting firm will be selected according to quality- and cost-based selection
procedures, and biodata technical proposals will be requested from short-listed firms. The terms of
reference of the experts are provided below.
Transmission and System Operations Specialist (International, 2 person-months)
2. The Transmission and System Operation Specialist will work closely with the Executing Agencies for
preparation of a DPR for power evacuation system from solar power projects. He would also design
the Renewable Energy Control Center (RECC) for the state-wide management of renewable energy.
The scope of work would include, but not necessarily limited to, the following:
Site reconnaissance to assess and evaluate site conditions, locations for transmission
connectivity (including transmission line route, pooling sub-stations, etc.);
Site validation based upon following criteria: length of transmission lines; pooling substations;
surrounding land uses; site access; land ownership; presence/absence of environmentally
sensitive lands; topography (slope); presence/absence of known cultural resources; special
engineering requirements; and cost.
Technical aspects preparation for DPR and bidding documents
assist EAs in executing power system analyses such as load flow and system stability, taking into
account the specific characteristics of the solar power projects;
Assist the EAs in the choice of a suitable technology for RECC, and develop requirements for
hardware, software and communication equipment;
Propose system concepts to support the grid connected solar project, including the model to
integrate RECC;
Propose technical aspects for DPR, including but not limited to: a preferred design configuration,
mode of procurement and suggested contract package;
Prepare the inputs for special sections of the bid documents such as desired output
specifications for the power evacuation system, performance warranties and related
parameters to be used to ensure desired performance, specifications to shortlist bidders on
technical commercial and financial parameters, special conditions of contract etc;
Provide an estimate of the detailed component wise bill of quantities and prepare total cost
estimates for the preferred configuration that could be used for the bidding document;
Assist the EA to prepare a procurement plan for the transmission components;
Undertake economic and financial analysis to support the project.
3. With support of EAs, the consultant shall produce the DPR including system concept, design
configuration, mode of procurement, implementation plan including phasing, contract package,
detailed cost estimates, economic analysis and financial analysis and special inputs for bid

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documents including output specifications, performance warranties etc by the end of the
assignment.
4. Qualifications: The consultant should possess university bachelor degree in electrical engineering or
system operation; have 5 years of experience in establishing and / or planning for development of
grid operations centers, including the integration of renewable energy generation from diverse
sources such as wind, solar, and biomass. Prior experience in clean energy project financed by
international financial institutions and multilateral development agencies is preferable.
Economics and Financial Specialist (National, 4 person-months)
5. The activities of this position include but are not limited to the following:
Perform economic and financial analysis to determine its economic and financial rate of return
in accordance with ADBs Guidelines for the Economic Analysis of Projects and Guidelines for the
Financial Governance and Management of Investment Projects;
Review, update, and, where necessary, supplement new studies and analyses to estimate
demand and supply;
Carry out sensitivity analysis, and compare the with- and without-project scenarios;
Assess the financial management capacity of Maha Genco and Maha Transco;
Conduct governance assessment, prepare governance enhancement program;
Prepare a socioeconomic and poverty profile of the area of influence, based on a review of
existing studies and surveys of the representative section;
Conduct a qualitative analysis of projects impact on reducing unemployment and poverty, and
specifying gender impacts;
In cooperation with the environment expert, quantify the environmental benefits of
implementing the projects to cater to demand;
6. Qualifications: The consultant should possess a university bachelors degree in economics, finance,
management accounting or business administration, and 10 years of experience in analyzing similar
power sector projects. Prior experience in analyzing projects financed by international financial
institutions is preferable. Knowledge of the Indian electricity sector, the regulatory regime would be
required
Public Private Partnership Specialist (International, 1 person-month)
7. The activities of the position include, but are not limited, to the following:
Assess the legal, institutional and regulatory environment in Maharashtra to establish whether it
is conducive to facilitate PPP investments in the solar power generation projects;
Organize and conduct 2 workshops one within India and another outside India, to create a
platform for interaction between potential investors and Maha Genco.
Assess investor expectations and recommend institutional arrangements to be established in
Maha Genco to facilitate formation and active support to PPP joint ventures;
8. Qualifications: The consultant should have a qualification in business administration, finance,
management accountancy or economics, and 10 years of prior experience in structuring capital
investment projects with public and private partnerships, preferably in the energy sector. Prior
experience in developing concession agreements is desirable.

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9. Reporting Requirements: The firm should submit a draft report after 7 weeks and the final report
after 11 weeks. The report should be in a format that can be incorporated into the report and
recommendation of the President.

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Annex 2 Detailed cost for evacuation system


Cost for 220 kV transmission line
COST
RATE COST
(MILLION
COMPONENTS MEASURE UNITS (MILLION (MILLION
INR) FOR 10
INR) INR)/ KM
KM
SURVEY TREE CUTTING,
0.28 0.028
COMPENSATION
METRIC
TOWER 259 0.067 17.35 1.735
TONS
TOWER ACCESSORIES 0.275 0.028
METRIC
NUT BOLTS 9 0.101 0.909 0.091
TONS
CONDUCTORS KM 61.5 0.164 10.086 1.009
EARTH WIRE KM 10.25 0.035 0.359 0.036
INSULATORS, CONDUCTOR,
HARDWARE, GROUND WIRE 5.046 0.505
ACCESSORIES
SPARES ON ITEM ON (2-7) 3% 1.021 0.102
TRANSPORTATION TO SITE ON (2-8) 5% 1.752 0.175
INSURANCE ON (2-8) 1% 0.350 0.035
TRANSMISSION LINE
FOUNDATION AND SUB 8.405 0.841
SETTING
ERECTION AND STRINGING
ON (2-7,11) 7.50% 3.182 0.318
CHARGES
SERVICE TAX ON (12) 12.36% 0.393 0.039
TOTAL 49.409 4.941

Cost of 132 kV Transmission Line 10 KM


RATE
COST (MILLION
COMPONENTS MEASURE UNITS (MILLION
INR)
INR)
SURVEY TREE CUTTING,
0.28
COMPENSATION
TOWER METRIC TONS 154 0.067 10.318
TOWER ACCESSORIES 0.275
NUT BOLTS METRIC TONS 5.7 0.101 0.5757
CONDUCTORS KM 61.5 0.088 5.412
EARTH WIRE KM 10.25 0.035 0.359
INSULATORS, CONDUCTOR,
HARDWARE, GROUND WIRE 3.363
ACCESSORIES

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RATE
COST (MILLION
COMPONENTS MEASURE UNITS (MILLION
INR)
INR)
SPARES ON ITEM ON (2-7) 3% 0.609
TRANSPORTATION TO SITE ON (2-8) 5% 1.046
INSURANCE ON (2-8) 1% 0.209
TRANSMISSION LINE FOUNDATION
6.505
AND SUB SETTING
ERECTION AND STRINGING CHARGES ON (2-7,11) 7.50% 2.011
SERVICE TAX ON (12) 12.36% 0.249
SUBTOTAL 31.211

Cost for 220 /33 kV substation

RATE (MILLION COST (MILLION


COMPONENTS MEASURE UNITS
INR) INR)
LAND DEVELOPMENT WITH RCC
10.000
WALLS
DEVELOPMENT OF CONTROL
ROOM, STORES SHED, AC 8.500
PLANTS, SUBSTATION
ELECTRIFICATION ON (2) 7.50% 0.638
WATER SUPPLY AND DRAINAGE 3.000
CONSTRUCTION ROADS 2.500
METAL, SPREADS, GI PIPES 2.500
CONSTRUCTION OF CABLE
3.000
TRENCHES
TRANSFORMER OIL COLLECTION
0.700
TANK
SUBTOTAL 30.838
220 KV CIRCUIT BREAKER NO. 4 1.33 5.320
33 KV CIRCUIT BREAKER NO. 3 0.167 0.501
220 KV ISOLATORS NO. 12 0.281 3.372
33 KV ISOLATORS NO. 10 0.044 0.440
220 KV CURRENT
NO. 12 0.253 3.036
TRANSFORMERS
33 KV CURRENT TRANSFORMERS NO. 9 0.027 0.243
220 KV POTENTIAL
NO. 6 0.254 1.524
TRANSFORMERS
33 KV POTENTIAL
NO. 6 0.019 0.114
TRANSFORMERS
220 KV LIGHTNING ARRESTOR NO. 6 0.049 0.294
33 KV LIGHTNING ARRESTOR NO. 6 0.003 0.018

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RATE (MILLION COST (MILLION


COMPONENTS MEASURE UNITS
INR) INR)
POWER TRANSFORMER 220 / 33
NO. 2 8.372 16.744
KV 2* 50 MVA
220 KV TRANSFORMER CONTROL
NO. 2 0.729 1.458
AND RELAY PANEL
220 KV B/C CONTROL AND RELAY
NO. 1 0.313 0.313
PANEL
220 KV B/S CONTROL AND RELAY
NO. 1 0.416 0.416
PANEL
33 KV BS CONTROL AND RELAY
NO. 1 0.073 0.073
PANEL
CONTROL CABLES
TRANSFORMER BAY 2 0.085 0.170
220 KV T/F HV BAY 2 0.126 0.252
220 KV B/C BAY 1 0.088 0.088
220 KV BS BAY 1 0.088 0.088
220 KV PT BAY 2 0.024 0.048
33 KV TRANSFORMER LV BAY 2 0.044 0.088
33 KV BS BAY 1 0.044 0.044
33 KV PT BAY 2 0.011 0.022
220 KV STRUCTURES BAY 4 1.584 6.336
33 KV STRUCTURES BAY 3 0.33 0.990
220 KV EARTHING AND LIGHTING
BAY 4 0.4 1.600
SYSTEM
33 KV EARTHING AND LIGHTING
BAY 3 0.07 0.210
SYSTEM
FENCING 4.500
FIREFIGHTING EQUIPMENT NO 2 0.75 1.500
TRANSFORMER RAIL TRACK NO. 2 0.5 1.000
STATION TRANSFORMER NO. 2 0.378 0.756
AC DISTRIBUTION BOARD NO. 2 0.489 0.978
BATTERY SET BATTERY CHARGER NO. 1 0.47 0.470
220 KV BUS BAR AND
BAY 8 0.75 6.000
INSULATORS
33 KV BUS BAR AND INSULATORS BAY 6 0.08 0.480
SPARES FOR CB, PT, ISOLATOR,
3% 1.785
CT, PT, LA
TRANSPORTATION TO SITE ON (1-27) 5% 3.064
INSURANCE ON (1-27) 1% 0.613
CONCRETE FOR 220 KV
BAY 4 2.2 8.800
FOUNDATION
CONCRETE FOR 33 KV BAY 3 0.5 1.500

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RATE (MILLION COST (MILLION


COMPONENTS MEASURE UNITS
INR) INR)
FOUNDATION
CONCRETE FOR 220 KV PLINTH
BAY 2 0.65 1.300
FOUNDATION
ERECTION CHARGES BAY ON (1-32) 7.50% 5.331
SERVICE TAX ON 33 12.36% 0.659
SUBTOTAL 82.537

Cost of 132/33 kV substation


RATE COST
COMPONENTS UNIT UNITS (MILLION (MILLION
INR) INR)
CIVIL COST
LAND DEVELOPMENT WITH RCC WALLS 7.000
DEVELOPMENT OF CONTROL ROOM, STORES
6.500
SHED, AC PLANTS, SUBSTATION
ELECTRIFICATION ON (2) 7.50% 0.488
WATER SUPPLY AND DRAINAGE 2.500
CONSTRUCTION OF ROADS 2.000
METAL, SPREADS, GI PIPES 2.000
CONSTRUCTION OF CABLE TRENCHES 2.500
TRANSFORMER OIL COLLECTION TANK 0.700
SUBTOTAL 23.688
SUMMARY OF 220/ 33KV SUBSTATION
EXPENDITURE
132 KV CIRCUIT BREAKER NO. 4 0.563 2.252
33 KV CIRCUIT BREAKER NO. 3 0.167 0.501
132 KV ISOLATORS NO. 12 0.155 1.860
33 KV ISOLATORS NO. 10 0.044 0.440
132 KV CURRENT TRANSFORMERS NO. 12 0.103 1.236
33 KV CURRENT TRANSFORMERS NO. 9 0.027 0.243
132 KV POTENTIAL TRANSFORMERS NO. 6 0.086 0.516
33 KV POTENTIAL TRANSFORMERS NO. 6 0.019 0.114
132 KV LIGHTNING ARRESTOR NO. 6 0.032 0.192
33 KV LIGHTNING ARRESTOR NO. 6 0.003 0.018
POWER TRANSFORMER 132 / 33 KV 2* 25 MVA NO. 2 6.624 13.248
132 KV TRANSFORMER CONTROL AND RELAY
NO. 2 0.659 1.318
PANEL
132 KV B/C CONTROL AND RELAY PANEL NO. 1 0.455 0.455

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RATE COST
COMPONENTS UNIT UNITS (MILLION (MILLION
INR) INR)
132 KV B/S CONTROL AND RELAY PANEL NO. 1 0.482 0.482
33 KV BS CONTROL AND RELAY PANEL NO. 1 0.073 0.073
CONTROL CABLES
TRANSFORMER BAY 2 0.085 0.170
132 KV T/F HV BAY 2 0.126 0.252
132 KV B/C BAY 1 0.088 0.088
132 KV BS BAY 1 0.088 0.088
132 KV PT BAY 2 0.024 0.048
33 KV TRANSFORMER LV BAY 2 0.044 0.088
33 KV BS BAY 1 0.044 0.044
33 KV PT BAY 2 0.011 0.022
132 KV STRUCTURES BAY 4 0.891 3.564
33 KV STRUCTURES BAY 3 0.33 0.990
132 KV EARTHING AND LIGHTENING SYSTEM BAY 4 0.325 1.300
33 KV EARTHINING AND LIGHTENING SYSTEM BAY 3 0.07 0.210
FENCING 2.500
FIRE FIGHTING EQUIPMENTS NO 2 0.75 1.500
TRANSFORMER RAIL TRACK NO. 2 0.5 1.000
STATION TRANSFORMER NO. 2 0.378 0.756
AC DISTRIBUTION BOARD NO. 1 0.17 0.170
BATTERY SET BATTERY CHARGER NO. 1 0.232 0.232
132 KV BUS BAR AND INSULATORS BAY 8 0.55 4.400
33 KV BUS BAR AND INSULATORS BAY 6 0.08 0.480
SPARES FOR CB, PT, ISOLATOR, CT, PT, LA 3% 1.226
ON (1-
TRANSPORTATION TO SITE 5% 2.104
27)
ON (1-
INSURANCE 1% 0.421
27)
CONCRETE FOR 132 KV FOUNDATION BAY 4 1.7 6.800
CONCRETE FOR 33 KV FOUNDATION BAY 3 0.5 1.500
CONCRETE FOR 132 KV PLINTH FOUNDATION BAY 2 0.65 1.300
ERECTION CHARGES BAY ON (1-32) 7.50% 3.784
SERVICE TAX ON 33 12.36% 0.468
SUBTOTAL 58.451

