September 2016 Volume 5 | Issue 5 | `100 www.InfralinePlus.com
The Complete Energy Sector Magazine for Policy and Decision Makers
Make in India: Limited impact on energy sector
Government pushes 100% rural electrification to achieve 24/7 power supply
As solar rooftop goes slow, government doubles target for solar parks
Amit Jain
VK Arora
Ravi Singhania
Shravan Sampath
Managing Director CMI Ltd
Chief Mentor Karam Chand Thapar & Bros
Managing Partner Singhania & Partners
CEO Oakridge Energy
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InfralinePlus
September 2016 | Volume 5 | Issue 05
The Complete Energy Sector Magazine for Policy and Decision Makers
Editor’s Letter
Editorial
The energy sector has been into an overdrive since the last few years thanks to the quick decision making, policy reforms and proactive measures taken by the government. However, one central idea behind these measures has been the policy to promote domestic manufacturing in all sectors under the ‘Make in India’ umbrella. It has been two years since this programme was announced, September 25, 2014, to be precise; however, the results are yet to be seen on ground, especially in the energy sector. A lot more needs to be done to boost domestic production of natural resources and manufacturing of equipment. Nonetheless, there have been some positive developments in the power sector of note. While the jury is still out on the claims being made with regard to India being ‘power surplus’, there is no doubt that the Government is aggressively pursuing its goal of 100 percent electrification to provide 24/7 power supply. Close monitoring is being done through Gram Vidyut Abhiyanta (GVA) and various actions are also being taken on a regular basis to expedite the progress. The Government is also trying to revive stranded gas-based power capacity in the country. Under the government´s revival plan for stranded gas-based power plants, LNG is be imported and cash-strapped state power distribution companies are financially supported to buy electricity from them. The fourth reverse e-auction to provide subsidy to buy gas for running stranded power projects and those operating at sub-optimal level is likely to be conducted after October. The recent revision in the rail freights has caught everyone off guard. The move is being fiercely debated, especially by the power companies, as it is likely to push up tariffs of power produced from coal-based plants by 8 to 10 paise per kWh. Clearly, the sector is unhappy given that it is yet to come to terms with the Clean Cess levied earlier this year. A debate has also been ignited in the renewable energy sector. While the blossoming of the solar growth story is for everyone to see, we bring to you an interesting piece which argues that the current rapid transformation seen in the solar sector may not be sustainable in the long run due to various financial and technological challenges that are expected to arise. It is claimed that while talks of how policy making in the solar power sector is currently driving growth but it could result in substantial stressed assets due to various financial challenges facing the solar industry in India. It will be interesting to see how this growth story pans out.
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September 2016 www.InfralinePlus.com
InfralinePlus
Contents Editor’s Letter
1
Cover Story
33 Make in India: Limited impact on energy sector so far
2
The ‘Make in India’ programme is yet to make an impact on the ground despite a series of measures taken by the Modi government to improve the ease of doing business. Two years after the campaign was launched by Prime Minister Narendra Modi in September 2014, private investment is still trickling in. The government is banking on public spending to drive the growth. However, this strategy has its own limitations and cannot substitute for private investment.
33 Power News Briefs
4
Coal
19
p4
News Briefs p19
In Conversation: Amit Jain, Managing Director, CMI Ltd p8
Expert Speak: VK Arora, Chief Mentor, Karam Chand Thapar & Bros p22
Expert Speak: India Power Corporation Ltd
In Depth: Under utilisation of thermal power plants cause of worry for power producers p24
P11
In Depth: Government aggressively pursuing 100% rural electrification to achieve 24/7 power supply dream P13 Statistics
p17
In Depth: Coal freight rate hike a mixed bag
P28
Statistics
p31
Topics Covered
Topics Covered
Power equipment
Coal import
Cables and transformers
Coal transportation
Rural electrification
Coal production
September 2016 www.InfralinePlus.com
Oil and Gas
39
Renewable
49
News Briefs p39
News Briefs p49
In Conversation: Ravi Singhania, Managing Partner, Singhania & Partners p42
Expert Speak: Shravan Sampath, CEO, Oakridge Energy p54
In Depth: Gas-based power plants: Gas-ping for fuel! p44
In Conversation: Pradeep Misra, CMD, Rudrabhishek Enterprises Pvt Ltd p56
Statistics p47
In Depth: As solar rooftop goes slow, govt doubles target for solar parks p58 In Depth: Government looks at providing impetus to small hydro programme p61 Statistics p64
Topics Covered
Topics Covered
Legal issues
Solar tariffs
Gas supply
Solar parks
Crude oil import
Small hydro production
3
Expert Speak/Interview
Amit Jain
VK Arora
Managing Director CMI Ltd
Chief Mentor Karam Chand Thapar & Bros
Off Beat
66
Event Focus: Law- Assemble India Summit by Infraline Energy
Ravi Singhania
Pradeep Misra
Managing Partner Singhania & Partners
CMD Rudrabhishek Enterprises Pvt Ltd
Reports & Studies
69
People in News
71
September 2016 www.InfralinePlus.com
NewsBriefs | Power India powers past 6,000 MW mark in nuclear energy
With synchronization of the second unit of the Kudankulam power plant, India’s civil nuclear programme has reached a couple of landmarks: the Kudankulam project turned a page on protests and a legal challenge over its safety parameters in the Supreme Court, and India crossed the 6,000 MW mark in nuclear
power. Once the output of Unit II is scaled up to a full 1,000MW in two months, India’s 22 nuclear power reactors will be able to generate 6,780MW of power and the Nuclear Power Corporation of India Limited (NPCIL) expects four more reactors to be commissioned in a year. Unit II is functioning smoothly as scientists seem to have incorporated the right lessons from hitches that marred Unit I’s functioning after attaining criticality in 2013. The two 1,000MW nuclear units built with Russian assistance have made Tamil Nadu the highest consumer of nuclear power on a daily basis. Kudankulam I and II are also the last nuclear units in India built with foreign collaboration that will not attract the liability clause legislated after the India-US nuclear deal.
