CHAPTER 1

INTRODUCTION
1.1 INTRODUCTION OF THE STUDY

Damodar Valley Corporation (DVC) is one of the pioneering integrated power utilities in
India, playing a significant role in the development of the energy sector, particularly in the
eastern region of the country. DVC was established on July 7, 1948, under the Damodar
Valley Corporation Act, 1948, enacted by the Government of India. DVC operates primarily
in the Damodar River Basin, which spans across the eastern states of Jharkhand and West
Bengal. DVC is primarily engaged in the generation, transmission, and distribution of
electricity. It owns and operates thermal and hydroelectric power plants across its service
area. DVC also has interests in coal mining activities to ensure a reliable fuel supply for its
thermal power plants. The corporation operates coal mines to support its power generation
operations.
Damodar Valley Corporation (DVC) operates in a dynamic and complex environment with
numerous risks, including market risk and operational risk. Market risk includes uncertainty
associated to changes in commodity prices, interest rates, and electrical market dynamics,
whereas operational risk refers to potential interruptions in DVC's internal processes and
systems. Effective risk management is critical to ensuring DVC's financial performance,
operational resilience, and long-term sustainability.

1.2 PROBLEM STATEMENT

Enhancing Risk Management Practices to Mitigate Market, Financial and Operational Risks
in Damodar Valley Corporation to enhance its ability to anticipate, mitigate, and respond to
various risks effectively, thereby minimizing potential adverse impacts on its operations and
financial performance.

1.3 OBJECTIVIES OF THE STUDY

• Evaluate the risks faced by Damodar Valley Corporation from the market and their
operations.
• Suggest ways to manage these risks.
• Propose financial techniques to hedge these risks, reducing their impact.

1.4 PURPOSE OF THE STUDY

By proactively addressing market risk and operational risk through effective risk
management strategies and financial hedging techniques, Damodar Valley Corporation can
enhance its resilience and protect its financial interests.
1.5 LIMITATIONS OF THE STUDY

• Study based more on secondary data

• Availability of data from the primary sources
• Limitation of time
1.6 METHODOLOGY

• Analysed internal operational processes to assess the impact of market risk and
operational risk on DVC's financial performance.
• Analysed historical market data and industry trends.
• Contacted DVC officials to about their existing risk management framework and
challenges faced.
 CHAPTER 2
BUSINESS PROFILE
2.1. Industry Analysis

2.1.1. Overview of Damodar Valley Corporation

Damodar Valley Corporation (DVC), the first major Multipurpose Integrated River Valley
Project of the Country, conceived in line of TVA, come in to existence on 7th July 1948. It is
an autonomous company governed by DVC Act 1948. Established in 1948, in the aftermath
of India's independence, DVC epitomizes a bold vision to tame the powerful Damodar River
and its tributaries for multi-dimensional progress. With its headquarters nestled in Kolkata,
DVC has since been at the forefront of generating hydroelectric & thermal power, promoting
irrigation, facilitating flood control, and fostering regional prosperity across the states of
Jharkhand and West Bengal. As a vital cog in India's energy and water management
infrastructure, DVC continues to exemplify innovation, sustainability, and a commitment to
serving the communities along the Damodar basin.

2.1.2 Market Position and Competitors

The Damodar Valley Corporation (DVC) holds a significant market position in the energy
sector, particularly in the eastern region of India. As a major player in hydroelectric power
generation and water management, DVC has established itself as a key contributor to the
region's energy supply and infrastructure development. Here's a look at its market position
and some of its competitors:

Market Position of DVC:

• Hydroelectric Power Generation: DVC operates several hydroelectric power plants

along the Damodar River and its tributaries, contributing a substantial portion of the
electricity consumed in the eastern states of Jharkhand and West Bengal
• Energy Supply: DVC plays a crucial role in meeting the energy demands of the
region, providing reliable and renewable energy sources to industries, residential
areas, and agricultural sectors.
• Water Management: DVC's dams and reservoirs serve as critical components of
water management and irrigation systems, helping mitigate the impact of floods and
droughts while facilitating agricultural activities in the region.
• Infrastructure Development: DVC's projects have contributed to the development
of infrastructure in the states it operates in, fostering economic growth, and improving
living standards for local communities.