Cost for 220 kV bay

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RATE/
AMOUNT
UNIT IN
PARTICULARS UNIT QTY. IN RS.
RS.
MILLION
MILLION
CIRCUIT BREAKER NO. 1 1.33 1.330
ISOLATOR WITHOUT EB NO. 2 0.281 0.562
ISOLATOR WITH EB NO. 1 0.29 0.290
CURRENT TRANSFORMER NO. 3 0.263 0.789
LIGHTENING ARRESTOR NO. 3 0.049 0.147
C&R PANEL FOR LINE SET 1 0.562 0.562
CONTROL CABLE BAY 1 0.146 0.146
STRUCTURE BAY 1 1.584 1.584
EARTHING & LIGHTING BAY 1 0.4 0.400
FIRE FIGHTING EQUIPMENT SET 1 0.2 0.200
BUS BAR AND ISOLATOR BAY 2 0.75 1.500
SUB TOTAL I 7.510
SPARES FOR LA, CT, PT ETC. 3% 0.225
SUB TOTAL II 7.735
CONCRETE FOR FOUNDATION BAY 1 2.2 2.200
TRANSPORTATION TO SITE 5% SUB TOTAL-II 5% 0.387
INSURANCE 1% OF SUBTOTAL II 1% 0.077
ERECTION CHARGES (@ 7.5% ON SUB TOTAL-I &
0.728
ITEM NO. 13)
SERVICE TAX ON ERECTION CHARGES SR.NO. 15 12.36% 0.090
TOTAL 11.218

Cost for 132 kV bay

RATE/
AMOUNT IN
PARTICULARS UNIT QTY. UNIT IN RS.
RS. MILLION
MILLION
CIRCUIT BREAKER NO. 1 0.563 0.563
ISOLATOR WITHOUT EB NO. 2 0.155 0.310
ISOLATOR WITH EB NO. 1 0.164 0.164
CURRENT TRANSFORMER NO. 3 0.103 0.309
LIGHTENING ARRESTOR NO. 3 0.032 0.096
C&R PANEL FOR LINE SET 1 0.422 0.422
CONTROL CABLE BAY 1 0.123 0.123
STRUCTURE BAY 1 0.891 0.891
EARTHING & LIGHTING BAY 1 0.325 0.325
FIRE FIGHTING EQUIPMENT SET 1 0.2 0.200
BUS BAR AND ISOLATOR BAY 2 0.55 1.100
SUB TOTAL I 4.503
SPARES FOR LA, CT, PT ETC. 3% 0.135

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RATE/
AMOUNT IN
PARTICULARS UNIT QTY. UNIT IN RS.
RS. MILLION
MILLION
SUB TOTAL II 4.638
CONCRETE FOR FOUNDATION BAY 1 1.7 1.700
TRANSPORTATION TO SITE 5% SUB TOTAL-II 5% 0.232
INSURANCE 1% of Subtotal II 1% 0.046
ERECTION CHARGES (@ 7.5% ON SUB TOTAL-I
0.465
& ITEM NO. 13)
SERVICE TAX ON ERECTION CHARGES SR.NO. 15 12.36% 0.058
GRAND TOTAL 7.139

Cost for 33 kV bay


RATE/ UNIT
AMOUNT IN RS.
COMPONENT UNIT IN RS. QTY.
MILLION
MILLION
CIRCUIT BREAKER SET 0.167 1 0.167
ISOLATOR WITHOUT EARTHING BLADE SET 0.044 1 0.044
ISOLATOR WITH EARTHING BLADE SET 0.053 1 0.053
CURRENT TRANSFORMER NOS. 0.032 3 0.096
LIGHTENING ARRESTOR NOS. 0.003 3 0.009
CONTROL & RELAY PANELS SET 0.146 1 0.146
POWER & CONTROL CABLES SET 0.045 1 0.045
STRUCTURES SET 0.33 1 0.330
EARTHING & LIGHTING L.S. 0.07 L.S. 0.070
BUSBAR & INSULATORS SET 0.08 2 0.160
SUB TOTAL I 1.120
SPARES FOR CT, PT, LA, ETC. 3% 0.034
SUB TOTAL II 1.154
CONCRETE FOR FOUNDATION L.S. 0.5 1 0.500
TRANSPORTATION TO SITE 5% ON SUB
5% 0.058
TOTAL-II
INSURANCE OF TOTAL 1% ON SUB
1% 0.012
TOTAL-II
ERECTION CHARGES (@ 7.5% ON SUB
0.122
TOTAL-I & ITEM NO. 12)
SERVICE TAX ON ERECTION CHARGES
0.015
SR.NO. 14
TOTAL 1.860

Cost for metering

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RATE/ AMOUNT
COMPONENTS UNIT UNIT IN RS. QTY. IN RS.
MILLION MILLION
INFRASTRUCTURE FOR ABT METERING SYSTEM
ABT METER (WITH MODBUS PROTOCOL) NO. 0.04 12 0.480
DATA CONNECTOR UNIT SET 0.15 1 0.150
CONTROL DESK COMPLETE WITH WIRING NO. 6.00% 1 0.060
COMPUTER AT THE SUBSTATION LEVEL NO. 0.08 1 0.080
PRINTER (LASERJET - A4 SIZE) NO. 0.03 1 0.030
UPS - 1 KVA NO. 0.04 1 0.040
GPS NO. 0.02 1 0.020
CMRI NO. 0.065 1 0.065
CABLE, CONNECTOR AND ACCESSORIES SET 0.03 12 0.360
ENERGY MANAGEMENT & MONITORING SOFTWARE AT
NO. 0.04 1 0.040
SUB-STATION
INSTALLATION CHARGES OF ABT METERING SYSTEM AT
ONE LOC. NO. 0.15 1 0.150
II) S/S HAVING METERS BETWEEN 11-20
SUB TOTAL I 1.475
INFRASTRUCTURE FOR CONNECTIVITY
ROUTER FOR SUBSTATION (CISCO AMKE) NO. 0.15 1 0.150
SWITCH 10/100-8 PORT MANAGEABLE & SNMP NO. 0.015 1 0.015
VOIP EQUIPMENT 2 PORT NO. 0.015 1 0.015
ANALOGUE PHONE EQUIPMENT NO. 0.50% 1 0.005
CABLE AND ACCESSORIES THEREOF SET 0.002 1 0.002
ANTENNA AND MAST SET 0.15 1 0.150
INSTALLATION OF COMPLETE SYSTEM AT ONE LOCATION NO. 0.075 1 0.075
ANNUAL BANDWIDTH CHARGES 0.05 0.050
SUB TOTAL - II 0.462
TOTAL 1.937

Estimate of PLCC Station Equipment for 220 KV System


RATE/ UNIT AMOUNT
COMPONENTS UNIT QTY. IN RS. IN RS.
MILLION MILLION
UPS COMPRISING OF NO. 1 0.129
I) 48 V, 200 AH BATTERY AND 0.0539
II) 48 V, 50 A, BATTERY CHARGES WITH
0.08
D.C. BOARD
MICROPROCESSOR BASED 12/8 LINES EPAX
NO. 1 0.308 0.308
WITH TELEPHONE CABLE AND WIRING ETC.
PUSH BUTTON TELEPHONES NO. 5 0.00044 0.002
PLCC TESTING EQUIPMENT DIGITAL SIGNAL
L.S. 0.55 0.550
LEVEL METER, DIGITAL SIGNAL LEVEL

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RATE/ UNIT AMOUNT


COMPONENTS UNIT QTY. IN RS. IN RS.
MILLION MILLION
OSCILLATOR, OSCILLOSCOPE WITH ALLIED
ASSORTMENT ETC.
SUB TOTAL-I: 0.989
SPARES @ 3% ON SUB TOTAL-I 0.030
SUB TOTAL-II: 1.019
TRANSPORTATION 5% SUB TOTAL-II 0.051
INSURANCE @ 1% ON SUB TOTAL-II 0.010
COST OF INSTALLATION, TESTING &
7.50% 0.074
COMMISSIONING @ 7.5% ON SUB TOTAL-I
SERVICE TAX ON ITEM 7 12.36% 0.009
TOTAL 1.163

Cost Estimate of PLCC Line Equipment on One End of 220 KV Transmission Line
RATE/ UNIT
AMOUNT IN
EQUIPMENT QTY. IN RS.
RS. MILLION
MILLION
WAVE TRAP 1250 A/0.5 MH THREE CONNECTING CLAMPS 2 0.227 0.455
COUPLING CAPACITORS FOR 220 KV 2 0.177 0.354
CO-AXIAL CABLE 75 OHMS UNBALANCED 0.5 KM 0.095 0.048
TWIN CHANNEL CARRIER SET 1 0.583 0.583
PROTECTION COUPLER DOUBLE CIRCUIT
COUPLING DEVICE FOR PHASE TO PHASE COUPLING (200 W) 1 SET 0.030 0.030
COST OF CIVIL WORKS L.S. 0.015 0.015
SUB TOTAL-I 1.485
COST OF SPARES(@3%) 0.045
SUB TOTAL-II 1.530
TRANSPORTATION, INSURANCE @6% ON SUB TOTAL-II 5% 0.076
INSURANCE @1% OF SUBTOTAL II 1% 0.015
COST OF INSTALLATION, TESTING AND COMMISSIONING
7.50% 0.111
@7.5% ON SUB TOTAL-I
SERVICE TAX (12.36% ON ITEM NO. 10) 12.36% 0.014
TOTAL 1.747

Cost of SCADA system


RATE COST
COMPONENTS UNIT QUANTITY (MILLION (MILLION
INR) INR)
BASE SERVER CUM WORK STATION
COMPRISING PENTIUM PC 2.8 GHZ 1.44
SET 0.400 1.000 0.4
MB FDD 1 GB RAM, 80 GB HARD DISC,
COMBO DRIVE (CD RAM & DVD R/W), 21"

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RATE COST
COMPONENTS UNIT QUANTITY (MILLION (MILLION
INR) INR)
TFT MONITOR, KEY BOARD, MOUSE AND
LICENCED OPERATING SYSTEM
SCADA SOFTWARE SET 2.100 1.000 2.1
BAY CONTROLLER/RTU, GPS CLOCK,
PARALLEL REDUNDANT UPS SYSTEM (MIN SET 3.000 1.000 3
5 HOURS BACKUP)
LAN SWITCH, OPTICAL FIBRE CABLES,
CONTROL CABLES, A3 SIZE PRINTER
SET 0.800 1.000 0.8
(LASERJET, COLOUR), A4 SIZE DOT MATRIX
PRINTER, FURNITURE FOR SCADA SYSTEM
LAPTOP WITH MAINTENANCE SOFTWARE
SET 0.200 1.000 0.2
OF LATEST HARDWARE CONFIGURATION
MISCELLANEOUS SET 0.500 1.000 0.5
TOTAL 7

Miscellaneous cost

COST (MILLION
COMPONENTS
INR)
CONTROL ROOM FURNITURE 1.000
MATERIAL FOR PANTRY 0.250
DISPLAY EQUIPMENT (TV, DISH ANTENNA) 0.050
TOTAL 1.300

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Annex 3 IEGC - Relevant extracts for renewable rnergy


. 5.2 (u) Special requirements for Solar/ wind generators
System operator (SLDC/ RLDC) shall make all efforts to evacuate the available solar and wind power and
treat as a must-run station. However, System operator may instruct the solar /wind generator to back
down generation on consideration of grid security or safety of any equipment or personnel is endangered
and Solar/ wind generator shall comply with the same. For this, Data Acquisition System facility shall be
provided for transfer of information to concerned SLDC and RLDC
(i) SLDC/RLDC may direct a wind farm to curtail its VAr drawl/injection in case the security of grid or
safety of any equipment or personnel is endangered.
(ii) During the wind generator start-up, the wind generator shall ensure that the reactive power drawl
(inrush currents incase of induction generators) shall not affect the grid performance.3. Wind energy
being of variable nature, needs to be predicted with reasonable accuracy for proper scheduling and
dispatching of power from these sources in the interconnected system. Hence wind generation
forecasting is necessary for increased penetration. Wind generation forecasting can be done on an
individual developer basis or joint basis for an aggregated generation capacity of 10 MW and above
connected at a connection point of 33 kV and above. If done jointly, the wind forecasting facility shall be
built and operated by wind developers in the area and sharing of the cost shall be mutually discussed
and agreed.
-----------------------------
5.3 g) The SLDC shall take into account the Wind Energy forecasting to meet the active and reactive
power requirement
---------------------------------
Annexure-1
4. The wind energy forecasting system shall forecast power based on wind flow data at the following
time intervals:
i) Day ahead forecast: Wind/ power forecast with an interval of 15 minutes for the next 24 hours for the
aggregate Generation capacity of 10 MW and above.
ii) The schedule by such wind power generating stations supplying interstate power under longterm
access and medium-term and short-term open access may be revised by giving advance notice to RLDC.
Such revisions by wind power generating stations shall be effective from 6th time-block ,the first being the
time block in which notice was given. There may be maximum of 8 revisions for each 3 hour time slot
starting from 00:00 hours during the day.
5. The wind generators shall be responsible for forecasting their generation upto an accuracy of 70%.
Therefore, if the actual generation is beyond +/- 30% of the schedule, wind generator would have to bear
the UI charges. For actual generation within +/- 30% of the schedule, no UI would be payable/receivable
by Generator, The host state, shall bear the UI charges for this variation, i.e within +/- 30%. However, the
UI charges borne by the host State due to the wind generation, shall be shared among all the States of
the country in the ratio of their peak demands in the previous month based on the data published by
CEA, in the form of a regulatory charge known as the Renewable Regulatory Charge operated through
the Renewable Regulatory Fund (RRF). This provision shall be applicable with effect from 1.1.2011, for
new wind farms with collective capacity of 10 MW and above connected at connection point of 33 KV
level and above, and who have not signed any PPA with states or others as on the date of coming into
force of this IEGC. Illustrative calculations in respect of above mechanism are given in Appendix.