Prices of gas for power projects may fall further
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Power Minister Piyush Goyal expects prices to fall further in the next round of subsidy-based auction of gas for power projects, given the softening of global rates and muted electricity demand in the country. Generators are unable to sell power as distribution companies are buying cheap electricity on a short-term basis from the market, which makes for a strong case for the bids to be even more favourable for the government. In an attempt to kick-start stranded gas-based projects, Prime Minister Narendra Modi’s government had introduced subsidy-based auctions to import gas and supply it to these power units. Lower prices for gas would translate into a lower subsidy burden for the government. “The fourth
round of bids will start soon and we are looking at the possibility of even lower prices given that the international gas prices are much lower than what they were one-and-a-half years back when we formulated the scheme.
National Power thieves in rural India steal over 20percent of electricity
India is looking to its countryside to understand how more than 20% of power distributed by state retailers goes missing. Rural Electrification Corp. plans to install equipment that will transmit usage data from metres at each of the country’s 100,000 rural feeder stations, one of the final electricity distribution points between power plants and customers. Data from the meters, which will be installed by state retail companies, will be streamed live to the public. Tracking rural usage is part of Prime Minister Narendra Modi’s vision of reforming the country’s power sector and lighting every home in the country by 2019. Regional distributors lose almost 23% of the electricity they buy through theft, unmetered usage and dissipation through old wires, hurting their finances and preventing them from repaying debt. A federal-government plan to make them profitable has set a target of bringing that down to 15% by 2019. The data gathered from the feeders will be posted on a new smartphone application.
India urges power producers to seek opportunities overseas India is urging its power producers to look overseas for new markets as fewer new plants are needed at home amid surplus generation capacity. The Indian government is encouraging state-run power producers to build plants overseas, Coal and Power Minister Piyush Goyal said recently. The country is projected to report surplus power supply for the first time in at least eight years during the year ending March, even as several parts remain without access to electricity. “State-run generators NTPC Ltd. and NLC India Ltd. as well as private producers can explore opportunities in India’s neighboring countries and beyond,” Goyal said. Some have already signed international agree-
ments. NTPC, India’s biggest generator, is building a 1,320 megawatt coal-based power project in Bangladesh and is considering setting up another plant in Sri Lanka.
Tata Power Co. Ltd., among India’s biggest private producers, has signed agreements to build two wind power projects in South Africa and has commissioned a 120 megawatt hydro project in Zambia. India’s coal-based power plants used 60.9 percent of their capacity in June, according to the power ministry’s Central Electricity Authority. Plants operated by private companies and provincial governments reported an even lower utilization rate. That has led to stockpiling of coal, which helps produce more than three-fourths of India’s electricity. Coal India Ltd., which accounts for more than 80 percent of India’s output, is also seeking markets to export the commodity.
September 2016 www.InfralinePlus.com
NewsBriefs | Power Power prices to rise, with coal freight hike, green cess
New rate and cess increases would erode the benefit to power plants from surplus coal availability. The recent freight rate increase by Indian Railways for coal and the clean energy cess doubling to Rs 400 a tonne for coal has offset by 15p a unit of power of the earlier total benefit of 35p
a unit from its surplus availability and reduction in price in both the domestic and international markets. According to NTPC, after accounting for all costs, the price of power would increase by close to 25 per cent on an average for all its units. For pithead plants, the fuel price escalation is 12-25p a unit and for non-pithead, 28-40p a unit of power produced. Pithead plants are in the vicinity of a coal mine. This might disturb the merit order of states procuring power from NTPC. The company’s energy cost came down to Rs 1.69 a unit in February, from Rs 2.03 a unit a year before. The decrease in price was due to rationalisation of linkages and reduction in imported coal consumption.