Key Competitors:

• National Thermal Power Corporation (NTPC): NTPC is one of the largest power
generation companies in India, operating thermal power plants across the country. It
may compete with DVC in supplying electricity to consumers, especially in areas
where thermal power is prominent.
• Tata Power: Tata Power is a prominent player in India's power sector, involved in
both conventional and renewable energy generation. It may compete with DVC in
supplying electricity to consumers in the eastern region.
• Adani Power: Adani Power is another major player in India's power generation
sector, with a focus on thermal power plants. It could be a competitor to DVC in
supplying electricity, particularly in regions where Adani Power has a presence.
 • West Bengal State Electricity Distribution Company Limited (WBSEDCL):
WBSEDCL is the state-owned electricity distribution company in West Bengal.
While not a direct competitor in power generation, it is involved in distributing
electricity to consumers in the region where DVC operates.
• Jharkhand Bijli Vitran Nigam Limited (JBVNL): JBVNL is the state-owned
electricity distribution company in Jharkhand. Similar to WBSEDCL, it may not
directly compete with DVC in power generation but is involved in electricity
distribution in the region.

Company Name Market Capitalisation (In Billion Indian

Rupees)
National Thermal Power Corporation Ltd. 2,96,503
Power Grid Corporation Ltd. 1,42,895
Adani Power Ltd. 2,72,839
Tata Power Company Ltd. 1,04,979

2.1.3 Industry Trends

Several industry trends are shaping the power sector in India, reflecting the country's efforts
to meet growing energy demands, address sustainability concerns, and embrace technological
advancements. Here are some notable trends:

1. Renewable Energy Expansion: India is witnessing a significant expansion of

renewable energy sources, particularly solar and wind power. Government initiatives,
such as the National Solar Mission and wind energy auctions, have spurred
investments in renewable energy projects, aiming to increase the share of renewables
in the energy mix and reduce dependence on fossil fuels.
2. Energy Storage Solutions: The adoption of energy storage solutions, such as battery
storage, pumped hydro storage, and grid-scale storage systems, is gaining momentum
in India. Energy storage technologies help address intermittency issues associated
with renewable energy sources and improve grid stability and reliability.
3. Electric Vehicles (EVs) and Charging Infrastructure: The rise of electric vehicles
in India is driving the need for robust charging infrastructure. The government's
ambitious plans to promote EV adoption, coupled with incentives and policy support,
are spurring investments in EV charging stations and related infrastructure to support
the transition to electric mobility.
4. Smart Grid Technologies: The deployment of smart grid technologies, including
advanced metering infrastructure (AMI), distribution automation, and demand
response systems, is gaining traction. Smart grids enable real-time monitoring,
optimization, and management of the electricity grid, enhancing efficiency, reliability,
and resilience.
5. Energy Efficiency Initiatives: India is ramping up efforts to improve energy
efficiency across various sectors, including industry, buildings, and appliances.
Initiatives such as the Perform, Achieve, and Trade (PAT) scheme and the Standards
& Labelling (S&L) program aim to promote energy-efficient technologies, reduce
energy consumption, and lower carbon emissions.
6. Digitalization and IoT Integration: The integration of digital technologies, Internet
of Things (IoT), and data analytics is transforming the power sector, enabling
 predictive maintenance, asset optimization, and real-time monitoring of energy
infrastructure. Digitalization enhances operational efficiency, reduces downtime, and
improves decision-making processes.

2.1.4 Challenges and Opportunities

Challenges:

• Environmental Concerns: DVC's hydroelectric power generation activities can have

environmental impacts, including habitat disruption and alteration of river
ecosystems. Balancing the need for energy generation with environmental
conservation is a significant challenge.
• Climate Change: Climate change poses risks to DVC's operations, including changes
in precipitation patterns, water availability, and extreme weather events. Adapting to
climate change impacts while maintaining operational resilience is crucial.
• Aging Infrastructure: Some of DVC's infrastructure, including dams and power
plants, may be aging and require maintenance, upgrades, or modernization to ensure
safety, reliability, and efficiency.
• Regulatory Compliance: DVC operates within a complex regulatory environment,
including environmental regulations, water management policies, and electricity
market regulations. Ensuring compliance with these regulations while meeting
operational objectives can be challenging.