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6. A maximum generation of 150% of the schedule only, would be allowed in a time block, for injection by
wind, from the grid security point of view. For any generation above 150% of schedule, if grid security is
not affected by the generation above 150%,, the only charge payable to the wind energy generator
would be the UI charge applicable corresponding to 50- 50.02 HZ.
7. In case of solar generation no UI shall be payable/receivable by Generator. The host state , shall bear
the UI charges for any deviation in actual generation from the schedule. However, the net UI charges
borne by the host State due to the solar generation, shall be shared among all the States of the country
in the ratio of their peak demands in the previous month based on the data published by CEA , in the
form of regulatory charge known as the Renewable Regulatory Charge operated through the Renewable
Regulatory Fund as referred to in clause 5 above.. This provision shall be applicable ,with effect from
1.1.2011, for new solar generating plants with capacity of 5 MW and above connected at connection
point of 33 KV level and above and , who have not signed any PPA with states or others as on the date of
coming into force of this IEGC. Illustrative calculations in respect of above mechanism are given in
Appendix

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Annex 4 REMC configuration as per POWERGRID report

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Annex 5 Cost details of REMC


Cost of Installation of RTU at 37 locations

SL. ESTIMATED COST


COMPONENT QUANTITY RATES
NO. (RS. MILLION)
SUPPLY OF RTU AND ASSOCIATED
1 37 3.565052 131.91
EQUIPMENT
INSTALLATION, TESTING &
COMMISSIONING OF RTU AND
2 ASSOCIATED EQUIPMENT (GPS, 37 0.259551 9.60
TRANSDUCERS, RTU/DCS) ALONG
WITH CABLE CONNECTIONS
INTEGRATION OF RTU WITH CONTROL
3 37 0.85843 31.76
CENTRE AT KALWA AND AMBAZARI
TOTAL 173.27

Installation of Weather monitoring stations

SL. ESTIMATED COST


COMPONENT QUANTITY RATES
NO. (RS. MILLION)
SENSORS FOR AIR, TEMPERATURE,
1 50 0.27 13.50
WIND, HUMIDITY, IRRADIANCE
TRIPOD STAND WITH IP65 ENCLOSURE
4 FOR ELECTRONICS PARTS AND 50 0.048 2.40
ACCESSORIES
POWER SUPPLY ELEMENT FOR
5 ANALOG MODULE WITH CONNECTING 50 0.019 0.96
CABLES
PERIPHERAL ELEMENT FOR AI
6 50 0.021 1.05
MODULE WITH CONNECTING CABLES
7 BUS INTERFACE MODULE 50 0.017 0.85
8 CONNECTING CABLES 50 0.0094 0.47
9 INSTALLATION AND COMMISSIONING 50 0.088 4.40
10 INTEGRATION WITH CONTROL CENTRE 50 0.022 1.10
TOTAL 24.73

SCADA integration

SL. ESTIMATED COST


COMPONENT QUANTITY RATES
NO. (RS. MILLION)
UNIX PERIPHERAL KIT & SPECTRUM
1 10 0.408495 4.08
LICENSE
2 SPARC ENTERPRISE M3000 SERVER 10 1.494716 14.95
3 24-INCH WIDESCREEN LCD MONITOR 27 0.030145 0.81
4 COLOR LASER PRINTERS A3 + A4 7 0.24229 1.70

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SL. ESTIMATED COST


COMPONENT QUANTITY RATES
NO. (RS. MILLION)
NETWORK READY
HP BW LASER PRINTER A4 NETWORK
5 7 0.035671 0.25
READY
6 EMULATOR SOFTWARE 4 0.30837 1.23
7 ANNUAL MAINTENANCE CONTRACT 3 3.24454 9.73
INSTALLATION OF SOLARIS,
8 SPECTRUM, CUSTOMIZATION OF 1 8.913693 8.91
SETUP, TESTING AND INTEGRATION
TOTAL 41.67

Communication System for data gathering at SLDC


ESTIMATED COST
SL.
COMPONENT QUANTITY RATES (RS.
NO.
MILLION)/YEAR
1 LEASE LINE - - 2.109
MODEM AND OTHER RELATED
2 140 0.005 0.19
CHARGES
TOTAL 2.35

Evaluation of Communication cost for BSNL lease line


ANNUAL RENTAL (64
DISTANCE NUMBER TOTAL
KBPS) IN RUPEES
0-100 KM 16500 7 115500
100-300 KM 30000 11 330000
300-500 KM 40000 11 440000
>500 KM 45000 7 315000
TOTAL 7 115500
RATE IN RS. MILLION 1.2005
RATE FOR 128 KBPS IN RS. MILLION (1.8
2.109
MULTIPLE)

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Annex 6 Organisation structure of MSPGCL

Board of Directors

Managing Director

Company Secy.

Director (Operations) Director (Projects) Director (Finance) E.D. (H.R.)

E.D. (O&M)-I E.D. (O&M)-II E.D. (Proj-I) E.D. (Proj-II) E.D. (F&A.) CGM (HR)
E.D. (C.P.)
Mumbai Nagpur Mumbai Nagpur

CGM (Finance) CGM (Tech.)


CE (Works) CE, CSTPS CE (P&P) CE KPKD Proj. CE (C.P.)

CE, CEHSU CE Kkhda TPS CE (PMG) CE BSL Proj.


CE (RCD) CGM (TRD.)
CE, FMC CE, Paras TPS CE (Civil-I) CE (GC) Koradi

CE, Stores CE BTPS CE Cpur Proj. CGM (Accounts) CGM (Security)

CE, (Civil-III) CE Koradi TPS CE (Civil)


CGM (Int. Aud)
Chief Fire Officer CE (Civil-II)

CE, (Hydro)

CE Parli TPS

CE NSK TPS

CE Uran GTPS

CGM (I.T.)

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Annex 7 MSPGCL authorized signatories in the bank accounts


Cheque signing power - Single

Name of employee Designation Cheque signing limit


Mr. S. M. Madan CGM (F) INR 100 Mn.
Mr. S.K. Labde CGM (A/c) INR 100 Mn.
Mr. D.C. Patil GM (F) INR 10 Mn.
Mr. V.S. Chitlange GM (HO A/C) INR 10 Mn.
Ms. Dipti Gaimar Chief Manager (IF) INR 2.5 Mn.
Mr. Nitin K. Suryawanshi Sr. Manager (WM & Cash) INR 1 Mn.

Cheque signing power - Jointly


Name of employee Designation Cheque signing limit
Mr. S. M. Madan CGM (F)
Jointly with
Mr. D.C. Patil GM (F) INR 500 Mn.
Or
Mr. V.S. Chitlange GM (HO A/c)
Mr. S. M. Madan CGM (F)
Jointly with
Ms. Dipti Gaimar Chief Manager (IF) INR 250 Mn.
Or
Mr. Nitin K. Suryawanshi Senior Manager (WM & Cash)
Mr. D.C. Patil GM (F)
Or
Mr. V.S. Chitlange GM (HO A/c) INR 50 Mn.
Jointly with
Mr. Nitin K. Suryawanshi Senior Manager (WM & Cash)
Ms. Dipti Gaimar Chief Manager (IF)
Jointly with
Mr. Nitin K. Suryawanshi Senior Manager (WM & Cash) INR 10 Mn.
Or
Ms. Supriya S. Bagwe Manager (WM)

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Annex 8 Organisation Structure of MSETCL

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Annex 9 Existing PPP models in Maharashtra


Historically, Maharashtra has seen the presence of private sector throughout the value chain. In recent
times the private sector has participated under various PPP routes across the various business segments
as discussed below.
Generation

Source: CEA monthly reports

MSEDCL is the first distribution license in India to procure power under Case-1 route even before the
Ministry of Power issued detailed guidelines in accordance with the National Tariff Policy 2005.
MSEDCL has conducted two Case-1 bids for long-term procurement and one Case-1 bid for medium-
term procurement. The bidders were required to quote tariffs for different components of capacity and
energy charges. Based on the quoted tariffs, a levelized tariff is calculated for the term of the PPA. The
Bidder with the lowest Levelized Tariff is declared as the Successful Bidder for the quantum of power (in
MW) offered by such Bidder in its Financial Bid.
Transmission
Utility (as on
Transformation Capacity
31st March Sector Line length (Ckt KM)
(MVA)
2012)
MSETCL State 39872 89178.5
Tata Power Private 962 8254.5
Rinfra Private 500 2600
-
JPTL JV between MSETCL and JSW 330
(s/s owned by MSETCL)
Source: Respective Transmission Companys business plan

Maharashtra State Electricity Transmission Company Limited (MSETCL) was the first State Transmission
Company in India to form a Joint Venture (JV) company with the private sector (JSW Energy Limited) in

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2008. Subsequently, MSETCL has entered into two more JVs with Adani Power Limited and Indiabulls
Realtech Limited. These evacuation schemes are associated with the upcoming generation projects of
the concerned private developer and were the natural choices to be the JV partner for the transmission
project. The private companies are the majority stakeholders in all these JV companies.
JV Company Equity contribution Line length (Ckt. Km.)
JPTL JSW Energy Limited: 74%, MSETCL: 26% 330
APML Adani Power Limited: 74%, MSETCL: 26% 438
SPTCL Indiabulls Realtech Limited: 74%, MSETCL: 26% 112
APTCL Indiabulls Realtech Limited: 74%, MSETCL: 26% 222
Source: Respective Transmission Companys business plan

Distribution
Maharashtra is one of the few states in India to have both private and state government controlled
distribution companies.
Sector Licensed area (Sq. km.) Sales in MUs Consumers in Mn
MSEDCL State 3,08,000 74,947 19.3
Tata Power Private 485 5,811 2.65
Reliance Private 400 6,387 2.8
BEST Corporation 70 4,286 1.0
Source: Business plan and tariff petition of respective distribution companies for FY2012

Maharashtra is the first state in India to successfully award a Distribution Franchise in Bhiwandi. It has
further awarded two more distribution franchisees in Aurangabad and Nagpur area.
Selection is based on the annualised Input Rates for power injected by MSEDCL at Input Points in the
Franchise Area for the entire term of DFA. The Evaluation of Financial Proposals submitted by the
Bidders, is carried out by comparing the sum of Net Present Value of the Input Rates multiplied by the
Input energy as specified in the bid document for entire term of DFA. The Bidder with the highest Net
Present Value was selected for these franchisees.

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Annex 10 Existing PPP models in solar energy


In the last couple of years Governments of India has taken some major initiative to promote Solar based
power generation in the country and has envisaged 20000 MW of capacity addition by 2022 from solar
based generating sources.
Jawaharlal Nehru National Solar Mission (JNNSM)
JNNSM was launched by Government of India on 24.11.2009. The Mission will be implemented in three
phases as follows:
Target for Phase 1 Target for Phase 2 Target for Phase 3
Application segment
(2010-2013) (2013-2017) (2017-2022)
Off Grid solar
200 MW 1000 MW 2000 MW
applications
Utility grid power
1000-2000 MW 4000-10000 MW 20000 MW
including roof top

There are primarily three schemes for promotion of solar power projects under Phase-I of JNNSM. These
are:
Name of scheme Potential solar power (MW)
Projects Under Migration Scheme 84
Projects Under New Projects Scheme-Batch 1 620
Projects Under New Projects Scheme-Batch 2 350
Roof Top PV & Small Solar Power Generation Programme 98.05

New projects under Phase-1 were allocated to the private sector through a competitive bidding process.
The bidders were required to quote a discount in Rs/kWh on the CERC approved applicable tariff. The
Projects offering the maximum discount in Rs/kWh on the CERC approved applicable tariff were selected
first and so on till the total bid capacity matched the capacity on offer.

Batch I Batch II

Benchmark tariff Tariff range: Rs Benchmark tariff Tariff range: Rs


Rs 17.91 per kWh 10.95 -12.76 /kWh Rs 15.39 per kWh 7.49 -9.44 /kWh

150 MW (including 30 projects worth 27 projects worth


350 MW
migration projects) 150 MW were 350 MW were
selected selected

Maximum size for Maximum size for


PV bid: 5 MW PV bid: 20 MW

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Similar auctions are envisaged under Solar Policies of most states such as Rajasthan, Karnataka, Madhya
Pradesh and Tamil Nadu. The State of Gujarat, which declared a policy prior to JNNSM continued to
award projects on a first-cum-first-serve basis at the feed-in-tariff determined by the State Regulator.
Gujarat solar rooftop project
To promote solar rooftop PV project in the state Government of Gujarat has under taken two pilot
projects of 2.5 MW each were awarded through a competitive tariff bidding process in Gandhinagar city.

Bid Tariff <= Feed-in Tariff


Government pays no subsidy
notified by GERC

Bid Tariff > Feed-in Tariff Government. shall be required to


notified by GERC subsidize the difference

The developer would be developing the projects on rooftops of government building (80%) and private
individual rooftops (20%). The developers would be required to pay green incentive of Rs. 3/kWh for
leasing of rooftop. The power would be sold to Torrent Power which is the local distribution licensee.
The tariffs for solar PV and thermal projects are higher than the tariffs discovered in the Batch I and
Batch II of Phase-1 of the JNNSM bids which were in the range of Rs. 10.95 12.76/kWh and Rs. 7.49
9.41/kWh respectively.
Most of the states have opted for a private sector led development of solar potential in the State, with
State Government allocating projects to the private sector either on a tariff-based competitive bidding
route (e.g., envisaged under the solar policy in Rajasthan, Karnataka, Tamil Nadu, Madhya Pradesh, etc.)
or on a first-cum-first-serve basis under a fixed feed-in-tariff as in Gujarat. MSPGCLs choice of a public
utility-driven approach to solar development has several advantages, as it makes for a more planned
and coordinated approach to solar development in the State. With an effective PPP model, it has the
potential of offering a sound, quality-focused and performance-oriented model for developing the solar
potential in the State.