Kudankulam’s second unit connected to grid Kudankulam Nuclear Power Project’s (KNPP) second unit, which has a capacity of 1000 MW, went online recently, and is currently operating at 170 MW output. With this, the atomic power generation of Nuclear Power Corporation of India Ltd (NPCIL) has crossed 5,000 MW. The second unit will be disconnected from the grid after four days for testing and will be reconnected a week later. After clearances from the Atomic Energy Regulatory Board, the power generation will be increased in stages. By November, the unit is expected to touch its full capacity of 1000 MW. Currently, the unit has permission to operate up to 50% capacity. The second
unit went critical on July 10, 2016. The First Unit (1000 MW) of KNNPP was dedicated to the country early this month by the Prime Minister.
National Discoms to turn around by next year thanks to UDAY, says power secretary
Power distribution continues to be an area of concern. However, with the implementation of Ujwal DISCOM Assurance Yojana (UDAY), aimed at making ailing power distribution companies (discoms) to operationally efficient, some are expected to witness a turnaround in a year, said Union Power Secretary Pradeep Kumar Pujari. Pujari said since the launch of UDAY in November the debt service liability of discoms has reduced because of the reduction in losses and a dip in generation cost. The Centre has already extended the deadline for implementing UDAY by a year to March 31, 2017. About 15 states have joined. “Discoms’ capacity to buy, purchase and supply power 24x7 is still a question. Lot of focus is being given to distribution so that discoms turnaround both financially and in operational efficiency. They have to improve operational efficiency, reduce aggregate transmission and commercial (AT&C) losses, which are quite high,” Pujari said.
35 percent of India’s total thermal power capacity lying unused More than a third of India’s 303 gigawatt thermal power capacity is lying unused while the rest is running at a shade over 55% utilisation owing to inadequate demand. Utilisation is expected to fall further if more capacity is added as planned by the government, portending losses for power firms. About 35% of the total capacity, or 104 gigawatt, is lying idle at present. The government added about 24,000 mw of fresh conventional capacity last year and plans to add 86 gigawatt by 2022. In addition, 100 gigawatt of solar capacity is to be added by 2022. The list of shut units includes a chunk of 31gigawatt capacity that was set up after 2009.
These include 6,360 mw capacity that does have power supply contracts with distributioncompanies but is lying shut due
to non-availability of coal. Another 5,650 mw have neither coal nor power supply contracts with any distribution company. The next set of 9,316 mw have coal supply contracts but does not have power supply agreements. Yet another set of 2,940 mw have letter of coal supply assurance from Coal India and has managed to sign power purchase agreements but has not been receiving coal from the state-run miner. The last set includes 3,300 mw of plants that do not have power purchase agreements and despite Coal India’s assurance of supplies, have not been receiving coal.
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September 2016 www.InfralinePlus.com
NewsBriefs | Power Punjab goes all out to sell excess power, but finds no buyers
In a desperate effort to sell excess power, the state government has made an offer to all power utilities across the country. In the offer, it says that is willing to “dedicate power from two private thermal plants” recently established in Punjab “with an aim to sell its surplus power” for which it is paying fixed charges to these plants without
consuming their power. But not even a single utility in the country has come forward to buy that power. Hence, the state is unable to sell the 2,520 megawatts available with it. Highly placed officials within the Punjab State Power Corporation Limited (PSPCL) said that Secretary (Power), Punjab, recently wrote to many states to sell and “sign a long-term contract for selling power from two of its private thermal plants”. “The letter mentions that the state power utility was willing to enter into a long-term agreement to sell roughly 2,500 MW — 540 MW (2x270 MW) from GVK Thermal power project near Goindwal Sahib and 1,980 MW (3x660 MW) from Talwandi Sabo Power Limited (TSPL),” they said.
Maharashtra to soon introduce Energy Conservation policy
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The Maharashtra government will soon come up with an Energy Conservation policy which will aim at enhancing the technology required to improve electricity generation. The draft of the policy, prepared in line with the Centre’s Energy Conservation Policy of 2001 has been uploaded on the government’s website and recommendations have been invited from experts to strengthen it. “Increase in development and growing population of the state has caused a rise in the demand for electricity. Most of the electricity being generated today is through nonrenewable sources like coal, fuels, etc which causes an imbalance in nature, increases pollution and is a factor causing global
warming. Also since these resources are fast depleting, there may not have enough of them in future. Thus these resources need to be used wisely. The Energy department said the new policy will ensure the government provides sufficient infrastructure for the Centre’s 2001 policy to be implemented.
States Chhattisgarh curtails power tariff for industry
Chhattisgarh government’s decision to reduce power tariff for industry had allegedly come as a shock for the secondary steel makers in neighbouring state of Maharashtra. Following the fall in demand and high running cost, over 100 mini steel plants in Chhattisgarh had cut short the production over last many months that finally culminated in complete shut down on August 1. The mini steel plants across Chhattisgarh remained close for over a fortnight before the state government announced to curtail power tariff for the industry. The annual production output from secondary steel makers in the state had been about 4 million tonnes (MT). Of which, about 25 per cent steel is consumed in the state’s domestic market. Since, the steel makers were not fulfilling the domestic demand, steel from Maharashtra started coming to the local market. The average per unit power tariff for the industry was reduced by Rs 1.40 per unit and would remain effective till March 2017.