Challenges:

• Renewable Energy Expansion: DVC can capitalize on the growing demand for
renewable energy by expanding its portfolio of hydroelectric power plants and
exploring opportunities in other renewable energy sources such as solar and wind.
This can help diversify its energy mix and contribute to India's renewable energy
targets.
• Modernization and Technological Upgrades: Investing in modern technologies and
infrastructure upgrades can enhance the efficiency, reliability, and safety of DVC's
operations. Adopting advanced control systems, automation, and predictive
maintenance techniques can optimize performance and reduce downtime.
• Water Resource Management: DVC can leverage its expertise in water
management to address challenges such as irrigation, flood control, and water supply.
Collaborating with local authorities and implementing innovative solutions can
improve water resource utilization and benefit communities in the region.
2.2 Business Canvas

DVC's Business Model Canvas:

Customer Segments:
• Industrial Sectors: DVC caters to a wide range of industries requiring
large amounts of power for manufacturing, processing, and other
activities. This includes steel, cement, chemicals, and mining companies.
• Commercial Sector: Hospitals, hotels, shopping malls, and residential
complexes rely on DVC for their electricity needs.
• Government Sector: DVC plays a crucial role in powering vital
government operations. They supply electricity to state electricity boards,
ensuring a steady flow of power for public services and infrastructure.
Key Partners:
• Coal Suppliers: Reliable coal supply is critical for DVC's thermal power
generation. Partners like Bharat Coking Coal Limited (BCCL) and
Central Coal Fields Limited (CCL) are essential in securing fuel for their
power plants.
• Government Agencies: The support of governments from West Bengal,
Jharkhand, and India is crucial for DVC's operations. They provide land,
permits, and other resources necessary for power generation and
infrastructure development.
• Power Grid and Transmission: Power Grid Corporation of India
ensures efficient transmission of DVC's generated electricity across the
region. Additionally, partnerships with National Thermal Power
Corporation (NTPC) allow DVC to leverage their vast transmission
network.
• Other Stakeholders: Indian Oil Corporation (IOCL) provides fuel oil for
emergencies or backup purposes. Bharat Heavy Electricals Limited
(BHEL) and Steel Authority of India (SAIL) are potential partners for
equipment supply and infrastructure development.

Key Activities:
• Power Generation: DVC's core activity is generating electricity through
thermal and hydel power plants.
• Industrial Power Supply: They prioritize supplying reliable and
consistent power to industrial customers, critical for their smooth
operation and economic growth.
• Water Management and Supply: DVC manages water resources for
power generation, cooling purposes, and potentially supplying water for
industrial needs.
• Industrial Development: DVC might contribute to the development of
industries in their operational areas by providing stable power supply and
potentially engaging in infrastructure projects.
• Environmental and Social Development: DVC strives to balance their
operations with environmental and social responsibility. This could
 involve implementing measures to reduce pollution, promote sustainable
practices, and support local communities.

Value Propositions:
• Reliable Power Supply: DVC prioritizes providing a steady and
dependable flow of electricity to their customers, minimizing disruptions
and ensuring smooth operations.
• Competitive Rates: DVC offers electricity at competitive prices, making
them an attractive option for cost-conscious consumers.
• Efficient Service: Prompt response to customer queries and efficient
service delivery are key aspects of DVC's customer service approach.
• Fast Connections: DVC aims to connect new customers to the grid
within a reasonable timeframe, typically within 6-9 months.
• Contractual Agreements: DVC might offer tailored contracts to
industrial and commercial clients, providing them with the certainty and
stability they require for their power needs.

Customer Relationships:
• Single Window Service: DVC aims to simplify interaction by providing
a single point of contact for all customer communication and grievance
redressal, streamlining the process.
• Transparency and Information Sharing: DVC emphasizes transparent
communication by keeping customers informed about power supply,
outages, and other relevant information.

Channels:
• Online Portal: DVC might utilize an online portal for customers to
access billing information, report issues, and potentially track power
consumption.
• Direct Connection: Direct communication with customer service
representatives remains an important channel for personalized assistance
and resolving complex issues.
 • Power Grid Connections: The physical power grid infrastructure acts as
the primary channel for delivering electricity to customers.

Revenue Stream:
• Electricity Supply: This is the primary revenue stream for DVC. They
generate income by selling the electricity they produce to their various
customer segments - industrial, commercial, and government sectors. The
charges are typically based on the amount of electricity consumed (kWh)
and may vary depending on the type of customer and contract terms.
• Sale of By-Products: DVC's power generation process might create by-
products like fly ash and bottom ash. These by-products can be processed
and sold to other industries for use in construction materials, cement
manufacturing, or other applications.
• Sale of Scrap: During plant maintenance or upgrades, DVC might
generate scrap metal or other materials. Recycling or selling this scrap can
be a minor revenue stream.
• Government Grants: Depending on government initiatives or specific
projects, DVC could receive grants to support their operations or
development activities related to water management, environmental
initiatives, or social development projects.