August 2016 Volume 5 | Issue 4 | `100 www.InfralinePlus.com
The Complete Energy Sector Magazine for Policy and Decision Makers
G S T
rowth for power & coal
tressed solar
ransforming India Govt announces draft Solar-Wind Hybrid policy Transmission push on the cards with private participation
Satyajit Ganguly Managing Director ONGC Tripura Power Co. Ltd.
Salil Garg Director-Corporate Ratings India Ratings
Ramakrishnan M
Saurabh Kumar
Vice President The Smart Cube
Managing Director EESL
10 ,00 50 ,00 0+ c 0+ irc rea ulati on de rsh ip
&2016
Yearbook DirectorY
Key Highlights
Sector Performance Review: FY 2015-16 Key Policy and Regulatory updates Extensive Database of Sector specific Companies including Manufacturers, Developers, EPC’s, BFSI’s and Consultants Top management with contact details
Oil & Gas
ory 2016 Yearbook & Direct
Renewable
Energy
Yearbook & Directory 2016 • Roads
Power
tory 2016 Yearbook & Direc
Yearbook & Directory 2016 • Renewable
tory 2016 Yearbook & Direc
Yearbook & Directory 2016 • Oil & Gas
Yearbook & Directory 2016 • Power
Direct exposure to top decision makers and influencers
ory 2016 Yearbook & Direct
Roads
For any further information, kindly contact us on the below mentioned coordinates:
Ashwini Solomon, (Manager– Business Development) Tel: +91-0120-6799157/100 (D), +91-9811708110 (M) Fax: +91-0120-6799101; Email: ashwini.solomon@infraline.com marketing@infraline.com
InfralinePlus
August 2016 | Volume 5 | Issue 04
The Complete Energy Sector Magazine for Policy and Decision Makers
Editor’s Letter
Editorial
August 2016, perhaps, will go down as one of the most important months in the history of economic reforms in India. After a lot of debate and deliberation, the Rajya Sabha finally passed the GST Bill on August 3. The new tax regime will pave the way for a single unified and uniform tax regime in India, something which has been a long time demand of the industry. While clarity is yet to emerge on the tax rate and various other issues need to be ironed out, the economy is gung-ho about the passing of the GST Bill. From the perspective of investors, both domestic and global, the idea of onenation-one-tax would not only reduce the level of taxes but will also improve ease of doing business. Coming to the energy sector, the new GST regime is expected to be a mixed bag. Renewable sector, currently a beneficiary of several indirect tax exemptions, may be a big loser as a result of GST since the bill proposes to revoke most of the exemptions. For the oil and gas sector, products like kerosene, naphtha and LPG will be under the ambit of GST, while five items in the basket — crude oil, natural gas, aviation fuel, diesel and petrol — have been excluded during the initial years. Dual tax regime for the oil and gas industry is expected to make compliance difficult and hence, may impact the industry negatively. On the other hand, power sector stands to benefit if is brought under the ambit of GST. It is estimated that a GST rate of 18 per cent for the power sector could result in 15-20 per cent reduction in retail tariff. Further, a cut in power cost will also improve payment by end-consumers and reduce incentive for theft and losses. This will also help distribution utilities to reduce their problem of revenue deficit. The GST will also facilitate seamless movement of goods across various States in India and reduce the transaction cost of businesses. Further, an uncertain and unpredictable tax regime is one of the biggest impediments for the smooth growth of the manufacturing sector and the single uniform tax regime will also propel the Make in India program. This would make Indian products competitive in the domestic and international markets which would further spur economic growth. Apart from GST, the Government has also provided policy push which is beginning to bear fruit. In the coal sector, the Government’s decision to allow flexibility in utilisation of domestic coal has been well accepted. Flexibility in optimal use of domestic coal in efficient Generating Stations will result in the cost of electricity generation and reduce the power purchase cost of State Distribution companies. Such flexibility will be able to leverage coal to electricity conversion, efficiency of equipments as well as transportation cost optimization, thereby benefiting the entire industry. Similarly, the Government has come out with a draft National Wind-Solar Hybrid Policy to promote large grid connected wind-solar PV system. This is aimed at optimal and efficient utilization of transmission infrastructure and land, reducing the variability in renewable power generation and thus achieving better grid stability. The goal of the Policy is to develop 10 GW of wind-solar hybrid capacity by 2022. All of this is likely to see enhanced investor interest in the sector. Amidst this entire buzz, let me wish our readers a happy 70th Independence Day!
Shashi Garg, Editor News Team Chetan Gupta Analyst Mohd. Arif Content Consultant News Monster
Business Development Manoj Narang, Director Tel.: 0120-6799106 / 100 Email: manoj.narang@infraline.com
Advertisement Ashwini Solomon Tel.: 0120-6799157/100 Mobile: +91 9811708110 Email: ashwini.solomon@infraline.com advertising@infraline.com
Circulation & Subscription Sneha Pandey Tel.: 0120 6799125 Email: sneha.pandey@infraline.com
Form IV Periodicity of its Publication: Monthly Printer’s / Publisher’s / Mrs Shashi Garg Editor’s / Owner’s Nationality Indian Address
14-D, Atmaram House, 1, Tolstoy Road New Delhi - 110001
Place of Publication
14-D, Atmaram House, 1, Tolstoy Road New Delhi - 110001
Printed at Address
SHASHI GARG Managing Director and Editor InfralineEnergy Research and Information Services Registered Office
Branch Office
14th Floor, Atmaram House, 1, Tolstoy Road, New Delhi - 110001 Email: business@infraline.com
Noida A-31, Sector 3, Noida Tel.: 0120-6799100
Sagar Offset Printer (I) Pvt. Ltd. Plot No 518, Ecotech-III, Udhyog Kendra Extn-II, G. Noida, G.B. Nagar (U.P.) 201308
Name and address of individuals who own the newspaper and partners or shareholders holding more than one percent of the total capital Owner: M/s Infraline Technologies (India) Private Limited, 14-D, Atmaram House, 1, Tolstoy Road, New Delhi - 110001 Shareholders holding more than one percent of total Capital of the owner Company 1. Mrs Shashi Garg, 60, Siddhartha Enclave, New Delhi-110014 2. Abhav Garg, 60, Siddhartha Enclave, New Delhi-110014 I Shashi Garg hereby declare that the Particulars given above are true to the best of my knowledge and belief. Sd Mrs Shashi Garg Signature of the Publisher
1
August 2016 www.InfralinePlus.com
InfralinePlus
Contents Editor’s Letter
1
Cover Story
35 GST: A mixed bag for energy, infra sectors
2
History was made on 3rd August, 2016, with India taking a giant leap towards a single unified market after the Rajya Sabha approved the Goods and Services Tax (GST) – a reform considered almost three decades back. Taxation experts say that the GST will transform the Indian economy by giving rise to a common market and reduce the cascading effect of tax on the cost of goods and services.
35 Power News Briefs
4
Coal
20
p4
News Briefs p20
Expert Speak: Satyajit Ganguly, Managing Director, ONGC Tripura Power Company Ltd p8
In Conversation: Salil Garg, Director-Corporate Ratings, India Ratings p23
In Depth: Govt seeks transmission push with private participation P10
Expert Speak: Ramakrishnan M, Vice President and Mayank Taneja, Senior Analyst, The Smart Cube p25
In Depth: Water management for thermal plants need of the hour P14
In Depth: Coal linkage auction for non-regulated sector gathers steam p27
Statistics
In Depth: Flexibility in utilisation of domestic coal to bring down cost of power generation P30
p18
Statistics Topics Covered
Topics Covered
Power transmission
Coal linkage
Thermal power generation
Coal imports
Power reforms
Domestic production
p33
August 2016 www.InfralinePlus.com
Oil and Gas
41
Renewable
53
News Briefs p41
News Briefs p53
In Depth: A long road ahead for CBM to be a potential star p44
In Conversation: Saurabh Kumar, Managing Director, EESL p58
In Depth: LNG imports critical to rescue gas-based capacity p48
In Depth: Coming together of solar and wind: Govt announces draft Hybrid policy p62
Statistics p51
Statistics p65
Topics Covered
Topics Covered
Coal Bed Methane
Energy efficiency
LNG imports
LED Lighting
Natural gas demand
Solar and wind
3
Expert Speak/Interview
Satyajit Ganguly
Mayank Taneja
Managing Director, ONGC Tripura Power Company Ltd
Senior Analyst The Smart Cube
Off Beat
67
In Depth: Prime Minister Narendra Modi’s Cabinet gets some new faces
Salil Garg
Saurabh Kumar,
Director-Corporate Ratings India Ratings
Managing Director EESL
Reports & Studies
71
People in News
72
August 2016 www.InfralinePlus.com
NewsBriefs | Power India’s total power generation capacity crosses 300 GW mark
India’s total installed power generation capacity has crossed the 300-Gw mark, which includes 42 Gw of renewable energy sources, including solar and wind. India’s total power generation capacity was 3,03,118.21 Mw as on June 30, 2016, which includes 42,848.43 Mw, stated Power Min-
ister Piyush Goyal in a written reply to the Rajya Sabha on Monday. Private sector’s cumulative installed power generation capacity was 1,24,995.51 Mw as on June 30, 2016 while central plants account for 76,296.76 Mw and state capacities 101,825,94 Mw. The minister also stated that the country has generated 12.01 billion units of electricity from renewable energy sources till June-end this financial year while the output was 65.78 billion units in 2015-16 and 61.78 billion units in 2014-15. The target from clean sources in 2015-16 was 70 billion units. The minister also told the House that 1,107.82 billion units of electricity were generated last financial year.
States pull the plug on mega power equipment tender
4
The Centre’s plan to procure electrical equipment on a mass scale under its two flagship schemes for power supply reforms in states might not take off, even though tenders for the same had been bid out. This is because state governments are not willing to follow a uniform norm. The central government’s plan to bring down the cost of power equipment, and eventually the power tariffs, faced stiff resistance from four states — Uttar Pradesh (UP), Maharashtra, Madhya Pradesh (MP), and Chhattisgarh — of which three are Bharatiya Janata Party (BJP)ruled. Power is a subject in the concurrent list and state governments have so far been procuring equipment themselves. The Union
Budget for 2016-17 had allocated Rs 5,500 crore for Integrated Power Development Scheme for urban power supply and Rs 3,000 crore for the Deendayal Upadhyay Gram Jyoti Yojana for rural power supply.
National Jaypee Group in talks to sell stake in power transmission unit
Debt-laden Jaypee Group, which has so far sold power assets worth Rs.11,900 crore, may get luckier and get more funds as it enters into discussions with JSW Group for selling its stake in Jaypee PowerGrid Ltd. The group is also likely to get more funds from its asset sale of Bina thermal power plant than the stated Rs.2,700 crore. On 18 July, group company Jaiprakash Power Ventures Ltd agreed to sell its 500 megawatt (MW) Bina thermal power plant to JSW Energy Ltd for an enterprise value of Rs.2,700 crore. Separately, Jaiprakash Power Ventures has also started discussions to sell its 74% in power transmission subsidiary Jaypee PowerGrid Ltd. These deals are critical for Jaypee Group as it struggles to reduce its debt to stay afloat. As on 31 March, Jaiprakash Power had a debt of Rs.22,414.94 crore.
PowerGrid approves investment proposals of Rs 2,731 crore Power Grid Corporation has approved investment of Rs 2,731 crore in various projects, including setting up of a transmission system for solar park at Bhadla in Rajasthan for Rs 1,429.38 crore. The board of the company approved as many as 11 proposals in its meeting held on July 20. The transmission system for solar park at Bhadla in Rajasthan at an estimated cost of Rs 1,429.38 crore with commissioning schedule of 30 months from the date of investment approval is among the approved proposals. The investment approval also include transmission system strengthening for independent
power projects in Chhattisgarh and other generation projects in Western region at an estimated cost of Rs 333.17 crore with commissioning schedule progressively by March, 2019. The company will also invest in transmission system strengthening associated with Mundra Ultra Mega Power Project (Part-B) at an estimated cost of Rs 300.94 crore, with commissioning schedule of 29 months. The projects also include Western Region Strengthening Scheme XVI at an estimated investment cost of Rs 150.99 crore, with commissioning schedule of 24 months from the date of investment approval.
August 2016 www.InfralinePlus.com
National Nationwide powermen strike on Sept 2 against Electricity (Amendment) Bill
Public sector power employees have announced a nationwide strike on September 2 over the Electricity (Amendment) Bill. In a meeting held recently, National Co-ordination Committee of Electricity Employees and Engineers (NCCOEEE) flayed the Centre for allegedly failing to address the burning issues
of the energy sector even as they labeled the Bill as anti-people. The powermen had earlier sought discussion on the modified Electricity (Amendment) Bill with all the stakeholders for an “amicable settlement of the issues”. The meeting at New Delhi was attended by the representatives of Electricity Employees Federation of India, Indian National Electricity Workers Federation, All India Federation of Electricity Employees, All India Power Engineers Federation (AIPEF), TNEB Workers Union, All India Power Men’s Federation (AIPF) and All India Federation of Diploma Engineers. AIPEF Chairman Shailendra Dubey said NCCOEEE resolution mentioned that the central government was playing hide and seek on the Electricity (Amendment) Bill.
Centre asks States to offer power to industries at fixed rates The Centre has asked all States to offer power to industries at a fixed rate for a fixed period to attract investments. Power Minister Piyush Goyal said in Lok Sabha that the country was producing sufficient power and hence efforts should be made by state governments to attract industries by offering uninterrupted power. “Industries need uninterrupted power. If we can guarantee power, investment will come for industries. Therefore, I would like to request all members to persuade their respective state governments to offer regular power to industries for a fixed rate like Rs. 4, Rs. 4.5 or Rs. 5 per unit for 10 or 15 years,” he said. Goyal said
as per information reported by the States to Central Electricity Authority, energy shortage at all-India level was reduced to 2.1 per cent during 2015-16 which is the lowest in last two decades.
Piyush Goyal inducts Urban Vidyut Abhiyantas to monitor Integrated Power Scheme
Union Power Minister Piyush Goyal recently inducted Urban Vidyut Abhiyantas (UVAs) to monitor the implementation of the Integrated Power Development Scheme (IPDS). The Minister said the UVAs will take the work on a mission mode, similar to the Grameen Vidyut Abhiyantas deputed for the Deen Dayal Upadhyay Gram Jyoti Yojana. Goyal further said they will upload their reports on the implementation of the scheme on the URJA mobile application of the Ministry of Power in an effort to increase transparency. Some of the UVAs will be inducted in the State power distribution companies. These UVAs have an experience of 3-15 years in project management/distribution franchisee/ infrastructure sector. The IPDS is part of the Ministry of Power’s efforts to ensure 24x7 electricity availability to all by 2022 and has a total outlay of Rs 65,424 crore.
No final decision on scrapping SPVs for four UMPPs No final decision has been taken to scrap special purpose vehicles set up for four ultra mega power projects in Maharashtra, Odisha, Karnataka and Chhattisgarh. “No final decision has been taken to wind up the four special purpose vehicles (SPVs),” Power Minister Piyush Goyal said in a reply to the Lok Sabha. Activities in the ultra mega power projects (UMPPs) -- Maharashtra, Odisha (second additional UMPP), Karnataka and Surguja in Chhattisgarh -- are stuck due to various reasons, including agitation by local people and non-identification of a suitable site. Goyal added that around Rs 96.82 crore has been spent by SPVs
set up for these UMPPs. According to the minister, the Chhattisgarh government has said it in not keen on setting up of 4,000-mw UMPP in the state. Four
UMPPs, namely Sasan in Madhya Pradesh, Mundra in Gujarat, Krishnapatnam in Andhra Pradesh and Tilaiya in Jharkhand, have already been transferred to the developers, he said. “Out of the four awarded UMPPs, two namely Mundra and Sasan are in operation,” the minister said. The minister said 6x660 mw Sasan UMPP in Madhya Pradesh, which was awarded and transferred to Reliance Power in 2007, is fully commissioned. The 5x800 mw Mundra UMPP in Gujarat, which was awarded and transferred to Tata Power in 2007, also stands fully commissioned, he added.
5
August 2016 www.InfralinePlus.com
NewsBriefs | Power No hike in power tariff for urban domestic consumers in UP
Urban domestic power consumers in poll bound Uttar Pradesh got a major sop when the UP Electricity Regulatory Commission (UPERC) announced no hike in power tariff for financial year 2016-17. The sop extended to rural consumers, including those in
Bundelkhand region where tariff for tube well users have been brought down to Rs 160/BHP/month to Rs 100/BHP/month. Commercial establishments like shops and commercial complex and malls will see a hike of 7.24% with the average tariff being increased from 7.47 per unit to 8.01 per unit. The new tariff will come into effect expectedly from August 10 soon after UP Power Corporation Limited (UPPCL) issues a notification in a day or two. Announcing the decision, UPERC chairman, Desh Deepak Verma said that the tariff has been designed so as to compensate the rising cost of distribution companies without putting excessive load on the consumers.
Plan ready to meet Maharashtra power needs till 2040
6
The state energy ministry has prepared a plan to meet the power requirements of the state till 2040. According to energy minister Chandrashekhar Bawankule, distribution sector will need 22,000 crore in the coming 25 years, while transmission sector will require 15,000 crore. On the generation front, the MSEDCL will sign power purchase agreements (PPAs) for 4,000MW in the coming years. Rest of the requirement will be met through renewable sources. At present MSEDCL is grappling with oversupply and will have 6,000MW surplus power even in 2019-20. Bawankule clarified that the 4,000MW PPAs will be utilized after 2025. Earlier, in the state
assembly, Bawankule admitted that MSEDCL’s financial position was not good. “Its arrears due from consumers have reached 20,000 crore, of which 13,000 crore are owed by farmers. Lift irrigation schemes (LISs) and public water works are also major defaulters.
States National Gujarat offers to sell Railways power at low rates
Gujarat government has offered to sell Indian Railways its surplus electricity for running trains and other related work across the country. Gujarat’s state-owned units currently generate around 1500 MW to 2000 MW electricity which is expected to increase to 4,000 MW in the coming years. The surplus electricity can be supplied to the Railways at economical rates through the national grid. In 201314, the railways paid Rs 10,000 crore for using around 4000 MW electricity across the country. If Gujarat sells its surplus power to the railways, it can be of mutual interest to both. The state-owned power generating units currently have unused capacity of around 1500 MW to 2000 MW. In 2013-14, Indian Railways used over 17.5 billion units of electricity during 201314, equivalent to about 4000 MW and paid about Rs10,000 crore towards electricity charges, says an analysis of Vidyut Energy (a unit of the Indian Railways). This 4000 MW used by the railways in 2013-14 constitutes about 1.8% of the country’s total power generation.
No hike in Punjab power tariff With the Punjab Assembly poll round the corner, the PSERC has brought relief for the 85 lakh power consumers in the state. For a second consecutive year, the power tariff for the year 2016-17 has been left unchanged. The state electricity regulatory commission has also announced a number of sops for two important categories of consumers — a portion of agriculture pump set consumers get free replacement of their pumpsets, while all categories of industrial consumers will get a relief of Rs 0.36- Rs 0.11 per unit in power tariff. The new rates will be applicable from August 1. The power tariff for the domestic, nonresidential consumers and bulk supply
consumers has remained unchanged, although the power subsidy bill of the Punjab State Power Corporation Limited will swell from Rs 5,600 crore last fiscal
to Rs 6,364 crore this year. Announcing the detailed power tariff order, Punjab State Electricity Regulatory Commission (PSERC) chairman DS Bains said the decision to not increase the tariff was not based on political considerations, but because the state was “power surplus” and thus, there was no need to burden the consumers. Bains in fact projected the state power utility to have a revenue surplus of Rs 165.94 crore. He said the PSPCL would save a total of Rs 270 crore this year – Rs 120 crore through interest payment and Rs 150 crore towards bringing down transmission and distribution losses to 14.5 per cent by the end of this fiscal.
August 2016 www.InfralinePlus.com
International
France and Ireland eye 1 billion euro power link by 2025
France and Ireland plan to build a 1 billion euro ($1.10 billion) cable which would allow electricity to flow between the two countries by 2025, Ireland’s grid operator said as French President François Hollande visited the country. Ireland currently imports electricity
from Britain via Northern Ireland but is looking for ways to increase its electricity supplies. The planned 600-km link will run between Brittany and the south coast of Ireland. “The (interconnector) will improve security of supply on the island of Ireland and increase competition, driving down prices for customers,” Fintan Slye, EirGrid Chief Executive said. French average spot prices on power exchanges were around 30 percent cheaper than those in Britain last year, according to data from French power grid operator RTE. If built, the 700 megawatt (MW) sub-sea cable could transport enough electricity to power around 450,000 homes, Eirgrid said.
World Bank stops funding world’s biggest power plant plan The World Bank has suspended funding to help develop a $14 billion hydropower project in the Democratic Republic of Congo, a stage in what could become the world’s biggest power plant, after a disagreement with the nation over implementation plans. The announcement to halt financing the Inga 3 project followed the Congo’s decision “to take the project in a different strategic direction to that agreed between the World Bank and the government in 2014,” the Washington-based lender said in a statement. The World Bank agreed to $73 million in technical assistance for the first phase of the $100 billion Grand Inga
hydropower project which would produce 44,000 megawatts. Inga 3 alone would produce at least 4,800 megawatts, almost double Congo’s current installed capacity.
China stakes a strong claim in the Greek electricity landscape
The strong presence of Chinese firms came as a surprise in the tender for the concession of 24 percent of power grid operator ADMIE, given that the interest of both Italy’s Terna and France’s RTE had been taken for granted. China entered the race for a stake in the Greek grid through two giants, the State Grid Corporation of China (SGCC) – which was also present in the first tender for 66 percent of ADMIE – and China Southern Power Grid, which was not expected to weigh in as it does not fulfill the basic condition of the tender for participating in the European interconnection system of ENTZO_E. It is learnt that the latter Chinese company has expressed an interest in entering a consortium with one of the other companies that fulfill the conditions. Government sources describe the Chinese interest as very significant and associate it with Beijing’s strategy to acquire stakes in energy infrastructure projects in Europe.
Russia and Bangladesh sign $11.38 billion loan deal for nuclear plant Russia and Bangladesh have signed an $11.38 billion loan agreement, paving the way for the main construction work of Rooppur Nuclear Power Project. The intergovernmental loan agreement was signed in Moscow, according to a statement from the ASE Group of Companies, the general contractor of the project. The Russian loan covers 90 percent of the project cost and carries an interest rate of LIBOR plus 1.75 percent. The interest rate will not exceed 4 percent. The repayment period is 30 years, including a grace period of 10 years. Disbursement will begin in 2017. Sergei Anatolyevich Storchak, deputy minister for finance of the Russian
Federation, and Mohammad Mejbahuddin, senior secretary of the Economic Relations Department of Bangladesh, signed the agreement. Speaking at the event, Vladimir Sabushkin, senior vicepresident of ASE Group of Companies, said: “Now we have both the legal and financial base for implementing the Rooppur nuclear power project.” “For us, as the general contractor of the project, Russia’s state credit to Bangladesh is very important to begin the main construction works.” Bangladesh is borrowing the funds from Russia to build the 2,400-megawatt nuclear power plant.
7
August 2016 www.InfralinePlus.com
ExpertSpeak Need to fast track GNA mechanism for development of Inter-State Transmission Systems Satyajit Ganguly, Managing Director, ONGC Tripura Power Company Ltd, outlines the challenges being faced by the power transmission industry and why it makes sense to expedite implementation of the GNA mechanism in India.
8
As India embarks on developing a robust country-wide mesh of power grid, it is imperative to have a mechanism to allow planning with fair degree of certainty without prior knowledge of pairs of injection and drawal. System strengthening for additional drawal and additional injection could be done without knowing the contracted source of purchase or sale because power in a meshed network would be transferred by displacement. In other words, the generator and the States/Consumer could be given General Network Access (GNA) to Inter State Transmission System (ISTS) for the agreed quantum of power (MW). A GNA agreement could become the driver for investment. The new approach should therefore involve introduction of GNA mechanism in ISTS for transmission system development and hassle free access to the transmission system by the Generators. GNA is the ability in MW to draw or supply from a given point/zone of connection (POC) to any ISTS point as assessed by the Central Transmission Utility (CTU) through system studies. The concept of PoC charges has de-linked the transmission charges and losses from the notional path of transaction. GNA is also not path specific or point-to-point specific. Accordingly, GNA charges would be the PoC charges.
Salient features of GNA Entities availing GNA shall have to commit to pay such POC charges (in-
jection or drawal) for 25 years as may be prescribed by CERC. GNA holder shall have the option to be scheduled as preferred customer provided the counter party is also having GNA under Long-Term Open Access (LTOA) category, Medium Term Open Access (MTOA) and Short- Term Open Access (STOA) and Satyajit Ganguly, Managing Director, ONGC Access through GNA Tripura Power Company Ltd a market power exchanges friendly (PX). product and more accountability of transmission Further, planners to anticipate and remove product to improve congestion. Further, a new and GNA holders system reliability having PPAs dynamic approach to planning and remove of more than required for GNA would help in congestion three years shall improving system reliability. With be entitled under LTA both GNA and PoC pricing being point category. They may seek reservation based, the users will be able to get the under MTOA/STOA category. For full benefit of PoC transmission pricing access sought by the drawing entity which is free from pan caking. (DISCOM, OA consumers) above its Specifically, power generators also GNA, request shall be entertained only stand to benefit from GNA. Benefits for STOA/PX service at a premium include all India access with flexibility (say 100%) after accommodating GNA to change point of drawal, no liability holders. Generators may be mandated to pay for notional point of drawal to take GNA corresponding to their charges, no requirement to declare ex-bus capacity (other than captive). target beneficiaries and connectivity Drawee entity may also be mandated to be linked to GNA so that it does not to take GNA corresponding to import result in congestion. / export requirement. Transfer of On the other hand, even the distriphysical GNA right at least within the bution companies (discoms) stand to Discoms of a state is a possibility. A benefit from GNA. Benefits include GNA registry would be set up to keep potential for buying of power from track of GNA transfers. anywhere in the market and reliable access for short term and medium term market. This will be a great Benefits of GNA mechanism comfort to OA consumers as well as GNA is expected to extend benefits to Discoms. Further, states would be the sector in general. These include a empowered to determine their GNA market friendly transmission service
August 2016 www.InfralinePlus.com
requirement and get the ISTS built for it. Drawing entities will also be allowed to import power beyond GNA subject to the margins. The transmission premium will be shared amongst the GNA holders. In addition, discoms will be able buy cheap power with certainty through the PX where the competition is intense thereby benefitting the consumers.