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Annex 11 Participants of Mahagenco - ADB consultative workshop held on


March 21, 2013

Sr.
Name Organization Category
No.
1 S Ramesh State Bank of India FI
2 Nishant Idnani HSBC FI
3 Umesh Kaushik Sharp Developer
4 Taivchiro Ogura Sharp Developer
5 Bratin Roy TUV SUD Internal
6 Ravi Gupta TUV SUD Internal
7 Anand Jain Kiran Energy Developer
8 Meeta Gupta L&T Infra Finance FI
9 Prasant Sinha L&T Infra Finance FI
10 Arun Kumar Sun Power Corp Developer
11 Vish Iyer Mahindra Developer
12 Firdaus ul Haque Mahindra Solar Developer
13 Dharmarajan N First Solar Developer
14 Kedar Deshpande Astonfield Developer
15 Avinash Mirajicar Solarredirect Energy Developer
16 Akshat Jain Indiabulls Power Developer
17 J Rajaraman Canadian Solar Developer
18 Vinay Shetty Canadian Solar Developer
19 Jay Kumar Vacon Developer
20 Manish Wadhia ICICI Bank FI
21 V K Midha BHEL Developer
22 Om Prakash G Kulkarni BD - Consultant External Consultants
23 Nitin M Sabnis BD - Consultant External Consultants
24 Nikhil Agrawal SBI Capital Market Ltd FI
25 Sachin Patel Reliance Power Developer
26 Taiich Developer
27 Rajat Misra SBICAPS FI
28 Pankaj Sindwani Tata Capital FI
29 M. Prasad L&T Solar Developer
30 Nikhil Sanghani L&T Solar Developer
31 Charu Mathur Schneider Developer
32 Sandip Ghosh Schneider Developer
33 V N Vispute Vacon Developer
34 Manish Karua Adani Power Developer
35 Praveen Hande Lanco Solar Developer
36 Prem Verma Abengoa Solar Developer
37 Mukesh Gurbani Procon Engineers External Consultants

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Sr.
Name Organization Category
No.
38 Asheesh Sharma MD Mahagenco Internal
39 Ajoy Mehta Principal Secretary Internal
40 S.A.M Naqvi Mahagenco, Director Finance Internal
41 C. S. Thotwe Mahagenco, Director Projects Internal
42 Jaikumar Srinivasan Mahagenco, ED Finance Internal
43 V S Patil Mahagenco, ED Corporate Planning Internal
44 Ashok Khonde Mahagenco, CGM Solar Internal
45 Shubash Gupta Mahagenco, EE Solar Internal
46 Mahesh Aphle Mahagenco, PRO Internal
47 Priyadarshan S.B High Chem Internal
48 Gopinath PV High Chem Internal
49 J Srinivasan ADB Internal
50 Antonio Lopez Martinez ADB Internal
51 Debasish Mishra Deloitte Internal
52 Shubhranshu Patnaik Deloitte Internal
53 Amitabh Saha Deloitte Internal
54 Shreyas Mhatre Deloitte Internal
55 Chandra Boreddy Deloitte Internal
56 Umesh Agrawal PWC Internal
57 Business Standard Press Press
58 Maharashtra Times Press Press
59 Sakal Press Press

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Annex 12 Minutes of Meeting Mahagenco-ADB consultative


workshop

Agenda
Stakeholder Consultation Workshop on the PPP Model for Development of upcoming solar projects of
Mahagenco.
Participants
Principal Secretary Energy, Mr. Ajoy Mehta
Mahagenco: Managing Director, Mr. Asheesh Sharma, Director (Finance) and Director (Projects),
ED(Corporate Planning) ED (finance), CGM (Solar), EE (Solar) and other officials
Mr. J Srinivasan and Antonio Lopez Martinez from ADB
Consultants from high-Chem
Deloitte India
34 Participants including leading financial institutions and developers
Key Discussion Points
A half day stakeholder workshop was organized by Mahagenco and ADB to discuss the proposed
performance linked revenue sharing model for implementing the future solar projects of Mahagenco.
The discussion started with Debasish Mishra welcoming the Chief Guest, MD Mahagenco, ADB officials,
Mahagenco official and other dignitaries. Managing Director, Mahagenco delivered the key note and
presented to the group a brief about the company and the achievements of Mahagenco in the solar
sector. He also explained that Mahagenco is proposing to implement all its future solar projects under
the PPP Route which will bring in better efficiency in the development and operation of solar projects
for Mahagenco.
ADB Assistance Program
Mr. Srinivasan, ADB briefly explained a general overview of the Banks overall program in India which
includes lending to both the public and private sector. He also explained the loan assistance program to
Mahagenco and Mahatransco which will be essentially for development of;
Solar PV generation to cater to RPO up to FY2020
Associated evacuation facility
Renewable Energy Management Center at SLDC for all renewable energy.
This will be a blended loan from ADB and Clean Technology Fund Loan and will be a Multi-tranche
facility (3 tranches) from 2013 to 2018. Each tranche will be processed when Maha Genco has land for
construction and has entered into MOU or PPA.
ADBs loan will be a USD loan for 25 years with 5 years grace period and will come at an interest rate of
60 bps spread over six Month USD LIBOR. CTF on the other hand will be very cheap funding for 40 years

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with 10 years grace period and will come at a fixed interest rate of 25 bps. Maha Genco and Maha
Transco are responsible for the interest rate and foreign exchange risks on USD loans.
Sector overview in Maharashtra and policy issues
This was followed by a note by Principal Secretary Energy, Shri Ajoy Mehta on the Renewable Sector in
Maharashtra and the policy issues. Following were his key observations and comments;
a) MSEDCL will procure 100,000 MU in FY13 and this demand is expected to grow at 9% in the
years to come.
b) The RPO obligation for solar is 0.25% currently and will be roughly 250 MU for Mahadiscom. This
will grow in the years to come
c) As a philosophy Government of Maharashtra intends to develop solar capacities in the state
through public sector entities like Mahagenco under the feed in tariff mechanism. In future,
reverse bidding could be called for to discover lower tariffs which can be passed on to the
Consumers. However in the current structure Mahagenco will develop the solar projects which
will help Mahadiscom meet its RPO obligation under current regulatory framework.
d) The proposed PPP model in solar power development intends to improve the efficiency of
generation and de-risk the project development and operation activities
e) Government of Maharashtra and Mahadiscom supports this PPP concept and will sign PPA with
Mahagenco for meeting its Solar RPO obligation.
Technical Details
ADB consultants, high-Chem presented to the group the overall details about the project sites. They
informed that Mahagenco has acquired around 118 Hectares of land at Kaudgaon and is in advance
stage for transfer of 159 Hectares at Gangakhed and 72 Hectares at Baramati. They also informed that
the team had undertaken detailed site visit of the Kaudgaon project. Following are the key observations
of the team;
a) The land area is in three different plots which is generally flat
b) Based on the evaluation of the radiation data the proposed CUF will be 19.43% for Poly
Crystalline technology
c) Water depth of approximately 450 feet - 500 feet
d) The site location is Seismic Zone III and is safe
e) Evacuation is proposed to be undertaken through a 220 kV LILO line at site
Mr. Srinivasan, ADB clarified that equipment can be only procured from ADB member countries.
Following comments/ suggestion were received from the participants;
a) Can a weather station be setup at site so that the bidders can get actual site date and can apply
correction factors on historical data?
b) Will there be any cap on installed capacity in MW or minimum requirement of CUF or will
generation be the only qualification parameter?
c) Is the proposed capacity an AC or DC capacity?

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d) Will Mahagenco consider deemed generation for non-availability of transmission system?


e) Will this bid process have any restriction on the technology?
f) Clear contour maps will be required at the bidding stage
Business Model
Debasish Mishra, Deloitte presented the details of the overall Business model for the upcoming solar
project of Mahagenco. He explained that Mahagenco will own the solar plant and the developer will be
responsible for design, construction, procurement operation and maintenance. In addition he will also
part finance the project. The developer will receive a part of the capital cost on COD of the plant from
Mahagenco. The balance cost including O&M will be received through a revenue share over the life of
the project. This will ensure that the bidder will be a responsible stakeholder and committed to the
project. Mahagenco is considering two models for evaluation
a) Staggered Revenue share
b) Fixed revenue share through the life of the project
As Mahagenco will be owner of this project it will be claim the tax depreciation on the assets.
Based on the overall framework following were the key comments / suggestion received from the
participants;
a) Will lenders to the private developers have any charge on the assets? The Financial institutions
further clarified that charge only on the receivables will be considered as unsecure and charge
on assets in case of default will be required.
b) Instead of revenue sharing model can we have a profit sharing model where both parties get
depreciation benefit
c) Will the private developer be paid even if the distribution company doesnt pay timely to
Mahagenco
d) There was a suggestion that termination payments in the PPA should cover atleast the debt
outstanding for this project
e) There should be penalty on Mahadiscom for not meeting RPO targets
f) There should be predetermined incentive and disincentives mechanism in the bid document
g) Bankers suggested that heavy front loading and back loading should not be allowed in the bid.
There should be cap on maximum and minimum revenue share quoted in the bid
Selection Criteria, Security & Protection Arrangements
Shubhranshu Patnaik, Deloitte presented the key thoughts on the Selection criteria and the security and
protection arrangements for this project. He presented to the group a comparison of various
qualification criteria, technical and financial requirements and security arrangement of JNNSM,
Maharashtra Sakri project and solar bid process of other states.
ADB clarified that the proposed bid process will be a single block for each project site. MD, Mahagenco
and ADB also clarified that the proposed bid process will be a two stage two envelop to allow
simultaneous approval of ADB loan.
Following were the key comments / suggestion received from the participants;

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a) Will a consortium be allowed to meet the technical and financial qualification for this project
b) Financial qualification for the bidders should be in proportion to the investment requirement of
the developer
c) Who will bear the risk of solar radiation?
d) Will there be an EMD required for participating in the Bid process?
e) Will the bid be floated project wise or a consolidated bid for the entire capacity be floated by
Mahagenco?
f) What will be dispute resolution mechanism for this project
g) MD Mahadiscom wanted the evaluation process and the PPA to be kept simple without many
complications. He was also of the view that there should be a cap on maximum generation from
a project, so that Mahadiscom is not forced to purchase power more than its RPO requirement
Managing Director, Mahagenco thanked everyone for attending the workshop. He informed that the all
the presentations will be hosted on Mahagencos website and requested the participants to submit
written comments within next 15 days.

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Annex 13 Comments on MSPGCLs PPP model for proposed solar projects


Sr. Comments Received MSPGCL Response
No.
Proposed Public Private Partnership (PPP) model
1. Stakeholders had varied recommendations: MSPGCL considers the current PPP model as
a) Withholding 50% payment to be paid an improvement over pure EPC based model.
by MSPGCL over 25 years is too long a It adequately shares risks and returns
period for a contractor to realize. The between MSPGCL and developer.
model proposed is hybrid i.e. EPC As explained during the workshop dilution of
contractor cum Developer. Consider MSPGCL ownership towards the private
inviting bids based on (a) pure EPC developer is not envisaged under this model
contract basis or (b) pure developer
basis.
b) If it is on pure EPC basis, then
responsibility to fund 100% of the
Project should rest with MSPGCL and
majority of payment (except normal
retention amounts) be paid during
construction & the remaining paid
within one year of COD
c) If pure developer model is proposed,
then allow developer to take the
responsibility of financing who gets
paid based on energy delivered
(similar to the bids being invited by
MNRE under JNNSM)
d) In case MSPGCL still prefers to take
hybrid approach, the Selected Bidder
may form Joint Venture with MSPGCL
in a separate SPV. In this way the
Selected Bidder and MSPGCL shall
have ownership over the asset in
proportion of their shareholding in
SPV to facilitate smooth financing of
the project.
2. MSPGCL has proposed to release a certain Under this model MSPGCL is looking at
percentage of capital cost (around 50%) on private developers who would be committed
successful commissioning of the project and to the project and would prefer a long term
balance amount to be paid on the revenue association. This would ensure that the
sharing basis for the entire life of the project quality of the project is maintained.
(say 25 years). Stakeholders have
recommended that revenue sharing for entire
life is too long period for the EPC contractor.
Stakeholders have requested MSPGCL to
consider the payment period for maximum

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Sr. Comments Received MSPGCL Response


No.
tenure of five years (by the way of revenue
sharing or up-front release of payment). This
will not only ensure the long term interest of
the contractor as required by MSPGCL but also
ensure establishment of performance
parameters (w.r.t. to output) of the plant in
the period of five years.
3. The project developer will have to adhere to MSPGCL is currently proposing a CUF based
provisions regarding a minimum electricity performance measure in this model.
generation from the solar power project.
The stakeholders recommended that the
performance criteria should be based on the
Performance Ratio (PR) of the plant and not
on CUF or generation.
CUF or generation of a solar plant is
dependent on the GHI for a particular
location. Since the land is being allotted by
MSPGCL, only technology and its availability is
under developers scope.
4. ADB is considering funding of approximately Currently MSPGCL is seeking Governments
USD 500 Million. approval for funding these projects and the
a) Is this funding for the first phase of same will be finalized in due course.
the project or the entire capacity of Currently the funding from ADB is in a
500 MW planned by MSPGCL? proposal stage. ADB has appointed Project
b) Is the agreement with ADB to fund Preparatory Technical Assistance consultants
500mn USD firm or in-principle? to review these projects.
c) Is the funding from ADB confirmed?
As per the document issued by
Maharashtra State Power Generation
Co. Ltd. (Discussion note on
development of solar power projects
under PPP mode), ADB is
considering funding.

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Sr. Comments Received MSPGCL Response


No.
5. Developer and MSPGCL should work on a The suggestion is noted. MSPGCL will
band of CUF wherein: appropriately accommodate this concern
a) If the CUF drops lower due to reasons
attributable to the developer, the
developer shall be penalised to the
tune of 100% of the revenue loss.
b) Anything above the CUF band shall be
the shared in 90:10 ratio with higher
share to the developer.
c) If CUF is within the decided band then
the revenue shall be shared 50:50 by
both parties.
The CUF band shall move lower by the panel
deration factor % y-o-y.
6. Pursuant to the aforementioned point, the The suggestion is noted. MSPGCL will
EPC player has to adhere to provisions appropriately accommodate this concern
regarding a minimum electricity generation
from the solar power project. Accordingly, if
the CUF is less than 18%, EPC player shall be
liable to a penalty to the extent of 100% of the
loss in revenue.
It is suggest that in case of lower insolation
and generation, there could be a proportional
adjustment to the revenue proposed to be
shared with the developer instead of
imposition of additional penalty.
7. All the risk is passed to the Developer, MSPGCL is responsible for acquisition of the
however profit is shared land, achieving approvals & clearances,
signing of PPA. The developer is responsible
for construction and O&M. MSPGCL proposes
to share capital cost and revenues with the
developers.
The proposed model adequately shares risks
and returns between MSPGCL and developer
8. Most of the utilities meet RPO in terms of MW As per the RPO regulation in Maharashtra the
installed and consequently approval is quantum of purchase obligation from
provided in terms of MW. Keeping the MW Renewable sources are proposed as
open ended by MSPGCL for its upcoming percentage of the total power purchase.
project may not be practical The Capacity of the plant will be guided by
the terms of the PPA to be signed with
MSEDCL.
9. As the State Generation Utility, MSPGCL can For the Kaudgaon project MSETCL will be
effectively bear the responsibility for responsible for developing the transmission
evacuation of power including right of way till system till the plant bus bar. Power

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Sr. Comments Received MSPGCL Response


No.
MSETCL substation. The metering for the evacuation including metering and billing will
purpose of billing and payment may be carried happen at the periphery of the generation
out at plant boundary. project.
10. In a conventional project financing situation MSPGCL will appropriately address this
for an IPP solar project, lenders are typically concern and consider suitable security for
given assignment rights on the PPA, land and bidders lenders by way of charge on the
equipment for the plant during the duration of assets.
the loan. In the proposed structure, prima
facie this will not be possible and financial
institutions have expressed concerns
regarding risks faced by them in lending to
developers without such security. It would be
crucial to incorporate mechanism(s) such as
inter-creditor agreement between ADB and
developers lenders to grant them first lien on
the asset and land in case of default, to
address these concerns.
General bid conditions
11. In order to ascertain the capabilities of EPC The suggestion is noted. MSPGCL will review
contractor the various stakeholders the same while preparing the bid document.
recommend to insert the following in the
tender document:
Technical Qualification
a) Experience of developing at least one
solar project minimum 5 MWp to
qualify for 25 MW, 10 MWp to qualify
for 50 MW and so on.
b) Experience of developing and
financing solar PV projects of
minimum capacity of 15 MW in India
and operating at least one project of
minimum 5MW capacity successfully
in India for one year
c) The EPC contractor must have
executed more than 100 MV of Grid
Connected Solar PV projects as on
January 01, 2013
Financial qualification:
a) The EPC contractor should have
minimum turnover of Rs. 10000 Crores
and
b) Networth of the project would be Rs 8
Crore/MW up to 25 MW project and
Rs 7 Crore/ MW for capacity > 25 MW.