West Bengal is no more power surplus: CEA West Bengal is no longer a power surplus state with deficit projected to be 7,257 million units in 2016-17. The Central Electricity Authority’s (CEA’s) Load Generation Balance Report (LGBR) prepared with the inputs of Regional Power Committees (RPCs) says that West Bengal’s projected off peak demand for 2016-17 has been pegged at 52,867 million units; while availability is 45,610 MUs. Peak requirement for the same period has been estimated at 8,439 MUs against a peak availability of 8,138 MUs. This puts the state to a 13.7% and 3.6% off peak and peak deficits respectively, bringing the state out of the much touted
power surplus status. Although West Bengal chief minister Mamata Banerjee
claimed to have started exporting power to power starved states considering Bengal’s power surplus status, the CEA figures points out to the need of importing power both during the peak and off peak periods. A host of states including Delhi, Haryana, Himachal Pradesh, Gujarat, Madhya Pradesh, Maharashtra, Daman & Diu, Dadra Nagar Haveli, Tamil Nadu, Karnataka, Kerala, Puducherry, Orissa, Sikkim, Mizoram and Tripura are now power surplus putting the country’s average power situation to an off peak surplus of 1.1% and peak surplus of 2.6%, according to the CEA.
September 2016 www.InfralinePlus.com
NewsBriefs | Power Chinese giant to buy Pakistani power company for $1.6 bn
Chinese multinational Shanghai Electric is set to buy the utility serving Pakistan’s biggest city of Karachi, in a $1.6 billion deal that will be the biggest private-sector acquisition in the country’s history. China is stepping up investment in its South Asian neighbour as part of a $46 billion project unveiled
last year that will link its western Xinjiang province to Pakistan’s Gwadar port with a series of infrastructure, power and transport upgrades. “We have received the public announcement of intention for acquisition of up to 66.4 percent of the shares of K-Electric Limited by Shanghai Electric Limited,” a Pakistan Stock Exchange notification said. The Karachi Electric Corporation, set up in 1913 as a public-sector company, was sold to Saudi Arabia’s Aljomaih Group in 2005, who in turn sold it to the UAE’s Abraaj Capital. “Chinese interest is tremendous in Pakistan and the new deal would be quite attractive to strengthen cooperation under CPEC,” said Taha Javed, director of research at Alfalah Securities.
Brazil to seek foreign investment in its power sector Brazil’s government will organize a roadshow abroad to attract investors to its power sector, and might consider offering power delivery contracts denominated in dollars to facilitate attraction of foreign capital, Luiz Barroso, head of state-run power research company EPE, said. “The fact is that there is a lot of money available on European investment funds ... That money flows to countries who offer dollar-denominated receivables,” Barroso said. “Since the long-term currency risk is difficult to manage, it is an idea to be discussed,” he added. Barroso cited this month’s large Chilean power auction, where bidders, mostly from Europe, were awarded dollar-denominated power delivery contracts.
Financing has been a critical factor for power companies in Brazil, as the worst recession in generations squeezes available credit. Although recognizing Chile’s economy is much more linked to the dollar compared with Brazil, Barroso said a discussion regarding this possibility should take place.
International ADB approves $810m for Pakistan’s energy sector overhaul
The Asian Development Bank (ADB) has approved an $810 million multi-tranche financing facility to develop Pakistan’s power transmission system, to improve the reliability and quality of energy supply, and to meet increasing demand for electricity. “A reliable and sustainable power sector is critical to the economic growth and wellbeing of Pakistan,” said Megan Wolf, Energy Specialist with ADB’s Central and West Asia Department. “Fast implementation of this facility and related reforms to alleviate power shortages will improve the prospects for the economy.” The loan facility will help fund the staged rehabilitation and expansion of the transmission network, increasing transmission capacity and energy efficiency and security. It will also support government efforts to develop a more transparent and efficient power sector by promoting reforms in the National Transmission and Despatch Company Limited, and the sector’s newly established commercial operator, the Central Power Purchasing Agency (Guarantee) Limited.
China faces massive closures of small thermal power plants China’s power generation companies will have to contend with massive closures of their smaller coal-fired power plants as government plans to shut excessive coal and steel capacity deprives the plants of customers. China Guodian Corp, one of the country’s top five state-owned power companies, might stumble as less-efficient “zombie” power plants are no longer economically viable, said Zhang Shumin, Guodian’s chief economist. “Thermal power plants will face difficulties in operating in the next three to five year, even edging to bankruptcy, especially for the small plants and those that fail to meet environmental
standards,” said Zhang. To relocate employees from the small thermal power plants, Guodian plans to increase wind power in its portfolio to transfer those workers to new
positions. Guodian has 130 gigawatts (GW) of installed capacity as of 2015, with renewables accounting for 49 percent of the total. As the world biggest wind power supplier, it has 24 GW of wind power installed, or 18 percent of the nation’s total, said Zhang. Profits have shrunk at China’s big power companies in the first half of the year as result of sagging power demand and rising coal prices. Coal fires nearly three-quarters of Chinese power plants, but plants were operating at historically low utilization rates last year. Thermal power plants under 600 megawatts would be phased out as they are not efficient.