Concerns While the concept is designed to derive all the benefits associated with POC tariff, there are certain issues which need to be safeguarded so that it remains win-win for all the stakeholders. The success of the GNA would be contingent upon the success rate of actual scheduling of contracts undertaken by sellers with buyers spread across the country with minimal congestion. The guidelines delineated in NEP 2005 should be adhered to: “Network expansion should be planned and implemented keeping in view anticipated transmission needs that would be incident on the system in the open access regime. Prior agreement with beneficiaries would not be a precondition. CTU/STU should undertake network expansion in consultation with stakeholders and take up execution after regulatory approval�. It may be inferred from the above
that despite such blanket approval, the transmission network has not been built in an optimum manner until today. Congestion is commonplace and not an exception specifically in inter-regional corridors between NEW and SR, WR and NR, S1 and S2 and ER and NR. The intra-regional corridors are equally congested in W3 region and N3 region etc. Therefore generators would like to get a guarantee from CTU that once they pay GNA along with counterparties, their contract will be scheduled without any congestion in ISTS, failing which a penal amount equal to three-fourth of the contract value may be recovered from CTU. Similarly, generators connected to STU system may like to get a guarantee from STU with similar penal provision. Secondly, some DISCOMs have filed petitions highlighting various operational/implementation issues of POC and are not paying transmission charges in line with POC. If those issues are not resolved immediately it would be difficult to ensure that DISCOMs pay their share of GNA charges, which may put the entire concept in jeopardy. Third, presently, generators apply for connectivity to start with much before the synchronization and are permitted to arrange for tie-up with beneficiaries with ease (as long-term
power purchases by DISCOMs are few and far) and then apply for LTOA/ MTOA/STOA. It gives them some time and advantage in managing cash-flow better before the commercial operation of the unit. With the implementation of GNA, the generators will be forced to apply for GNA immediately which will start the fund outflow much before the commercial operation thereby hampering the cash-flow balance. Lastly, GNA (Import/export requirement) should be assessed by the States at least 4-5 years in advance and STUs of respective state should be the nodal agency for assessment in line with Section 39 of the Electricity Act. But whether such arrangement under federal structure is maintainable and whether CERC/SERC/CTU would take responsibility is something that only time can tell. This is a very crucial point as more and more States are implementing coercive measure to force IPPs to remain connected with STU only as embedded customers. In such a scenario, development of STU corridor is paramount for developing competitive power-market.
Summary GNA is a market friendly transmission service product which is intended to improve system reliability and to remove congestion. It will extend full benefit of PoC transmission pricing, free from pan caking of charges. It would also help generators as it does not require identification of target region or beneficiaries at the time of seeking access. However, its success would be contingent upon the beneficiary DISCOMs seeking GNA as per their load demands. The details regarding the term of payment and the time of payment would have be addressed separately and adequately to ensure that neither generator nor beneficiaries are burdened right from the beginning. The views in the article of the author are personal For suggestions email at feedback@infraline.com
9
August 2016 www.InfralinePlus.com
InDepth
Govt seeks transmission push with private participation
10
►► Policy reforms and increased confidence of lenders have made power transmission attractive ►► NITI Aayog has set a target of adding 51,400 ckm transmission line in 2016-17
By Team InfralinePlus
India is one of the few countries where the power transmission sector has been opened up for private participation and has garnered significant interest from private players. The recent policy reforms in distribution segment (UDAY scheme for discoms) and the push for renewable energy can be seen as the drivers for fast implementation of transmission lines during the Twelfth Plan (2012-2017) at 21,912 circuit km (ckm) as on May 31, 2016. Since
the seventh five-year Plan, this is the highest net addition of CKM under any five-year plan. Policy reforms and increased confidence of lenders have made the power transmission sector in India attractive for the private sector. The improved pace of project implementation and stable realisation from investment have transformed this sector from what was earlier described as a stressed sector to a new promising
investment destination. There have been suggestions that foreign investors may get to own power transmission lines in India as the government is looking at monetising the assets by offering equity to international pension funds aimed at mopping up INR 10,000-12,000 crore investments. The proposal will aim at unlocking value of the existing power transmission lines to generate revenues that can be re-invested in strengthening
August 2016 www.InfralinePlus.com
transmission system and other infrastructure projects. Even as the market opportunity for private sector in transmission business has improved, strict qualifying requirements in recent tenders have ensured that the most competent bidders are in the fray. This has improved credibility and attractiveness for private sector with core competency in transmission and will ensure that bids are not aggressive and projects are completed in time. A total of 13 projects went under tariff-based competitive bidding during 2015-16 at a cumulative estimated cost of INR 18,300 crore. Three projects each were won by Sterlite Grid, Essel Infra, Adani Power and state-owned Power Grid Corporation of India (PowerGrid). One was won by Kalpataru Power. Apart from buying operational assets, more companies are looking to bid for projects in 2016-17, both for PowerGrid EPC (engineering, procurement, construction) projects as well as for the PPP-BOT (publicprivate partnership on built, operate, transfer) projects. Power transmission companies with assets that are up and running are seeing interest from
buyers, who expect gains from the government’s attempts to plug power leakage and attract investments. Adani Transmission Ltd, India’s largest private power transmission company is said to be in talks to buy a 74% stake in Maru Transmission Service Co. Ltd and a 49% stake in
Even as the market opportunity for private sector in transmission business has improved, strict qualifying requirements in recent tenders have ensured that the most competent bidders are in the fray. This has improved credibility and attractiveness for private sector with core competency in transmission and will ensure that bids are not aggressive and projects are completed in time
Aravali Transmission Service Co. Ltd. Both are subsidiaries of GMR Infrastructure.
Historical trend Transmission infrastructure is the backbone for the operation of a competitive electricity market. Development of the transmission system must match with the generating capacity on one side and growing demand on the other with flexibility for generators to switch from one drawing entity (Discom or Consumer) to another and vice versa for the drawing entity to switch from one generator to another. While transmission as a segment accounts for only about 8% of the total costs of the power value chain, it makes the real Umbilical cord of power, without which all investments in power sector become fruitless. With Open Access now being more important than ever before, transmission is not only an enabler for power but also is the multiplier of a competitive power market as well as basic parameter of power price sensitivity. In recent years, investment in transmission networks have lagged the curve vis-a-vis investments in generation. The accepted thumb rule is that for development of a robust power system, every unit currency invested in generation, shall be followed by an investment of 0.5 unit in transmission. This ration of 1:0.5 has not been respected in Indian power investment scenario. In the 11th plan, which saw the real burst of generation investments, the ratio stood at 1:0.3. While generation grew by 55%, transmission growth was stunted at 27% only, leaving large deficit to be filled in 12th plan. This deficit moves the ratio to 1:0.6 or even more. The expected fund requirement for meeting 12th plan generation targets of about 88 GW is about INR 4.8 lakh Crores, which means the transmission sector would need investments of about INR 3 lakh Crores. Against this, government has kept transmission investment target
11
August 2016 www.InfralinePlus.com
InDepth Fig.1: Net addition of transmission lines (in ckm) over successive five-year plans Transmission Lines Addition Over Successive Five Year Plans 19969 17393
17636
IX Five Year Plan (1997 -2002)
X Five Year Plan (2002 -2007)
21351
21912
XI Five Year Plan (2007 -2012)
XII Five Year Plan (2012 -2017) As of May 2016
13626
VII Five Year Plan (1985 -1990)
VIII Five Year Plan (1992 -1997)
Net Addition in Circuit Kilometers Source: Ministry of Power
12
While there has been a marked increase in the growth of the central sector transmission system and transformation capacity during the previous (XI) and the current (XII) five-year plans, transmission congestion in some parts of the grid as evident in the last few years, underlines the need for emphasis on the development of adequate transmission system Private sector investment in green energy corridor projects The green corridor, a INR 40,000 crore transmission network for renewable energy, was envisaged by state-owned Power Grid Corporation in 2011. The project was divided into two parts to speed it up. PowerGrid is setting up the first corridor connecting states rich in renewable energy. Work is also on for a second corridor connecting solar parks in Andhra Pradesh, Madhya Pradesh, Karnataka, Rajasthan and Gujarat. Rajasthan, Karnataka, Gujarat and Andhra Pradesh will issue their tenders later this year. These projects are expected to be awarded through transparent bidding to speed up transmission for upcoming solar parks. The move is in line with the government’s plan to open up power transmission to private investment. Adani Power, Sterlite Power, Essel Infra and Tata Power are likely to bid for these projects. The decision to adopt the tariff-based competitive bidding (TBCB) route for new solar parks means the private sector would be allowed to compete for 21 prospective solar parks. It seems essential to ensure power evacuation infrastructure to the investors in solar projects. It takes 3-6 years for the developers to commission transmission lines while the solar project can be ready in six months. Private participation will ease the burden on the government (PGCIL) to commission transmission projects in a limited time.
at INR 2.09 lakh Crores only, thus compounding the existing investment gap in transmission. While there has been a marked increase in the growth of the central sector transmission system and transformation capacity during the previous (XI) and the current (XII) five-year plans, transmission congestion in some parts of the grid as evident in the last few years, underlines the need for emphasis on the development of adequate transmission system, especially at the intra-state level and its coordinated planning and development with the inter-state transmission system. India faces irregular power availability across states. Some states in the northern and western parts of the country have surplus power, while some states in the south face shortages. The central government, which has made boosting power generation a key policy priority, is looking to supply adequate power at affordable prices, with the aim of doubling electricity generation to two trillion units by 2019. The centre has set a target of bringing 24x7 ‘power for all’ by fiscal 2019.
Future trends To meet the government’s target of providing 24x7 power to all, government’s think tank NITI Aayog has set a target of adding 51,400 ckm transmission line in 2016-17, 82 per cent more than what was achieved in 2015-16. In order to provide fillip to the transmission segment, the government may soon invite bids from private and public companies for interstate power transmission projects through reverse electronic auction on build-operate-own (BOO) basis for 35 years. The proposal for separation of planning function from PowerGrid has also been mooted amid rising concerns on conflict of interest and level playing field for private companies as the state-run company is involved in planning the transmission system and participates in the bidding as well.
August 2016 www.InfralinePlus.com
Industry concerns India is one of the few countries where the transmission segment of the power sector has been opened up for private participation and has garnered significant interest from private players. The private developers however, face a number of challenges in implementing transmission projects awarded under the competitive bidding route, which include: - Delays in securing clearances under Section 164 and Section 68 of Electricity Act 2003; - Delays in securing transmission license from the Appropriate Commission; - Delays and cost escalation in securing Right of Way (ROW) clearance; - Delays in acquiring forest land due to differing dispensations for Central Transmission Utility (CTU) vis-a-vis private developers; - Fixed quoted tariff for 35 years creates challenges due to long gestation period of the transmission projects leading to cost and time overruns. In contrast, the Central Transmission Utility (CTU) under cost plus regime does not face most of these challenges as: - It has automatic clearance under Section 164 and Section 68 of the Electricity Act 2003 being deemed as a ‘central project’; - It is a deemed licensee; - It has the power to pay double compensation for the forest land and acquire it without any procedural issues, being deemed a ‘central project’; - The tariff determination for projects executed by the CTU is under cost plus regime which allows any cost escalation to be passed through the tariffs although there is a sunset clause which mandates competitive bidding for all future projects.
Exponential growth in power generation has already proved that a healthy private sector participation is must to achieve significant improvements in capacities. For private sector to draw confidence for participation in the process of competitive transmission, these key policy shifts are required to be made to make the whole process more investor friendly, empathetic and credible
India being on brink of explosive growth path cannot achieve it without robust power sector growth, which cannot happen without having sufficient emphasis on inter-state and intra-state power transmission networks. Exponential growth in power generation has already proved that a healthy private sector participation is must to achieve significant improvements in capacities. For private sector to draw confidence for participation in the process of competitive transmission, these key policy shifts are required to be made to make the whole process more investor friendly, empathetic and credible. Going forward, demand could further increase with increasing industrialization. If India’s transmission capacity is not augmented in a timely manner, the grid congestion problem is expected to further aggravate in certain areas. In order to address the changing market mind set, there is a need to design and develop a grid which addresses the changing needs of the consumers and generators as well as acts as a market enabler for growth of power demand and generation. For suggestions email at feedback@infraline.com
13
August 2016 www.InfralinePlus.com
InDepth
Water management for thermal plants need of the hour
14
►► Total freshwater consumption of coal plants in India estimated at 4.6 bcm meters per year ►► Dedicated targets for reduction in freshwater consumption need to be set for thermal plants
By Team InfralinePlus
Despite the central government’s determination to increase domestic coal production up to 1bn tonne by 2019, the power sector faced a new foe, water scarcity. A lack of cooling water for coal-based power plants in Karnataka, Maharashtra and West Bengal led to repeated shut downs and curtailment in electricity generation.The water crisis has once again highlighted the urgency of shifting to a diversified energy model that reduces India’s reliance
on coal-based thermal power, to save water and prevent power outages.
Thermal power sector: A water guzzler? Coal power plants are one of most water-intensive industrial users of fresh water across the world and in India. The water consumption of coal power plants has not received sufficient attention, even during a drought affected year. Coal power plants require large
volumes of water for their operations. Water is mostly consumed for cooling, with additional water going into scrubbing the air pollutants from power plant emissions and handling coal ash. A Greenpeace India analysis of a report released in March this year estimates that the total freshwater consumption of coal power plants in India is 4.6 billion cubic meters per year. This is enough to meet the basic water needs of 251 million (25.1 crore)
August 2016 www.InfralinePlus.com
The water available in India’s most important reservoirs now stands at merely 29% of total storage capacity of 45.8 billion cubic metres, the latest numbers released by the Central Water Commission (CWC) reveals. The commission monitors live water storage status of 91 big reservoirs that have a holding capacity of 150 BCM, which is 62% of the total storage capacity in India. Out of these, 37 reservoirs have the capacity of generating more than 60 MW of hydropower.
people. This figure will more than double if all proposed plants are built. According to the report, the water consumption for solar and wind energy is negligible in comparison to coal and the government’s ambitious 175 GW target for wind and solar energy holds the key to securing both water and electricity supplies in water stressed regions. The total capacity of power plants operating in Maharashtra which use fresh water in cooling towers and cooling ponds is 14,660 MW while these coal power plants altogether consume about 350 million cubic metres of water each year. On the other hand, the total capacity of power plants in Madhya Pradesh which use fresh water in cooling towers is 9344 MW and these coal-based power plants altogether consume about 222 million cubic metres of water each year. It is estimated that power plants of National Thermal Power Corporation (NTPC) at Farraka (West Bengal), Adani Power at Tiroda (Maharashtra), GMR at Warora (Maharashtra), MAHAGENCO at Parli(Maharashtra) and the Karnataka Power Corporation (KPCL) at Raichur(Karnataka) were the worst affected, losing about INR 2,400 crore in revenues due to the shut downs.
The total capacity of power plants operating in Maharashtra which use fresh water in cooling towers and cooling ponds is 14,660 MW while these coal power plants altogether consume about 350 million cubic metres of water each year. On the other hand, the total capacity of power plants in Madhya Pradesh which use fresh water in cooling towers is 9344 MW
Figure-1: Generation and Revenue Losses from Coal-based power plants (due to water scarcity) (for the period between January 1, 2016 and May 21, 2016) KPCL (Raichur)
Generation and Revenue Losses from Coal-based
Generation and Revenue Losses power power plants (due tofrom waterCoal-based scarcity) plants (due MAHAGENCO (Parli)to water scarcity) GMR (Warora) Adani Power (Tiroda)
Total generation loss: 6,828 MUs Total revenue loss: INR 239,004 lacs (INR 2390 crore)
NTPC (Farakka) NTPC (Farakka)
Adani Power MAHAGENCO GMR (Warora) KPCL (Raichur) (Tiroda) (Parli)
Generation Loss (MUs)
1,119
570
480
4,529
130
Revenue Loss (in INR Lakhs)
39183
19958
17136
158,516
4,211
Source: Greenpeace Report (June 2016)
Such abnormally low levels of water have already affected electricity potential and generation, particularly at hydropower projects. The electricity generation from Tehri hydro power project stood at 205 million units (MUs) on March 10 compared with 1,921 MU at full reservoir level, according to data available with Central Electricity Authority (CEA). On March 10 last year, the energy content was 386 MUs in the dam on the Bhagirathi River in Uttarakhand in the Himalayas.The situation is even worse in some other dams. The energy content at the SardarSarovar dam on the Narmada River, the country’s largest in central India, stood at 95 MU on March 10 against 1,818 at full reservoir level. It was 288 MU on the same date last year, according to CEA’s data.
Treatment of sewage water for TTPs: An alternative? Given the increasing competition for water for different uses like agriculture and domestic supply, it is clear that such problems are likely to increase in the future. The government of India has also recognised the seriousness of the issue and has started taking steps to address it. The one measure that it seems to be relying upon in a big way is to require thermal power plants to use treated sewage rather than fresh water. In the amendments to the National Tariff Policy (2006) notified by the Ministry of Power (MoP) on January 28, 2016, there is a provision that now requires that “the thermal power plant(s) including the existing plants located within 50 km radius of sewage treatment plant of any municipality/local bodies/similar organisation shall… mandatorily use treated sewage water produced by these bodies…” Government’s directive to use recycled sewage water by power plants will call for an investment of up to INR 32,000 crore to meet the requirement of 80 GW capacities of
15
August 2016 www.InfralinePlus.com
InDepth
Water-Power Nexus: Several TPPs face shutdown undermining financial viability Case Study: Maharashtra
16
This summer has already seen temporary shut downs of KPCL’s Raichur power plant and NTPC’s Farakka plant due to lack of water. MAHAGENCO’s Parli power plant has been shut since July 2015 due to lack of water. Five years earlier Maharashtra’s state-owned utility, MAHAGENCO, had shut down several units of the 2340 MW Chandrapur Thermal Power Station due to the impact of drought. The construction of NTPC’s Solapur power plant in Maharashtra has been delayed due to huge question marks about where the plant will get water to run on. Water scarcity could severely undermine the plant’s financial viability. Water crisis in Maharashtra had been precipitated as Dhapewada dam, the water source for 3,300 MW Tiroda power plant of Adani Power, had almost gone dry. The only way to increase water level in this dam is to get water released from Bawanthadi dam in Madhya Pradesh (MP) having capacity of 217 million cubic metres (mm3). The state’s share is 50%. Tiroda plant supplies 2,400 MW on an average to Maharashtra State Electricity Distribution Company Limited (MSEDCL). At present, the discom has 1,700 MW surplus power during night hours and 1,000 MW extra power during day hours. Closure of Tiroda plant could lead to shortage of 700 MW during night and 1,400 MW during day. MSEDCL would have had to buy additional power from open market. If power was not available at affordable rates, then MSEDCL would have gone in for load shedding. Closure ofTiroda plant would burden MSEDCL with INR 233 crore as the company would have to pay capacity charges to Adani as per the power purchase agreement (PPA). Given the precarious water situation in large parts of India, the fact that generating electricity from coal requires significant quantities of water is a clear financial risk multiplier. Financial risks from water scarcity could range from physical constraints, where plants will experience water shortages leading to shutdowns, to regulatory risks with increased constraints on water use, the restriction or cancellation of permits and tighter technological requirements to curtail water use. Civil unrest because of the conflict between power generators and local farming communities over access to water will further reduce companies’ social license to operate, and bring reputational damage to financiers of new coal projects. This could result in abrupt policy changes, as policy makers realise that water consumption based on existing policies is unsustainable.
Government’s directive will not be legally binding and it depends on state regulators to implement it. But even if central and state generators with aggregate capacity of 80 GW follow this directive, they would be requiring supply of 8,000 million litres treated water per day
state and central utilities depending upon the distance between sewage treatment plant and the power plant, according to Industry estimates. Government’s directive will not be legally binding and it depends on state regulators to implement it. But even if central and state generators with aggregate capacity of 80 GW follow this directive, they would be requiring supply of 8,000 million litres treated water per day. Recently, NTPC has decided to use sewage water treated by Nagpur Municipal Corporation’s (NMC) sewage treatment plant (STP) at Bhandewadi for its Mouda plant. The plant is operating two 500 MW units using Gosikhurd water. NMC is building a 200 million litre per day (MLD) capacity STP at Bhandewadi.While recycling and reuse of sewage is a welcome step, it needs to be undertaken with great caution and only after assessing implications in each individual case. Finding the coal to run power plants in India is no longer the big
August 2016 www.InfralinePlus.com
hurdle it was a couple of years ago. Coal India (CIL) has cranked up production, and inventories held by power producers are at a record high. The bigger resource crunch today is water. The water needed in ash-handling systems and cooling plants could easily create acute local shortages, which would in turn lead to power plants being turned off and electricity prices spiking. Power Ministry is preparing a national roadmap for setting up water reprocessing facilities, which could marginally increasepower tariff. The power plants require water for a critical plant operation – condenser cooling. But, today, technologies are
available in which water is replaced with condenser cooling systems based on air. The projected water scarcity in future will potentially cripple power plant operations resulting in revenue losses running into several crores on a daily basis. The future situation is alarming, considering that 2/3rd of the current and planned capacities fall in water stressed regions. Hence, the risks to operations due to water scarcity would impair the viability of power plant operations. Power plants, who have historically treated water availability as a given, need to hence radically overhaul their current approach to water management. It is
Coal India has cranked up production, and inventories held by power producers are at a record high. The bigger resource crunch today is water. The water needed in ash-handling systems and cooling plants could easily create acute local shortages, which would in turn lead to power plants being turned off and electricity prices spiking
not possible for power plant operators to expect water availability at current levels in the future. Deploying a water management strategy today would help companies mitigate the impact of upcoming water scarcity and ensure sustainability of their operations, in the long term. Water management needs to become an integral factor in planning of future strategic initiatives. For existing plants, dedicated targets for reduction in freshwater consumption need to be set, with clear timelines for short-term and long-term measures. Water-shed management plan could be combined with CSR activities to implement water conservation measures for other users in the watershed. The power plant must prepare a scenario analysis to develop a contingency plan to deal with exigencies like regulatory disruptions or physical shortages. For future capacity additions, location planning must incorporate potential water risks in the decision making process. Potential measures that can be incorporated for some of the under construction plants also need to be assessed. For suggestions email at feedback@infraline.com
17
August 2016 www.InfralinePlus.com
StatisticsPower Trends in Production of Primary Sources of Energy in India (2014-15) Year
Coal (Million Tonnes)
Lignite (Million Crude Petroleum Tonnes) (Million Tonnes)
Natural Gas (Billion Cubic Metres)
Electricity* Hydro & Nuclear (GWh)
2005-06
407.04
30.23
32.19
32.2
1,18,818
2006-07
430.83
31.29
33.99
31.75
1,32,304
2007-08
457.08
33.98
34.12
32.42
1,37,344
2008-09
492.76
32.42
33.51
32.85
142576
2009-10
532.04
34.07
33.69
47.5
1,25,316
2010-11
532.69
37.73
37.68
52.22
1,40,524
2011-12
539.95
42.33
38.09
47.56
1,63,000
2012-13
556.4
46.45
37.86
39.83
1,46,497
2013-14
565.77
44.27
37.79
35.41
1,69,076
2014-15(P)
612.44
48.26
37.46
33.66
1,65,346
Growth rate of 2014-15 over 2013-14(%)
8.25
9
-0.87
-4.94
-2.21
CAGR 2005-06 to 2014-15(%)
4.17
4.79
1.53
0.44
3.36
(p): provisional * Thermal electricity is not a primary source of energy
18
Trends in Installed Generating Capacity of Electricity in Utilities and Non-utilities in India from 2005-06 to 2014-15 (in Mega Watt ) Utilities
Thermal *
Hydro
Nuclear
Total
Non-utilities Total
31.03.2006
88,601
32,326
3,360
1,24,287
21,468
1,45,755
31.03.2007
93,775
34,654
3,900
1,32,329
22,335
1,54,664
31.03.2008
1,03,032
35,909
4,120
1,43,061
24,986
1,68,047
31.03.2009
1,06,968
36,878
4,120
1,47,966
26,980
1,74,946
31.03.2010
1,17,975
36,863
4,560
1,59,398
28,474
1,87,872
31.03.2011
1,31,279
37,567
4,780
1,73,626
32,900
2,06,526
31.03.2012
1,56,107
38,990
4,780
1,99,877
39,375
2,39,252
31.03.2013
1,79,072
39,491
4,780
2,23,344
43,300
2,66,644
31.03.2014
1,99,947
40,531
4,780
2,45,259
42,257
2,87,516
31.03.2015(F)
2,24,674
41,268
5,780
2,71,722
44,657
3,16,379
Growth rate of 2014-15 over
12.37
1.82
20.92
10.79
5.68
10.04
2013-14(%) CAGR 2005-06 to 2014-15(%)
9.75
2.47
5.57
8.14
7.6
8.06
As on
Grand Total
Thermal includes Renewable Energy Resources. ** Capacity in respect of Self Generating Industries includes units of capacity 1 MW and above. CAGR: Compound Annual Growth Rate =((Current Value/Base Value)A(l/nos. of years )-l)* 100 Source : Central Electricity Authority (P) Provisional
August 2016 www.InfralinePlus.com
Actual power supply position of various States during the year 2015-16 Region / State / System
Requirement
Availability (MU)
Surplus(+) / Deficit(-)
(MU)
(MU)
(MU)
Chandigarh
1,607
1,607
0
(%) 0
Delhi
29,626
29,583
-43
-0.1
Haryana
47,506
47,437
-69
-0.1
Himachal Pradesh
8,821
8,758
-63
-0.7
Jammu & Kashmir
16,572
14,037
-2,536
-15.3
Punjab
49,687
49,675
-12
0
Rajasthan
67,417
67,205
-212
-0.3
Uttar Pradesh
106,350
93,033
-13,317
-12.5
Uttarakhand
12,889
12,675
-214
-1.7
Northern Region
340,475
324,009
-16,466
-4.8 -1.3
Chhattisgarh
25,650
25,310
-340
Gujarat
103,544
103,540
-4
0
Madhya Pradesh
62,375
62,375
0
0
Maharashtra
141,817
141,361
-456
-0.3
Daman & Diu
2,337
2,337
0
0
Dadra & Nagar Haveli
5,925
5,925
0
0
Goa
5,120
5,119
-1
0
Western Region
346,767
345,967
-800
-0.2
Andhra Pradesh
50,437
50,366
-71
-0.1
Karnataka
64,302
60,971
-3,331
-5.2
Kerala
23,318
23,194
-124
-0.5
Tamil Nadu
97,277
96,586
-690
-0.7
Telangana
50,254
49,948
-307
-0.6
Puducherry
2,437
2,429
-8
-0.3
48
48
0
0
Southern Region
Lakshadweep
288,025
283,494
-4,532
-1.6
Bihar
23,960
23,658
-302
-1.3
Damodar Valley Corporation
18,437
18,234
-203
-1.1
Jharkhand
7,735
7,560
-174
-2.3
Odisha
26,763
26,600
-163
-0.6
West Bengal
47,359
47,194
-165
-0.3
Sikkim
399
399
0
-0.1
Andaman & Nicobar
240
180
-60
-25
124,653
123,646
-1,007
-0.8
625
591
-35
-5.5
8,762
8,271
-491
-5.6 -3.6
Eastern Region Arunachal Pradesh Assam Manipur
840
810
-30
1,832
1,724
-108
-5.9
Mizoram
471
455
-16
-3.3
Nagaland
755
738
-16
-2.2 -4.7
Meghalaya
Tripura
1,202
1,146
-57
North-Eastern Region
14,488
13,735
-752
-5.2
1,114,408
1,090,851
-23,557
-2.1
All India
19
August 2016 www.InfralinePlus.com
NewsBriefs | Coal Rs 2,237-crore revenue generated from 74 coal mines
According to the government, revenue of around Rs 2,237 crore has already been generated till May-end from the allocation of 74 coal mines. “The revenue already generated till May 31, 2016 from the allocation of 74 coal
mines under the provisions of the Coal Mines (Special Provisions) Act, 2015 is Rs 2,237 crore (excluding royalty, cess and taxes) which shall be devolving entirely to the coal bearing state concerned,” Coal and Power Minister Piyush Goyal said in a reply to Rajya Sabha. The revenue which would accrue to the coal bearing states from the allocation of mines comprises of upfront payment as prescribed in allotment document, auction/allotment process and royalty on per tonne of coal production, the minister added. Under the provisions of Coal Mines (Special Provisions) Act, 2015 and its rules, he said, the government has so far allocated 75 coal mines for specified end uses.