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No.
12. Stakeholders had varied recommendations for MSPGCL is only considering single block bid
single and multiple block process: process for the proposed solar projects.
a) Single block bid process: block should
have a maximum capacity of 50 MW.
b) Multiple block bid process: Minimum
and maximum size of award to a
single developer as 10 MW and 25
MW respectively.
13. It is recommended to have a performance The suggestion is noted. The value of
guarantee of Rs 50 lakh / MW Performance Guarantee will be finalized
during drafting of the bid document
14. MSPGCL is considering two options of revenue The suggestion is noted. Currently, MSPGCL is
share fixed revenue share for 25 years and reviewing both the options and will choose
variable revenue shares every 5 year block. the final option while drafting the bid
Stakeholders recommend the fixed documents.
percentage revenue share model as it would
simplify the overall program and more
importantly ensure that the interests of
developer are aligned to those of MSPGCL
over entire term of the Power Purchase
Agreement.
15. MSPGCL will acquire land and obtain The estimated timeline for achieving COD of
necessary clearance for this project. the project will be finalized while drafting the
a) What will be the time frame available bid documents. However under ideal
to the developer for COD after condition the same may not be more than 12-
handing over the land? 18 month from the date of issue of notice to
b) May please address the situation, if proceed.
the land is not handed over by the
time construction is due to start All issues related to achievement of project
c) Please clarify, whether Boundary wall, milestone will be discussed in details and
Area Grading, Drainage survey, will be addressed in the bid document
under MSPGCLs scope?
d) Site enabling surveys like Topography
and Geological surveys are under
whose scope?
16. MSPGCL will also coordinate with MSETCL for MSETCL will develop the transmission system
evacuation of power from the project site to from the plant site. MSPGCL will follow up,
the state grid. and coordinate the development of the same
a) Please elaborate coordinate. with MSETCL.
Developing Transmission Line is under Delays in development of the transmission
whose scope? corridor will be handled as per the regulatory
b) What if the evacuation facility is ready framework in the state of Maharashtra
by the time project is ready to
commission? Will the project be

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Sr. Comments Received MSPGCL Response


No.
allowed for deemed generation?
17. The provision for construction power and This will be evaluated while drafting the bid
construction water may be included in document
MSPGCLs scope.
Payment and payment security mechanism
18. The revenue sharing model suggests that part MSPGCL will be making the payment based
payment will be made to developer towards on the milestone. The payment schedule and
capital cost during construction and after milestones will be finalized while preparing
commissioning of the plant. It is the bid document
recommended that MSPGCL disburse the up-
front corpus payable to the successful
developer in a phased manner beginning with
issue of LOA through to commissioning with
the following milestones:
Milestone % of Corpus
Signing of LOA 20%
Completion of module
10%
structures foundations
Erection of module
10%
structures
Delivery of modules,
inverters and Switchyard 30%
equipment at site
Installation of modules
10%
and inverters
Installation of switchyard
10%
and other plant civil works
Commissioning and Final
10%
Acceptance Test
19. As per the Performance-linked Revenue MSPGCL is considering fixed payment of upto
Sharing Model proposed, the project 50% of the EPC cost.
developer shall receive 50% of his EPC cost MSPGCL will finalize the EPC cost based on
upfront on achieving successful commercial MERC benchmarks for capital cost.
operation. The bidder will receive the rest of The fixed amount paid by MSPGCL
his payment as a share of revenue over the life progressively till commissioning of plant will
of the project. be same irrespective of the capital cost
The upfront payment that the developer incurred by the developers.
receives at COD may be lowered to 25% of the
EPC cost and the balance 75% could be
received as a share of revenue over the life of
the project. This will help MSPGCL execute
more projects, does away with their need to
raise large amount of capital and also helps

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No.
attract credible developers for the project.
Please alsp clarify/ provide the reference
Project Cost for this purpose
20. Tariffs for projects achieving COD post FY13 The procurement schedule will be intimated
will be as determined by MERC through to the bidders once the bid documents are
separate tariff order. developed by MSPGCL. Applicability of MERC
Please clarify that the present tariff of MERC tariff will depend on the implementation
will be applicable for projects achieving COD schedule. The same will be provided in the
after FY13, or, clarify the applicable tariff, bidding document.
prior to bid submission.
21. Will ADB enter into a direct agreement with ADB will lend to Government of India which
the developer? will be allocated to MSPGCL and MSETCL
a) In case of payment default by MSPGCL under the budgetary allocation of
to developer, provisions should be Government of Maharashtra.
available to the developer to sell
power to third parties.
b) In case of payment default by
MSPGCL, will ADB step in to continue
operations and provide the payment
to the developer?
22. Given the fact that a substantial payment for MSPGCL will appropriately address this
the development cost is proposed to be concern and consider suitable security for
recovered through revenue share over the bidders lenders by way of charge on the
operating life of the project. This will be tough assets. MSPGCL is considering payment
for developers to get the project funded as the security in the form of LC and / or Escrow
remaining payment is also huge and is divided arrangement in favor of the developers.
into life time of the project which is 25
(twenty five) years and arranging funding by
the developer will be difficult as usually the
tenure of loan is around 12 years for solar PV
projects.
The Developers Lender will seek charge on the
assets including land for this proportion of
project cost.
MSPGCL should provide a six month revolving
letter of credit to developer in case of delayed
payment or non-payment.
23. The bid documents can contain a direct Kindly refer to the presentations during the
agreement providing for such provisions on a workshop uploaded on MSPGCL website.
pari-passu basis with MSPGCLs lenders for the www.MSPGCL.in
project.
What is the tenure of loan from ADB to
MSPGCL? If the agreement for payment

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Sr. Comments Received MSPGCL Response


No.
security is to be done with ADB, who
guarantees the security post loan tenure is
over?
Document does not explicitly mention the
loan tenure from ADB. Also it does not
mention about the tenure for which the
agreement between ADB, MSPGCLs lender
and the developer
24. We propose MSPGCL to kindly make the MSPGCL is evaluating different model for
remaining payment (revenue sharing) into two revenue sharing. The same will be finalized
slabs i.e. equal installments for the first 12 while drafting the bid document.
(twelve) years, and different percentage of
equal installments for the next 13 (thirteen)
years. So, in order to allot projects based on
the same, discounting factor will be known to
all the project developers and based on the
same, levellized number can be figured out.

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Annex 14 FMA questionnaire MSPGCL


Topic Response Remarks

1. Implementing Agency

1.1 What is the entitys legal status / registration? 100% owned by Government
of Maharashtra

1.2 Has the entity implemented an externally- Yes, it has implemented KfW funding is procured
financed project in the past (if so, please project financed by for 125 MW solar power
provide details)? international funding project being developed
agencies like World Bank at Sakri
and KfW in the past

1.3 What are the statutory reporting requirements Annual reports approved by The Company also
for the entity? the Govt. of Maharashtra submits quarterly
reports to bank about
the progress of the
project being financed

1.4 Is the governing body for the project Yes


independent?

1.5 Is the organizational structure appropriate for Yes


the needs of the project?

2. Funds Flow Arrangements

2.1 Describe (proposed) project funds flow MSPGCL is procuring ADB MSPGCL has shared their
arrangements, including a chart and explanation funding for the first time but experience of fund flow
of the flow of funds from ADB, government and it is likely to flow through from KfW, which is
other financiers. GOI and GOM similar to attached at the end of
other counterpart funding this questionnaire

2.2 Are the (proposed) arrangements to transfer the Yes The response is based
proceeds of the loan (from the government / on the experience with
Finance Ministry) to the entity satisfactory? other counterpart
funding

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Topic Response Remarks

2.3 What have been the major problems in the past Lot of time is taken in MSPGCL has an
in receipt of funds by the entity? meeting the compliance. agreement with KfW
Further, it usually takes 6-8 wherein the amount is
months to receive the directly paid from KfW
amount from the day invoice to the contractor.
is raised by the contractor. MSPGCL has suggested
similar agreement with
Under such case as per the
ADB. In this case the
agreement between
amount is paid within 30
MSPGCL and the contractor;
days
MSPGCL pays to the
contractor within 30 days
through internal accruals,
this effects the cashflows of
MSPGCL

2.4 In which bank will the Imprest Account be Bank of Maharashtra/Bank


opened? of India/Canara Bank

2.5 Does the (proposed) project implementing unit No But the existing F&A
(PIU) have experience in the management of team has experience of
disbursements from ADB? managing funds from
KfW

2.7 Does the entity have/need a capacity to manage MSPGCL does not have the MSPGCL currently
foreign exchange risks? capacity to manage foreign absorbs the gains/losses
exchange risks arising out of foreign
currency variation. The
company proposes to
follow similar approach
for ADB funding as they
feel that hedging cost
will be more than the
net losses

2.8 How are the counterpart funds accessed? Routed through Govt. of
India and Govt. of
Maharashtra

2.9 How are payments made from the counterpart Invoices raised from the
funds? contractor are sent to Govt.
of Maharashtra for
processing of payment

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Topic Response Remarks

2.10 If part of the project is implemented by The organization has


communities or NGOs, does the PIU have the structured reporting
necessary reporting and monitoring features mechanism from the field to
built into its systems to track the use of project the head office. However
proceeds by such agencies? suitable mechanism needs
to be formulated to suite the
requirement.

2.11 Are the beneficiaries required to contribute to Beneficiaries are not


project costs? If beneficiaries have an option to required to contribute to
contribute in kind (in the form of labor), are project costs
proper guidelines formulated to record and
value the labor contribution?

3. Staffing

3.1 What is the (proposed) organizational structure Headed by Director


of the accounting department? Attach an (Finance). Organizational
organization chart. chart is attached

3.2 Identify the (proposed) accounts staff, including Sr. Manager and above level Staffs identified and
job title, responsibilities, educational officers are graduates with their designation are
background and professional experience. Attach minimum 5 years of attached
job descriptions and CVs of key accounting staff. experience

3.3 Is the project finance and accounting function Yes


staffed adequately?

3.4 Is the finance and accounts staff adequately Yes


qualified and experienced?

3.5 Is the project accounts and finance staff trained No Training on ADB
in ADB procedures? procedures needs to be
provided

3.6 What is the duration of the contract with the Most of the staffs are on Some of the data entry
finance and accounts staff? permanent pay roles and are job is outsourced to
with the organization for the external agencies for a
last 20-30 years. period of 2 years which
is renewed periodically

3.7 Indicate key positions not contracted yet, and All positions have been
the estimated date of appointment. contracted

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Topic Response Remarks

3.10 Does the project have written position Yes, it is done for all projects
descriptions that clearly define duties, and will be done for this
responsibilities, lines of supervision, and limits project too
of authority for all of the officers, managers, and
staff?

3.11 At what frequency are personnel transferred? Regional office staff is


usually transferred in 3
years. Staff from HO is not
usually transferred

3.12 What is training policy for the finance and Induction training is
accounting staff? provided during the time of
appointment. Regular
training is provided for
junior level staff. Now as the
SAP is implemented, the
officials are provided with
SAP training

4. Accounting Policies and Procedures

4.1 Does the entity have an accounting system that At present company has
allows for the proper recording of project customized software termed
financial transactions, including the allocation of FABC and is in the process of
expenditures in accordance with the respective implementing SAP
components, disbursement categories, and
sources of funds? Will the project use the entity
accounting system?

4.2 Are controls in place concerning the preparation Yes, MSPGCL has financial
and approval of transactions, ensuring that all scrutiny of orders i.e. pre
transactions are correctly made and adequately auditing, internal auditing
explained? and also auditing of bills

4.3 Is the chart of accounts adequate to properly Chart of account provides


account for and report on project activities and for function wise account
disbursement categories? codes to capture data the
accounting units

4.4 Are cost allocations to the various funding Yes


sources made accurately and in accordance with
established agreements?

4.5 Are the General Ledger and subsidiary ledgers Yes


reconciled and in balance?

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Topic Response Remarks

4.6 Are all accounting and supporting documents Yes


retained on a permanent basis in a defined
system that allows authorized users easy
access?

Segregation of Duties

4.7 Are the following functional responsibilities Yes, done by different


performed by different units or persons: (i) persons. Done by finance
authorization to execute a transaction; (ii) department
recording of the transaction; and (iii) custody of
assets involved in the transaction?

4.8 Are the functions of ordering, receiving, Yes


accounting for, and paying for goods and
services appropriately segregated?

4.9 Are bank reconciliations prepared by someone Yes


other than those who make or approve
payments?

Budgeting System

4.10 Do budgets include physical and financial Yes, both physical and Progress is monitored
targets? financial targets every 6 months and
suitable adjustments
made (both physical and
financial)

4.11 Are budgets prepared for all significant activities Yes, item-wise, section-wise.
in sufficient detail to provide a meaningful tool SAP system has all these
with which to monitor subsequent provisions
performance?

4.12 Are actual expenditures compared to the Every 6 months


budget with reasonable frequency, and
explanations required for significant variations
from the budget?

4.13 Are approvals for variations from the budget Required in advance
required in advance or after the fact?

4.14 Who is responsible for preparation and approval Finance department is


of budgets? responsible for preparation
and approved by board

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Topic Response Remarks

4.15 Are procedures in place to plan project Formats and procedures are
activities, collect information from the units in in place. Proper
charge of the different components, and documentation is done
prepare the budgets?

4.16 Are the project plans and budgets of project Yes


activities realistic, based on valid assumptions,
and developed by knowledgeable individuals?

Payments

4.17 Do invoice-processing procedures provide for: Yes


(i) Copies of purchase orders and receiving
reports to be obtained directly from issuing
departments? (ii) Comparison of invoice
quantities, prices and terms, with those
indicated on the purchase order and with
records of goods actually received? (iii)
Comparison of invoice quantities with those
indicated on the receiving reports? (iv) Checking
the accuracy of calculations?

4.18 Are all invoices stamped PAID, dated, reviewed Yes


and approved, and clearly marked for account
code assignment?

4.19 Do controls exist for the preparation of the Yes. Changes are placed on
payroll and are changes to the payroll properly the website after the
authorized? approval from HR
department

Policies And Procedures

4.20 What is the basis of accounting (e.g., cash, Accrual


accrual)?

4.21 What accounting standards are followed? Companies Act 1956

4.22 Does the project have an adequate policies and Yes


procedures manual to guide activities and
ensure staff accountability?

4.23 Is the accounting policy and procedure manual Yes, new location codes will
updated for the project activities? be created

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Topic Response Remarks

4.24 Do procedures exist to ensure that only Yes. Done by CGM


authorized persons can alter or establish a new (accounts) with approval of
accounting principle, policy or procedure to be Director (Finance)
used by the entity?

4.25 Are there written policies and procedures Yes, accounts manual, DOP,
covering all routine financial management and Employee service regulation
related administrative activities?

4.26 Do policies and procedures clearly define Yes


conflict of interest and related party
transactions (real and apparent) and provide
safeguards to protect the organization from
them?