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September 2016 www.InfralinePlus.com
InConversation High voltage transmission conductors and cables to see exponential growth The market for high voltage transmission conductors and cables is all set to explode with various reforms being unleashed by the government in the power transmission sector. Amit Jain, Managing Director, CMI Ltd, talks to InfralinePlus on his outlook for the cabling sector in India and how initiatives like Make in India are provind a huge impetus to the industry. Excerpts:
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How has Make in India impacted the power and industrial sector in India? Make in India has provided huge impetus to the industry. With the focus on new manufacturing facilities in India, the wire and cable industry market will definitely witness growth. With the focus shifting to manufacturing in India, the industry wins in another way. The Chinese sub-standard imports, that cause trouble and give a bad name to the industry, will possibly be replaced by more robust Indian counterparts. Indian companies in the industry will start focusing on R&D, innovation and product quality, now that the industry is gearing up to take the challenge head-on and is creating awareness about the need for certifications and educating the influencers in the category. What are the key growth drivers for your power cabling business? The key triggers for our business growth have been constant innovation and focus on R&D. We have managed to stay ahead of the technology curve and this has been because of us pumping money into the R&D and we have innovated new products, keeping in mind changing customer requirements. We have been also focused on quality and that is why we are the
preferred supplier for most of the categories that we operate in. This has been visible in our growth trajectory, with us going from the revenues of Rs. 5.6 Crore in 2004-05 to Rs.240.22 Crore in 2015-16. How has been the growth in your cabling business in the power sector? Has growth in renewable energy capacity impacted your business? Currently, around 17% of our revenue comes from the power sector. We have already geared up and have increased our capacities substantially to meet with the increased demands. We expect that the power industry’s share of our revenues will rise up to around 20% and the real numbers will possibly double with the increased demand. In power sector, cables and wires are a must and we believe that there will be many openings and avenues available in the sector in the future. We have the wherewithal and the product range to service this sector as well. Please share your outlook on the power sector going forward in terms of demand and supply as well as growth. The Government is spending a huge amount in the power sector which is pegged at around US$ 1 trillion
Amit Jain, Managing Director, CMI Ltd
(Rs. 65 Lakh Crore) investment kitty by 2030. The figure includes around 40% of power gear which will be by domestic manufacturing in India. This in itself is a stupendous figure and possibly points to the explosive growth in the sector. We have already put in place the most modern technology in our recently acquired facilities, which are possibly the best in the country. We are amongst very few companies in the country to manufacture the maximum range of cables being used and will, we hope be able to reap rich dividends from the investments made. Which are your key segments/ target market for high voltage and low voltage power cables? Our key segments / target market for high voltage and low voltage power cables include Power Generation & Transmission Utilities, Power distribution Utilities, Refineries & Petrochemicals, Cement & Steel Industry, Railways & Metro Rails and Infrastructure Development Utilities.
September 2016 www.InfralinePlus.com
What are the key issues facing cabling business in India? What suggestions would you have to remove those challenges? The issues are three-fold. First are input costs, which can change majorly with the variation of cost of raw materials. Second is issue of Certification, which is not standard and the third is the issue of Quality and R&D in the segment. The fluctuating price of raw material (copper, etc.) is a concern area for key players in the organized sector. It becomes an even bigger issue for players like us who are focused on the B2B segment and our bottom lines are impacted by any steep price rise in the raw materials. Global certifications and requirements are very different from that in India and it is therefore important that any Indian organization that is looking at sales abroad keeps itself updated on the global requirements. Constant quality checks, R&D, Innovations, and Certifications will be the way to excel in exports. Short turnaround times on customization requirements will also help the cable companies in the global arena. Research & development is most important in any field of manufacturing activity. One has to be updated with any development in the industry in the country or abroad. The requirements of customers are changing. Special insulating / jacketing compound with special parameters like fire retarding parameters, low smoke zero halogen parameters, TPU jacketing, lead free compounds etc are now in demand. Similarly there are different changes in construction of cables to meet specific requirement of customers and we take all necessary action to meet these specific requirements. We at CMI continuously keep ourselves updated with the development in the industry in country or abroad & with new requirements of the customer and keep producing cables as per customer requirements. We are putting in a good portion of our revenues in
R&D is most important in any field of manufacturing activity. One has to be updated with any development in the industry in the country or abroad. The requirements of customers are changing. Special insulating / jacketing compound with special parameters like fire retarding parameters, low smoke zero halogen parameters etc are now in demand R& D activities including putting in the most modern plant & machinery and trying new raw materials. The government is opening up the power transmission segment for private players. What are your views on this issue? The possibilities are immense and we believe that the opening up of transmission sector will exponentially explode the market in the segments that CMI
operates in. With the private players’ entry into transmission, there is a huge scope for extra high voltage transmission conductors and cables, because we believe that the focus will be on changing the legacy cables and putting in wires and cables that can minimize distribution losses due to leakages, which currently accounts for as much as 20-25% of the total power being transmitted. We believe that our market share will grow exponentially with these and we will become an even more significant player in our categories of operation. We already manufacture a wide variety of conductors and cables targeted at the EHV transmission segment and will be able to capitalize on the opportunities. Please elaborate on your presence in the power and industrial segment in terms of your offerings. In the power and industrial segment, CMI is manufacturing cables, wires & conductors for wide range of application. There is a wide variety of cables that we have developed and have the capability to manufacture. We are in B2B segment and have clients in every sector. For suggestions email at feedback@infraline.com
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ExpertSpeak
UDAY needs to deliver for actual power surplus Amidst claims that India is likely to have a power surplus for the first time this year, India Power Corporation Ltd analyses the situation on ground and picks out financial restructuring of power discoms through UDAY scheme as one of the most crucial steps in achieving the same.