Power generation utilities owe Rs 12,028 crore to Coal India
20
Power generation utilities owe Rs 12,028 crore to state-owned CIL as on March 31. Various steps are being taken by Coal India for timely recovery of dues from all its consumers. The party-wise outstanding dues are being reviewed by the subsidiary companies on a monthly basis. In case of major defaulters, CIL authorities have taken up the matter with various ministries. In a bid to rescue almost bankrupt state electricity retailers, the central government had last year approved a scheme to rejig Rs 4.3 lakhcrore debt of the utilities. The Cabinet had approved the scheme to ease the financial crunch of power distribution companies or discoms that has impaired their ability to buy electricity. The rescue plan, called Ujwal
Discom Assurance Yojna or UDAY, aims at reviving ailing state electricity boards and bolstering operational efficiency of power distribution companies. It envisages reducing interest burden, cost of power and aggregate technical and commercial losses.
National Coal India’s e-auction premium shrinks to a half
Kollkata-based Coal India Ltd (CIL) may have benefited from higher realizations on spot sales of the fuel through e-auction for years. But not anymore. The miner sold coal through e-auction at a price mere 20 per cent more than the notified price in the first quarter ended June - a sharp drop from 40 per cent premium it fetched in the same period last fiscal. The sharp drop in the premium available on e-auction sales - coupled with a drop in volumes -- is attributed to the slump in spot power prices on the back of lacklustre demand for electricity. E-auction was launched by the government in 2005 to ease coal supply for customers in the non-core sectors of cement, fertilizer and sponge iron. The new trend signals how the electronic trading platform, a traditional profit centre for CIL, is now failing to attract customers. According to fresh data, during the quarter ended June, CIL offered 26.3 MT coal to spot consumers but could allocate only 12.3 MT - or 47 per cent - of the quantity, thanks to the depressed demand.
CAG suspects 1st e-auction of coal blocks was rigged with multiple biddings Multiple bids by corporate groups made through joint ventures or group arms may have limited the competition for 11 coal mines auctioned in the first two rounds in March 2015, according to the federal auditor’s report on the first e-auction of natural resources conducted by the Modi government. The auction was conducted after the Supreme Court cancelled allotment of 204 blocks in 2014. The Comptroller and Auditor General’s (CAG) report supports the suspicion that the government itself had developed after the first two rounds of bidding, prompting the coal ministry to put up
firewalls against the probability of pricerigging or cartelisation from then on. The government has been looking at barring multiple bids by any corporate group to curtail the probability of price rigging or cartelisation, which the coal ministry then believed had led to wide variation in the winning bids — described as “outliers” — in the first round of mine auctions for power plants. These outliers had prompted the ministry to put under the scanner bids for several blocks and finally reject the winning bid of Naveen Jindal group firm for Gare Palma IV/2&3 blocks.
August 2016 www.InfralinePlus.com
NewsBriefs | Coal National Coal linkages: Captive power segment comes to CIL’s rescue
Lack of demand for Coal India’s linkages from sponge iron and cement sectors is being made up in a small way by the captive power segment. Excepting the small offerings of a Western coalfields mine, the rest of the coal offered in the first three days found buyers. In a majority of the cases,
coal was sold at a (small) premium ranging up to ₹100 a tonne, it has been learnt. CIL is scheduled to auction linkages worth 18 million tonne in the current round. Nearly 5 million tonne linkages were sold in the first two days. After improved demand in May, when offtake was up by almost three per cent; demand for the fuel slowed down in July. According to the latest information, offtake grew by merely one per cent during the month. The modest growth came in the backdrop of a one per cent reduction in coal-based power generation during the month as hydro-electricity was available at a cheaper rate.
Kerala makes fresh bid for coal block allocation Four years after it lost a claim on the Baitarani West coal block in Orissa, the state is making a fresh bid for coal block allocation. The State Government has requested the Centre to allocate it a new coal block for power generation. A tentative plan is to use the coal to fuel a power plant that would be established jointly by Kerala and Odisha in Odisha. The Union Power Minister said the state’s request would be considered when it submits concrete plans for a (power) project. According to top officials, the state is gunning for a coal block with reserves of 200 million tonnes. In July 2007, the Kerala State Electricity Board, along with Odisha Hydro Power
Corporation and the Gujarat Power Corporation Ltd, was allocated the 602 million tonne Baitarani West coal block in Talcher, Odisha. The next year, they floated an SPV - Baitarani West Coal Company Ltd - to mine the block.
National Green panel gives nod to MCL’s coal washery project in Odisha
International
The Centre’s green panel has recommended environment clearance to stateowned Mahanadi Coalfields Ltd (MCL) to establish a 10 million tonnes per annum capacity coal washery in Talcher district in Odisha. Coal India arm MCL has proposed setting up of ‘Jagannath Coal Washery’ with 10 million tonnes per annum (MTPA) capacity in an area of 30 hectare at Hensmul village in Talcher district. MCL’s coal washery proposal was taken up for discussion in the recent meeting of the Expert Appraisal Committee (EAC) set up under the Union Environment Ministry. As per the rule, the ministry gives final green clearances to the projects based on the EAC recommendations. Among conditions specified, MCL has been asked to set up the washery as per the project report submitted to the committee. It has been told to transport raw coal through pipe-belt conveyor, and clean coal and rejected ones by rail with wagon loading through silo.
Mahanadi Coalfields to commission coal corridor by March 2017 Mahanadi Coalfields Ltd (MCL) would complete work on a separate, dedicated coal transportation coal corridor in the coal-rich Talcher region by March 2017. The alignment of the coal corridor would be such that it passes through the coal mining blocks but avoids the populated areas of the coal bearing region. MCL has already commenced work on the corridor. In the existing coal transportation road of 35 km length from Hingula to Pawitra Mohan Chowk in Talcher area, MCl would deploy road sweepers and water sprinkling system on the routes passing through the populated areas. Both Talcher and Ib valley coalfields are under
MCL’s jurisdiction and have been classified as critically polluted areas of Odisha. Since MCL operates numerous coal mines in this belt, such large scale mining has the potential to
degrade the environment unless adequate measures are taken to curb pollution. Besides taking action for regulatory compliance of the stipulations of consent order, MCL being one of the major stakeholders of these two areas needs to take some additional steps for improvement of overall environmental scenario of the areas. On groundwater and its recharge potential, it was decided that MCL should take expeditious action to start survey work by CSIR-National Geophysical Research Institute (NGRI), Hyderabad during post monsoon period and ensure that the report preparation by NGRI is completed by July-2017.
21
August 2016 www.InfralinePlus.com
NewsBriefs | Coal Greenpeace slams China for creating more coal-fired power plants
A report created by Greenpeace East Asia was released recently slamming China for creating more coal-fired power plants. This came after China signed a new
climate change policy in 2014. This policy resulted in China pledging to bring their renewable energy usage up to 20 percent by 2030. These changes began after it was clear China was the biggest emitter of greenhouse gasses in the world. Greenpeace went on to explain, China was on track to add one additional coal-fired power plant a week until the year 2020. It is believed this is due to the country’s issues related to overcapacity. Greenpeace is concerned because China has still not reduced their emissions, two years after their climate change policy was put in place, and are still unable to meet the air quality standards.
BHP Billiton’s thermal coal production falls 16% on year in fiscal 2015-16
22
Mining giant BHP Billiton expects further declines in its thermal coal production in fiscal 2016-2017 after periods of drought and heavy rain took a toll on output in the current fiscal year that ended June 30. Production plunged 16% year on year to 34.25 million mt and well below the year’s guidance of 40 million mt, the company said in its annual operational review. Further declines are expected in fiscal 2016-2017 and it sees output only at 32 million mt. BHP Billiton’s New South Wales coal production fell 13% year on year to 17.1 million mt in fiscal 2015-2016 on bad weather as well as rescheduling of mine plans based on individual pit economics. “Productivity improvements at New South Wales Energy Coal are expected to partially offset the divestment
of our New Mexico assets,” BHP Billiton said. The sale of the San Juan Mine to Westmoreland Coal was completed in January this year and the transfer of the Navajo coal mine to the Navajo Transitional Energy Company was on track for December 31, BHP said.
International Philippines’ coal demand to grow over 1 MT/yr until 2020
The Philippines’ coal consumption could grow by more than 1 million tonnes annually until 2020 as it expects to switch on more coal-fired power plants to support its economy. The Southeast Asian country’s consumption of the fossil fuel reached 22 million tonnes last year, and about 80 percent of that, or a record high 17.4 million tonnes, had to be imported almost entirely from Indonesia, the world’s top seller of thermal coal used in electricity generation. Higher Philippine coal demand could be good news for Indonesia though it might be insufficient to move prices in an over-supplied market. The Philippines relies heavily on coal imports as domestic supply, mainly from mine operated by Semirara Mining Corp , is not enough and the heat content is too low to be used in most of the country’s power plants. Imports in 2014 totalled 15.2 million tonnes, based on government data. “We’re looking at an increment of 1 million tonnes per year until 2020,” Arnulfo Robles, executive director of the Philippine Chamber of Coal Mines, said.
Bangladesh awards USD2.5b coal-fired power project to Malaysia Bangladesh has awarded a USD 5 billion project to build a 1,320-megawatt coalfired power plant to Malaysia. The decision was conveyed by visiting Bangladesh State Minister for Power, Energy and Mineral Resources, Nasrul Hamid, to Prime Minister Najib Razak. Special Envoy for Infrastructure to India and South Asia S. Samy Vellu, said Najib has expressed the government’s gratitude to the Bangladeshi government for awarding the project on a government-to-government understanding. “It’s final. The Bangladesh Cabinet made the decision to award the project to the Malaysian Government. “Now, a Malaysian
consortium will implement the project but it will do a feasibility study first,” he said. In 2014, Malaysia and Bangladesh signed a government-to-government memorandum of understanding (MoU) to implement the
project. The MoU paves the way for the Malaysian consortium to finance and build the power plant in Maheshkhali, Cox’s Bazar, Bangladesh with the Bangladesh Power Development Board (BPDB). The Malaysian consortium and BPDB would have equal equity shareholding in the power plant with a concession period of 21 to 25 years. Samy Vellu said if the parties decided to go ahead with the project after the completion of the feasibility study, they will form a joint venture (JV) company and conduct international tender to appoint the engineering procurement and commission (EPC) contractor for the project.
August 2016 www.InfralinePlus.com
InConversation
‘Discoms unable to cater to latent demand’ After the Modi government came into power in May 2014, India has seen dramatic improvement in generation, pushing electricity shortfall to all-time lows. This turnaround was made possible by increased production of coal. Coal availability has improved to the extent that now the government is looking at exporting coal to deal with rising stocks at mines. However, the moot question is, how sustainable is this situation? As economic growth picks up momentum and flows of investment into government’s flagship programmes like Make in India become stronger, electricity demand too would go up. In such a scenario, will electricity supply be able to keep pace with demand? In an interview to Infraline Plus, Salil Garg, Director-Corporate Ratings, India Ratings, fields questions about the medium-term electricity supply challenges. Excerpts: Salil Garg, Director-Corporate Ratings, India Ratings
The central electricity authority (CEA) says India will become power surplus by end of this fiscal. How sustainable will be this projected situation of excess power given the government’s strong focus on manufacturing sector? India has seen rapid growth in power generation capacity in the past 5 years because of investments in the sector from 2006-2007 onwards. As a result, almost 100,000 GW of new capacity has been added in the past five years. This capacity has helped reduce the power deficits which is visible in CEA data. Many states are reporting very low or nil deficits. Therefore, CEA could be technically right in saying that India will become power surplus by the end of this fiscal. However, this will not capture the latent demand in the system and scheduled load shedding by the discoms. The surplus power situation will continue as long as the coal supplies remain robust and as long as
the discoms are unable to cater to the latent demand. Over the medium term, the demand is expected to catch up with supplies. The government says it could export surplus coal. Do you think India will find buyers for its high ash content coal? Anyway, will this strategy make sense for India which has been undertaking huge imports to meet domestic coal deficit? Would India not benefit more if it exports electricity instead of coal? The government is hopeful of finding buyers for Indian coal. It may sound far-fetched but small quantities of Indian coal could get exported in the near term while India would still be importing coal at some other locations as boiler designs and other economic considerations will prevent complete import substitution. Export of electricity is an option but such exports are possible to limited geographies. India is
already exporting electricity to Bangladesh where potential exists for further increase in volumes. There was a talk of electricity export to Pakistan as well but that has other geopolitical implications. Do you think electricity demand is growing at a healthy pace? How is your medium-term outlook on power demand growth? Electricity demand is indeed growing at a healthy pace though the bulk of the increased demand is coming from the domestic segment. The slowdown in industrial growth has, however, subdued demand growth from the industry. As we know, electricity demand in this country is also a function of effective intermediation by the discoms. The discoms have not been able to service demand fully due to their poor financial status, thus there is a huge latent demand in the sector. In the medium term, electricity demand will still remain robust and could outstrip the GDP growth. In case the discoms are able
23
August 2016 www.InfralinePlus.com
InConversation to improve their financial capabilities under Mission UDAY, there is a possibility of consistent double-digit demand growth over the next 3 years.
24
Do you think time has come for the government to open up commercial coal mining for private sector? Is the goal of producing 1.5 billion tonne of coal by 2019-20 achievable? Globally coal mining is largely in the domain of coal mining companies instead of the captive users. Commercial mining companies are expected to have the technical capabilities to mine coal economically and also manage the market risks. India has not seen very effective results from allocating mines to the end users. Opening of the coal to commercial mining involves a deeper dialogue with the stakeholders especially from the regulatory and environmental perspective. Given the present state of affairs, a rapid action is not expected on this front. As far as growth in coal output is concerned, the last two years have been very successful but it is difficult to maintain high rates of output growth over a long term. The target of 1.5 billion tonne by 2019-20 appears to be
very difficult, even achieving 1 billion tonne will have serious challenges. One also has to look at the demand. Do you think India should use nuclear power instead of coalfired generation given the growing global concern over emissions? Or do you think clean coal technologies will show the way in coming days? Theoretically, nuclear fuel has an edge over coal from emissions perspective
India has not seen very effective results from allocating mines to the end users. Opening of the coal to commercial mining involves a deeper dialogue with the stakeholders especially from the regulatory and environmental perspective. Given the present state of affairs, a rapid action is not expected on this front
but nuclear power will face difficulties in gaining critical mass India, mainly due to long gestation period, high cost and concerns over fuel availability. Thus, coal will remain the dominant fuel in India for power generation even if further investments in coal remain muted. Should India provide additional incentives to promote usage of LNG in electricity generation? Use of LNG for electricity generation is not economical and is possible only with the help of subsidies. It is not possible to have a large capacity based on an imported fuel which is highly price sensitive and needs constant government support. This is not a viable business model from the point of view of investors and users. At a time when LNG prices are benign, there is no interest to invest in gas-based power generation. Making the existing gas-based investments viable is a challenge at the moment. How far solar and wind electricity can help India in meeting its energy demand given the intermittent nature of renewable? India has declared very ambitious targets for solar, wind power generation but even after achieving these targets, renewable will remain less than 10% of the total electricity produced in the country. Yes, solar and wind pose grid stability issues which will hopefully get resolved with the help of advancements in technology. Also, the renewables will meet part of the incremental electricity demand and garner a large chunk of investments in the sector. However, we have seen that there are other challenges in the renewable electricity space including availability of capital and poor financial health of counterparties. As a result, investors are cautious at this moment. For suggestions email at feedback@infraline.com
August 2016 www.InfralinePlus.com
ExpertSpeak
Coal: Darker days ahead for India? In this article, Ramakrishnan M, Vice President and Mayank Taneja, Senior Analyst, the Smart Cube, assesses the current supply demand scenario of coal in India and examines the path chosen by the Indian government while answering questions on the government’s long-term strategy—is India aiming to become a net exporter of coal by 2020, is privatisation on the cards and the forecast price trend.
Ramakrishnan M, Vice President, the Smart Cube
Mayank Taneja, Senior Analyst, the Smart Cube
25
Declining Coal India coal (consumed by power plants Limited (CIL), primarily in West Bengal, Bihar global coal the largest and Jharkhand) by 1–30%—net prices and reduced coal miner increase stood at ~6.3%. The shipping rates have globally, announcement came amid made imported coal contributes declining prices globally due cheaper than ~82% to Into increased output and low domestic coal dia’s total coal demand. Moreover, in June 2016, production. Dur~12 power stations across UP, ing FY2015–2016, Maharashtra and West Bengal asked the state-led company produced ~536 the CIL to stop further supply due to MT of coal—an 8.5% Y-o-Y increase. extensive stockpile. This has raised However, the commodity’s demand did eyebrows at the strategy pursued by not report a similar trend, with demand the state-owned miner, or indirectly, from the power sector (the largest the Indian government. consumer of coal) witnessing a decline. During FY2014–2015, the country’s The Government way – power plants operated at 65% capacPrivatisation, reduced ity, posting the lowest plant load factor dependence on import since 1990. To achieve its goal of 100% rural While the gap between supply and electrification, the Indian government demand should have led to a decline plans to introduce reforms in the coal in coal prices, in May 2016, CIL industry—the country’s largest source raised the prices of low-grade coal of electricity. The aim is to make India (consumed by a majority of the power self-sufficient in terms of coal producplants in the country) by 13–19% and tion, i.e., reduce dependence on imreduced those of higher grades of ports to zero by the end of this decade.
Hence, India’s coal production target has been set at 1.5 billion MT (1 billion MT to be achieved by the CIL) by 2020. With the above targets in mind, the government passed the Coal Mines Special Provisions Bill and the Mines & Minerals Development and Regulation (MMDR) bill in March 2016. It can now allow private companies to mine and sell coal in the open market. In addition, the state-run CIL is ramping up operations and increasing production. To achieve the 1-billion MT mark, the company aims to invest INR 57,000 crore during 2015–2020.
Uncertainty Prevails – Price Outlook and Challenges Ahead With the production ramp-up, the government has been successful in reducing imports so far. During FY2015–2016, imports declined ~15% Y-o-Y, and thus helped generate savings of ~INR 28,000 crore in
August 2016 www.InfralinePlus.com
ExpertSpeak
foreign exchange. Further, in April and May 2016, coal imports posted Y-o-Y declines of ~15% and ~19%, respectively. The government expects to save ~INR 30,000 crore during FY2016–2017. However, declining global coal prices and reduced shipping rates have made imported coal cheaper than domestic coal, especially in coastal states—such as West Bengal. Further, due to the increase in prices by the CIL, along with rising surcharges, taxes and transport costs,
26
states prefer importing coal, instead of purchasing it domestically. Low demand from the power sector, clubbed with the above factors, has resulted in extensive stockpile at CIL mines, despite the government encouraging states to buy the commodity domestically, and forced the government to postpone its current plans of auctioning mines to private and foreign companies. While the CIL has hiked the prices of low-grade coal, it has dropped those of high grades of the
Due to the increase in prices by the CIL, along with rising surcharges, taxes and transport costs, states prefer importing coal, instead of purchasing it domestically. Low demand from the power sector has resulted in extensive stockpile at CIL mines, despite the government encouraging states to buy the commodity domestically, and forced the government to postpone its current plans of auctioning mines
commodity to increase consumption. A majority of the company’s labour (60%) goes into the production of the latter, the cost of which is difficult to recover on account of very few takers in India. In addition, the company’s plans to invest in hi-tech machinery and technology to improve efficiency, while ramping up production, are not being received well by labour unions (which fear huge job losses). Amid the challenging and dynamic scenarios prevailing in the domestic as well as the global coal market, the Indian government is taking numerous measures such as privatisation, accelerated infrastructure development and faster approvals to create a favourable position for India in the global coal landscape. However, it remains to be seen as to what all measures will work for the Indian market. The views in the article of the author are personal For suggestions email at feedback@infraline.com
August 2016 www.InfralinePlus.com
InDepth Coal linkage auction for Non-Regulated sector gathers steam
27
►►CIL to auction coal linkages for an annual contracted quantity of 23.25 MTPA ►►Coal linkages for sponge iron sector conducted, cement sector in action
By Team InfralinePlus
Battling all odds, the Government has fast tracked the auction of coal linkages for the non-regulated sector. The Government had earlier conducted auction of coal linkages for the sponge iron sector and has now kicked off the bidding process for the cement sector. Notably, this is the first time coal linkages are being e-auctioned. Earlier, the fuel supply agreements were governed by the New Coal Distribution Policy of October
2007. The linkage would be for five years, while there is an exit clause in the agreement where the consumers can exit after two years without giving any penalty. The Agreement (FSA) shall be executed between the Successful Bidder and the relevant Subsidiary in respect of the Allocated Quantity within 30 days of receipt of the Performance Security; and submission of the documents specified in Scheme Document.
Bidders will have to execute separate FSAs for each Lot where they emerge as Successful Bidders. Lot shall mean a specified quantity of coal belonging to a particular grade which is to be offered for sale and which may be dispatched by road or by rail. Each Lot will contain only one Grade and will also have a pre-identified Secondary Source. Each Lot will have a specified mode of dispatch i.e. road or
August 2016 www.InfralinePlus.com
InDepth
rail. Bidders will have to off-take coal from Lots via the specified mode of dispatch only. Players with large NCRs and located at Pit head will control the ascent in price, and overall the outcome of auctions.
Auction for sponge iron sector
Coal India has secured a booking of about 2.05 million tonnes (mt) against the offer of 3.78 mt in the first tranche of linkage auction for the non-regulated sponge iron sector. The auction was conducted in 18 slots spanning six days. There were no bidders in some of the slots while only in three slots, the booking exceeded the offer amount and hence attracted a premium over the notified price in such cases.