4.27 Are manuals distributed to appropriate Yes


personnel?

Cash and Bank

4.28 Indicate names and positions of authorized Attached


signatories in the bank accounts.

4.29 Does the organization maintain an adequate, Yes


up-to-date cashbook, recording receipts and
payments?

4.30 Do controls exist for the collection, timely Yes


deposit and recording of receipts at each
collection location?

4.31 Are bank and cash reconciled on a monthly Yes


basis?

4.32 Are all unusual items on the bank reconciliation Yes, Reconciliation is
reviewed and approved by a responsible undertaken by the Divisional
official? Accountant Cash and the
Authorization is done by the
section in charge.

4.33 Are all receipts deposited on a timely basis? Yes, all cheques are
deposited on next working
day

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Topic Response Remarks

Safeguard over Assets

4.34 Is there a system of adequate safeguards to Yes, Insurance are in place


protect assets from fraud, waste and abuse?

4.35 Are subsidiary records of fixed assets and stocks Yes


kept up to date and reconciled with control
accounts?

4.36 Are there periodic physical inventories of fixed Yes, Inventories is done
assets and stocks? every done.
Fixed assets every 3 years

4.37 Are assets sufficiently covered by insurance Not all assets are insured.
policies? Only those assets which are
prone to fire earth quake or
other calamities are insured.
Even the insurance policies
dont cover all kind of risks
and vary for different assets

Other Offices and Implementing Entities

4.38 Are there any other regional offices or executing Regional offices
entities participating in implementation?

4.39 Has the project established controls and Available for all projects.
procedures for flow of funds, financial Will also be done for this
information, accountability, and audits in project
relation to the other offices or entities?

4.40 Does information among the different Yes, periodic formats are in
offices/implementing agencies flow in an place
accurate and timely fashion?

4.41 Are periodic reconciliations performed among Yes


the different offices/implementing agencies?

Other

4.42 Has the project advised employees, Available for all projects.
beneficiaries and other recipients to whom to Will also be done for this
report if they suspect fraud, waste or misuse of project
project resources or property?

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Topic Response Remarks

5. Internal Audit

5.1 Is there a internal audit department in the Yes


entity?

5.2 What are the qualifications and experience of CA/MBA/graduates with Internal audit is
audit department staff? experience in power sector outsourced. The
permanent staff usually
does the monitoring
work

5.3 To whom does the internal auditor report? Director (Finance) and Internal audit committee
Internal audit committee is comprised of board of
directors

5.4 Will the internal audit department include the Yes


project in its work program?

5.5 Are actions taken on the internal audit findings? Yes Audit committee
meeting is held every
month, where the
internal audit team
submits its compliance
report

6. External Audit

6.1 Is the entity financial statement audited The auditors are appointed
regularly by an independent auditor? Who is the by CAG
auditor?

6.2 Are there any delays in audit of the entity? No delays. Usually within 6
When are the audit reports issued? months from end of financial
year

6.3 Is the audit of the entity conducted according to Indian auditing standards as
the International Standards on Auditing? per Companies Act 1956

6.4 Were there any major accountability issues No major issues


brought out in the audit report of the past three
years?

6.5 Will the entity auditor audit the project Entity auditor will audit the
accounts or will another auditor be appointed to project accounts. CAG will
audit the project financial statements? undertake the performance
audit

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Topic Response Remarks

6.6 Are there any recommendations made by the There were


auditors in prior audit reports or management recommendation on non-
letters that have not yet been implemented? maintenance of fixed asset
register and physical
verification of assets. Now it
is done.

6.7 Is the project subject to any kind of audit from CAG will have a
an independent governmental entity (e.g., the supplementary audit
supreme audit institution) in addition to the
external audit?

6.8 Has the project prepared acceptable terms of Done for all projects. Will be
reference for an annual project audit? done for this project too

7. Reporting and Monitoring

7.1 Are financial statements prepared for the Yes, in accordance to


entity? In accordance with which accounting Companies Act 1956
standards?

7.2 Are financial statements prepared for the Project wise statements are
implementing unit? prepared

7.3 What is the frequency of preparation of Quarterly


financial statements? Are the reports prepared
in a timely fashion so as to useful to
management for decision making?

7.4 Does the reporting system need to be adapted Yes


to report on the project components?

7.5 Does the reporting system have the capacity to Yes, SAP system is used
link the financial information with the project's
physical progress? If separate systems are used
to gather and compile physical data, what
controls are in place to reduce the risk that the
physical data may not synchronize with the
financial data?

7.6 Does the project have established financial Yes, systems are in place.
management reporting responsibilities that Whenever new project
specify what reports are to be prepared, what comes it will go through the
they are to contain, and how they are to be same system
used?

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Topic Response Remarks

7.7 Are financial management reports used by Yes


management?

7.8 Do the financial reports compare actual Yes


expenditures with budgeted and programmed
allocations?

7.9 Are financial reports prepared directly by the Formats are available. It will
automated accounting system or are they be done in SAP once totally
prepared by spreadsheets or some other functional
means?

8. Information Systems

8.1 Is the financial management system Yes


computerized?

8.2 Can the system produce the necessary project Yes


financial reports?

8.3 Is the staff adequately trained to maintain the Yes. After the
system? implementation of SAP
adequate training is
provided by the vendor on
use of SAP.

8.4 Does the management organization and Yes


processing system safeguard the confidentiality,
integrity and availability of the data?

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Annex 15 MSPGCL authorized signatories in the bank accounts

Name and designation of staff


Name Designation
Mr. J. K. Srinivasan Director (F)-(On charge) and ED (F&A)
Mr. S. M. Madan CGM (F)
Mr. S.K. Labde CGM (Accounts)
Mr. D. C. Patil GM (F)
Mr. V.S. Chitlange GM (HO A/cs)
Mr. G.M. Uikey GM (CA)
Ms. Siji Jose CM (F)
Ms. D. K. Gaimar CM (IF)
Mr. V.V. Kulkarni CM (CA)
Ms. Smita Chowdhary Sr. Manager (F)
Mr. R. G. Vaspe Sr. Manager (Loan)
Mr. R. Lanjewar Sr. Manager (LIF)
Mr. Nitin Suryawanshi Sr. Manager (WM & Cash)
Mr. S.G. Naik Sr. Manager (SB)
Mr. S.N. Dhotarkar Sr. Manager (HO A/cs)

Cheque signing power - Single


Name of employee Designation Cheque signing limit
Mr. S. M. Madan CGM (F) INR 100 Mn.
Mr. S.K. Labde CGM (A/c) INR 100 Mn.
Mr. D.C. Patil GM (F) INR 10 Mn.
Mr. V.S. Chitlange GM (HO A/C) INR 10 Mn.
Ms. Dipti Gaimar Chief Manager (IF) INR 2.5 Mn.
Mr. Nitin K. Suryawanshi Sr. Manager (WM & Cash) INR 1 Mn.

Cheque signing power - Jointly


Name of employee Designation Cheque signing limit
Mr. S. M. Madan CGM (F)
Jointly with
Mr. D.C. Patil GM (F) INR 500 Mn.
Or
Mr. V.S. Chitlange GM (HO A/c)
Mr. S. M. Madan CGM (F)
Jointly with
INR 250 Mn.
Ms. Dipti Gaimar Chief Manager (IF)
Or

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Name of employee Designation Cheque signing limit


Mr. Nitin K. Suryawanshi Senior Manager (WM & Cash)
Mr. D.C. Patil GM (F)
Or
Mr. V.S. Chitlange GM (HO A/c) INR 50 Mn.
Jointly with
Mr. Nitin K. Suryawanshi Senior Manager (WM & Cash)
Ms. Dipti Gaimar Chief Manager (IF)
Jointly with
Mr. Nitin K. Suryawanshi Senior Manager (WM & Cash) INR 10 Mn.
Or
Ms. Supriya S. Bagwe Manager (WM)

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Annex 16 FMA questionnaire MSETCL


Topic Response Remarks

1. Implementing Agency

1.1 What is the entitys legal status / registration? 100% owned by Government
of Maharashtra

1.2 Has the entity implemented an externally- Yes, it has implemented IFC is a Indian Rupee
financed project in the past (if so, please project financed by JICA and loan
provide details)? IFC in the past

1.3 What are the statutory reporting requirements Annual reports approved by
for the entity? the Govt. of Maharashtra

1.4 Is the governing body for the project Yes


independent?

1.5 Is the organizational structure appropriate for Yes


the needs of the project?

2. Funds Flow Arrangements

2.1 Describe (proposed) project funds flow MSETCL is procuring ADB


arrangements, including a chart and explanation funding for the first time.
of the flow of funds from ADB, government and They are aware that it will
other financiers. flow through GOI and GOM

2.2 Are the (proposed) arrangements to transfer the Yes


proceeds of the loan (from the government /
Finance Ministry) to the entity satisfactory?

2.3 What have been the major problems in the past No


in receipt of funds by the entity?

2.4 In which bank will the Imprest Account be Bank of India


opened?

2.5 Does the (proposed) project implementing unit No The PIU does not have
(PIU) have experience in the management of experience of managing
disbursements from ADB? any counter-part funds.
JICA pays directly to the
contractor. MSETCL
repays the loan amount
to GOM

2.7 Does the entity have/need a capacity to manage MSETCL does not have the
foreign exchange risks? capacity to manage foreign
exchange risks

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Topic Response Remarks

2.8 How are the counterpart funds accessed? No experience in managing Training needs to be
counterpart funds provided for managing
ADB funds

2.9 How are payments made from the counterpart JICA directly pays to the
funds? contractor

2.10 If part of the project is implemented by The organization has


communities or NGOs, does the PIU have the structured reporting
necessary reporting and monitoring features mechanism from the field to
built into its systems to track the use of project the head office. However
proceeds by such agencies? suitable mechanism needs
to be formulated to suite the
requirement.

2.11 Are the beneficiaries required to contribute to No the beneficiaries are not
project costs? If beneficiaries have an option to required to contribute to the
contribute in kind (in the form of labor), are project cost under the
proper guidelines formulated to record and present project scheme
value the labor contribution?

3. Staffing

3.1 What is the (proposed) organizational structure Headed by Director


of the accounting department? Attach an (Finance). Organizational
organization chart. chart is attached

3.2 Identify the (proposed) accounts staff, including Sr. Manager and above level
job title, responsibilities, educational officers are graduates with
background and professional experience. Attach minimum 5 years of
job descriptions and CVs of key accounting staff. experience

3.3 Is the project finance and accounting function The project finance and Still there will be some
staffed adequately? accounting function in not positions left to be filed
staffed adequately.
Recruitment has been done
and the officials are
expected to join in 2
months. This will reduce the
burden of work.

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Topic Response Remarks

3.4 Is the finance and accounts staff adequately Yes, newly recruited
qualified and experienced? accounts officer are qualified
CA/ ICWA, Senior Manager
CA/ ICWA with 5 year
experience. However legacy
staffs with substantial
experience are graduates.

3.5 Is the project accounts and finance staff trained No, they are not as they Training on ADB
in ADB procedures? have not handled ADB fund procedures needs to be
yet provided

3.6 What is the duration of the contract with the Most of the staffs are on
finance and accounts staff? permanent pay roles and are
with the organization for the
last 20-30 years.

3.7 Indicate key positions not contracted yet, and Appointment has been done There might be some
the estimated date of appointment. for lower level (less than more positions left to be
Manager level) and are filed
expected to join in next 2
months

3.10 Does the project have written position Duties of all the employee
descriptions that clearly define duties, are defined including
responsibilities, lines of supervision, and limits financial power limits and
of authority for all of the officers, managers, and authority under the
staff? delegation of power
document issued by
MSETCL.

3.11 At what frequency are personnel transferred? Generally 2-3 years,


However depending on the
competency of the
employee and
organizational requirements
employees may be retained
at some critical position in
the organization

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Topic Response Remarks

3.12 What is training policy for the finance and Induction training is
accounting staff? provided during the time of
appointment. Regular
training is provided for
junior level staff at regular
intervals. Now as the SAP is
implemented, the officials
are provided with SAP
training

4. Accounting Policies and Procedures

4.1 Does the entity have an accounting system that The organization follows the
allows for the proper recording of project Companies Act, 1956 and
financial transactions, including the allocation of the accounting rules
expenditures in accordance with the respective specified as per the
components, disbursement categories, and statutory requirement of the
sources of funds? Will the project use the entity country. In most of the cases
accounting system? expenditures are allocated
under respective project
heads. However in cases
where allocation is not
possible MSETCL follows
standard prudent methods
for allocation of the cost.
MSETCL is also in the
process of implementing the
SAP system which will
further streamline the
process

4.2 Are controls in place concerning the preparation Board has approved the
and approval of transactions, ensuring that all delegation of power (DoP)
transactions are correctly made and adequately for its employees and all
explained? approvals are in line with the
DoP.

4.3 Is the chart of accounts adequate to properly Yes


account for and report on project activities and
disbursement categories?

4.4 Are cost allocations to the various funding Yes


sources made accurately and in accordance with
established agreements?

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Topic Response Remarks

4.5 Are the General Ledger and subsidiary ledgers Yes


reconciled and in balance?

4.6 Are all accounting and supporting documents Yes, all documents are
retained on a permanent basis in a defined maintained in hard copy in a
system that allows authorized users easy systematic manner properly
access? segregated into folders.

Segregation of Duties

4.7 Are the following functional responsibilities Yes, all these functional
performed by different units or persons: (i) responsibilities are given to
authorization to execute a transaction; (ii) different persons in the
recording of the transaction; and (iii) custody of finance department
assets involved in the transaction?

4.8 Are the functions of ordering, receiving, Yes


accounting for, and paying for goods and
services appropriately segregated?

4.9 Are bank reconciliations prepared by someone Yes


other than those who make or approve
payments?

Budgeting System

4.10 Do budgets include physical and financial Annual budget prepared Progress is monitored
targets? include both physical and every 6 months and
financial targets suitable adjustments
made (both physical and
financial)

4.11 Are budgets prepared for all significant activities Yes, item-wise, section-wise.
in sufficient detail to provide a meaningful tool SAP system has all these
with which to monitor subsequent provisions
performance?

4.12 Are actual expenditures compared to the Every 6 months


budget with reasonable frequency, and
explanations required for significant variations
from the budget?

4.13 Are approvals for variations from the budget Required in advance
required in advance or after the fact?

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Topic Response Remarks

4.14 Who is responsible for preparation and approval Finance and account
of budgets? sections is responsible for
preparation and approved
by board

4.15 Are procedures in place to plan project Yes, formats and procedures
activities, collect information from the units in are in place for collection of
charge of the different components, and data from the project units
prepare the budgets? for preparation of the
budget

4.16 Are the project plans and budgets of project Yes, the details are provided
activities realistic, based on valid assumptions, by officials on field. 5%
and developed by knowledgeable individuals? variation does not require
board approval

Payments

4.17 Do invoice-processing procedures provide for: All invoices submitted are


(i) Copies of purchase orders and receiving audited and verified for any
reports to be obtained directly from issuing inconsistency or violation of
departments? (ii) Comparison of invoice terms of contract. Payments
quantities, prices and terms, with those are released only after
indicated on the purchase order and with receiving the confirmation
records of goods actually received? (iii) or work completion report
Comparison of invoice quantities with those from the user.
indicated on the receiving reports? (iv) Checking
the accuracy of calculations?