For the first time in history, India will have a surplus of electricity. This unprecedented situation will be reflected in both peak (3.1% surplus) and nonpeak (1.1% surplus) hours in 2016-17, according to data from the Central Electricity Authority. While parts of India have earlier shown a surplus for short periods of time, this is the first time in the entirety of its existence that the entire nation will, on average, show no deficit in power supply and demand. This stands in sharp contrast to the situation a few years ago, where the deficit was as high as 13%. Even as recently as the last fiscal, the power deficit stood at 3.2% and 2.1% during peak and non-peak hours respectively.
Uneven distribution of power supply The difference between power supply and power demand has been positive since June 2016, but it is not evenly distributed across the country. As many as half of the states still have some degree of power deficit, while others have a surplus. Southern India is expected to have nearly 3.3% surplus power, and new plants generating a total of 2,000 MW are likely to be commissioned in the region in the near future. Tamil Nadu, once a severe power shortage state, now has the largest power surplus, ahead of the other surplus states such as Maharashtra, Madhya Pradesh, Delhi, Gujarat, and
Karnataka. As many as 17 states in all will have a power surplus One in 2016-17. of the Tamil Nadu key factors is preresponsible for the dicted to slow growth of power retain its generation is the dire financial status surplus at of state power least until discoms 2021, which is further set to boost industrial growth in the state. It should also be noted that while the date indicates that the demand of state power utilities is being met, it does not account for power failures and outages caused by rolling blackouts and technical failures.
Reasons for power surplus The current government, which looks on the power surplus as a major accomplishment, has undertaken several steps to reach this outcome. One of these has been an increase in coal production, revitalising several stalled power plants. This has also led to India, the world’s largest importer of coal, to look for export markets for domestically produced coal. According to union power minister, Piyush Goyal, 46,453 MW of conventional power capacity has been added to the grid under his oversight, along with the revival of 11,000 MW of gas
plants. The government has promised to electrify all villages in the country by 2018, as well as provide electricity around the clock. To accomplish the latter, it has entered into agreements and action plans with 21 states. By 2022, the government plans to add 175 GW of renewable energy to the grid. The state of power in the country is best captured by looking at the per capita power consumption. On average, the per capita consumption in India in 2015-16 was 1,070 kWh, less than half the world average of 3,026 kWh. This low number can be attributed to India’s massive population, the low per capita income of its citizens, and large swathes of people not having access to electricity. The states of Odisha, Kerala, Madhya Pradesh, Mizoram, Tripura and Sikkim will be power surplus states this year, but their per capita power availability is lower than the national average. The demand for power in India has grown in fits and bursts, registering at 6.6% in 2014-15 and 4.2% in 2015-16. Bihar, the state with the lowest per capita power availability in the nation, saw a massive jump of nearly 25% for both these years – a strong indicator of increased availability to the people.
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September 2016 www.InfralinePlus.com
ExpertSpeak Slow growth in power generation portfolio
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Even with improvements in the domestic coal supply and the falling prices of international coal, India has shown only gradual growth in its power generation portfolio. Thermal power rose by only 5.5% between 2014-15 and 201516 to 943 billion units; in contrast, the country’s thermal power capacity has grown much faster, growing to 2,10,675 MW from 1,51,490 MW in three years. This represents a growth rate of 11% per annum. This means that the capacity utilisation at power plants has fallen, and plant load factors are declining all over the country. One of the key factors responsible for the slow growth of power generation is the dire financial status of state power distribution companies (DISCOMs). The accumulation of decades of inefficiency, coupled with subsidised tariffs, has led to these companies amassing a collective loss of ` 3.8 lakh crore (March 2015). Unable to purchase the power needed to continue operations, DISCOMs are forced to shed excessive load instead. “Due to legacy issues, DISCOMs are trapped in a vicious cycle. Operational losses are being funded by debt. The outstanding debt of these DISCOMs has increased from about ` 240,000 crore in 2011-12 to about
` 430,000 crore in 2014-15 -- with interest rates of 14-15 per cent,” Piyush Goyal recently said.