Key provisions 28
Linkages are assured supply commitments from Coal India Limited (CIL) and Singareni Collieries Company Ltd (SCCL) to a company that has an end-
Sub Sector
Offered Quantity (Mt)
Allocated Quantity (Mt)
Sponge Iron
3.78
2.098
Cement CPP
2.15 17.52 0.30 (Left out from Tranche I) 0.30 (Left out from Tranche I) Offered Quantity (Mt)
1.29 To be allocated
Steel Coking Coal Others Sub Sector
use plant. In February, 2016, the Cabinet Committee on Economic Affairs (CCEA) approved that all allocations of coal linkages/Letter of Assurance (LoAs) for non-regulated sector shall henceforth be auction-based. As per CCEA decision, proportion of coal allocation between power and non-power sector was pegged at 75% and 25%, respectively. Bidders with tapering linkages are allowed to participate in the linkage auction. Total quantity earmarked for Tranche-I is 23.25 mtpa. Quantity for Tranche-I shall be aggregate of FSAs
In February, 2016, the Cabinet Committee on Economic Affairs (CCEA) approved that all allocations of coal linkages/Letter of Assurance (LoAs) for non-regulated sector shall henceforth be auction-based. As per CCEA decision, proportion of coal allocation between power and non-power sector was pegged at 75% and 25%, respectively
To be allocated To be allocated Allocated Quantity (Mt)
of non-regulated sector maturing in FY2016 onwards and 25% of incremental CIL/SCCL production during FY2016 over FY2015. FSA tenure may be as decided by MoC, subject to a maximum tenure of 15 years. Separate quantities are to be earmarked for sub-sectors. It has been decided to conduct the current auction of coal linkages under non-regulated sector (Tranche I) under the following sub-sectors: Cement (excluding its CPPs), Sponge Iron (excluding its CPPs), all Captive Power Plants (CPPs), Steel (Coking Coal), all EUPs that do not fall as mentioned above are included in Others sub-sector [excluding Fertilizer (urea) sector]. A bidder must be a consumer of coal engaged in the Specified End Use and should be the owner of the Specified End Use Plant for which it is submitting the Bid. Bidders shall not have been convicted for wrongful utilization of coal by the Central Bureau of Investigation or any other governmental authority or statutory or judicial body. The Specified End Use Plant for which the Bidder is submitting the Bid should have commenced commercial operations as on the date of issuance of this Scheme Document and should have a Normative Coal Requirement of not less than 4200 TPA. Auction methodology shall be Non Discriminatory Ascending Clock Auction. In this system auctioneer increments the premium on electronic platform till demand supply equilibrium is established. Bidder will have
August 2016 www.InfralinePlus.com
to register each EUP on the MSTC system. In the event that the bidder combines one or more DRI/Cement units under one EUP, it will not be able to split them subsequently and submit different Bids in respect thereof. As a part of Conditions to Auction, bidders shall provide details such as technical data of EUP (capacity of EUP only DRI/Cement plant is to be provided), details of any existing coal linkages (expiring after June 30, 2016) for the above EUP and details of any coal mine allocated under CMSP and/or MMDR Acts. Premium shall remain constant over contract period; Notified price to be paid shall be suitably indexed on semi annual basis. The auction will commence at the Reserve Price (Floor Price) and the bidders shall bid for premium above the Reserve Price and for a particular Quantity. Reserve Price shall be the notified price published for a particular grade of coal. Premium for the first round will be Rs. Zero/ tonne. Other than the first round, round premiums will depend on the Demand/Supply Ratio of the immediately preceding round and will be determined by the auction platform as follows: The system will then calculate the Normative Coal Requirement of the EUP. Bidders can bid up to normative annual coal requirement of the end use plant (EUP). The Bidder shall deposit the necessary Bid Security and the Process Fee. The Bidders also need to submit a process fee in the form of an earnest money deposit within the timelines stipulated. Post submission of the requisite information/payments, e-auction process will commence wherein the bidders are required to bid for quantity against a certain price. CIL will allocate coal from area or mine within a subsidiary, as deemed fit. Linkage Auctions for Sponge Iron and Cement already concluded during June 10-16 and June 28-July 2 respectively.
Demand/Supply Ratio in a particular round
Incremental Round Premium (Rs. per tonne)
Greater than 100% and less than or equal to 125%
10
Greater than 125% and less than or equal to 200%
25
Greater than 200% and less than or equal to 300%
50
Greater than 300%
100
The Sponge Iron Manufacturers Association had argued against clubbing of sponge iron sector with cement and captive power producers sectors. Further, the association wanted coal mines of high grades to be exclusively reserved for iron and steel sector as coal is a feed stock used to reduce iron ore unlike other sectors where it is used as heating fuel Linkage Auctions for ‘Captive Power’ announced on June 22, and auctions scheduled to start on 19 July 2016. Muted response has been received from sponge-iron and cement sectors with 40-45% quantity remaining un-allocated. Low response has been witnessed for higher grades. After the cement sector, coal linkages will be offered to captive power plants.
Voices of discontent
The decision to auction coal linkages for non-regulated sector had its share of opposition from the sector. According to CII, the proposed methodology of auction may lead to unsustainable price discovery as demand for coal is much more than the availability and also because Coal India is the only supplier in the market. Further, Cement Manufac-
turers Association had argued the present fuel supply agreement system be continued and the implementation of proposed market based allocation mechanism be only done after development of infrastructure like port and railway to facilitate movement of coal from mines/ports in an cost effective manner. The association wanted the government to shift to eauction methodology after the indigenous production would be adequate to meet the ever rising demand. The Sponge Iron Manufacturers Association had argued against clubbing of sponge iron sector with cement and captive power producers (CPP) sectors. Further, the association wanted coal mines of high grades to be exclusively reserved for iron and steel sector as coal is a feed stock used to reduce iron ore unlike other sectors where it is used as heating fuel. Besides, Railways need to accord same priority to the sponge iron plants in allocation of rakes as is given to steel plants. Similar fears were voiced by the Indian Captive Power Producers Association indicating that the auction and market based allocation will help and serve purpose of coal consumers within the close vicinity of auction pit heads and far away consumers will be deprived and never be able to get coal through this process. According to the association, all CPPs should have been kept in one basket and pegged at par with power generation category with the creation of quota for them. For suggestions email at feedback@infraline.com
29
August 2016 www.InfralinePlus.com
InDepth Flexibility in utilisation of domestic coal to bring down cost of power generation
30
►► To reduce cost of power generation by 40-50 paise per unit; savings of Rs 25,000 crore PA ►►To help in better utilization and consumption of domestic coal by the industry
By Team InfralinePlus
Coal is the primary source of power generation in our country. Broadly coal-based thermal power plants can be categorized as Pit Head based plants, which are situated near coal Mines, and Load centre based plants situated near load centres. Depending upon the technology, thermal power plant has different efficiency levels for conversion of coal to electricity. The cost of generation of power is depen-
dent on timely availability of coal and transportation distance of coal from mine to generating station. Presently, on one hand, there are efficient power plants faced with a shortage of coal and on the other hand other plants are running way below capacity. The Union Cabinet on May 4, 2016 has approved a proposal to relax norms for utilisation of domestic coal with an objective of allowing optimal
utilization of domestic coal by the generation utilities for reducing power purchase cost of state-owned distribution utilities. This initiative paves way for optimal use of domestic coal in efficient power plants as well as lowers the cost of electricity. It is also in line with the UDAY scheme which envisages liberally allowing of coal swaps from inefficient plants to efficient plants and from plants situated
August 2016 www.InfralinePlus.com
away from coal mines to pit head to minimize cost of coal transportation which consequently help in reduction in cost of power. Before this reform, coal linkages were provided to individual companies for a particular plant only. The linkage was not allowed to transfer the coal even between two plants of the same company. Though to ensure cost optimization through savings in the transportation cost, the government has recently allowed swapping of coal linkage between some plants of NTPC. However this arrangement was approved on case-to-case basis. These norms offer freedom to use coal in any power generation unit, instead of prefixing its source and consumption point. This provides flexibility in use of coal amongst the generating stations of state owned utilities, plants of other state power utilities, company owning the Central Generating stations and IPPs, amongst each other. The proposal envisages that all the long term coal supply contracts of state generating stations will be clubbed and assigned to respective states or state nominated agency. Similarly, coal linkages of individual central generating stations will be clubbed and assigned to the company owning them, so as to enable efficient coal utilization or allocation amongst end use generating stations.
These norms offer freedom to use coal in any power generation unit, instead of prefixing its source and consumption point. This provides flexibility in use of coal amongst the generating stations of state owned utilities, plants of other state power utilities, company owning the Central Generating stations and IPPs, amongst each other The Central Electricity Authority (CEA) is the authorized body which in consultation with all the Stakeholders issues the methodology for implementation of use of coal assigned to the State(s) in their own
Generating stations, other State Generating Stations, Central Generating Stations (CGS) and IPPs. Similarly methodologies used by a company owning CGS for use of coal in their own plants or any other efficient
Average cost of supply for a discom at varying levels of mix of coal based generation in procurement and average distance for coal transportation Average cost of supply per unit sold (Rs/unit) % mix of coal based generation in overall procurement for the discom
Source: ICRA
Average distance for coal transportation (KM) 100
200
300
400
500
600
55%
5.90
5.96
6.03
6.09
6.15
6.22
60%
5.78
5.85
5.92
5.99
6.06
6.13
65%
5.66
5.74
5.81
5.81
5.96
6.04
70%
5.54
5.63
5.71
5.71
5.87
5.95
75%
5.43
5.51
5.60
5.60
5.77
5.86
31
August 2016 www.InfralinePlus.com
InDepth
plants shall also be issued by Central Electricity Authority. For usage of coal in State or Central power generating stations, the deciding criteria will be plant efficiency, coal transportation cost, transmission charges and overall cost of power. The actual realization of savings depends on the decrease in the coal transportation distance.
Benefits envisaged
32
It is a positive development for the utilities as it would result in an optimal utilization of the linkage coal from mines and assist to minimize the transportation cost of domestic coal used. Coal is transported from mines to end user plants within range of varied difference range most likely between 100 km to 1000 km. On an average, coal is transported for 700 kilometer as sources of coal for every generating station is prefixed. Providing flexibility for consumption points will lead to optimal utilization and help lower transportation costs. This in turn will lead to reduction in power purchase cost for distribution utilities. According to ICRA, the average cost of supply for distribution utility
Impact of new norms ▪▪ It is expected this initiative will help to reduce cost of power generation by 40-50 paise per unit which will subsequently lead to savings of Rs 25,000 crore per annum in 4-5 years. ▪▪ It is also anticipated that it will help in improving the consumption of domestic coal by the industry, mainly the power sector, against cheaper imports in the country.
It is a positive development for the utilities as it would result in an optimal utilization of the linkage coal from mines and assist to minimize the transportation cost of domestic coal used. Coal is transported from mines to end user plants within range of varied difference range most likely between 100 km to 1000 km
is estimated to decrease by 7 paise per unit for every 100 km reduction in distance travelled for transportation of coal, considering that the distribution utility procures 60% of its overall power requirement from coal-based generation stations. If this assumption is altered i.e. distribution utility procures 75% of its overall power requirement from coal based generation stations than for every 100 km reduction in coal haulage, cost of generation would reduce by 9 paise per unit. Average cost of supply for a discom at varying levels of mix of coal based generation in procurement and average distance for coal transportation It will not only help in reduction of transportation cost but also result in removal of congestion of Railway network. This will also be a more environment friendly arrangement as less coal will be used to produce more power and also the distance for transportation of coal would be optimized. Considering the coal prices remains low and domestic coal production maintains its growth rate during the year, the government is expecting to reduce the coal import bill by Rs 40,000 crore during FY17. This will also help in getting rid of micro management by government for utilization of coal in specified facilities and to grant more flexibility to central public sector undertakings, states and private power producers at a group level to determine which of their facilities gets the fuel. For suggestions email at feedback@infraline.com
August 2016 www.InfralinePlus.com
StatisticsCoal Trends in Consumption of Energy Sources in India (FY’06 - FY’15) Coal#
Year
Lignite
Crude Oil**
(Million Tonnes)
(MMT)
Natural Gas (Billion Cubic Metres)
Electricity* $ (GWh)
2005-06
433.27
30.24
130.11
36.39
118,818.00
2006-07
462.35
30.81
146.55
37.6
132,304.00
2007-08
502.82
34.65
156.1
39.8
137,344.00
2008-09
549.57
31.85
160.77
39.81
142,576.00
2009-10
585.3
34.41
192.77
55.67
125,316.00
2010-11
589.87
37.69
196.99
61.18
140,524.00
2011-12
642.64
42.77
204.12
59.69
163,000.00
2012-13
688.75
46.83
219.21
52.92
146,497.00
2013-14
724.18
44.64
222.5
47.67
169,076.00
2014-15(p)
827.57
49.57
223.24
48.25
165,346.00
Growth rate of 2014-15 over 201314 (% )
14.28
11.05
0.33
1.22
-2.21
CAGR 2005- 06 to 2014-15(% )
6.69
5.07
5.55
2.86
3.36
(p): Provisional GWh = Giga Watt hour = 106 xKilo Watt hour
33
*Includes hydro & nuclear electricity from utilities. **Crude oil in terms of refinery crude throughput. $ Due to non-availability of the Consumption data it has been assumed that Consumption is equal to the Production # Does not include Lignite
Trends in Industry wise Consumption of Raw Coal in India (FY’06 - FY’15) (Million tonnes) Year 1 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15(p) Distribution (%) Growth rate of 2014-15 over 2013-14(%) CAGR 2005-06 to 201415(%)
Brick
Others *
Total
7 21.69 20.9 18.49 14.68 1.79 -20.64
Fertilizers & chemicals 8 2.82 2.86 2.64 2.69 0.33 2.05
0.13 2.01 4.01 0.11 0.01 -97.18
9 51.85 63.08 67.72 77.52 89.5 92.58 69.36 116.24 133.19 169.46 20.66 27.23
10=2 to 9 395.59 419.8 453.57 489.17 513.79 523.47 608.17 713.39 739.34 820.31 100 10.95
-9.3
-1.17
-3.26
12.57
7.57
Electricity
Steel & Washery
Cement
Paper
Textile
Sponge Iron
2 306.04 321.91 350.58 377.27 390.58 395.84 437.67 485.47 493.25 527.1 64.26 6.86
3 19.66 17.3 16.99 16.58 16.45 17.26 47.86 51.7 53.05 66.37 8.09 25.11
4 14.97 14.71 15.27 13.12 14.66 15.08 26.36 31.79 32.46 37.95 4.63 16.91
5 2.77 2.5 2.64 2.16 2.34 2.43 2.03 2.12 1.91 1.54 0.19 -19.15
6 0.29 0.3 0.37 2.53 0.27 0.28 0.26 0.3 0.36 0.42 0.05 16.39
5.59
12.94
9.75
-5.71
3.82
(P): Provisional * Includes Sponge Iron, colliery consumption, jute, bricks, coal for soft coke, fertilisers & other industries consumption. @ From 1996-97 and onwards Cotton includes ‘Rayon’ also.
August 2016 www.InfralinePlus.com
StatisticsCoal Monthly Coal Production during FY12 to FY17 (Million Tonnes) Month
2016-17
2015-16
2014-15
2013-14
2012-13
2011-12
April May June July August September October November December January February March Total (Apr-Mar)
40.35 42.58 42.27
48.87 49.23 46.49 42.27 43.63 44.95 53.33 56.59 61.95 62.89 60.12 69.41 637.87
45.38 45.58 43.75 42.34 43.46 43.97 49.73 54.62 58.37 58.08 58.34 69.2 609.18
43.52 43.23 40.42 39.94 38.38 41 42.73 47.71 54.23 57.13 52.26 65.3 565.85
41.46 44.09 41.36 39.27 35.84 35.76 44.26 46.17 53.69 56.47 50.75 64.06 553.18
39.84 40.76 38.5 38.71 32.37 29.53 39.66 47.56 52.78 54.29 55.1 63.62 532.72
125.65
FOB Thermal Coal Prices - Australia & South Africa - FY 2017 Australia (FOB Newcastle 6700 kcal/kg) (USD/Ton)
South Africa (FOB Richards Bay 6000 kcal/kg) (USD/Ton)
April 16
50.8
52.7
May 16
51.2
53.7
Jun 16
53.4
57.3
Month
34
Indonesian Coal Prices - HBA - FY 2016-17 Month
HBA 6322 kcal/kg (USD/ ton)
HPB MARKER (kcal/kg GAR) (USD/Ton) Gunung Bayan I 7000
Prima Coal 6700
Pinang Coal 6150
Indominco IM East 5700
Melawan Coal 5400
Envirocoal 5000
Jorong J-1 4400
Ecocoal 4400
April 16
52.32
55.87
57.84
52.29
43.06
43.25
41.6
33.45
30.87
May 16
51.2
54.66
56.7
51.26
42.16
42.44
40.89
32.88
30.35
Jun 16
51.81
55.32
57.32
51.82
42.65
42.88
41.28
33.19
30.63
August 2016 www.InfralinePlus.com
CoverStory
GST: A mixed bag for energy, infra sectors
35
►►GST could add 1 to 1.5 per cent to GDP, say economists ►►Renewable energy to feel the brunt due to higher solar and wind tariffs By Infraline Bureau
History was made on 3rd August, 2016, with India taking a giant leap towards a single unified market after the Rajya Sabha approved the Goods and Services Tax (GST) – a reform considered almost three decades back. Taxation experts say that the GST will transform the Indian economy by giving rise to a common market and reduce the cascading effect of tax on the cost of goods and services. Specifically, the proposed reform will impact the Tax Structure, Tax Incidence, Tax Computation, Tax Payment,
Compliance, Credit Utilization and Reporting leading to a complete overhaul of the current indirect tax system, says consulting firm EY. It adds GST will have a far-reaching impact on almost all the aspects of the business operations in the country, for instance, pricing of products and services; supply chain optimization; IT, accounting and tax compliance systems. Economists say that implementation of GST could add 1 to 1.5 per cent to GDP, supporting the ongoing economic recovery that remains fragile. While
the overall economy will definitely get a boost from the implementation of the GST, impact on different sub-sectors in the energy sector will not be uniform. Renewable sector will feel the pinch when the country shifts to the GST even as there is no consensus over bringing oil, gas and electricity within the ambit of the proposed indirect tax reform. Conventional power producers, however, expect significant gains from the implementation of the GST. “Currently, the power sector is subject to multiple taxes on capital goods and
August 2016 www.InfralinePlus.com
CoverStory
other inputs. The incidence of these taxes passes to end consumers in the form of higher tariffs. It is estimated that the GST rate of 18 per cent for power sector could result in nearly 15 per cent reduction to consumers,” says Ashok Khurana, director general, Association of Power Producers. On the other hand, the GST could create complications for infrastructure and real estate sectors which are currently enjoying various tax sops.
Renewable energy to feel the brunt of GST
36
GST is a key taxation reform as it seeks to simplify a complex maze of state and central taxes by subsuming these into a single tax levied at the point of consumption. Renewable sector, currently a beneficiary of several indirect tax exemptions, may be a big loser as a result of GST since the bill proposes to revoke most of the exemptions. Despite the threat looming over the renewable energy sector, Union power minister Piyush Goyal seems disinclined to pitch for keeping the industry out of the GST purview. Instead, he wants a level-playing field for domestic manufactures. “Ideally we should put GST on imports so that it becomes a level-playing field and domestic manufacturing is not at disadvantage. Today there is an inverted duty structure. Domestic manufacturers are paying more taxes than imports,” Goyal said recently. Bridge to India, a solar sector consulting firm, says that due to implementation of the GST, input cost or tariff increase will go up by 12-20 per cent, which could wipe out the pricing gains of the past two years in the solar sector. The cost increase of this magnitude would also put viability of several projects in jeopardy. The cost increase would arise because of two reasons: currently, no import duty or indirect tax is applicable on solar modules but under the new regime, GST of between 17-20 per cent
Under the current regime, there is no tax or duty applicable on import of solar cells or modules as against an import duty of 26-29 per cent applicable to most goods. As solar modules are normally procured directly by the project developers, there is also no additional local tax. Under the GST regime, this zero rate would be replaced by a combination of basic custom duty and the applicable GST rate would be payable. The consulting firm points out that VAT and other levies such as excise, entry tax and octroi on solar modules and the complete system, together at around 5 per cent in most states because of many exemptions, would again be replaced by a combined GST of 17-20 per cent. The industry had been expecting solar cells and modules to find a place in the exemption list of around 100
essential items where GST would be waived off. But given Goyal’s comments, that looks unlikely. Solar equipment would fall either under the standard list or merit list. In either scenario, the overall project cost is likely to increase and pare most of the price reduction gains made over the last 1-2 years, Bridge-to-India concludes. Under the current regime, there is no tax or duty applicable on import of solar cells or modules as against an import duty of 26-29 per cent applicable to most goods. As solar modules are normally procured directly by the project developers, there is also no additional local tax. Under the GST regime, this zero rate would be replaced by a combination of basic custom duty and the applicable GST rate. It is expected that the basic custom duty will continue to be waived off for solar cells and modules but the standard GST rate will need to be paid. The standard import duty for inverters in India is 28.44 per cent but this is reduced to just 5.15 per cent for solar projects. Consequently, the cost of imported solar inverters will also increase under the GST regime. However, many prominent international inverter suppliers assemble their inverters in India and tax inefficiencies weeded out by GST
August 2016 www.InfralinePlus.com
should benefit local manufacturing by providing them with a level playing field against imports. Currently, VAT and/or a CST is applicable on sale of equipment within India. Several states including Uttar Pradesh (UP) and Rajasthan have completely waived off VAT, normally around 14 per cent for solar equipment, and most other states have set it around the 5 per cent. Excise duty on manufacturers is also waived off for items such as solar module mounting structures. As all these exemptions go away and VAT, CST and excise duty get replaced with GST, the project cost will certainly increase. However, a part of this increase will be offset as a pass through will be allowed on the GST paid at the time of import and savings on multiple taxes and duties along the value chain, Bridge-to-India says. The magnitude of actual cost increase will depend on the applicable GST rate and the procurement pattern. The ministry of new and renewable energy (MNRE) estimates the cost increase to be in the range of 12-16 per cent for a GST rate of 20 per cent. Now the question is how do developers manage the risk of GST being implemented when they are bidding for projects and signing PPAs? Most power purchase agreements
(PPAs) in India include a ‘change in law’ clause, wherein, any impact due to change in law is passed through to power procurers. However, there is no precedence or a process in place for calculating the pass through impact of such a change for bidding based solar project. This uncertainty will be a cause of concern for the investors, say analysts. Post implementation of GST, power distribution companies’
Currently, VAT and/or a CST is applicable on sale of equipment within India. Several states including Uttar Pradesh (UP) and Rajasthan have completely waived off VAT, normally around 14 per cent for solar equipment, and most other states have set it around the 5 per cent. Excise duty on manufacturers is also waived off for items such as solar module mounting structures
willingness to buy more solar power at higher tariffs will also be affected and could pose another short-term challenge for the sector. Similarly, cost of wind power will go up by 11-14 per cent, depending on whether equipment are procured within or outside home state. Currently, wind power equipment are exempted from additional excise duty and special additional duty. However, when GST comes into effect, IGST of 20 per cent along with additional tax of 1 per cent will be applicable on interstate procurement of wind equipment. However, for intra-state procurement, only 20 per cent IGST will be applicable on wind power equipment. Service tax which is currently applicable at 14.5 per cent would be replaced by GST of 20 per cent. Levelised tariff could go up to nearly Rs 7.5 a unit from the current level of Rs 6.58 a unit.
Power and coal sector to reap benefits
Power companies have made a strong case for the inclusion of power, coal and natural gas in the GST regime to subsume multiple taxes and thereby reduce the cost of power projects and the per-unit tariff. They say the power transmission & distribution (T&D) sector should be granted the infrastructure industry status and that all related tax benefits available to other infrastructure sectors be extended to this sector. Industry players say even though generation is exempt from CENVAT, excise and value-added tax, taxes on power generation equipment and other inputs are included in the cost of power. The overall impact of present taxation regime at both Central and state levels leads to higher price of power. A power sector analyst explained that taxes on domestic coal are at 27-28 per cent while on domestic natural gas it is at 19 per cent. Besides, service tax is levied at 14.5 per cent on input service availed such as engineering,
37
August 2016 www.InfralinePlus.com
CoverStory
38
procurement and construction; operation and maintenance services; and electricity duty is levied at one per cent of cost of generation and 17-20 per cent across states on consumption of power. It is estimated that a GST rate of 18 per cent for the power sector could result in 15-20 per cent reduction in retail tariff. Further, a cut in power cost will also improve payment by end-consumers and reduce incentive for theft and losses. This will also help distribution utilities to reduce their problem of revenue deficit, the analyst said. There will be no difference between inter and intra states with the launch of GST and the benefit of availing CST will be done away with, which is expected to result in lesser movement of goods, thereby reducing logistics costs. The government should not put electricity in the exempted category of goods under GST regime so that the cascading impact and burden of tax does not fall on electricity consumers. The inclusion of power and coal sectors in GST regime will result in lowering of bulk power, retail tariff and support the Make in India initiative, said another tax expert. Industry players want the government to announce extension of e-bid LNG scheme by another five years to take advantage of low crude oil prices and extend Ujwal Discom Assurance Yojana (UDAY) scheme to private owned discoms.
Oil and Gas: Consensus yet to emerge
There is still no consensus over bringing oil and gas within the GST ambit. However, there is provision for including the sector in GST at a later stage when political consensus is achieved. Analysts have pointed out various inconsistencies in GST’s provisions. For example, they have pointed out that while input (goods and services) consumed in exploration and production of crude oil and natural gas will be under the GST regime, crude oil and
There will be no difference between inter and intra states with the launch of GST and the benefit of availing CST will be done away with, which is expected to result in lesser movement of goods, thereby reducing logistics costs. The government should not put electricity in the exempted category of goods under GST regime so that the cascading impact and burden of tax does not fall on electricity consumers natural gas will be outside the proposed tax net. Crude oil, which is input for refinery, will be outside the purview of GST whereas other inputs for refineries will be under GST. Crude oil, natural gas, petrol, diesel, and jet fuel will be outside GST and will remain under existing taxation system. Other petroleum products, such
as naphtha, light diesel oil, kerosene, furnace oil, etc, will be under the GST regime. This arrangement will lead to avoidable multiple tax regimes for petroleum sector, extra burden on the consumer and add to the tax burden on consumers, warn tax experts. It will also increase compliance work for state governments and the industry, they add. They suggest that a “State Controlled Specific levy” can be levied by state governments over and above standard SGST on petro, diesel, ATF and natural gas which will address revenue concerns of the states. The levy will be a single point levy perhaps at the point of sale from an oil company to a dealer or consumer on which no input credit will be available at subsequent stages. Tax experts suggest that the proposed amendment to the Constitution be confined to empowering Centre and the states for levy of GST on all goods and services. Exclusion of petroleum products through the proposed Constitution Amendment Bill is not desirable since it will require another Constitutional amendment to levy GST on these products, even if the Centre and the States were to reach a consensus on full or partial or stage-wise implementation of GST for the sector, in future, they point out.