4.18 Are all invoices stamped PAID, dated, reviewed Yes


and approved, and clearly marked for account
code assignment?

4.19 Do controls exist for the preparation of the Yes. Changes are placed on
payroll and are changes to the payroll properly the website after the
authorized? approval from HR
department

Policies And Procedures

4.20 What is the basis of accounting (e.g., cash, Accrual


accrual)?

4.21 What accounting standards are followed? Companies Act 1956

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Topic Response Remarks

4.22 Does the project have an adequate policies and Yes


procedures manual to guide activities and
ensure staff accountability?

4.23 Is the accounting policy and procedure manual Yes, new location codes and
updated for the project activities? activity will be created

4.24 Do procedures exist to ensure that only Yes. Done by CGM (finance)
authorized persons can alter or establish a new with approval of Director
accounting principle, policy or procedure to be (Finance)
used by the entity?

4.25 Are there written policies and procedures Yes, accounts manual, DOP,
covering all routine financial management and Employee service regulation
related administrative activities?

4.26 Do policies and procedures clearly define Yes


conflict of interest and related party
transactions (real and apparent) and provide
safeguards to protect the organization from
them?

4.27 Are manuals distributed to appropriate Yes


personnel?

Cash and Bank

4.28 Indicate names and positions of authorized CGM (F&A), AGM (F&A), Sr
signatories in the bank accounts. Manager and Managers

4.29 Does the organization maintain an adequate, Yes


up-to-date cashbook, recording receipts and
payments?

4.30 Do controls exist for the collection, timely Yes


deposit and recording of receipts at each
collection location?

4.31 Are bank and cash reconciled on a monthly Yes


basis?

4.32 Are all unusual items on the bank reconciliation Yes, Reconciliation is
reviewed and approved by a responsible undertaken by the Divisional
official? Accountant Cash and the
Authorization is done by the
section in charge.

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Topic Response Remarks

4.33 Are all receipts deposited on a timely basis? Yes, all cheques are
deposited on next working
day

Safeguard over Assets

4.34 Is there a system of adequate safeguards to Yes, Insurance are in place


protect assets from fraud, waste and abuse?

4.35 Are subsidiary records of fixed assets and stocks Yes


kept up to date and reconciled with control
accounts?

4.36 Are there periodic physical inventories of fixed Yes, inventory audit is done
assets and stocks? every half year

4.37 Are assets sufficiently covered by insurance Lines are insured


policies?

Other Offices and Implementing Entities

4.38 Are there any other regional offices or executing MSETCL field office in the
entities participating in implementation? zone will also be monitoring
and coordinating the entire
implementation process.

4.39 Has the project established controls and Yes


procedures for flow of funds, financial
information, accountability, and audits in
relation to the other offices or entities?

4.40 Does information among the different Yes, periodic formats are in
offices/implementing agencies flow in an place
accurate and timely fashion?

4.41 Are periodic reconciliations performed among Yes


the different offices/implementing agencies?

Other

4.42 Has the project advised employees, Available for all projects.
beneficiaries and other recipients to whom to Will also be done for this
report if they suspect fraud, waste or misuse of project
project resources or property?

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Topic Response Remarks

5. Internal Audit

5.1 Is there a internal audit department in the Yes


entity?

5.2 What are the qualifications and experience of CA/ICWA/graduates with Internal audit is
audit department staff? experience outsourced. The
permanent staff usually
does the monitoring
work

5.3 To whom does the internal auditor report? Board of Directors The company does not
have audit committee

5.4 Will the internal audit department include the Yes


project in its work program?

5.5 Are actions taken on the internal audit findings? Yes

6. External Audit

6.1 Is the entity financial statement audited The auditors are appointed
regularly by an independent auditor? Who is the by CAG
auditor?

6.2 Are there any delays in audit of the entity? There were delays before
When are the audit reports issued? but CAG has not taken
strong view and hence it is
not reported in the annual
report

6.3 Is the audit of the entity conducted according to Indian auditing standards as
the International Standards on Auditing? per Companies Act 1956

6.4 Were there any major accountability issues No major issues


brought out in the audit report of the past three
years?

6.5 Will the entity auditor audit the project Entity auditor will audit the
accounts or will another auditor be appointed to project accounts. CAG will
audit the project financial statements? undertake the performance
audit of MSETCL

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Topic Response Remarks

6.6 Are there any recommendations made by the There were


auditors in prior audit reports or management recommendation on non-
letters that have not yet been implemented? maintenance of fixed asset
register and physical
verification of assets.

6.7 Is the project subject to any kind of audit from CAG will have a
an independent governmental entity (e.g., the supplementary audit
supreme audit institution) in addition to the
external audit?

6.8 Has the project prepared acceptable terms of Done for all projects. Will be
reference for an annual project audit? done for this project too

7. Reporting and Monitoring

7.1 Are financial statements prepared for the Yes, in accordance to


entity? In accordance with which accounting Companies Act 1956
standards?

7.2 Are financial statements prepared for the Yes


implementing unit?

7.3 What is the frequency of preparation of Quarterly


financial statements? Are the reports prepared
in a timely fashion so as to useful to
management for decision making?

7.4 Does the reporting system need to be adapted Yes


to report on the project components?

7.5 Does the reporting system have the capacity to Yes


link the financial information with the project's
physical progress? If separate systems are used
to gather and compile physical data, what
controls are in place to reduce the risk that the
physical data may not synchronize with the
financial data?

7.6 Does the project have established financial Yes


management reporting responsibilities that
specify what reports are to be prepared, what
they are to contain, and how they are to be
used?

7.7 Are financial management reports used by Yes


management?

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Topic Response Remarks

7.8 Do the financial reports compare actual Yes


expenditures with budgeted and programmed
allocations?

7.9 Are financial reports prepared directly by the Will happen shortly once
automated accounting system or are they SAP is fully implemented
prepared by spreadsheets or some other
means?

8. Information Systems

8.1 Is the financial management system Yes


computerized?

8.2 Can the system produce the necessary project Yes


financial reports?

8.3 Is the staff adequately trained to maintain the Yes. After the
system? implementation of SAP
adequate training is
provided by the vendor on
use of SAP.

8.4 Does the management organization and Yes


processing system safeguard the confidentiality,
integrity and availability of the data?

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Annex 17 Procurement Capacity Assessment Questionnaire MSPGCL


Specific Assessment and Ratings
Question Answer/Finding Risk
A. ORGANIZATIONAL AND STAFF CAPACITY
A.1. How many years experience does the 25 years Low
head of the procurement
department/unit have in a direct
procurement role?
A.2. How many staff in the procurement Average
department/unit are:
i. Full Time? 7
ii. Part Time? -
iii. Seconded? Consultants on deputation basis
A.3. Does the procurement staff have Yes, All office communication are Low
English language proficiency? undertaken in English
A.4. Are the number and qualifications of Yes Average
the staff sufficient to undertake the
additional procurement that will be
required under the proposed project?
A.5. Does the unit have adequate Yes, there are adequate number of Average
facilities, such as PCs, internet equipment like PCs, photocopy machine
connections, photocopy facilities, printers, internet connections, printers etc., to
etc., to undertake the planned undertake the planned procurement.
procurement?
A.6. Does the agency have a procurement The team has recently participated in a Average
training program? procurement related training program
organized by ADB in New Delhi.
A.7. Does the agency have a Procurement The procurement committee is generally Average
Committee that is independent from the headed by a member Board of Directors
head of the agency? with adequate representation from
different departments like finance, legal,
commercial etc. Incase of large value
procurement process external independent
individuals are also engaged.
A.8. Does the agency have a procurement MSPGCL has procurement department Low
department/unit, including a permanent which handles all project and O&M related
office that performs the function of a procurement activities. For Solar related
Secretariat for the Procurement Unit, and project a special department has been
which serves as the main support unit of formed Solar Power Generation

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the Procurement Committee?? Department (SPGD), this handles all
procurement activities related to solar
projects.
A.9. If yes, what type of procurement does There is separate Solar Power Generation
it undertake? Department (SPGD). They undertake only
procurement of solar related projects.
A.10. At what level does the Chief Engineer (SPGD) Low
department/unit report (to the head of
agency, deputy etc.)?
A.11. Do the procurement positions in the Function of the Department and Job Low
agency have job descriptions, which Description for all the position has been
outline specific roles, minimum technical outlined in the office note no.
requirements and career routes? CE/CP/SPGD/Change of Name/ 148
A.12. Is there a procurement process The procurement process followed is as High
manual for goods and works? per the general procurement manual of
MSPGCL
A.13. If there is a manual, is it up to date The procurement manual is old and is not
and does it cover foreign-assisted upto date. The same doesnt cover foreign
projects? assistance
A.14. Is there a procurement process No
manual for consulting services?
A.15. If there is a manual, is it up to date NA
and does it cover foreign-assisted
projects?
A.16. Are there standard documents in MSPGCL will adapt the ADB standard bid
use, such as Standard Procurement document. This document will be review by
Documents/Forms, and have they been SPGD and the Board of Directors before
approved for use on ADB funded projects? floating the tender
A.17. Does the ToR follow a standard The ToR contains all the essential elements
format such as background, tasks, inputs, like objectives, background, tasks, inputs,
objectives and outputs? and outputs/ deliverable etc. and is
standard across the organization
A.18. Who drafts the procurement SPGD with assistance from technical and Low
specifications? commercial consultants
A.19. Who approves the procurement Board of Director along with the Managing
specifications? Director
A.20. Who drafts the bidding documents? SPGD with assistance from commercial
consultants

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Question Answer/Finding Risk


A.21. Who manages the sale of the SPGD
bidding documents?
A.22. Who identifies the need for CE (SPGD) Low
consulting services requirements?
A.23. Who drafts the terms of reference Consultant and SPGD
(ToR)?
A.24. Who prepares the request for Consultant and SPGD
proposals (RFPs)?

B.1. Is there a referencing system for Yes. They are named as: MSPGCL/Dept Low
procurement files? Name/Tender No.
B.2. Are there adequate resources Yes, All records are adequately stored by Low
allocated to record keeping infrastructure, the centralized department
which includes the record keeping system,
space, equipment and personnel to
administer the procurement records
management functions within the
agency?
B.3. For what period are records kept? 10 years Low
B.4. Are copies of bids or proposals Yes Low
retained with the evaluation?
B.5. Are copies of the original Yes Low
advertisements retained with the pre-
contract papers?
B.6. Is there a single contract file with a Yes Low
copy of the contract and all subsequent
contractual correspondence?
B.7. Are copies of invoices included with Yes Low
the contract papers?

C.1. Has the agency undertaken foreign- Yes. It has made EPC procurement for 125 Average
assisted procurement of goods or works MW solar project at Sakri. The project is
recently (last 12 months, or last 36 funded by KfW. The EPC for the project has
months)? (If yes, please indicate the being awarded to Lanco, Megha, Prithvi
names of the development partner/s and
the Project/s.)

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Question Answer/Finding Risk


C.2. If the above answer is yes, what were Management of EPC vendors and quality of
the major challenges? equipment installed
C.3. Is there a systematic process to Yes, MSPGCL has a detailed planning Low
identify procurement requirements (for a process based on which it identifies the
period of one year or more) procurement requirements
C.4. Is there a minimum period for 3 months Low
preparation of bids and if yes how long?
C.5. Are all queries from bidders replied to Yes
in writing?
C.6. Does the bidding document state the Yes Low
date and time of bid opening?
C.7. Is the opening of bids done in public? Yes Low
C.8. Can late bids be accepted? No
C.9. Can bids be rejected at bid opening? No
C.10. Are minutes of the bid opening Yes Low
taken?
C.11. Who may have a copy of the All the bidders are sent the copy of the
minutes? minutes
C.12. Are the minutes free of charge? Yes
C.13. Who undertakes the evaluation of Consultant and Bid evaluation committee Low
bids (individual(s), permanent committee,
ad-hoc committee)?
C.14. What are the qualifications of the The evaluators should be well acquainted Low
evaluators with respect to procurement with the technology, specific requirement,
and the goods and/or works under evaluation criteria and procurement
evaluation? process. Further he should be also aware
of the financial process and practices.
C.15. Is the decision of the evaluators final Based on the evaluation report submitted Low
or is the evaluation subject to additional to the SGPD the same is forwarded to the
approvals? board of directors for their approval
C.16. Using at least three real examples, 3 months Low
how long does it normally take from the
issuance of the invitation for bids up to
contact effectiveness?
C.17. Are there processes in place for the The primary responsibility of cargo Low
collection and clearance of cargo through clearance is with the EPC developer.
ports of entry? However MSPGCL needs to provide all

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official documents for the same. The
department has dedicated official who
coordinate with the EPC developer.
C.18. Are there established goods Yes, Low
receiving procedures?
C.19. Are all goods that are received Yes Low
recorded as assets or inventory in a
register?
C.20. Is the agency/procurement Yes Low
department familiar with letters of credit?
C.21. Does the procurement department Yes Low
register and track warranty and latent
defects liability periods?

C.22. Has the agency undertaken foreign- No High


assisted procurement of consulting
services recently (last 12 months, or last
36 months)? (If yes, please indicate the
names of the development partner/s and
the Project/s.)
C.23. If the above answer is yes, what NA
were the major challenges?
C.24. Are assignments and requests for Yes Low
expressions of interest (EOIs) advertised?
C.25. Is a consultants selection Yes, Department Heads with Low
committee formed with appropriate representatives from Finance and audit
individuals, and what is its composition (if team from the selection committee
any)?
C.26. What criteria is used to evaluate Technical qualification of the firm Low
EOIs?
C.27. Historically, what is the most QCBS Low
common method used (QCBS, QBS, etc.)
to select consultants?
C.28. Do firms have to pay for the RFP No Low
document?
C.29. Does the proposal evaluation criteria Yes Low
follow a pre-determined structure and is it
detailed in the RFP?