UDAY the likely saviour To help rectify this situation, the government has instituted the Ujwal DISCOM Assurance Yojana, a “financial turnaround and revival package” for the country’s beleaguered DIS-
Even with improvements in the domestic coal supply and the falling prices of international coal, India has shown only gradual growth in its power generation portfolio. Thermal power rose by only 5.5% between 2014-15 and 2015- 16 to 943 billion units; in contrast, the country’s thermal power capacity has grown much faster, growing to 2,10,675 MW from 1,51,490 MW in three years
COMs. This scheme aims to improve operational efficiency, reduce power costs, reduce interest costs and enforce financial discipline on state-owned DISCOMs. Under UDAY, states will be allowed to take over 75% of the DISCOMs debt, which they can then offset through the sale of government bonds. 50% of the debt will be taken over in 2015-16 and 25% in 2016-17. The remaining 25% will continue as loans with limited rates of interest imposed on them. These measures will provide immediate pecuniary relief to DISCOMs, improving their financial health and cash flow. To qualify for UDAY, DISCOMs have to meet efficiency parameters through the adoption of new technologies (such as smart meters and grids), upgrades to their transmission infrastructure and periodic hikes in tariffs. States are further incentivised to join UDAY through provisions for additional funding from the Centre and increased coal supplies. These incentives seem to have had the desired effect, as 18 states have joined the scheme in some measure or other. The government hopes that the improved financial situation of DISCOMs will enable them to increase their power purchases, boosting demand as well as the capacity utilisation levels of power plants. According to Goyal, the role of the central government will be that of a catalyst, enabling states and DISCOMs to alleviate their financial woes while taking a hands-off approach to the process. Through UDAY, he hopes to reduce the systemic cost of the power ecosystem by ` 1.8 trillion every year by 2019, against the prior scenario. He also says that the scheme creates strong incentives against DISCOMs relapsing into losses in addition to solving current issues. The views in the article of the author are personal For suggestions email at feedback@infraline.com
September 2016 www.InfralinePlus.com
InDepth Government aggressively pursuing 100% rural electrification to achieve 24/7 power supply dream
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►► Center plans to electrify 18,452 un-electrified villages within 1,000 days by May 1, 2018 ►► Mini-grids being seen as a likely solution to meet the electricity demand of vast rural population
By Team InfralinePlus
India’s rapidly growing economy has fuelled an intensifying demand for electricity for which supply has struggled to keep pace. India is now the fourth-largest generator of electricity after Japan, United States and China – though still comparatively low energy access rate of 81% (World Bank, 2014) – leaving about 237 million people without reliable access to electricity. The growth in demand for power has outpaced the supply of power, led by
rapid urbanization and industrialization in the country. As soon as Modi Government came to power in 2014, it launched one of its ambitious projects of Rural Electrification. The center plans to electrify 18,452 un-electrified villages within 1,000 days by May 1, 2018. Rural electrification is often considered to be the backbone of the rural economy. Rural energy needs include energy for a) Cooking
b) Basic lighting c) Irrigation d) Communication e) Water heating f) Cottage industry and so on. Rural electrification can meet most of these and the impact can be seen on improved farm productivity, improved health and education, improved communication and economic development through creation of employment in rural areas which traditionally depend on agriculture related income generation activities.