August 2016 www.InfralinePlus.com
States’ concerns on revenue buoyancy and autonomy on taxation of petroleum products can be met by a state-controlled specific additional levy on petrol, diesel, ATF and natural gas, experts suggest. If crude petroleum, natural gas, petrol, diesel, aviation turbine fuel and electricity are kept out of GST, it would result in cascading. Since petroleum products play an important role in India’s energy use, and are used directly or indirectly as inputs in most sectors, the proposed design would result in cascading in various sectors of the economy. However, bringing these goods into the GST regime, without any other changes in the economy, would imply that GST has to be levied at higher rates for revenues to be protected. Since contribution of taxes on petroleum products generate substantial revenues for state governments, the latter have expressed apprehension that switchover to GST will lead to loss of flexibility that they currently enjoy to increase revenue. They also point out that collection is currently easy because of a limited numbers of assesses (only oil companies). The 10 per cent SGST envisaged on petrol, diesel, jet fuel and natural gas is lower than the VAT rates across many states. Promise of compensation from the Centre is at best for a limited period and cannot solve a structural problem, say states. As per the Amendment Bill, certain petroleum products (petroleum crude, high speed diesel, petrol, natural gas, and aviation turbine fuel) would remain outside the ambit of GST until a date to be determined by the GST Council. Until that date is confirmed, existing indirect taxes would continue to apply on petroleum products. This means that production/manufacture of petroleum products would continue to attract excise duty, as currently applied, and sale of these products would be subject to VAT/ CST, as currently applied.
The specified petroleum products would be subject to the current regime on the output side and to the GST regime on the procurement side, with GST also applying to non-specified petroleum products. Availability of credit of input GST against output excise and VAT on specified petroleum products and vice versa seems unlikely, say experts.
If crude petroleum, natural gas, petrol, diesel, aviation turbine fuel and electricity are kept out of GST, it would result in cascading. Since petroleum products play an important role in India’s energy use, and are used directly or indirectly as inputs in most sectors, the proposed design would result in cascading in various sectors of the economy
Infrastructure benefits may go
Under the current policy, infrastructure projects enjoy concessional duty benefits under various indirect tax laws, thus bringing down the cost for infrastructure projects. However, there is no clarity on concessions/ exemptions for infrastructure projects under the GST regime. A project owner engaged in setting up of a power plant or engaged in power transmission or distribution can currently procure goods under inter-state sales at a concessional CST rate of 2 per cent against Form C and structure some of the procurements as in-transit sale to reduce tax incidence on the project. However, there is no such concession provided under the Model GST law. In the absence of such exemptions, there is a possibility of significant increase in project cost. There is a concept of ‘deemed export’ defined under the Model GST law. It is yet not clear which types of projects will be eligible for the deemed export benefit. To ensure that there is limited tax burden on infrastructure projects, it is important that all key types of infrastructure projects (including roads, highways, ports, airport, railways and power) should
39
August 2016 www.InfralinePlus.com
CoverStory
40
be made eligible for ‘deemed export’ benefits, say experts. Free of cost (FOC) supplies by project owners to contractors appears to be liable to GST. Thereafter, the contractor may need to include value of such free supplies in the value of his services, thereby increasing the tax incidence, especially in scenarios where the project owner is not eligible to take credit, or where the contractor avails any exemption. Else, the FOC supplies would create a cash flow issue, warn experts. Project cost may be impacted due to GST credit restrictions in many sectors, depending upon the end use. Place of provision for services in relation to immovable property would be location of the immovable property. There may be possible issues where a single contract is entered into for provision of services related to immovable properties across two or more states. For example, in case of highway construction services, railway track laying project, typically a single contract may be entered into with the vendor, for which consolidated invoices may be raised at one location. Such a contract may involve execution across multiple states. Under the current regime, contractors are required to segregate contract values (for sale of goods) for the purpose of determining VAT/ CST liability in different states. However, considering that there would be no distinction between goods and services under the GST regime, the same would need to be done for services as well, and hence, there may be a requirement for the vendor to raise separate invoices, for which separate contracts may also be required, warn tax consultants. In case of infrastructure projects, Indian entities do procure significant amount of services, especially pertaining to technical know-how, designs from their parent companies. Under the GST Model Law, the concept of valuation for services in related party transactions has been introduced. Therefore,
for any services provided between group companies, such as royalty for access to global brand, group company cost allocations, etc, it needs to be demonstrated that the transaction is at arm’s-length. If this cannot be demonstrated, the value will be determined based on the GST valuation rules, that is, based on services of like kind and quality, or the cost of providing the services, including profit. Implementing these provisions may be challenging to implement in respect of cross-border transactions, as it may not be feasible for the resident entity to obtain the value of similar
In case of infrastructure projects, Indian entities do procure significant amount of services, especially pertaining to technical know-how, designs from their parent companies. Under the GST Model Law, the concept of valuation for services in related party transactions has been introduced services, or to provide the details of their cost of supply of services, to substantiate that the price is at arm’s length. Additionally, the Model GST Law provides that if there is a reason to doubt the accuracy of the transaction value declared by the supplier, then the authorities can determine the transaction value as per the GST valuation rules. Such an unfettered power to question the transaction value can lead to litigation, warns PwC.
Real estate to see additional tax burden
“The Model GST Law specifies that works contract would be taxed as a
service. This is a welcome move and should provide certainty on taxability of the construction sector,” says Anita Rastogi, Partner-Indirect Tax, PwC. “The concern is however from the aspect of valuation as currently no deduction is provided under GST for value of land, or no abatement/ composition is provided. This may lead to significant increase in tax burden, especially if such services are taxed at Standard GST rate (which is expected to be 18 per cent),” she adds. Even if such services are subjected to lower tax rate (expected to be around 12 per cent) considering that there is additional tax incidence in the form of Stamp duty on value of land/ immovable property, it would need to be evaluated whether the tax incidence would be higher than the current regime (in absence of any deduction). Additionally not all expenses incurred are allowed as credits and this restrictions under credit rules could have significant adverse impact on Real Estate industry. The industry was expecting a much more liberal credit regime where it could get the credit of the construction services acquired in relation to commercial property which would be subsequently leased, Rastogi says. However, the draft law could be interpreted to mean that there may not be any credit available either to a contractor or the developer involved in construction of immovable property (whether sold as underconstruction property or leased). This does not seem to be the intent of the lawmaker and hence would need significant revision, experts point out. Considering the absence of valuation rules and the restrictions under credit rules, the proposed law as it stands today could have a negative impact on the industry, says PwC. It now remains to be see when the GST bill will be passed and in what form.
For suggestions email at feedback@infraline.com
August 2016 www.InfralinePlus.com
NewsBriefs | Oil & Gas Government set to start talks on merging 13 state oil companies to create behemoth
The government is set to start consultations for an ambitious plan to merge 13 state oil firms to create a giant corporation whose revenue dwarfs global energy major Chevron
which competes with US conglomerate General Electric in the Fortune-500 ranking. It is learnt that the Cabinet Secretariat has referred the idea of the integrated giant, which would also absorb various institutions related to safety, development and analysis, to the oil ministry. Following this, the oil ministry has begun the process of evaluating the prospects of creating the conglomerate, which will have a bigger market value than Russian state oil giant Rosneft and India’s Reliance Industries Ltd. It plans to consult all stakeholders including the state firms that may be combined to create the mega corporation that will be the country’s No. 1 in turnover, net profit, capital expenditure and market capitalisation.
In a first, natural gas hydrates discovered in the Indian Ocean A large natural gas discovery has been made in the Indian Ocean following a joint expedition by India and the U.S., opening up a new resource to meet energy needs. India’s Oil Ministry and the US Geological Survey made the discovery of large, highly enriched accumulations of natural gas hydrate — an icy form of the fuel — in the Bay of Bengal. “This is the first discovery of its kind in the Indian Ocean that has the potential to be producible,” the US agency said. India had in September 2014 agreed to collaborate to explore gas hydrates potential in the country and identify sites for pilot production testing. Natural gas hydrates are a naturally occurring, ice-like combination
of natural gas and water found in oceans and polar regions. The amount of gas within the world’s gas hydrate accumulations is estimated to greatly exceed the volume of all known conventional gas resources.
National
CAG audit nails Centre’s claim on LPG subsidy saving
The Centre claims it would end up saving almost Rs. 22,000 crore in the financial years of 2014-15 and 201516 since launching its two-pronged approach on cooking gas subsidy — introducing direct bank transfers of the subsidy and asking better off consumers to voluntarily give up theirs. However, a CAG report could seriously puncture the claim. The audit has found that the saving from people voluntarily giving up LPG subsidy and direct bank transfers adds up to less than Rs. 2,000 crore. The remaining saving is actually thanks to the dramatic fall in the prices of LPG that India annually imports. The audit has also found substantial systemic problems with the Direct Benefit Transfer in LPG scheme which is called Pahal by the government. Among them are diversion of domestic subsidy for commercial use and commercial consumption LPG being diverted to domestic use.
India, US to forge closer ties in oil, gas sector India and the US have decided to forge closer institutional and technical co-operation in the energy sector for re-assessment of conventional and unconventional hydrocarbon reserves in India, including its offshore areas. Oil minister Dharmendra Pradhan discussed the contours of a way forward during his meeting with US energy secretary Ernest Moniz in Washington. The two ministers reviewed bilateral energy cooperation, especially in oil and gas sector, between the two countries. The two sides also decided to share new technologies in development of biofuel and development
of petroleum storage. The bilateral energy cooperation between the two countries had started in the form of an energy dialogue in 2005, which also includes oil
and gas. Over the last decade, several areas of cooperation, such as technology for production from marginal fields, shale structures, developing gas pipeline network, improving refinery efficiency etc. had been identified. GAIL has contracted 5.8 million tonne per year of liquid gas from shale gas projects in the US, from where delivery is expected to start from 2017-end. Other Indian companies have also invested in shale oil and gas projects in the US. GAIL has 20% equity in Eagle Ford basin; Indian Oil and Oil India have 10% equity in Niobrara basin project.
41
August 2016 www.InfralinePlus.com
NewsBriefs | Oil & Gas
IOC in talks to buy GSPC’s stake in Mundra LNG terminal
Iraq becomes India’s top oil supplier
Iraq overtook Saudi Arabia for the first time to become India’s top oil supplier in the June quarter, helped by sales of discounted heavy crude that refiners have also been using to make bitumen to build roads in the world’s No.3 oil consumer. State oil firm Saudi Aramco has traditionally been the
main supplier to India and Riyadh could face pressure to deepen crude price cuts to regain market share, particularly ahead of the planned listing of Saudi Aramco. Iraqi oil accounted for about a fifth of Indian imports in the second quarter, up from 16 per cent a year ago. The Saudi market share in India over the period fell to about 18 per cent from a fifth last year, marking the first time Iraq has overtaken Saudi Arabia in an entire quarter. Facing inroads into its market shares, Saudi Aramco this month slashed the August official selling price (OSP) of its benchmark light crude grade to Asia by the most in nine months but analysts warned it may need to make deeper cuts.
ONGC should merge with a refining firm to stay competitive
42
Oil and Natural Gas Corporation (ONGC) should merge with a refining corporation such as Indian Oil, Bharat Petroleum or Hindustan Petroleum to weather price volatility, stabilise its income and stay competitive, a director at the state-run company said. “As an integrated company, during price fluctuations ONGC can make up in its refining and petrochemicals business whatever it loses as a crude oil producer. This will help stabilise the company’s revenue and profit,” Tapas Kumar Sengupta, director (offshore) said. Major oil firms across the world are better able to deal with the cyclical nature of the oil markets because they are integrated, he said.
National
ONGC already has presence in refining and petrochemicals through its units Mangalore Refinery and Petrochemicals Ltd and ONGC Petro additions Ltd but Sengupta said the scale has to be much bigger.
Indian Oil Corporation (IOC) is in talks to buy debt-laden Gujarat State Petroleum Corp’s (GPSC) stake in the underconstruction Rs 4,500 crore Mundra LNG import terminal in Gujarat. GSPC is looking to exit the 5 million tonnes a year LNG import terminal project, which is likely to be completed by mid-2017. It has offered its 50 per cent stake in the terminal to IOC. With a view to expand its gas business, IOC is keen to buy a stake in Mundra terminal but does not want GSPC to exit the project completely. IOC, the country’s largest oil company, wants the state government entity to remain as a part of the project for smooth operations. The terminal is not connected with any pipeline for shipping gas to consumers. To lay a pipeline to the nearest grid, it would require state government support and with GSPC on board, it could be done easily, according to IOC. IOC is keen to take half of GSPC stake and wants the Gujarat government entity to keep the remaining 25 per cent. GSPC LNG - a unit of GSPC holds 50 per cent interest in the project.
RIL, BP spend Rs 4,500 crore to maintain gas output at KG-D6 Reliance Industries and its partner BP plc of UK have invested over Rs 4,500 crore in the flagging eastern offshore KG-D6 block to maintain gas output at current level despite the steep natural decline that has set in the seven-year old fields. RIL-BP are currently producing from Dhirubhai-1 and 3 gas field and MA oil and gas field, three of the over one-and-half dozen discoveries made in the Bay of Bengal Block KG-DWN-98/3 or KGD6. The fields, which began gas production in April 2009, hit a peak output of 69.43 million standard cubic meters per day in March 2010 before water and sand ingress shut down well after well. The fields are
on steep natural decline and RIL-BP have spent over Rs 4,500 crore arrest the decline and continue to increase the ultimate recovery of gas. The block is currently
producing 8.7 mmscmd. Currently, RIL-BP are in the process of sidetracking (drilling) two of their existing wells and drilling away from the water to increase recovery of gas. Side-track campaign has also been initiated in MA field. Sources said the existing and enhanced production from these fields only get the price as per the formula that was approved in November 2014. Price according to this formula currently is USD 3.06 per million British thermal unit and is expected to be revised lower in October 2016. At these prices, leave alone new investment, even the base business will struggle to yield any profits, they said.
August 2016 www.InfralinePlus.com
NewsBriefs | Oil & Gas
BP profits plummet 44% as oil prices continue to fall
Total lands LNG deal with Japan
French energy company Total said it has landed a 17-year agreement to supply liquefied natural gas to the Japanese market starting in 2019. Total signed a binding agreement with Japanese utility
Chugoku Electric for the direct supply of LNG sourced from the French company’s global portfolio. “Strengthening our presence in Japan, the world’s largest LNG importer, through long-term cooperation with leading LNG buyers such as Chugoku Electric is a key component of Total’s strategy,” Laurent Vivier, the president of Total’s gas portfolio, said. Japan started taking on more natural gas to make up for the loss of nuclear power in the wake of the Fukushima Daicchi reactor meltdown in 2011. With the restart of some reactors, however, demand for gas could start moving lower on sector diversity and economic grounds.
would add to the country’s existing strategic reserves held in seven above-ground facilities at Zhoushan, Zhenhai, Dalian, Huangdao, Dushanzi, Lanzhou and Tianjin, as well as one underground facility also at Huangdao, with a total capacity of 28.6 million cubic meters.
Profits at BP plunged 44% to $720m (£550m) in the second quarter of 2016, as the collapse of crude prices continues to affect the energy sector. Oil companies have rushed to cut costs and curtail investment after oil prices fell to a 12-year low in January, resulting in tens of thousands of job losses in the UK alone. BP boss Bob Dudley said: “Compared with a year earlier, the underlying second-quarter result was impacted by lower oil and gas prices.” Dudley said concern about over supply because of the rising number of rigs being drilled in the US was “overdone”. BP is working on the assumption that oil prices will be in the range of $50-$55 a barrel next year. Oil prices fell to a three-month low amid concerns of a global oversupply of crude and natural gas. Dudley said it was “a huge relief” that the group was finally able to draw a line under the Deepwater Horizon oil spill in the Gulf of Mexico in 2010.
Bangladesh’s ability to reliably use the country’s domestic natural gas reserves. Expanding access to diverse and abundant sources of natural gas supply will promote
power reliability, industrial development, and job creation in the region. Moheshkhali FLNG will be the world’s first fully integrated turnkey floating LNG terminal whereby a single provider – Excelerate, will provide all services under a single contract. Excelerate will fully develop, design, construct, install, finance, and operate the terminal. This structure will allow for a single point of interface and responsibility to Petrobangla and provide seamless operations for the Bangladeshi market. Excelerate will operate the terminal for 15 years, after which the company will transfer ownership to Petrobangla.
China plans 70 million cubic meters for strategic oil storage China plans to construct a total of 70 million cubic meters of storage for its strategic petroleum reserve (SPR) in three construction phases. Equivalent to 441 million barrels, that would equal about 60 days of China’s current crude imports of about 7.4 million barrels per day. Though it is not known when the 70 million cubic meters of storage would be completed, the China Securities Journal reported that the government plans to build 44.6 million cubic meters, or 281 million barrels, of SPR storage sites by 2020, citing a draft government plan for 2016-2020 for the energy sector. The storage sites being built over the next four years would equal roughly 38 days of China’s current oil imports. It
International
Bangladesh in first LNG import terminal Excelerate Energy, Petrobangla, and the Government of Bangladesh executed an agreement for the construction and operation of Bangladesh’s first liquefied natural gas LNG import terminal – Moheshkhali Floating LNG (FLNG). Located offshore near Moheshkhali Island in the Bay of Bengal, the FLNG will provide the crucial infrastructure required for the country to access natural gas from global markets. It is expected to be in operation in 2018. The new terminal will enable Petrobangla to procure LNG from international gas markets, which will further complement and enhance
43
August 2016 www.InfralinePlus.com
InDepth
A long road ahead for CBM to be a potential star
44
►► India estimated to have a CBM resource potential of 28 BCM ►► CBM needs higher price realization to be successful By Team InfralinePlus
India’s Coal Bed Methane resources are said to have the potential to provide as much as 28 BCM, or about 76 mil sm3/day, of natural gas by 2040. That is almost as much as the 2015-16 domestic production of natural gas of 32 BCM, or 88 mil sm3/day. This future projection for CBM is given in the India Energy Outlook document brought out by the International Energy Agency in Dec 2015, with inputs from various international and Indian government agencies.
It is also way above the 2015-16 CBM production level of a mere 0.4 BCM, or just above 1 mil sm3/ day (Table 1). Reaching even this low level has taken 8 years to reach, after production of CBM started in 2007-08. The IE Outlook document bases its optimism for CBM on its estimate that, at end of 2014, India’s Remaining Recoverable Reserves (RRR) of CBM were 1,230 BCM,
which is similar to the levels for Conventional Onshore, Shallow Offshore, and Deep Offshore. Only Shale Gas is significantly higher (Table 2). Clearly, CBM has a long journey ahead to reach its full potential. A lot of exploration still needs to be done. According to the Directorate General of Hydrocarbons, the prognosticated CBM resources in the country are about 2,600 BCM, spread across 12 states of India, over 26,000 sq.km of
August 2016 www.InfralinePlus.com
Table 1 Annual CBM Production by Block, in mil sm3 Block
2011-12
2012-13
2013-14
2014-15
2015-16
Operator
Jharia, Jharkhand
3.56
2.95
3.38
2.48
2.04
ONGC
Raniganj East, W.Bengal
9.07
12.83
35.36
91.33
236.50
Essar Oil
Raniganj South, W.Bengal
70.04
88.02
121.13
132.35
152.93
Great Eastern Energy
Sohagpur East, MP
0.38
2.24
4.50
0.57
0.02
RIL
Sohagpur West, MP
1.14
1.20
1.15
1.51
1.38
RIL
Total mil sm3
84.19
107.24
165.52
228.24
392.87
Total in mil sm3/day
0.23
0.29
0.45
0.63
1.08
Source: MoPNG
Table 2 Natural Gas Resources in India, end 2014 in BCM Ultimately recoverable resources
Cumulative production
Remaining recoverable resources
Remaining % of URR
Proven reserves
Conventional onshore
1 570
280
1 280
82%
290
Shallow offshore
1 810
500
1 300
72%
340
Deep offshore
1 480
70
1 400
95%
770
Coal Bed Methane
1 230
0
1 230
100%
20
Shale gas
2 720
0
2 720
100%
0
Total India
8 810
850
7 930
90%
1 420
For the IE Outlook projections to be attained, the CBM would have to come from the 8,000 odd sq kms still under exploration, plus the 10,000 sq kms that has not yet been awarded for exploration. In order to gauge the prospects, it is useful to examine the experience of some of the parties operating blocks producing CBM total available coal bearing areas. Of this area, about 16,613 sq.km has been awarded across 33 blocks for exploration under four rounds of bidding for CBM held (including two nomination blocks, and one through Foreign Investment Promotion Board route). However, half of the 33 blocks have been relinquished (or in that process), covering 8,407 sq kms. Only 16 are under exploration, as of 31 March 2015. Thus, one-third of the total prospective area of 26,000 sq kms has been relinquished, with no CBM output.
Thus, for the IE Outlook projections to be attained, the CBM would have to come from the 8,000 odd sq kms still under exploration, plus the 10,000 sq kms that has not yet been awarded for exploration. In order to gauge the prospects, it is useful to examine the experience of some of the parties operating blocks producing CBM.
Preset experience Great Eastern Energy Corporation Ltd (GEECL) started exploration for CBM in 1993 with Coal India Limited (CIL)
in Raniganj South in West Bengal, some four years before Government formulated a CBM policy. GEECL was formally allocated the 210 sq km block through the FIPB route in 2001. It has invested over Rs. 1500 crore on the block, which produced about 0.4 mil sm3/d in 2015-16, from about 150 wells. This is halfway to the target of total 300 wells. GEECL estimates the quantum of Original Gas-In-Place (OGIP) to be 74 BCM, which is almost double of that estimated in 2005. Proved Reserves were reported at 49 BCM as on March 2015 - just a little less than the 54 BCM of Proved Reserves reported by Reliance for its Reserves Outside India (viz North America), or the 66 BCM reported for India, which are principally from its conventional fields, such as KG D6 field and PMT. GEECL has another block (667 sq kms) in Mannargudi, Tamil Nadu in India, with 28 BCM Gas-in-Place.
45
August 2016 www.InfralinePlus.com
InDepth
46
There is so much confidence in the CBM potential of the block that Matix Industries Ltd has invested over Rs 4,000 crores in a 1.25 mil mtpa Urea plant nearby, in expectation of drawing about 2.5 mil sm3/day from this CBM source. SAIL already draws about 0.4 mil sm3/ day. Essar is also continuing work on the remaining four blocks (area 2,233 sq kms) However, progress is stymied due to objections from farmers. Another major player is Essar Oil, which has 5 blocks across Jharkhand, Madhya Pradesh, Odisha and West Bengal, on which it has invested Rs 2,270 crores, till March 2015. It has made the most progress on the 500 sq km Raniganj East block in West Bengal, which was estimated to have Gas Initially In Place of 61 BCM at the time of allocation in 2001. The block currently produces about one mil sm3/ day, making Essar Oil the largest CBM producer in the country. Essar plans to reach 2 mil sm3/day by March 2017, and later go upto 3.5 mil sm3/day. About 500 wells are to be drilled over
the life of the block, which is expected to produce CBM for about 25 years. There is so much confidence in the CBM potential of the block that Matix Industries Ltd has invested over Rs 4,000 crores in a 1.25 mil mtpa Urea plant nearby, in expectation of drawing about 2.5 mil sm3/day from this CBM source. SAIL already draws about 0.4 mil sm3/ day. Essar is also continuing work on the remaining four blocks (area 2,233 sq kms). The third player making progress is Reliance industries Ltd, at its two blocks in Sohagpur West and Sohagpur East, in Madhya Pradesh, which were estimated to have 103 BCM Gas Initially In Place at the time of
allocation in 2001. The blocks (area 995 sq km) are targeted to produce about 3.5 mil sm3/d, from about 1,000 wells. Test Production recently started from Sohagpur West block. Reliance has enough confidence in the blocks to invest in a 302 km gas pipeline to transmit the gas from Shahdol to reach the national grid at Phulpur. Reliance has relinquished 3 blocks from bidding Round 2. The fourth party active in CBM is ONGC, which holds three blocks in Jharkhand, plus one in West Bengal, which were estimated to have 62 BCM Gas Initially In Place at the time of allocation in 2001, from total area of 870 sq kms. Only the Jharkhand field is in production, but at a very low level. The company may give up the West Bengal field, as an airport has been constructed that prevents exploration. It has relinquished 5 blocks from bidding Round 2. A few other companies are also active in CBM exploration, though not in production yet. Coal India Limited is also naturally interested in CBM. It has been granted permission by MoPNG
August 2016 www.InfralinePlus.com
to extract CBM from its coal mines, subject to complying with various procedures applicable to CBM activities. CIL may extract CBM prior to coal mining operations, or do both activities simultaneously.
Way forward From the foregoing, it is seen that four blocks together are able to produce about 8 mil sm3/d on long term basis. So, the output of 76 mil sm3/d projected in the IE Outlook would require about 32 more similar blocks. These could be from the blocks presently
under exploration, or from the yet to be awarded blocks, or from the coal blocks that CIL may explore for CBM. They could also be from some of the blocks that have been relinquished. Some blocks are given up because of poor prospectivity for CBM. Changes in technology or data analysis may bring these blocks back into the reckoning - as often happens in the Exploration business. Other blocks may have been given up for non-CBM reasons, such as lack of permission from various authorities. A change in perspective may be able to resolve
Another crucial aspect is sale price. Present policy allows CBM producers the price under the Domestic Pricing Guidelines of October 2014, which is USD 3.06/ mmbtu (GCV) for April to September 2016. The exception is GEECL, whose PSC allows it to charge higher prices: its average price for FY 2016 was $ 10.26/ mmbtu, compared to $11 plus for the previous two years
objections, and enable CBM exploration to commence. Another crucial aspect is sale price. Present policy allows CBM producers the price under the Domestic Pricing Guidelines of October 2014, which is USD 3.06/ mmbtu (GCV) for April to September 2016. The exception is GEECL, whose PSC allows it to charge higher prices: its average price for FY 2016 was $ 10.26/ mmbtu, compared to $11 plus for the previous two years. It may be noted that the DGH’s Hydrocarbon E&P Activities Report for 2014-15 indicates that CBM requires higher breakeven price than conventional gas. The Indian Energy Outlook also assumes higher price realisation for CBM. In sum, unlocking the potential of CBM requires a lot more work on the ground, as well as a review on pricing. For suggestions email at feedback@infraline.com
47
August 2016 www.InfralinePlus.com
InDepth
LNG imports critical to rescue gas-based capacity
48
►► Power and fertilizer sector are the leading end users of natural gas in India ►► Indo-Australian sub group to help in supplying cheap LNG for power plants By Team InfralinePlus
With natural gas accounting for just about 9% of its overall energy mix, India is trying hard to increase domestic production. India’s Liquefied Natural Gas (LNG) sector is undergoing a major transformation as it is set to occupy a crucial part in the country’s energy portfolio after the central government approved the use of imported gas for power generation and fertilizer production. Now, India’s plans to set up new terminals and expand existing facilities
will push up LNG terminal capacity to 47.5 million metric tonne per annum (mmtpa) by 2022 from the current 21.3 mmtpa, according to the Ministry of Petroleum and Natural Gas (MoPNG). The power sector is the leading end user of natural gas in India along with the fertilizer sector and consumes nearly one third of the total natural gas produced in the country. Moreover, central government is increasing its focus on gas based power projects due
to their high efficiency, low gestation period, environmental factors, and requirement of less water and land compared to other fuel based power plants. Various other policies such as recent updates in ‘Gas Allocation Policy’ have also been implemented to encourage use of gas in different end user segments. Other policies that are expected to have a positive impact on the country’s LNG market include E-bid RLNG for smoothing the supply
August 2016 www.InfralinePlus.com
of imported spot RLNG to power plants and fertiliser industries.