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Question Answer/Finding Risk


C.30. Are pre-proposal visits and meetings Yes Low
arranged?
C.31. Are minutes prepared and circulated Yes
after pre-proposal meetings?
C.32. To whom are the minutes The minutes are distributed to interested
distributed? consultants
C.33. Are all queries from consultants Yes Low
answered/addressed in writing?
C.34. Are the technical and financial Yes Low
proposals required to be in separate
envelopes?
C.35. Are proposal securities required? Yes Low
C.36. Are technical proposals opened in Yes Low
public?
C.37. Are minutes of the technical opening Yes
distributed?
C.38. Do the financial proposals remain Yes high
sealed until technical evaluation is
completed?
C.39. Who determines the final technical Evaluation Committee
ranking and how?
C.40. Are the technical scores sent to all No.
firms?
C.41. Are the financial proposal opened in Yes Low
public?
C.42. Are minutes of the financial opening Yes
distributed?
C.43. How is the financial evaluation Points scored are awarded on the financial Low
completed? bids.
C.44. Are face to face contract No
negotiations held?
C.45. How long after financial evaluation -
is negotiation held with the selected firm?
C.46. What is the usual basis for -
negotiation?
C.47. Are minutes of negotiation taken -

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Question Answer/Finding Risk


and signed?
C.48. How long after negotiation is the -
contract signed?
C.49. Is there an evaluation system for Consultants are directly monitored by the Low
measuring the outputs of consultants? Department heads

C.50. Are advance payments made? No advance payments are made for High
consultancy assignments
C.51. What is the standard period for 30 days after submission of invoice average
payment included in contracts?
C.52. On average, how long is it between Most of the time payments are made in
receiving a firms invoice and making stipulated time of 30 days. However there
payment? are some delays
C.53. When late payment is made, are the No
beneficiaries paid interest?

D.1. Is contractual performance Yes Low


systematically monitored and reported?
D.2. Does the agency monitor and track its Yes Low
contractual payment obligations?
D.3. Is a complaints resolution mechanism Yes Low
described in national procurement
documents?
D.4. Is there a formal non-judicial Yes Low
mechanism for dealing with complaints?
D.5. Are procurement decisions and Yes Low
disputes supported by written narratives
such as minutes of evaluation, minutes of
negotiation, notices of default/withheld
payment?

E.1. Is there a standard statement of Yes Low


ethics and are those involved in
procurement required to formally commit
to it?
E.2. Are those involved with procurement No Extremely
required to declare any potential conflict

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of interest and remove themselves from High
the procurement process?
E.3. Is the commencement of Procurement involving assistance from Bi- Low
procurement dependent on external lateral and multi-lateral funding needs
approvals (formal or de-facto) that are approval from the funding agency
outside of the budgeting process?
E.4. Who approves procurement Head of department, Board of Directors, Low
transactions, and do they have Managing Director approves the
procurement experience and procurement transaction
qualifications?
E.5. Which of the following actions require Contracts above Rs. 2 Crs require approval Low
approvals outside the procurement unit outside the evaluation committee.
or the evaluation committee, as the case Depending the value it is either approved
may be, and who grants the approval? by the Executive Director, Director,
Managing Director & Board of Directors
a) Bidding document, invitation to Executive Director, Director, Managing
pre-qualify or RFP Director & Board of Directors
b) Advertisement of an invitation for Executive Director, Director, Managing
bids, pre-qualification or call for Director & Board of Directors
EOIs
c) Evaluation reports Executive Director, Director, Managing
Director & Board of Directors
d) Notice of award Executive Director, Director, Managing
Director & Board of Directors
e) Invitation to consultants to Executive Director, Director, Managing
negotiate Director & Board of Directors
f) Contracts Executive Director, Director, Managing
Director & Board of Directors
E.6. Is the same official responsible for: (i) Yes Low
authorizing procurement transactions,
procurement invitations, documents,
evaluations and contracts; (ii) authorizing
payments; (iii) recording procurement
transactions and events; and (iv) the
custody of assets?
E.7. Is there a written auditable trail of Yes Low
procurement decisions attributable to
individuals and committees?

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General Ratings
Criterion Risk
A. Organizational and Staff Capacity Average
B. Information Management Low
C. Procurement Practices Average
D. Effectiveness Average
E. Accountability Measures Average
OVERALL RISK RATING Average

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Annex 18 Procurement Capacity Assessment MSETCL


Specific Assessment and Ratings
Question Answer/Finding Risk
A. ORGANIZATIONAL AND STAFF CAPACITY
A.1. How many years experience does the Total 17 years including 4 years in Low
head of the procurement procurement
department/unit have in a direct
procurement role?
A.2. How many staff in the procurement Low
department/unit are:
iv. Full Time? 17
v. Part Time? -
vi. Seconded? -
A.3. Does the procurement staff have Yes, All office communication are Low
English language proficiency? undertaken in English
A.4. Are the number and qualifications of Yes. The minimum qualification of each Low
the staff sufficient to undertake the staff is Bachelors in Engineering (BE) with
additional procurement that will be specialization in electrical i.e. BE (Electrical)
required under the proposed project?
A.5. Does the unit have adequate Yes, there are adequate number of Low
facilities, such as PCs, internet equipment like PCs, photocopy machine
connections, photocopy facilities, printers, internet connections, printers etc., to
etc., to undertake the planned undertake the planned procurement.
procurement?
A.6. Does the agency have a procurement Members of Contract & Monitoring (C&M) Average
training program? team did not attend any training programs.
Members of Central Procurement team in
the past have attended training programs
arranged by Japan International
Cooperation Agency (JICA)
A.7. Does the agency have a Procurement No High
Committee that is independent from the
head of the agency?
A.8. Does the agency have a procurement Yes Low
department/unit, including a permanent
office that performs the function of a
Secretariat for the Procurement Unit, and
which serves as the main support unit of
the Procurement Committee??

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A.9. If yes, what type of procurement does It undertakes Turnkey procurement for
it undertake? project cost above INR 100 Mn.
A.10. At what level does the The team members report to CE (C&M) Low
department/unit report (to the head of who is the unit head. CE (C&M) reports to
agency, deputy etc.)? ED (Projects)
A.11. Do the procurement positions in the Yes. The job descriptions are in line with Low
agency have job descriptions, which the ISO standards
outline specific roles, minimum technical
requirements and career routes?
A.12. Is there a procurement process There is no manual, but they follow a High
manual for goods and works? defined internal process
A.13. If there is a manual, is it up to date No. The team does not have experience of
and does it cover foreign-assisted procurement for foreign assisted projects
projects?
A.14. Is there a procurement process No. The team does not procure any
manual for consulting services? consulting services
A.15. If there is a manual, is it up to date NA
and does it cover foreign-assisted
projects?
A.16. Are there standard documents in MSETCL will adapt the ADB standard bid
use, such as Standard Procurement document. This document will be reviewed
Documents/Forms, and have they been by C&M department, ED/Director
approved for use on ADB funded projects? (Projects) and the Board of Directors
before floating the tender
A.17. Does the ToR follow a standard The ToR contains all the essential elements
format such as background, tasks, inputs, like objectives, background, tasks, inputs,
objectives and outputs? and outputs/ deliverable etc. and is
standard across the organization
A.18. Who drafts the procurement CE (Design & Engineering) and members of Low
specifications? Design & Engineering department
A.19. Who approves the procurement Board of Director along with the Managing
specifications? Director
A.20. Who drafts the bidding documents? C&M department
A.21. Who manages the sale of the C&M department
bidding documents?
A.22. Who identifies the need for The team does not procure any consulting Average
consulting services requirements? services

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Question Answer/Finding Risk


A.23. Who drafts the terms of reference NA
(ToR)?
A.24. Who prepares the request for NA
proposals (RFPs)?

B.1. Is there a referencing system for Yes. They are named as: MSETCL/Dept Low
procurement files? Name/Tender No.
B.2. Are there adequate resources Yes, All records are adequately stored by Low
allocated to record keeping infrastructure, the centralized department
which includes the record keeping system,
space, equipment and personnel to
administer the procurement records
management functions within the
agency?
B.3. For what period are records kept? 10-15 years Low
B.4. Are copies of bids or proposals Yes Low
retained with the evaluation?
B.5. Are copies of the original Yes Low
advertisements retained with the pre-
contract papers?
B.6. Is there a single contract file with a Yes Low
copy of the contract and all subsequent
contractual correspondence?
B.7. Are copies of invoices included with Yes Low
the contract papers?

C.1. Has the agency undertaken foreign- O&M department has undertaken Average
assisted procurement of goods or works procurement for JICA funded project
recently (last 12 months, or last 36
months)? (If yes, please indicate the
names of the development partner/s and
the Project/s.)
C.2. If the above answer is yes, what were It was O&M service contract. No major
the major challenges? issues found
C.3. Is there a systematic process to Yes, MSETCL Central Procurement Low
identify procurement requirements (for a Department identifies the equipment
procurement requirements and procurers

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Question Answer/Finding Risk


period of one year or more) on regulator basis. Any project specific
requirement for project cost of above INR
10 Crores is awarded on Turnkey basis and
the procurement is done by C&M
department
C.4. Is there a minimum period for Usually 8 days after finalization of Low
preparation of bids and if yes how long? estimates if not much changes to standard
documents and procedures. 1 month in
case major changes required in standard
document and procedures. 1 week is
required for preparing estimates
C.5. Are all queries from bidders replied to Yes
in writing?
C.6. Does the bidding document state the Yes Low
date and time of bid opening?
C.7. Is the opening of bids done in public? Yes Low
C.8. Can late bids be accepted? No
C.9. Can bids be rejected at bid opening? No
C.10. Are minutes of the bid opening Yes Average
taken?
C.11. Who may have a copy of the C&M department, department head of
minutes? respective department for which
procurement is undertaken. MOM is not
distributed to bidders. Only technically
qualified bidders are informed and called
for financial bids
C.12. Are the minutes free of charge? NA
C.13. Who undertakes the evaluation of CE (C&M) Average
bids (individual(s), permanent committee,
ad-hoc committee)?
C.14. What are the qualifications of the BE (Electrical). The evaluators should be Low
evaluators with respect to procurement well acquainted with the technology,
and the goods and/or works under specific requirement, evaluation criteria
evaluation? and procurement process. Further he
should be also aware of the financial
process and practices.
C.15. Is the decision of the evaluators final Approval of ED/Director (Projects) is taken Low
or is the evaluation subject to additional

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Question Answer/Finding Risk


approvals?
C.16. Using at least three real examples, Usually 6 months. In some cases it might Low
how long does it normally take from the be 8-10 months
issuance of the invitation for bids up to
contact effectiveness?
C.17. Are there processes in place for the The primary responsibility of cargo Low
collection and clearance of cargo through clearance is with the supplier.
ports of entry?
C.18. Are there established goods Yes Low
receiving procedures?
C.19. Are all goods that are received Yes Low
recorded as assets or inventory in a
register?
C.20. Is the agency/procurement Yes Low
department familiar with letters of credit?
C.21. Does the procurement department Yes Low
register and track warranty and latent
defects liability periods?

C.22. Has the agency undertaken foreign- No High


assisted procurement of consulting
services recently (last 12 months, or last
36 months)? (If yes, please indicate the
names of the development partner/s and
the Project/s.)
C.23. If the above answer is yes, what NA
were the major challenges?
C.24. Are assignments and requests for NA Average
expressions of interest (EOIs) advertised?
C.25. Is a consultants selection The team does not procure any consulting Average
committee formed with appropriate services.
individuals, and what is its composition (if
any)?
C.26. What criteria is used to evaluate NA Average
EOIs?
C.27. Historically, what is the most NA Average
common method used (QCBS, QBS, etc.)
to select consultants?

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Question Answer/Finding Risk


C.28. Do firms have to pay for the RFP NA Average
document?
C.29. Does the proposal evaluation criteria NA Average
follow a pre-determined structure and is it
detailed in the RFP?
C.30. Are pre-proposal visits and meetings NA Average
arranged?
C.31. Are minutes prepared and circulated NA
after pre-proposal meetings?
C.32. To whom are the minutes NA
distributed?
C.33. Are all queries from consultants NA Average
answered/addressed in writing?
C.34. Are the technical and financial NA Average
proposals required to be in separate
envelopes?
C.35. Are proposal securities required? NA Average
C.36. Are technical proposals opened in NA Average
public?
C.37. Are minutes of the technical opening NA
distributed?
C.38. Do the financial proposals remain NA Average
sealed until technical evaluation is
completed?
C.39. Who determines the final technical NA
ranking and how?
C.40. Are the technical scores sent to all NA
firms?
C.41. Are the financial proposal opened in NA Average
public?
C.42. Are minutes of the financial opening NA
distributed?
C.43. How is the financial evaluation NA Average
completed?
C.44. Are face to face contract NA
negotiations held?

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Question Answer/Finding Risk


C.45. How long after financial evaluation NA
is negotiation held with the selected firm?
C.46. What is the usual basis for NA
negotiation?
C.47. Are minutes of negotiation taken NA
and signed?
C.48. How long after negotiation is the NA
contract signed?
C.49. Is there an evaluation system for NA Average
measuring the outputs of consultants?

C.50. Are advance payments made? NA Average


C.51. What is the standard period for NA Average
payment included in contracts?
C.52. On average, how long is it between NA
receiving a firms invoice and making
payment?
C.53. When late payment is made, are the NA
beneficiaries paid interest?

D.1. Is contractual performance Yes Low


systematically monitored and reported?
D.2. Does the agency monitor and track its Yes Low
contractual payment obligations?
D.3. Is a complaints resolution mechanism Yes Low
described in national procurement
documents?
D.4. Is there a formal non-judicial Yes Low
mechanism for dealing with complaints?
D.5. Are procurement decisions and Yes Low
disputes supported by written narratives
such as minutes of evaluation, minutes of
negotiation, notices of default/withheld
payment?

E.1. Is there a standard statement of Yes Low

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Question Answer/Finding Risk


ethics and are those involved in
procurement required to formally commit
to it?
E.2. Are those involved with procurement No Extremely
required to declare any potential conflict High
of interest and remove themselves from
the procurement process?
E.3. Is the commencement of ED/Director (Projects) approval is required Low
procurement dependent on external
approvals (formal or de-facto) that are
outside of the budgeting process?
E.4. Who approves procurement Head of department, ED/Director Low
transactions, and do they have (Projects), Board of Directors, Managing
procurement experience and Director approves the procurement
qualifications? transaction
E.5. Which of the following actions require Low
approvals outside the procurement unit
or the evaluation committee, as the case
may be, and who grants the approval?
g) Bidding document, invitation to CE (C&M), ED/Director (Projects)
pre-qualify or RFP
h) Advertisement of an invitation for CE (C&M), ED/Director (Projects)
bids, pre-qualification or call for
EOIs
i) Evaluation reports ED/Director (Projects)
j) Notice of award CE (C&M), ED/Director (Projects)
k) Invitation to consultants to NA
negotiate
l) Contracts CE (C&M), ED/Director (Projects)
E.6. Is the same official responsible for: (i) No. Low
authorizing procurement transactions,
CE (C&M) is responsible for documents and
procurement invitations, documents,
evaluation of contracts. For rest of the
evaluations and contracts; (ii) authorizing
activities CE of respective
payments; (iii) recording procurement
departments/field level CEs are responsible
transactions and events; and (iv) the
custody of assets?
E.7. Is there a written auditable trail of Yes Low
procurement decisions attributable to
individuals and committees?

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General Ratings
Criterion Risk
A. Organizational and Staff Capacity Average
B. Information Management Low
C. Procurement Practices Average
D. Effectiveness Average
E. Accountability Measures Average
OVERALL RISK RATING Average

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