Figure 1: Grid Connected Gas-based Power Plants: Ownership, Consumption and Plant Load Factor (PLF) G rid C onnected G as -based Power Plants: Ownership, C ons umption and PLF (As of May 2016)
LNG imports on the up as domestic production falls
50 45
45
41
40
36
35 30
Percent
Falling production of natural gas in India has forced companies in the oil and gas, fertiliser and gas-based power generation sectors to rely heavily on imported LNG in recent years. In the last decade, domestic natural gas production has grown by just 10%, while imports of LNG have risen by 335%. The volume of gas import is expected to grow further in future. Currently, the country’s gas demand stands at 120 million standard cubic meters per day (mscmd), while the volume of domestic supply is 80 mscmd. Currently, there are four LNG terminals at Dahej and Hazira in Gujarat, Dabhol in Maharashtra and Kochi in Kerala. The recently-built Kochi terminal is barely functional due to the delay in the construction of pipeline planned to connect the terminal with the consumers. Recently, India and Australia decided to form a sub-group, to prepare a roadmap on streamlining issues that would help in providing cheap LNG for power plants in the country. The move will lead to committed LNG supply to gas-based power plants, which are running below their capacity due to lack of availability of gas. The grid connected gas-based power generation capacity in the country is around 24,508 MW. Of this, a capacity of 14,305 MW had no supply of domestic gas.
31
30
29 24
25 20
18 15
15 10 5 0 C entral S ec tor Ins talled C apacity
S tate S ec tor G as C ons umption
Private S ec tor Plant Load F actor
Source: Central Electricity Authority (CEA)
In the last decade, domestic natural gas production has grown by just 10%, while imports of LNG have risen by 335%. The volume of gas import is expected to grow further in future. Currently, the country’s gas demand stands at 120 million standard cubic meters per day (mscmd), while the volume of domestic supply is 80 mscmd
Will this rescue Ratnagiri (Dabhol) power plant? Ratnagiri Gas & Power Private Limited (RGPPL) is being restructured with the 5 million tonne LNG regasification unit being spun off into a special purpose vehicle (SPV) which will take on 50% of the total debt of INR 6,981 Crore. State-owned insurer Life Insurance Corporation (LIC), which had loaned the project INR 1,400 crore by subscribing to government -guaranteed bonds, is willing to continue to fund the project provided the government extends the guarantee. The project is being refinanced via the 5/25 route which allows the borrower to pay back the loan over a longer time period.
This may spell good news for developers of gas-based power plants and already Essar Power Ltd. is seeking liquefied natural gas to supply two power plants (Hazira and Bhander) after a global glut cut prices for the fuel by two-thirds since September 2014. The price for spot LNG to Asia was at $4.808 per mmbtu as of June end, down 66 percent since September 2014. The company is said to be in discussions with suppliers including Royal Dutch Shell Plc and state-run GAIL India Ltd. to supply the two plants in the state of Gujarat. The Bhander Power-Hazira plant was commissioned in 2006 and commenced full commercial operations in October 2008, but due to high price of the primary fuel, the company had kept the operations suspended since the past three years. The Essar Power-Hazira is a multi-fuel (naphtha, high-speed diesel, natural gasoline liquid and/or natural gas) combined-cycle power plant. The company has signed Power Purchase Agreements (PPAs) with Essar Steel (captive purposes) and Gujarat Urja Vikas Nigam Limited (GUVNL) to
49
August 2016 www.InfralinePlus.com
InDepth
Plans to shelve gas-based power plants along DMIC? The central government is said to have asked the state governments of Madhya Pradesh, Maharashtra and Gujarat, along the Delhi-Mumbai Industrial Corridor (DMIC) to consider using land allotted for five gas-based power plants to set up “industrial areas” or renewable energy projects following the non-availability of gas. The gas-fired projects, each with capacity of 1,000-1,200 MW, were to come up in Madhya Pradesh, Maharashtra and Gujarat as part of the corridor. The gas-based power projects in the DMIC were to come up at Indapur in Pune (Maharashtra), Ville Bhagad in Raigad (Maharashtra), Vaghel in Patan (Gujarat), Rajpur-Shahpur in Mehsana (Gujarat) and Chainpura Industrial Area in Guna District (Madhya Pradesh). sell power from the plant commissioned in October 1997.
Spot purchase replacing term contracts
50
Mideast Gulf states are among the world’s largest LNG producers and Middle Eastern and Indian buyers are turning away from term contracts to the spot market to procure gas for power generation and fertilizer and chemical production. The ability of buyers in the Middle East and India to import gas from around the world has encouraged growth in the region’s spot LNG trade. Cargoes from a range of traditional suppliers have moved to the region, as has gas from some of the newest LNG producers, including coal-bed methane operations in Australia and one of the first exports from the new US liquefaction plant at Sabine Pass on the Gulf coast. Shell, the
Increasing focus on expansion of gas pipeline infrastructure in the country, rising demand for natural gas from power and industrial sectors and favourable government policies makes LNG a commercially viable and suitable fuel for various end users in India. As a result, LNG demand is forecast to witness robust growth over the next 5-10 years in India world’s top LNG trader after buying BG Group, expects to produce around 30 million tonnes of LNG this year
and trade nearly 50 million tonnes, accounting for about a sixth of global trading volume. Global output capacity is expected to rise by half by 2020, potentially adding some 150 million tonnes of LNG to the market. Increasing focus on expansion of gas pipeline infrastructure in the country, rising demand for natural gas from power and industrial sectors and favourable government policies makes LNG a commercially viable and suitable fuel for various end users in India. As a result, LNG demand is forecast to witness robust growth over the next 5-10 years in India and project developers will have an abundant supply to run their plants not just at 25-30% Plant Load Factor (PLF) but at the required optimal levels of 80-85%. The uncertain future of Indian domestic gas production has cascading effects on the overall role of gas in the country’s energy sector. The impacts have already been felt in the power sector where the PLF of gas-fired plants during the year averaged only 18.64% in May last year and more recently at 23.73% (May 2016) due to unavailability of gas. As the economy expands and industries and households increase their consumption of natural gas, the dependence on imported LNG will only increase since the domestic output has been declining for years. For suggestions email at feedback@infraline.com
August 2016 www.InfralinePlus.com
StatisticsOil & Gas LNG Cargo Imported (2016) Date
Quantity(CBM)
Quantity (MMT)
3-Jun-16 6-Jun-16 8-Jun-16 8-Jun-16 9-Jun-16 13-Jun-16 14-Jun-16 14-Jun-16 16-Jun-16 16-Jun-16 16-Jun-16 17-Jun-16 17-Jun-16 20-Jun-16 20-Jun-16 20-Jun-16 21-Jun-16 23-Jun-16 23-Jun-16 25-Jun-16 28-Jun-16 28-Jun-16 29-Jun-16 29-Jun-16 30-Jun-16 30-Jun-16
156796 135918 152331 211851 135858 134336 155266 135965 72808 584 87892 140320 152361 136040 140508 146022 137049 84213 51712 135380 152410 142853 136824 135934 135129 144400
0.073 0.065 0.073 0.098 0.065 0.062 0.073 0.065 0.033 0.0007 0.04 0.066 0.071 0.065 0.065 0.068 0.066 0.04 0.025 0.061 0.071 0.067 0.066 0.065 0.064 0.069
Cargo Type LNG Price ($/MMBTU) Foreign Country 16-Jun Spot/Short-Term 6.21 EQUATORIAL GUINEA Long-Term 5.57 QATAR Long-Term 6.18 QATAR Long-Term 5.6 QATAR Long-Term 6.18 QATAR Spot/Short-Term 7.11 QATAR Spot/Short-Term 4.19 NIGERIA Long-Term 6.16 QATAR Spot/Short-Term 6.26 AUSTRALIA Spot/Short-Term 5.69 AUSTRALIA Spot/Short-Term 5.69 AUSTRALIA Spot/Short-Term 5.22 NIGERIA Long-Term 6.19 QATAR Long-Term 6.18 QATAR Long-Term 4.85 QATAR Spot/Short-Term 4.12 QATAR Spot/Short-Term 4.68 UNITED ARAB EMIRATES Long-Term 6.18 QATAR Long-Term 6.18 QATAR Spot/Short-Term 5.07 AUSTRALIA Long-Term 6.19 QATAR Spot/Short-Term 6.29 NIGERIA Spot/Short-Term 4.23 UNITED ARAB EMIRATES Long-Term 6.18 QATAR Spot/Short-Term 5.5 NIGERIA Spot/Short-Term 5.58 OMAN
Indian Port MAGDALLA DAHEJ DAHEJ DAHEJ DAHEJ MAGDALLA DAHEJ DAHEJ DAHEJ DAHEJ DAHEJ MAGDALLA DAHEJ DAHEJ DAHEJ MAGDALLA DAHEJ DAHEJ DAHEJ COCHIN DAHEJ MAGDALLA DAHEJ DAHEJ DAHEJ MAGDALLA
Month Wise Import/Export of Crude Oil and Petro-Products (2016-17) (As on June, 2016) (TMT) IMPORT/EXPORT IMPORT* CRUDE OIL PRODUCTS LPG MS/ Petrol Naphtha ATF/Aviation Turbine Fuel SKO/ Kerosene HSD/ Diesel LOBS/ Lube oil Fuel Oil Bitumen Others PRODUCT IMPORT TOTAL IMPORT PRODUCT EXPORT LPG MS/ Petrol Naphtha ATF/Aviation Turbine Fuel HSD/ Diesel SKO/ Kerosene LDO LOBS/ Lube Oil Fuel Oil Bitumen Others TOTAL PRODUCT EXPORT NET IMPORT
April
May
June
17960
17527
17667
795 74 238 23 0 503 179 81 122 1060 3075 21035
827 157 304 21 0 225 160 87 78 997 2855 20382
772 38 221 21 0 4 160 72 69 965 2321 19988
27 1368 494 674 2119 2 0 1 88 9 158 4940 16096
29 1561 593 598 1437 1 0 3 118 0 256 4595 15786
30 1491 602 643 2248 1 0 0 182 0 166 5363 14625
Note: POL imports by private parties taken from raw data of DGCI&S which is with a 2 month lag period. IOCL: Nepal sales taken in exports of IOCL. For Nepal exports, average US$ exchange rate considered . BPCL: For Nepal and Bhutan exports, average US$ exchange rate considered *LNG import not included
51
August 2016 www.InfralinePlus.com
StatisticsOil & Gas State-wise sales of selected petroleum products (As on June 2016) (TMT) State/UT
52
Chandigarh Delhi Haryana Himachal Pradesh Jammu and Kashmir Punjab Rajasthan Uttar Pradesh Uttarakhand SUB TOTAL NORTH Andaman & Nicobar Islands Bihar Jharkhand Odisha West Bengal SUB TOTAL EAST Arunachal Pradesh Assam Manipur Meghalaya Mizoram Nagaland Sikkim Tripura SUB TOTAL NORTH EAST Chhattisgarh Dadra & Nagar Haveli Daman & Diu Goa Gujarat Madhya Pradesh Maharashtra SUB TOTAL WEST Andhra Pradesh Karnataka Kerala Lakshadweep Puducherry Tamil Nadu Telangana SUB TOTAL SOUTH All India
Sales 45.7 776.7 629.5 130.6 169 779.7 995.2 2351.4 232 6109.8 8.7 769 215.9 391.9 1226.3 2611.7 16.5 294.7 23.6 17.1 21.6 18.7 12 35.4 439.6 197.7 16 9.5 57.9 868.2 751 2425.2 4325.4 923 1330.4 774.1 0.3 38.8 1818.6 762.5 5647.6 19134.2
LPG Per capita sales (Kg) 43.4 46.4 24.8 19 13.5 28.1 14.5 11.8 22.9 16.6 22.8 7.4 6.5 9.3 13.4 9.7 11.9 9.5 8.7 5.8 19.8 9.4 19.8 9.6 9.6 7.7 46.8 39 39.7 14.4 10.3 21.6 15.8 18.7 21.8 23.2 4 31.2 25.2 21.6 22.4 15.8
Sales 100.7 901.6 782.7 162.9 199.6 745.2 1183.5 2164.4 252.9 6493.5 14 545.4 349.4 553.8 654.6 2117.1 31.4 267.5 43.5 65.3 23.7 26.3 16.1 37.9 511.6 418.2 16.8 18.6 151.3 1526 1037.7 2836.5 6005 844.9 1664 1129.7 0 113.1 2052.1 915.4 6719.2 21846.4
MS Per capita sales (Kg) 95.5 53.8 30.9 23.8 15.9 26.9 17.2 10.8 25 17.6 36.8 5.3 10.6 13.2 7.2 7.8 22.7 8.6 16 22 21.7 13.3 26.4 10.3 11.2 16.4 49 76.6 25.3 14.3 25.2 22 17.1 27.2 33.8 0 90.9 28.4 25.9 26.6 18.1
Sales 0.7 0.7 57.7 22.7 141.7 66.5 377 1215.9 30.9 1913.9 4.6 618.6 202.8 299.8 736 1861.7 14.2 251.6 18.6 19.9 5.2 13.2 11.8 29.9 364.2 124.1 1.4 0.8 3.9 515.3 452.8 486.4 1584.8 183.2 379.2 97.1 0.8 3.3 304.7 133.5 1101.7 6826.3
SKO Per capita sales (Kg) 0.7 0 2.3 3.3 11.3 2.4 5.5 6.1 3.1 5.2 12 6 6.2 7.1 8.1 6.9 10.3 8.1 6.8 6.7 4.7 6.7 19.4 8.1 8 4.9 4.2 3.2 2.7 8.5 6.2 4.3 5.8 3.7 6.2 2.9 12.1 2.6 4.2 3.8 4.4 5.6
HSD Total (All products)* Per capita Total Per capita Sales sales (Kg) Sales sales (Kg) 114.7 108.7 440.3 417.4 1508.3 90 4995.8 298.2 5013.8 197.8 10772.3 424.9 575.7 84 1549.2 225.9 635.4 50.6 1341.5 106.9 3302 119.2 5961.5 215.2 5315.9 77.5 11217.7 163.5 7098.5 35.6 15011.6 75.2 746.7 73.8 1519.4 150.2 24311 66 52809.2 143.3 124.3 327.2 179.7 473 2254.8 21.7 4632.8 44.6 1602.2 48.6 2768 84 2231.7 53.2 4464.4 106.4 2955.2 32.4 7191.8 78.7 9168.1 33.9 19236.7 71.1 118.5 85.7 199.8 144.5 851.7 27.3 2115.4 67.9 87.8 32.3 179.5 66 294.5 99.4 418.5 141.2 57.1 52.4 113.1 103.7 59.4 30 127.3 64.2 57.5 94.6 100.2 164.9 93 25.3 212.1 57.8 1619.6 35.5 3465.8 76 1461.4 57.2 2872.6 112.5 150.8 410.9 81.4 334.9 181.1 745.5 308.8 211.8 729.9 500.7 5076.8 84.1 18954.3 313.9 3282.8 45.2 7008.1 96.5 7814 69.5 18223.1 162.2 18175.9 66.6 48379.9 177.3 3298.3 66.8 6179.2 125.1 5747.2 94 11051 180.8 2536.7 76 5551.3 166.3 13.8 214.2 15 232.7 330.4 265.5 520.8 418.5 6311.8 87.5 12698.9 176 3077.5 87.2 5705.2 161.7 21315.6 84.4 41721.2 165.1 74590.2 61.6 165612.8 136.8
Note:1. Per capita sales figures are based on provisional sales figures for the April 2015- March 2016 2. Population figures have been taken from Census of India, 2011 * Total (all product) sales include other petroleum products such as Naphtha, FO, ATF, Lubricants, Bitumen etc.
Sectoral Demand and Consumption of Natural Gas (June, 2016) (MMSCMD) Sector Fertilizer Power City Gas Industrial Petrochemicals/ Refineries/ Internal consumption/LPG Shrinkage/ manufacture/ Miscellaneous Sponge Iron/Steel Total
113 207 46 27
Domestic gas consumption May 2016 21.89 23.79 11.19 0.54
72 8 473
Sectoral Demand 2016-17*
21.61 6.25 6.57 1.4
Total Consumption (Domestic gas +RLNG) May,2016 43.5 30.04 17.76 1.94
9.92
30.68
40.61
0 67.33
1.34 67.85
1.34 135.19
R-LNG consumption May , 2016
August 2016 www.InfralinePlus.com
NewsBriefs | Renewable
International
PFC, REC will drop interest rates to double lending in three years
State-run power financiers Power Finance Corp (PFC) and Rural Electrification Corp (REC) will slash rates to single digits when lending to renewable energy projects following the government’s order setting tough targets for the two companies to double their exposure in the next three years. In order to achieve the targets, PFC
will have to sanction Rs 1.5 lakh crore loans and REC Rs 1 lakh crore by 2019. Both the companies are likely to make formal announcements very soon. In a recent review meeting with Piyush Goyal, minister for power, coal, renewable energy and mines, the two companies were asked to grow their businesses by 100 per cent by 2019, with specific focus on renewable energy projects. The minister prodded the companies to take up smaller renewable projects and asked the two firms to reduce cycle time for loan evaluation to disbursal to 60-90 days for renewable energy projects that take about a year to get commissioned. The companies take about 170 days for the same which has been constantly reducing.
India reveals plan for implementation of 10 Solar Zones The Ministry of New and Renewable Energy (MNRE) has moved forward with its plan to develop 10 special Solar Zones designed to accelerate the development of large-scale solar PV capacity in the country. Eyeing 2022’s 100 GW of solar PV target, the ministry has sanctioned the implementation of these zones, which will each cover approximately 10,000 hectares of “government-owned or privately owned wasteland, uncultivable land or fallow land in one or more than one patches”. Development of the first of these 10 zones will begin this year, with the project expected to span five years. Funding for each zone will be provided by the government to the tune of INR 440 million ($6.5 million). The
purpose of each Solar Zone is to act as a flagship demonstration facility highlighting the efficacy and affordability of solar power, with the aim being to encourage project developers and investors to pour more funds and effort into India’s growing solar industry.
National
Govt seeks bids for 300 megawatt of solar projects with storage
India has invited its first-ever bids for solar energy projects that include storage as a requirement as part of a trial program aimed at making the renewable resource a more reliable source of power. Solar Energy Corp. of India (SECI), the implementing agency for clean-energy projects, sought bids for 300 megawatts of solar power to be built in Andhra Pradesh and Karnataka. SECI is seeking bids for two projects of 50 megawatt each in Andhra Pradesh with a battery energy storage system of 5 megawatt/2.5 megawatt-hour attached. In Karnataka, it has invited bids for four solar projects of 50 megawatt each with the same storage specifications. The cost of the project will go up only marginally since the size of the storage component being sought is small, Tarun Kapoor, joint secretary at the ministry of new and renewable energy, said. “A Rs.500 crore solar project will become costlier only by about Rs.10 crore and the government is also extending support,” he said.
Grid-connected solar generation capacity touches 7.8 GW Total installed solar power generation capacity in the country touched 7,805 MW mark by June-end this year with Rajasthan topping the charts with 1,294.60 MW. Tamil Nadu and Chhattisgarh followed Rajasthan with grid connected solar power generation capacity of 1,267.41 MW and 1,123.36 MW respectively as on June 30, 2016, New and Renewable Energy Minister Piyush Goyal said in a written reply to Lok Sabha. In another reply, the Minister said the government has taken several initiatives to achieve this target. He further said the World Bank has approved
concessional loan of USD 500 million, Clean Technology loan of USD 120 million and Clean Technology Fund grant of USD five million to State Bank of India for the grid connected rooftop solar projects. As on June 30, 2016, estimates show that states will invest Rs 6,254 crore on solar power projects in the current fiscal, Goyal said. The estimated investments by states on solar projects was Rs 18,113 crore in 2015-16 and Rs 6,672 crore in 2014-15. Government has planned to add over 10,000 MW of solar power generation capacity during the current fiscal.
53
August 2016 www.InfralinePlus.com
NewsBriefs | Renewable National lab policy for renewable energy soon
The ministry of new and renewable energy is in the process of finalising a national lab policy to set norms for testing, standardisation and certification of renewable energy related products,
and define the infrastructure required for testing centres. The policy document is in the final stage of being prepared and is expected to be complete in a month’s time. A committee headed by ministry of new and renewable energy (MNRE) director BS Negi and National Institute of Solar Energy (NISE) director OS Sastry has already prepared a draft policy document. Noting that there are no existing standards for products such as solar pumps, solar batteries, solar lanterns and solar thermal systems, the draft said these need to be quickly put in place. It also spelled out the highly technical standards that each of these products should adhere to.
India-US solar dispute: WTO appellate body’s ruling expected by mid-Sept
54
In April, India had appealed against WTO’s panel ruling that the country’s power purchase agreements with solar firms are inconsistent with international norms. WTO’s appellate body is expected to give its ruling by mid-September in the solar mission dispute between India and the US. In April, India had appealed against WTO’s panel ruling that the country’s power purchase agreements with solar firms are inconsistent with international norms. The appellate body is a standing body of seven persons. It listens to the appeals from reports issued by panels in disputes involving WTO members. The body can uphold, modify or reverse legal findings and conclusions of a panel and its reports,
once adopted by the Dispute Settlement Body, must be accepted by the parties to the dispute. If the body would give ruling against India, the government would have to implement the order in the next 6-7 months.
National Solar power capacity addition outstrips wind in Q1
Solar power has overtaken wind power in new capacity addition for the first time in the country. During the first quarter of current fiscal, solar power sector added 1,031 MW of new capacity when compared with 374 MW of new capacity added by the wind segment, according to Union Ministry of New and Renewable Energy (MNRE). However, total capacity addition by the renewable sector in the first quarter was modest at 1,465 MW given the huge target set for the current fiscal. MNRE has fixed a total capacity addition target of 16,600 MW for 2016-17 and solar is expected to be the major contributor with about 12,000 MW of new capacity, followed by wind (4000 MW), biopower (400 MW), small hydro (250 MW) and waste to power (10 MW). As on June 30, total grid connected installed renewable power capacity in India stood at 44,237 (MW). Total capacity of wind power stood at 27,151 MW.
Centre nod to floating solar panels to meet ‘22 target The ministry of new and renewable energy has agreed on a proposal by solar power expert SP Gon Chaudhuri to have land-neutral solar power installations on water bodies. There is a major dearth of adequate land in states like Bengal, Bihar, Odisha and Assam to generate solar energy to meet India’s target of 60,000 MW of land-based solar energy under the National Solar Mission by 2022. The National Institute of Solar Energy along with the city-based NB Institute of Rural Technology headed by Gon Chaudhuri will conduct a study to identify water bodies and huge structures like rail stations and
stadiums to install floating solar panels in Bengal. “We expect the study to start off after the monsoons,” Gon Chaudhuri said. “The problem is the non-availability of
adequate land in many states. In Bengal, around 300 acre of land is required for the necessary solar installations to generate the power but scarcity of land is the main hindrance,” he said. The solar power expert said that to make up the unavailability of land, floating solar panel installations on water bodies is the only option. “It is found that around 3 lakh MW of solar power could be generated by tapping around 10-15% of waterbodies. States like Bengal, Bihar, Kerala, Odisha and Assam are the most potential ones for developing land-neutral solar power technology,” he said.
August 2016 www.InfralinePlus.com
NewsBriefs | Renewable
International
Delhi discoms can meet green power quota
The discoms will now be able to meet their annual renewable purchase obligations (RPO) with the Delhi Electricity Regulatory Commission (DERC) finally approving power purchase obligations (PPAs) from hydro projects. Tata Power Delhi, which
had filed the petition, argued that power from small hydro power projects was in the consumers’ interest as their cost of power was the lowest. There are eight hydro projects from where the discoms want to procure power but couldn’t due to lack of guidelines by the regulatory authority. According to discom officials, bids were invited from small hydro projects as their tariff was the lowest among all non-solar sources of energy. “The current tender has been floated to meet the renewable purchase obligations and it would be wise if the same is met with the minimum cost possible. The low cost will ultimately benefit the consumers,” said an official.
Gujarat HC notice to govt on PIL on Santhalpur solar park The Gujarat High Court has issued notice to the state government in response to a PIL alleging corruption in contracts for the development work at the country’s largest solar power project in Santhalpur tehsil of Patan district. A division bench of Chief Justice R Subhash Reddy and Justice V M Pancholi issued notices to the government, Gujarat Power Corporation Limited (GPCL), Anti-Corruption Bureau and thirteen contractors. The government recently filed an affidavit as per an earlier direction. GPCL had awarded the contracts and, therefore it should file reply in the matter, it said. But not satisfied with this stand, the HC issued notices to all the respondents seeking their reply.
The petition, filed by former Congress MLA Farsu Goklani, alleged that the government did not follow due procedure while awarding contracts worth Rs 550 crore for development work at the solar park at Charanka in Santhalpur tehsil.
States
Country’s 1st grid rooftop solar project in Odisha
The Green Energy Development Corporation of Odisha Limited (GEDCOL) and the Central Electricity Supply Utility (CESU) recently signed a 25-year project implementation agreement with Azure Power Mercury Private Limited to develop the country’s first grid connected rooftop solar project. The project, with a minimum installed capacity of four MW, will be set up across more than 100 Government buildings in Bhubaneswar and Cuttack. As many as 114 Government buildings in Bhubaneswar and 85 buildings in Cuttack are found suitable for generation of rooftop solar energy. The project will mobilise around Rs 35 crore of private investment and to be implemented by availing Central financial assistance from Ministry of New and Renewable Energy (MNRE), GEDCOL Managing Director Hemant Sharma said.
Solar power plants installed atop warehouses to generate 162 MW in Karnataka With Karnataka’s ambitious project of harnessing 400MW of power through grid-connected rooftop solar plants rocked by scams, the government has come up with an uncommon solution to fast-track the project: Install solar power plants on rooftops of warehouses. “We’re lagging behind in meeting the 2018 deadline; we have hardly managed to harness 5MW of solar rooftop power so far. The warehouses (godowns used for storing agricultural commodities), operated by the Karnataka State Warehousing Corporation (KSWC) and spread across the state, will now have solar power plants. We hope
to generate 162MW of solar power from these warehouses on the public private partnership (PPP) model,” officials said. A proposal to this effect is expected to
be placed before the cabinet for approval shortly. A total of 1.8 crore sqft warehouse space will be available for installing photo-voltaic solar panels. Spread across 193 places across the state, while 1 crore sqft is readily available to start rooftop projects, the remaining 80 lakh sqft is under construction and will be readied shortly. The cost of the warehouse solar projects is around Rs 1,200 crore. The idea of using warehouses for solar power generation was mooted by senior KAS officer Rajesh Gowda, who moved out as the managing director of KSWC, to promote clean energy.
55
August 2016 www.InfralinePlus.com
NewsBriefs | Renewable ADB approves $115m loan to enhance Sri Lanka power reliability
The Asian Development Bank (ADB) has granted $115m loan to Sri Lanka to help the country achieve its goal of 100% electrification and improving power reliability. The country also secured grants including $2m from the Japan
Fund for Poverty Reduction and $1.8m from the Clean Energy Fund under the ADB-managed Clean Energy Financing Partnership Facility. The funding will be used for a five-year project, which includes development of hybrid renewable energy systems and installation of a renewable energy micro-grid in the country’s Western Province. Featuring a combination of wind, solar and efficient diesel generation, along with energy-storing long life lithium-ion batteries, the hybrid renewable energy systems will provide a reliable electricity supply for communities on three isolated islands in the Jaffna area of the Northern Province.
Europeans keen to invest in Iran’s renewable energy sector
56
Giles Dickson, the CEO of the European Wind Energy Association (EWEA), said that renowned European companies are keen to invest in Iran’s renewable energy sector, especially in wind energy sphere. Dickson said that Iran has the potential to generate more than 30 gigawatts (GW) of electricity from wind energy. EU members are interested and ready to seize this opportunity to transfer their knowledge and technology to Iran and of course to invest in the country’s energy sector, he stressed, recommending that Iran could facilitate the presence of European companies by providing them with straightforward contracts in which land registry, conditional lease and Power Purchase Agreements (PPAs) are clearly stated. Mentioning
the challenges facing foreign investors in Iran, Dickson said that since there are still some obstacles in banking transactions with Iran, the most important challenge facing foreign investors is to overcome such hurdles and to find resources and export credit agencies to finance their projects.
International Biggest sale of clean energy finds no buyer for all of SunEdison
Three months after filing for Chapter 11 bankruptcy protection with $16.1 billion in liabilities, SunEdison Inc. has yet to field any bids to take over the entire business. Instead, it’s received more than 100 indications of interest for specific assets, Rothschild Inc., which is managing the sales process, said. That includes bids for individual projects, for bundles of wind and solar farms, and for its entire commercial and industrial unit. The developer also received at least one inquiry about its controlling stake in TerraForm Power Inc., one of its most valuable holdings. Potential buyers are looking to cherrypick the company’s best assets, or may be pursuing low-ball bids for the most speculative ones. SunEdison is marketing most of its assets and will entertain offers for all of them. At least 50 projects on five continents, from the U.S. and the U.K. to India, South Africa and Chile, are available with more than 5 gigawatts of capacity.
China launches new alert system to tame wind power investments China has launched a risk alerting system to prevent further investments in wind power generation in certain locations, after large amounts of power were wasted due to inadequate power transmission infrastructure. The National Energy Administration (NEA) has given a red alert, or the highest warning, to five provinces where new construction approvals and access to grid connections will be put on hold. Among the restricted regions are Jilin and Heilongjiang in northeast China, along with Gansu, Ningxia and Xinjiang province in western China, all with high concentration of wind farms but only limited grid connectivity. The world’s top wind power
user has seen a surge in new installations in the last decade, with 136 gigawatts of installed capacity as of May. Wind generation capacity increased by 32 percent during January to May against the same period last
year, official data shows. However, a national average of 26 percent of wind power generated in the first quarter of 2016 was wasted. Jilin, Gansu and Xinjiang provinces were the worst offenders with about half of their wind power generation wasted while Ningxia and Heilongjiang lost a little more than one-third of their wind power, according to the NEA. “We estimate that over the course of the first six months, 4.2 billion kilowatt hours of wind and solar power has been wasted, which is equivalent to New Zealand’s electricity use in the whole year of 2015,” said Peng Peng, an analyst with the Chinese Renewable Energy Industries Association.
`3600
`4140
`2820 `18000
`12000 `16200
`11400
503011022657 ING Vysya Bank Ltd. Connaught Palace, New Delhi - 110001
Account No.: Bank: Bank Branch:
110064003
NEFT Code:
`1200 `2400 `3600
cOver price
Branch
Bank .........................................................................................................
Dated ........................................................................................................
Cheque/DD no .........................................................................................
Delhi/NCR)
Private Limited. (Please add `20/- extra for cheques from outside
Kindly Draw the cheque/DD/PO in favor of Infraline Technologies (India)
By Cheque/dd/po
Open access subscripTiOns `3240 `6300 `9180
YOu paY resTricTed access subscripTiOn `1080 `2100 `3060
SofT Copy SuBSCripTion cOver price
provide your deTailS (in CapiTal leTTerS)
VYSA0005030
(for RTGS):
IFSC Code
Infraline Technologies (India) Pvt. Ltd.
Account Name:
making payment through nefT
`14400
`10200
1 Year 2 Years 3 Years
Term (Years)
co. seal & signature
Infraline Technologies (India) Private Limited Infraline Knowledge Tower, A-31, Sector 3, Noida-201301 Tel: +91-120-679 9125 (D); +91 120 6799100 (B); Fax: +91 120 679 9101, Email: sneha.pandey@infraline.com
To Subscribe: please fill in all the details mentioned in the order form and mail it to us at the below mentioned address. You can also fax us the order form if purchased through credit card/net banking on +91 120 6799101
place:
date:
4-5 weeks for processing your magazine subscription request. copies will be sent by ordinary post/courier. (Rs. 30/- per month for courier charges to be added for subscription outside Delhi/NCR) infraline will not be responsible for postal delay, transit losses or mutilation of copies. For soft copy subscription there are two types of access (a) restricted access - One user id and password will be provided and the user will not have any access to copy and download the content (b) Open access- One user id and password will be provided for registered multiple users and the users will have access to copy and download the content. no cancellation will be entertained after payment has been received and no refund shall be paid. please mention your name and address on the reverse of your dd/cheque. in case of online payment through debit or credit card rs. 33/- will be added to the total payable amount all disputes are subject to the exclusive jurisdiction of courts in new delhi only.
Terms and Conditions: in hard copy subscription one copy is provided for one subscription and five copies are provided for five subscriptions. please allow us
Mr/Ms............................................................................... Organization ....................................................... Designation ................................................................. Address ............................................................................................................................................................. ........................................................................................................................................... City..................................................................... State............................................................................... Pin Code ............................... Email ................................................................. Mobile ....................................................................................................... Phone (Off) ................................................................................................. Phone (Resi) ........................................................................... Date of Birth ...........................................................................
Card No. ........................................................................ Card Expiry date............................................................ Name (as appears on card) .......................................... ....................................................................................... Date ............................................................................... Signature .......................................................................
In case of online payment through debit or credit card Rs. 33/will be added to the total payable amount
please charge my credit/debit card
paymenT opTionS
`3060
`2100
`5850
`2400
`5250
3 Years
`6000
2 Years
`1440
`1200
1 Year
`1080
cOver price YOu paY (delhi ncr) YOu paY (OTher ciTies) cOver price YOu paY (delhi ncr) YOu paY (OTher ciTies)
One subscripTiOn
Five subscripTiOns
pleaSe TiCk ďƒž SCheme of your ChoiCe
hard Copy SuBSCripTion
Term (Years)
Subscribe Now!
Subscribe to infralineplus Magazine! Stay updated with the current industry trends and scenario through widely read interviews, articles and points of view by the industry stalwarts, policy and decision makers in the energy and infrastructure sector.
The CompleTe energy SeCTor magazine for poliCy and deCiSion makerS
Magazine SubScription forM
August 2016 www.InfralinePlus.com
InConversation
‘LED market size in India to reach Rs 21,600 crore by 2020’ India is all set to become the biggest market for LED lighting in the world, thanks to the regulatory and policy initiatives taken by the NDA government as well as the path breaking work done by Energy Efficiency Services Limited (EESL) - a Joint Venture of NTPC Limited, PFC, REC and POWERGRID. Saurabh Kumar, Managing Director, EESL, shares his vision on the energy efficiency industry in India and what lies in store in the future. Excerpts:
58
Please share your outlook on the LED lighting industry in India, in terms of market size, demand and growth potential. A phenomenal growth has been registered in the Indian LED market since the launch of the UJALA programme as it has created demand for affordable LED bulbs in the country. As per estimations, the market size of the Indian LED industry will reach as high as Rs. 21,600 crore by the year 2020. In the year 2013, out of the Rs. 13,000 crore turnover of India’s lighting industry, LED industry stood at Rs. 1,925 crore. The UJALA programme has played a significant role in creating awareness about LEDs in every nook and corner of the country and made the LED lighting technology more popular in India. Please outline the challenges in promoting LED as an energy efficient source of lighting in India. How can we overcome these? The biggest roadblocks in LED lighting adoption in India have already been taken care of by EESL. Problems and bottlenecks are now not as dominating as they used to be about one year ago. EESL effectively created awareness of energy saving LED
technology in India and fostered its subsequent demand in the country. When we started out, LED bulbs were quite expensive compared to CFLs or incandescent bulbs, each bulb was somewhere around Rs. 300-350. Moreover selling a comparatively costlier lighting option i.e. LED in a price sensitive market such as India was a challenge. EESL overcame this challenge with bulk procurements from LED manufacturers in the country and benefitted from volume discount. Interestingly, within one year of running this scheme, due to bulk procurements from indigenous manufacturers the prices of LED plummeted to about Rs. 55 per bulb. This way we were able to effectively implement Government of India’s idea of efficient lighting throughout the country. Please update on the UJALA scheme and progress achieved so far. Under UJALA scheme, we have distributed to over 13 crore LED bulbs in India, which are leading to energy savings of about 4,60,43,066 KWh every day. The total estimated cost savings per day through the distribution is about INR 18,41,76,523. The scheme has further successfully avoided a peak
Saurabh Kumar, Managing Director, EESL
demand of 3,365 MW and is helping reduce over 37,296 tonnes of CO2 emissions per day. With a vision of including 100 cities under the UJALA scheme, EESL has now successfully spread to more than 125 cities and will cover the whole country by 2019. What are the savings envisaged due to the LED bulb program of the Government in terms of peak demand and reduction in carbon footprint? As already stated, with the distribution of over 13 crore LED bulbs, the country is saving 4,60,43,066KWh of energy every day. Avoiding peak demand of 3,365 MW, it is further reducing over 37,296 tonnes of CO2 emissions per day. What other initiatives are being implemented by EESL towards energy efficiency? Following are some other initiatives: National Energy Efficient Fan Programme (NEEFP): National Energy
August 2016 www.InfralinePlus.com
Efficient Fan Program (NEEFP) was implemented by EESL for consumers under demand side management, with the aim of benefitting the people from all socio-economic bands. Under NEEFP, EESL aims to replace 35 crore inefficient regular ceiling fans across households with BEE 5 Star rated efficient ceiling fans by 2018. With the intent to give a significant thrust to the expansion of market for efficient fan technologies in India, EESL through its procurement of fans, has brought the price of a fan down by 33 per cent to Rs. 955, when compared to the market price. Streetlight National Programme (SLNP): Street lights in India were recognised as the second most potential group resulting in significant energy savings. The conventional lighting is not only a burden on current energy production but the insufficient lighting levels and bad colour rendering indices is a public problem. It has been theoretically stated that if illuminated street light structures are visible from the sky, it is nothing more than light pollution in the night sky. Here, the concept of ‘dark sky initiative’ was imbibed and research was carried out to come up
with street lights which consume less energy, illuminate only the pathways, reduce light trespass and have improved colour rendering index. A way forward was planned and EESL began replacing the conventional street lights with new energy efficient
Under NEEFP, EESL aims to replace 35 crore inefficient regular ceiling fans across households with BEE 5 Star rated efficient ceiling fans by 2018. With the intent to give a significant thrust to the expansion of market for efficient fan technologies in India, EESL through its procurement of fans, has brought the price of a fan down by 33 per cent to Rs. 955, when compared to the market price
ones at its own cost ,i.e., without any investment from Urban Local Bodies (ULBs). The new lights being put in place consume less energy, have drastic colour rendering index and illuminate only the focused area. The street light contracts that EESL enters into with ULBs or municipalities is typically of a 7-year duration, wherein EESL not only guarantees a minimum energy saving (usually of 50%) but also provides free replacements and maintenance of lights at no additional costs to the municipality. In this scheme, EESL’s investment is recovered through the long terms energy savings resulted by the new street lights. More than 878,319 inefficient street lights have already been replaced with LED lights across the nation and work is in progress wherein EESL has signed MoUs, entered into agreements for SLNP with state governments. The overall energy savings estimated from the completed cities is about 318829.79 kWh per day. The combined reduction of CO2 emissions taken from completed ULBs of different states is about 264 tonnes. EESL’s business model for efficient street lighting benefits municipalities by reductions in energy and maintenance costs. Agriculture Demand Side Management (AgDSM): India’s agricultural sector takes about 18% of the total national electricity consumption. As per the Central Electricity Authority (CEA), there are about 20.27 million pump sets installed in agricultural sector. As electricity supply is inconstant in the rural regions, the farmers frequently have to spend money on pump repairs. This results in adoption of rugged, locally manufactured pumps, which are highly inefficient. The average efficiency of existing inefficient pump sets is in the range of 20% - 30% whereas efficiency range of new star rated Energy Efficient
59
August 2016 www.InfralinePlus.com
InConversation
60
Pump sets (EEPS) is 40% - 50%. Therefore, there is a need to tap the huge energy savings potential promised in agriculture pumping sector. Under AgDSM proposition, replacement of inefficient agricultural pump sets is done with BEE star rated energy efficient pump sets to reduce the energy consumption. It has been experienced that the simple payback period in these projects is 2-3 years and total project duration is 4-5 years. Here, EESL enters into an understanding with the farmers and DISCOMs to provide with free BEE star labled pump set and later recovers its investment through received energy savings. Under AgDSM, about 4,423 pump sets have already been replaced in Andhra Pradesh and Karnataka combined. The AgDSM initiative has resulted in estimated savings of about 229.7 lakh kWh of electricity per annum. In the above regions of Andhra Pradesh and Karnataka, it was noted that well designed and targeted DSM programmes have proven to set examples and can be replicated at a large scale. The EESL model for Agricultural Demand Side Management (AgDSM) is beneficial for customers because there is
no upfront cost to farmers and utilities and there is free repair and maintenance during project period. EESL recovers costs from DISCOM through the annual energy savings achieved and there is reduction in power purchase costs, peak load and load-shedding to DISCOMS. This opportunity not only reduces the costs of Government and the
EESL began installing energy efficient lighting in government buildings which not only resulted in improving the overall energy consumption but also gave a better lighting output. This project is driven by the inculcation of Buildings Management Systems or the BMS, which provides a comprehensive view into building’s energy consumptions through data driven live reports
farmers, but also holds the potential of transforming into a big business opportunity, where investments can be recovered through monetary energy savings. EESL’s Buildings Efficiency Programme: The way to sustainable future lies in having smart infrastructure, that consumes less energy yet works better than the existing setup. It has been estimated that on an average, a building wastes about 30% of energy and if nothing was ever done to improve its efficiency, there is lot of room to bring about a big change. What if we devise methods to secure the 30% energy loss in buildings and not let it go waste? The obtained savings can be used to add to the energy production and help to realise the dream of 24 X 7 uninterrupted power supply. In a fresh move to initiate this change, Government of India appointed EESL to not only help make the existing buildings energy efficient but also improve their overall energy performance. To start with, EESL began installing energy efficient lighting in government buildings which not only resulted in improving the overall energy consumption but also gave a better lighting output. This project is driven by the inculcation of Buildings Management Systems or the BMS, which provides a comprehensive view into building’s energy consumptions through data driven live reports. The BMS is supported by a user-friendly software system that exhibits energy trend analysis and helps to optimize energy management strategies to further reduce the operational costs. EESL’s buildings programme has successfully been completed at Niti Ayog, Shram Shakti Bhawan, India Habitat Center, UPSC building, IP Bhawan along with others. Currently, work is being carried out in more than 18 buildings to make them more energy efficient.
August 2016 www.InfralinePlus.com
It was observed that on an average, EESL has successfully received energy savings of about 19% on bills with its completed buildings projects. Please elaborate on your plans on energy-efficient fans. What progress has been achieved under this initiative? EESL’s fan distribution scheme is also going on in Andhra Pradesh and UP and we have huge distribution targets in both the regions. With over 32 million fans sold every year at a 20% annual growth rate, ceiling fans are one of the most economical options (as and when compared to the Air Conditioning Units). Reports suggest that almost every electrified household in India has at least one unit for their summers. National Energy
Efficient Fan Program (NEEFP), was implemented for consumers under demand side management, with the aim of benefitting the people from all socio-economic bands. Under NEEFP, EESL aims to replace 35 crore inefficient regular ceiling fans across households with BEE 5 Star rated efficient ceiling fans by 2018. With the intent to give a significant thrust to the expansion of market for efficient fan technologies in India, EESL through its procurement of fans, has brought the price of a fan down by 33 per cent to Rs. 955, when compared to the market price. The price of LED bulbs has come down drastically due to the Government’s strong push towards energy efficiency.
Before the initiation of LED bulbs under UJALA scheme the penetration of LEDs was less than 1%. However after the tremendous success of the scheme the penetration now raised to 15-18%. The LED programme under UJALA is the largest in the world and the success of the programme is visible through the daily uptake of our LED bulbs which is now 350,000 to 400,000
However, do you feel the same has happened in the open market? Has the benefit of price reduction reached the end consumer? Before the initiation of LED bulbs under UJALA scheme the penetration of LEDs, the most efficient lighting in the market was less than 1%. However after the tremendous success of the scheme the penetration now raised to 15-18%. The LED programme under UJALA is the largest in the world and the success of the programme is visible through the daily uptake of our LED bulbs which is now 350,000 to 400,000. Government of India created a conducive regulatory institutional framework for fostering Energy Efficiency initiatives. Under regulatory perspective EESL was set up as the market aggregator. LED has become popular to the extent that small scale LED industries have come up in India. Their prices are today as low as Rs. 65-75 per LED bulb. This model which is fundamental to National LED programmes holds promise for other appliances as well. Having said that need of the hour is to replicate the LED model to other appliances which will help us achieve a higher scale and I am glad to say that EESL is already moving towards that. Do you feel India has the potential to be the biggest market for LED in the world? With the pace we are treading forward, we are hopeful that we can achieve this and it is not a far spot in future. We are running the world’s largest LED bulb distribution programme and the governmental push has led to the growth of indigenous manufacturers in LED bulb industry, which is only flourishing. I definitely foresee India exporting LED bulbs to other countries in abundance. For suggestions email at feedback@infraline.com
61
August 2016 www.InfralinePlus.com
InDepth Coming together of solar and wind: Govt announces draft Hybrid policy
62
►► Policy aims at generating 10 GW of hybrid capacities by FY 2022 ►► Timely finalisation and clarity on regulatory front remains key to achieve the objectives By Team InfralinePlus
India’s Intended Nationally Determined Contributions (INDC) document to United Nations Framework Convention on Climate Change at Paris (COP21) last year signified a 2030 target to achieve about 40% cumulative electric installed capacity from non-fossil fuel based energy resources, with the help of technology transfer and low cost international finance. Accompanying this is a domestic goal to achieve 175 GW of installed generation capacity through renewable energy (RE) sources by 2022. The slew of measures the central government is planning to undertake to
meet those targets includes a National Wind-Solar Hybrid Policy, which aims to encourage new technologies involving combined operation of wind and solar plants. In June, 2016, the Ministry of New and Renewable Energy (MNRE), Government of India, had issued a draft national wind solar hybrid policy with a target of implementing 10 GW of such hybrid capacities by FY 2022. MNRE is also implementing a programme to promote the installation of small wind energy and hybrid systems (SWES). The first-such pilot-
cum- demonstration project of 25 KW capacity will be installed at the wind turbine test station of National Institute of Wind Energy (NIWE) at Kayathar, Tootikudi District, Tamil Nadu. Under the programme, MNRE provides Central Financial Assistance (CFA) to community users for installation of such systems. The total installed capacity as on March 31, 2016 is 2.69 MW. There are 6 small wind turbine manufacturers and 9 models empanelled under this programme. These programmes have been highly successful in the US and EU countries.
August 2016 www.InfralinePlus.com
Both Solar and wind sector are complimentary The draft policy comes in the wake of how recent studies have revealed that wind and solar projects can complement each other by minimizing the variability of the power output and easing pressure on the grid. The policy aims to encourage new technologies and methodologies for such hybrid systems. “Superimposition of wind and solar resource maps shows that there are large areas where both wind and solar have high to moderate potential. Existing wind farms have scope of adding solar PV capacity and similarly, there may be wind potential in the vicinity of existing solar PV plant... Suitable policy interventions are required not only for new wind-solar hybrid plants but also for encouraging hybridization of existing wind and solar plants,” the draft policy added. The main aim of the policy is to lay a framework for promoting large grid connected wind-solar PV system. This will be helpful for creating optimal and efficient transmission infrastructure and land, reducing the variability in renewable power generation to achieve better grid stability. “The hybrid power injected in to the grid will not be more
than the transmission capacity/grid connectivity allowed/sanctioned for existing wind/solar project,” according to the draft policy, placing the onus of size restrictions on the utility owner rather than on the government, which is responsible for transmission capacity. “This will ensure that no augmentation of transmission capacity is required,” according to the policy statement. Policy & regulatory support is also proposed towards the hybrid projects
The draft policy comes in the wake of how recent studies have revealed that wind and solar projects can complement each other by minimizing the variability of the power output and easing pressure on the grid. The policy aims to encourage new technologies and methodologies for such hybrid systems
in the draft policy, given the eligibility of hybrid RE to meet the renewable purchase obligation norms (RPO, both solar and non-solar) by the obligated entities as well as continuation of all other policy & financial benefits which are currently made available to existing wind & solar projects. For new hybrid wind-solar projects, the draft policy proposes to provide the developer with the option of using the hybrid power for captive use, third party sale or sale to state electricity distribution utilities at prices determined by the state electricity regulatory commissions for the project. The policy states, “In case of new wind-solar hybrid projects, the developer have option to use the hybrid power for captive use or third party sale or may sell the hybrid power to Distribution Company (ies) at a price determined by the respective SERC for that hybrid power project. The hybrid power so purchased by Distribution Company may be used to offset both solar and non-solar RPO. The hybrid power may be procured through a transparent bidding process under different mechanisms. Parameters that may be considered for bidding could be total capacity delivered at grid interface point, CUF and unit price of electricity.”
A step in the right direction The variability in generation profile is likely to be reduced to some extent by the hybridization of wind and solar projects at same site, given that generation from both the sources is at different intervals and in complimentary seasons. This in turn would partially address the concerns of distribution utilities over the grid stability arising due to the intermittent nature of wind or solar. The existing wind farms have scope for adding solar capacity and similarly there could be wind potential in the vicinity of existing solar plant. Hence, it is believed that new policy will be a great boost to the state of
63
August 2016 www.InfralinePlus.com
InDepth
MNRE announced a scheme to set up 1 GW of wind power connected to transmission network of CTU • MNRE recently announced a scheme to set up 1 GW of wind power connected to transmission network of Central Transmission Utility (CTU) with an objective to facilitate supply of wind power to the non-windy states at a price discovered through transparent bidding process. According to the ministry, the scheme will encourage competitiveness through scaling up of project sizes and introduction of efficient and transparent e-bidding and e-auctioning processes. It will also facilitate fulfilment of Non-Solar Renewable Purchase Obligation (RPO) requirement of non-windy states. • The Scheme will be implemented for setting up 1000 MW capacity of CTU connected Wind Power Projects by Wind Project Developers on build, own and operate (BOO) basis. However, the capacity may go higher than 1000 MW, if there is higher demand from distribution companies (Discoms) of non-windy states. The introduction of tariff based bidding for awarding wind projects under this scheme is expected to encourage competition and lead to efficient tariff discovery which would be favourable for the discoms.
64
Tamil Nadu considering its leadership position in wind installed capacity. The country has already crossed 26,700 MW of wind and 7,600 MW of solar power installed capacity till May 2016. Tamil Nadu leads in wind installation capacity with 7,613 MW and comes close second to Rajasthan with an installed solar capacity of 1267 MW. Government through the draft policy has proposed that the Central Electricity Regulatory Commission (CERC) should lay down the guidelines for determination of generic tariff for wind-solar hybrid system. Further, the Commission is required to frame regulations for forecasting and scheduling for the hybrid systems. The policy also states that all fiscal and financial
incentives available to wind and solar power projects may also be made available to hybrid projects. “Low cost financing for hybrid projects may be made available through IREDA and other financial institutions including multilateral banks,” it added.
Issues to be addressed According to ICRA, timely finalisation and clarity on regulatory front remains key to achieve the objectives underlined in the draft policy. In a recent report, ICRA said, “While there are inherent advantages in hybrid projects in optimal utilization of resources, the project economics for such projects would be critically dependent upon tariff levels which
Government through the draft policy has proposed that the Central Electricity Regulatory Commission (CERC) should lay down the guidelines for determination of generic tariff for wind-solar hybrid system. Further, the Commission is required to frame regulations for forecasting and scheduling for the hybrid systems may be either feed-in tariff based or competitively bid based, as is proposed in the policy. In our view, overall regulatory clarity in terms of tariff norms for hybrid projects remains a key.” The Central Electricity Regulatory Commission is required to lay down generic tariff principles as well as scheduling & forecasting framework norms for such projects which would in turn provide guidance for State Electricity Regulatory Commission (SERCs) to follow. While hybrid systems are viewed as a good step forward for the renewable energy sector as they stand to facilitate the efficient use of both land and transmission infrastructure, the draft policy is not detailed enough when it comes to tariff structures and financial incentives. The success of draft hybrid wind and solar energy policy would depend on the tariff (rate) level, which might be feed-in rate-based or competitively bidbased. Besides, overall regulatory clarity in terms of rate norms for hybrid projects remains key for the success of the draft policy. For suggestions email at feedback@infraline.com
August 2016 www.InfralinePlus.com
StatisticsRenewableEnergy Programme/ Scheme wise Physical Progress in 2016-17 (During the month of June, 2016) FY- 2016-17 Sector
Achievement
Target
Cumulative Achievements (as on 30.06.2016)
I. GRID-INTERACTIVE POWER (CAPACITIES IN MW) Wind Power
4000.00
373.95
27151.40
Solar Power
12000.00
1031.48
7805.34
Small Hydro Power
250.00
30.32
4304.27
BioPower (Biomass & Gasification and Bagasse Cogeneration)
400.00
29.50
4860.83
Waste to Power
10.00
0.00
115.08
16660.00
1465.25
44236.92
Total
II. OFF-GRID/ CAPTIVE POWER (CAPACITIES IN MWEQ) Waste to Energy
15.00
0.00
160.16
Biomass(non-bagasse) Cogeneration
60.00
0.00
651.91
Biomass Gasifiers - Rural - Industrial
2.00
0.00
18.15
8.00
0.00
164.24
Aero-Genrators/Hybrid systems
0.30
0.00
2.69
100.00
3.40
325.40
1.00
0.00
18.71
186.30
3.40
1341.26
0.00
48.55
SPV Systems Water mills/micro hydel Total
III. OTHER RENEWABLE ENERGY SYSTEMS Family Biogas Plants (in Lakhs)
1.10
Source: MNRE
Solar Non-Solar
Buy Bids (REC) 23,944 139,250
Sell Bids (REC) 2,036,891 7,287,207
Total commissioned State/UT capacity till 30-06-16 (MW) 1 Andhra Pradesh 878.97 2 Arunachal Pradesh 0.27 3 Bihar 45.10 4 Chhattisgarh 93.78 5 Gujarat 1,123.36 6 Haryana 15.39 7 Jharkhand 16.19 8 Karnataka 153.32 9 Kerala 13.05 10 Madhya Pradesh 790.37 11 Maharashtra 385.76 12 Odisha 66.92 13 Punjab 520.70 14 Rajasthan 1,294.60 15 Tamil Nadu 1,267.41 16 Telangana 795.84 17 Tripura 5.00 18 Uttar Pradesh 143.50 19 Uttarakhand 41.15 20 West Bengal 11.77 21 Andaman & 5.10 Nicobar 22 Delhi 23.87 23 Lakshadweep 0.75 24 Puducherry 0.03 25 Chandigarh 6.81 26 Daman & Diu 4.00 27 J&K 1.00 28 Himachal Pradesh 0.20 29 Mizoram 0.10 30 Others(PSU/chan100.92 nel partner )under Rooftop TOTAL 7805.21 Sr. No.
Source: MNRE
REC Trading Volume and Price for July 2016 Through IEX REC Type
Commissioning Status of Grid Connected Solar Power Projects (as on 30-06-16)
Cleared Volume (REC) 23,944 139,250
Cleared Price (INR/REC) 3,500 1,500
No. Of Participants 565 953
Month of Auction July 2016
Source: IEX
Through PXIL REC Type
Buy Bid (No. of certificates)
Sell Bid (No. of certificates)
MCP (INR / Certificate)
MCV (No. of certificate) Qty. (MWH)
Non Solar
95757
5637674
1500
95757
Solar
14029
1447749
3500
14029
Source: PXIL
Month of Auction July 2016
65
August 2016 www.InfralinePlus.com
StatisticsRenewableEnergy State-wise and Agency-wise Physical Targets under National Biogas and Manure Management Programme (NBMMP) for the year 2016-17 for Family Type Biogas Plants (in No’s) SL No.
66
Name of the SNAs/SNDs/ KVIC/ BDTCs and States
Total Target Allocated
Target Allocated Gen. 7000
S.C. 1800
S.T. 1400
1
Andhra Pradesh (NEDCAP. Hyderabad)
2
Arunachal Pradesh (APEDA)
100
0
0
100
3 4 5 6 7
Assam (FDA) C’hhattisgarh (CREDA) Goa (Dir. of Agri.) Gujarat (GAIC) Haryana (Dir. of Agri.)
6200 1600 100 2000 1000
300 50 0 200 0
2500 1400 0 300 0
9000 3050 100 2500 1000
150 100 100 9000 1700 1000 6600 13500 200 500 300 2500 4800 250 300 9800 400 1000 800 400 6500# 77900 500
0 0 0 1000 50 100 400 1000 0 0 0 1000 200 0 0 1100 0 100 100 100 1500 9000 0
0 0 100 0 0 0 1000 0 0 0 0 500 0 0 0 1400 0 0 8600 0
150 100* 200 10000 1750 1100 8000 14500 200 500 300 4000 5000 250 300 12300 400 -** 1100 900 500 8000# 95500 500
800 500
100 0
100 0
1000 500
1000 1500
0 0
0 0
1000 1500
4300 82200
100 9100
100 8700
4500 100000
8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29
Himachal Pradesh (Dir. of Agri.) Jammu & Kashmir (JKEDA) Jharkhand (JREDA) Karnataka (RD&PRD) Kerala (Dir. of Agri.) Kerala (ANERT. Thiruvananthapuram) Madhya Pradesh (MPSAIDC) Maharashtra (RD&WCD) Meghalaya (MNREDA) Mizoram (Dir. of AH) Nagaland (Dir. of NRE) Odisha (OREDA) Punjab (PEDA) Sikkim (SREDA) Tamilnadu (RD&RD) Telangana (TNREDCL) Tripura (TREDA) Uttar Pradesh (RDD) Uttar Pradesh (UPNREDA) Uttarakhand (UREDA, Dehradun) Uttarakhand (RDD, Pauri) KVIC, Mumbai Sub total 30 BDTC. I IT Guwahati. (Assam. Meghalaya. Tripura, West Bengal) 31 BDTC. MPUAT. Udaipur (Rajasthan) 32 BDTC, 1 IT Delhi (UK. UP. Delhi. Haryana) 33 BDTC. UAS. Bangalore (Karnataka) 34 BDTC. PAU. Ludhiana (Punjab. HP & J&K) Sub total Grand Total
10200
[* Subject to refund of outstanding amount of previous years lying with the State Govt. ] [** Target not considered due to accounts from the year 2007-08 to 2014-15 are pending for settlement] [Targets to BDTCs considered as decided in the Progress Review Meeting held under the Chairman¬ship of Secretary, MNRE on 29.03.2016 at MNRE, New Delhi] [Note: Not exceeding the targets over 10% of the total as given in the last column] [# For KVIC. Mumbai national target 8000 (6500 (5700 Gen.+800 NEZ) and 1500 SCP target}] Source: MNRE
August 2016 www.InfralinePlus.com
OffBeat
Prime Minister Narendra Modi’s Cabinet gets some new faces 19 new faces inducted in the Union Council of Ministers of which 17 are from BJP Five ministers tendered their resignation to Prime Minister Narendra Modi
67
Prime Minister, Narendra Modi
By Team InfralinePlus
In a significant move, Prime Minister, Narendra Modi, in July 2016, brought about a major reshuffle in the portfolio of Cabinet Ministers. ▪▪ Nineteen new faces have been inducted in the Union Council of Ministers by Prime Minister Narendra Modi, of which 17 are from BJP, and two are representatives of allies -Anupriya Patel from Apna Dal in Uttar
Pradesh and Ramdas Athawale from Republican Party of India (Athawale) ▪▪ The list of newly appointed ministers of state includes three from Uttar Pradesh, four from Rajasthan, three from Gujarat, two from Maharashtra (excluding Javadekar), two from Madhya Pradesh and one each from Uttarakhand and Assam.
▪▪ There is also fresh, young talent in Apna Dal’s Anupriya Patel, 35, and the Mansukh Mandaviya, who has worked in the agriculture sector in Gujarat. ▪▪ Five ministers tendered their resignation to Prime Minister Narendra Modi. They include Nihalchand, Ram Shankar Katheria, Sanwar Lal Jat, Manuskhbhai D Vasva and M K Kundariya.
August 2016 www.InfralinePlus.com
OffBeat New portfolios of Cabinet Ministers
Additional portfolios of Cabinet Ministers
Chaudhary Birender Singh: Steel
Prakash Javadekar
The first minister to take oath in the new Cabinet. He is the only leader who was elevated to the Cabinet rank. He is now the new Union Minister for Human Resource. Earlier he was the Minister for Environment & Forests.
68
Piyush Goyal: Power, Coal, New and Renewable Energy, Mines
M. Venkaiah Naidu: Urban Development, Housing and Urban Poverty Alleviation, Information and Broadcasting
Ananth Kumar: Chemicals and Fertilizers, Parliamentary Affairs
Ministers of State (MoS)
Smriti Zubin Irani
She is the new Textile Minister. Earlier she was Minister, Human Resources Development
Ravi Shankar Prasad: Law and Justice, Electronics and I&T
Jayant Sinha, MoS, Civil Aviation (earlier Finance)
D.V. Sadananda Gowda
He is the new Minister of Stastitics and Programme Implementation. He previously served as Minister of Law and Justice
Narendra Singh Tomar: Rural Development, Panchayati Raj, Drinking Water and Sanitation
Manoj Sinha, MoS, Communications (earlier Railways)
August 2016 www.InfralinePlus.com
Vijay Goel, BJP MP has been sworn in as MoS. He was elected to Rajya Sabha from Rajasthan.Portfolio: MoS (Independent Charge), Youth Affairs and Sports
Anil Madhav Dave, Rajya Sabha MP represents Madhya Pradesh. He was first elected to the House in 2009. Portfolio: MoS (Independent Charge), Environment, Forest & Climate Change
Faggan Singh Kulaste represents the Mandla constituency of Madhya Pradesh. Portfolio: MoS, Health and Family Welfare
Parsottambhai Rupala, a Rajya Sabha MP from Gujarat.Portfolio: MoS, Agriculture and Farmers Welfare, Panchayati Raj
SS Ahluwalia is a vice president of the BJP and represents Darjeeling. Portfolio: MoS, Agriculture and Farmers Welfare, Parliamentary Affairs Ramesh Jigajinagi, MP from Bijapur, served on the consultation committee at the Ministry of External Affairs. Portfolio: MoS, Drinking Water and Sanitation
Affairs
Arjun Ram Meghwal, the BJP’s chief whip in Lok Sabha. He represents Bikaner, Rajasthan and has been a member of the House for two terms.Portfolio: MoS, Finance, Corporate Affairs Jasvantsinh Sumanbhai Bhabhor, an MP representing Dahod, Gujarat.Portfolio: MoS, Tribal Affairs
Ramdas Athawale, Rajya Sabha MP from Maharashtra. Portfolio: MoS, Social Justice and Empowerment
Rajen Gohain’s an MP from Assam. Portfolio: MoS, Railways
MJ Akbar, former journalist and Rajya Sabha MP. He represents Madhya Pradesh in the House.Portfolio: MoS, External
Mahendra Nath Pandey represents Chandauli in the 16th Lok Sabha. Portfolio: MoS, Human Resource Development
Ajay Tamta, Lok Sabha MP from Almora, Uttarakhand. Portfolio: MoS, Textiles
Krishna Raj , BJP MP, represents Shahjahanpur constituency of Uttar Pradesh.Portfolio: MoS, Women & Child Development Mansukh Mandaviya, MP – BJP who represents Gujarat in Rajya Sabha.Portfolio: MoS, Road Transport and Highways, Shipping, Chemicals and Fertilizers. Anupriya Patel, Apna Dal MP representing Mirzapur, Uttar Pradesh.Portfolio: MoS, Health & Family Welfare CR Chaudhary, Lok Sabha MP from Nagaur, Rajasthan. Portfolio: MoS, Consumer Affairs, Food and Public Distribution PP Chaudhary, Lok Sabha MP representing Pali, Rajasthan. Portfolio: MoS, Law and Justice, Electronics and Information Technology Dr Subhash Bhamre, BJP MP representing Dhule, Maharashtra. Portfolio: MoS, Defence For suggestions email at feedback@infraline.com
69
August 2016 www.InfralinePlus.com
Reports & Studies India’s Ease of Electricity rank jumped 29 points in one year, says World Bank report India ranks 70 among 189 economies on ease of getting electricity due to positive reforms that have aided ease of doing business in the country, according to a latest report by The World Bank. India has jumped by a whopping 29 points from 99 last year, the report said. Getting an electricity connection in India takes an average 90.1 days with nearly five procedural steps, the bank’s Ease of Doing Business Report 2016 said. Faster and enhanced convenience in ‘Getting Electricity’ has been the biggest contributor in making India improve its position by 12 ranks climbing to 130 as
compared to 142 a year ago in terms of the overall Ease of Doing Business. It said power utilities in Delhi and Mumbai have reduced time for getting electricity connections by improving internal work
processes. “Another focus is to make the process for getting a new electricity connection simpler and faster. Toward that end the utility in Delhi eliminated an internal wiring inspection by the Electrical Inspectorate—and now instead of two inspections for the same purpose, there is only one. The utility also combined the external connection works and the final switching on of electricity in one procedure,” the report said. It further said that utilities in Mumbai reduced the procedures and time for connecting to electricity by improving internal work processes and coordination.
Supreme Court’s order on revision of tariff under PPA positive for Gencos: ICRA
70
ICRA believes that the recent Supreme Court orders upholding statutory powers of state power regulators to review tariffs of power purchase agreements is a positive development for generation entities. This would cover generation companies that are in dispute with buyers over tariff review for events
that are uncontrollable. “While these orders are a positive development for the independent power producers, it is assumed that tariff re-determination or compensation-related issues are unlikely to be resolved quickly. Further, orders issued by power regulators whichever way they may favour - are likely to be contested and Supreme Court has noted in one of the cases that the final orders issued by the regulators shall be subject to scrutiny”, Sabyasachi Majumdar, Senior Vice President, ICRA said. On July 5, 2016, Supreme Court upheld an order issued by Appellate Tribunal for Electricity for re-determination of tariff by Gujarat Electricity Regulatory Commission in case of power purchase agreements signed by IPPs - Tarini Infrastructure (TIL) and Junagadh Power Projects (JPPPL) with
the Gujarat Urja Vikas Nigam (GUVNL). TIL operates two small hydro power projects of 3 MW and 2.6 MW, while JPPPL operates a 10 MW biomass-based power project in Gujarat. Supreme Court has also recently refused to stay proceedings by Central Electricity Regulatory Commission (CERC) in case of tariff compensation matter for Coastal Gujarat Power (CGPL) and Adani Power (APL). This is a positive for these power producers, given that CERC is currently evaluating tariff compensations, post APTEL’s order dated April 7, 2016. The tribunal had directed CERC to assess the extent of the impact of force majeure events on the projects of APL and CGPL and provide them such relief as may be available under the respective power purchase agreements.
Indian start-ups receive 50 per cent of global investments on wind energy A wind energy start-up landscape study by Traxcn has revealed that top investors bet on start-ups that are focused on power generation, and then manufacturing. The study has also revealed that start-ups based in India comprised 50 percent of start-ups across the world that received top investments in July 2016. Power generation start-ups attracted the highest investment - worth $7.08 billion, while manufacturing received a total investment of $1.68 billion over the last few years. This trend in the start-up ecosystem coincides with the government’s target of generating 175 MW of energy by 2022 out of which 60 MW (or 34.3 percent) would be derived from wind energy. In the power generation
category, Hyderabad’s Greenko Group ($737 million) and ReNew Power Ventures ($655 million) ranked first and second, respectively, among the most funded companies. Suzlon ($552 million) topped the manufacturing companies that raised funding last year. Merg-
ers and acquisitions in power sector had also increased 1.5 times in India during the first half of 2016, according to EY. There were 17 deals worth $1.6 billion during the JanuaryMay period compared to 15 deals worth $601million in the year-ago period. Greenko Energy Holdings ($230 million), ReNew Power Ventures ($265 million), Tata-owned Welspun Renewables ($617 million) were cited among the firms that received top investment since 2015. Traxcn, the research firm that curates and monitors start-up investments, also noted that the average ticket size of investments per year was highest in 2016 at $115 million, though 2015 saw the highest total funding in the sector at $2.7 billion worldwide.
August 2016 www.InfralinePlus.com
Reports & Studies UDAY unlikely to destabilise aggregate state finances but select states will feel the pinch
Aggregate impact of UDAY on the fiscal deficits of 13 states that have joined the scheme will be 0.47% of gross domestic product (GDP) in FY17 estimates India Ratings. However, state finances of Andhra Pradesh, Haryana, Jharkhand, Punjab, Rajasthan and Uttar Pradesh will come under pressure. “UDAY is unlikely to have a destabilising effect on fiscal
consolidation at an aggregate level. We estimate aggregate fiscal deficit of states at 3.2% of GDP in FY17. It is expected to be marginally better than the 3.4% recorded in FY16,” said Devendra Pant, chief economist, India Ratings & Research. Five states incurring high distribution losses that have yet not joined the UDAY scheme are Telangana, Madhya Pradesh Maharashtra, Tamil Nadu and West Bengal. Ind-Ra’s analysis shows that once they do, state finances of even Telangana, Madhya Pradesh and Tamil Nadu will come under stress. Ind-Ra notes that despite marginally better fiscal performance, states at the aggregate level are likely to miss the fiscal deficit target of 2.8% of GDP in FY17 by a wide margin.
India can gain hugely from regional power trade, says World Bank study
Regional trade in electricity can spare India from investing in 35,000 MW coal-fired capacities (at estimated $26 billion) over the next 25 years, according to a World Bank study cover-
ing all SAARC nations except the Maldives. Larger benefits will accrue through reduction in fuel cost and 6.5 per cent cut in greenhouse gas emission. The savings should come through replacement of thermal power with hydro-electricity to be sourced mostly from Nepal, followed by Bhutan and Afghanistan. The study by World Bank economists Michael Torman and Govinda Timilsina expects Nepal to add 52.1 GW (giga-watt) in 2040, over and above the existing 1 GW. Bhutan will add 9.1 GW and Afghanistan 3.6 GW. Without trade opportunities, Nepal and Bhutan cannot maximise hydro-electric generation potential because of the smaller size of domestic economies.
Govt should not delay halting coal plant expansion: Greenpeace
Noting that the International Energy Agency (IEA) reaffirmed its position that thermal power plants contribute to air pollution, Greenpeace India said the government should not delay halting its expansion plans for coal plants. “It is clear that India needs an aggressive shift to clean energy now. There should be no delay in implementing the thermal power plant emission standards and halting the expansion of coal-based power. “This is the only way to keep our air quality within breathable limits and reduce premature deaths,” said Sunil Dahiya, Campaigner, Climate and Energy, Greenpeace India. He said the government should move urgently to meet the three recommendations by the IEA - set an ambitious long-term goal for reducing air pollution, create a comprehensive clean air policy package for the energy sector including both emission controls and clean energy, and ensure effective monitoring and enforcement of emission standards. The IEA report suggests 85 per cent of particulate matter and almost all of the sulphur oxides and nitrogen oxides result from fuel combustion.
Rs 10 lakh crore investments needed for 1.5 bn tonne coal output Investments to the tune of more than Rs 10 lakh crore would be required in coal mining and allied sectors like power, steel and cement to achieve the target of 1.5 billion tonnes of coal production by 2019-20, according to the latest PwC-ICC report. “India has set an ambitious target of 1.5 billion tonnes (BT) of domestic coal production by FY 2020 and will need huge investments adding up to more than Rs 10 lakh crore in coal mining and its allied sectors like power, steel, cement, infrastructure for logistics, and coal washeries for achieving this goal,” the
report said. The government would need to take steps to promote smooth land acquisition, easy availability of water, augment infrastructure for logistics, develop coal washeries, capacity building and skill development to provide the support system for developing a cohesive environment for achieving the target, it said. Additionally, focused efforts are required from all stakeholders, especially governments, industry players, investors, funding agencies and infrastructure developers, it added.
71
August 2016 www.InfralinePlus.com
People in News Utpal Bora made OIL chief amid Assam field auction protests
The government has appointed Utpal Bora as the full-time chairman of Oil India Ltd after a gap of more than a year, during which the country’s secondlargest oil producer has seen a steady decline in output. The appointment of Oil
India chairman comes amid mounting protest from the BJP’s allies against the auction of 12 small discovered oil and gas fields in Assam as part of the Centre’s plan to attract private investments for developing 67 such discoveries across the country. These discoveries were made by state-run ONGC and OIL, who returned the fields because restrictive condition made them commercially unviable. These conditions have been relaxed for the auctions. Bora is at present an executive director with ONGC and runs the flagship explorer’s Mehsana field in Gujarat. It is company’s largest onland asset with 1,552 operational oil and gas wells that produce 6,000 tonnes of oil per day and 5.3 lakh cubic metre gas a day.
D Rajkumar appointed CMD of BPC (CMD) of Bharat Petroleum Corporation. Rajkumar is, at present, working as Managing Director of Bharat Petro Resources Ltd, a unit of BPCL focused on exploration and production. He has been appointed to the posts for five-year term, an order issued by the Department of Personnel and Training (DoPT) said. Rajkumar will take over the charge on or after October 1, 2016 after retirement of BPCL’s current chief S Varadarajan in September. BPCL is a state refiner and retailer.
72
Technocrat D Rajkumar has been appointed as Chairman and Managing Director
Rani Singh Nair appointed CBDT chairperson
Senior Indian Revenue Service (IRS) officer Rani Singh Nair has taken over as the new chairperson of Central Board of Direct Taxes (CBDT), the policy-making body of the Income Tax department under the Union Finance Ministry. Her predecessor Atulesh Jindal, who was appointed CBDT chief in February this year, retired recently. Nair, a 1979-batch IRS officer of the Income Tax cadre, worked as member (Legislation and Computerisation) at CBDT. An order of her appointment was issued by the Appointments Committee of Cabinet, headed by Prime Minister Narendra Modi. For Nair, who will be in office till 31 October, an important task would be to oversee effective execution of the ambitious one-time domestic black money disclosure programme, also called the Income Declaration Scheme (IDS). IDS is set to close on 30 September. Nair has been instrumental in framing the procedures and protocols that led to the rollout of IDS on 1 June 2016. The scheme aims at bringing undisclosed income and assets into the tax net.
Aruna Sharma appointed Steel Secretary in major bureaucratic reshuffle In a major reshuffle at the secretarial level of the Central government, senior IAS officer Aruna Sharma will take charge as Secretary of Ministry of Steel, while Aruna Sundarajan will take over as Secretary, Ministry of Electronics and Information & Technology. In other changes, Bhanu Pratap Sharma, Secretary, Department of Health and Family Welfare has been moved to the Department of Personnel and Training as Secretary. AK Dubey, Special Secretary, Ministry of Coal will join the Department of Youth Affairs as Officer on Special Duty and will take
charge as Secretary after the incumbent Rajiv Gupta retires. Further, M Sathiavathy, Director General, Directorate General
of Civil Aviation, has been moved to the Ministry of Labour and Employment as Officer on Special Duty. She will take charge as Secretary after the incumbent Shankar Agarwal retires. Sathiavathy’s replacement in the Directorate General of Civil Aviation has not been announced. Dinesh Singh, Special Secretary, Ministry of Statistics and Programme Implementation, has been moved to Department of Land Resources as Officer on Special Duty. Singh will take over as Secretary once the incumbent VS Madan retires.
Exclusive Information Covered in the recent past: • Monthly Trend Analysis and YoY Growth Regarding Production of Coal by CIL & SCCL • Monthly India’s Coal & Coke Import Summary • Monthly Trend Analysis and YoY Growth Regarding Offtake & Despatch Performance of CIL & SCCL • Spot E-Auction Prices and Allotment • Detailed Profiling of Coal Blocks Covering Data on Geological Reserves, Lease Area, Clearances, Coal Extracted etc
Coal Sector Knowledgebase The Coal Knowledgebase has comprehensive coverage of 200+ coal block profiles, allocation and de-allocation status, coal import data (port/country/type wise), coal production statistics, coal pricing. It also provides latest information on Coal India Limited and its subsidiaries, coal washeries, regulations, fuel supply agreements, spot and forward E-auction, Offtake/Dispatch of coal and demand supply
Exclusive Import-Export Data • Monthly collated data from all ports in India • Port wise importer details • Information on transportation & logistics • Coal linkages, FSA (coal distribution), coal prices & royalty
Membership Deliverables • Complimentary Daily Morning Newsletter and Daily International Bulletin • Dedicated Analyst Support • Weekly Knowledgebase Snippets • Global & Domestic Tenders • Unlimited Access to Knowledgebase • White Papers
For any further information, kindly contact us on the below mentioned coordinates:
Ruchi Sharma, AVP - Business Development Phone: +91 120 6799126, Mobile: +91 9560626529 Email: ruchi.sharma@infraline.com
RNI No: DELENG/2012/45441