September 2016 www.InfralinePlus.com
InDepth Current Progress
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Last month, the government declared that 10,079 villages have been electrified (till August 22) under DeenDayal Upadhyaya Gram Jyoti Yojana (DDUGJY) scheme. With the electrification of these villages, the number of electrified villages in the country has reached to 10,079.Out of these 28 newly electrified villages, four are in Assam, five in Chhattisgarh, three in Jharkhand, 10 in Meghalaya and 6 in Rajasthan. Out of remaining 8,373 villages, 525 villages are uninhabited. 5,069 villages are to be electrified through grid, 2,590 villages to be electrified through off-grid where grid solutions are out of reach due to geographical barriers and 189 villages are to be electrified by the state government, according to the statement released by the Ministry of Power (MoP) last month. The rural electrification scheme/ project has been undertaken on mission mode and the strategy for electrification comprises squeezing the implementation schedule to 12 months
and dividing village electrification process into 12-stage milestones with defined timeliness for monitoring. In order to expedite the progress further, a close monitoring is being done through Gram Vidyut Abhi-
The scale of the challenge the government has set itself to achieve in three to four years is nothing short of astonishing. It will have to provide an electricity connection to roughly 80 million households that are still not connected to the grid (2011 Census). Then it will have to ensure the connections actually buzz with uninterrupted power that reaches 237 million households
Deen Dayal Upadhyaya Gram Jyoti Yojana (DDUGJY) aims at separating the electric feeders for agricultural and non-agricultural purposes. The core objective of separation of feeders is to provide regulated supply to agricultural consumers and continuous power supply to non-agricultural consumers in rural areas. This arrangement allows the distribution company to regulate power supply to agricultural consumers as and when needed. The separation of feeders helps in flattening of the load curve by shifting the agricultural load to off-peak hours and thus facilitates peak load management. The scheme is also concentrating on strengthening the electrification infrastructure as laid out in the 12th 5-year plan of RGGVY. DDUGJY is an achievement at the policy formulation level. To achieve separation of feeders and complete electrification- the scheme allows discoms (distribution companies) and power departments to submit a report that is first distilled by a nodal agency as recommended by the State Level Standing Committee setup under the RGGVY. This report is then passed on to a monitoring committee, which then approves the final project after taking into account factors like costeffectiveness, human resource development and of course the final impact of the project. The scheme also very clearly outlines the things it will engage in like installing of capacitors, high voltage distribution systems, erection of HT lines etc. and the things it will keep itself out of like underground cabling and service lines to APL consumers among others. The DDUGJY scheme envisages connecting all the 33 KV or 66 KV grid sub stations/ billing offices / Regional / Circle / Zonal offices of utilities by extending optic fibre network being established under National Optic Fibre Network (NOFN). Provision of 100% grant has been made under the scheme for connecting the missing links of NOFN including terminal equipment.
yanta (GVA) and various actions are also being taken on regular basis like reviewing the progress on monthly basis during the RPM meeting, sharing of list of villages which are at the stage of under energisation with the state Discom, identifying the villages where milestone progress are delayed.
24/7 power supply: Village electrification holds the key The scale of the challenge the government has set itself to achieve in three to four years is nothing short of astonishing. It will have to provide an electricity connection to roughly 80 million households that are still not connected to the grid (2011 Census). Then it will have to ensure the connections actually buzz with uninterrupted power that reaches 237 million households.The government can take some solace from the fact that substantial connections provided between 2011-14 will lower the targets to be met in four years. To put this in perspective, between 2001 and 2011, an additional 61.6 million households got access to electricity. The government will have to more than double the rate of electrification to cover the remaining by 2019. The role that electricity has played in reducing poverty is especially significant because rural electrification is patchy and the supply unreliable. Though it is interesting to note that how an individual village is classified as ‘electrified’ when - 1) “Basic infrastructure such as a distribution transformer should be made available within the inhabited locality of the village’s revenue boundary”. This standard was inserted after it became apparent that many states played fast and loose with the status of electrification by simply connecting multiple villages with single line or setting up a solitary utility pole without a transformer; 2) “Any public place such a school, panchayat office, health centre, dispensary, community centre etc, should be able to avail of power supply on demand”. The logic here first and foremost was
September 2016 www.InfralinePlus.com
that critical institutions such as health centres deserve a constant supply of power. Secondly, it assumes that people who live in villages prefer to congregate in public places; thus the prioritizing of electricity to communal places such as “community centres”; 3) “The number of households electrified should be minimum 10% for villages which are unelectrified, before the village is declared electrified”. This essentially states that the minimum criteria that needs to be fulfilled before a whole village is declared electrified, is that 10% of its households need to be electrified. The most troubling criteria is the 10% figure: there is a wealth of data and reports that shows while India’s villages continue to reach almost 100% electrification, its rural households lag behind. Nearly 96% villages in India are electrified but only 69% of homes have electricity connections. For instance, in Uttar Pradesh, India’s most populous state, 99% of villages are electrified, but only 60% of households have access to electricity, with three out of four rural electrified households in UP receiving electricity for less than 12 hours a day. This implies that regular and reliable electricity could have a salutary effect in reducing poverty, regardless of how the poverty line is calculated.
Rural electrification through renewable energy Renewable energy based mini-grids is being seen as a possible solution to meet the electricity demand of vast rural population of India which addresses the climate change issues. Various renewable based mini-grid models have emerged in India. They have been able to set examples of how mini-grids can bring an end to energy poverty in India. But mini-grids developed so far in the country are facing several challenges due to high capital and operating costs, high tariff and inconsistent revenue collection, low demand in the villages, and bureaucratic delays etc. In some states with its unique
Figure 1: Comparison of villages electrified vs individual households electrified under rural electrification (in 2015-16) Villages Electrified vs Households Electrified (2015-16)
93%
97%
93% 67%
Jharkhand
86%
70%
Madhya Pradesh
Villages Electrified
Odisha
93%
60%
56%
Bihar
100%
99%
97%
Uttar Pradesh
West Bengal
Households Electrified
Source: Access to Clean Cooking Energy and Electricity report by CEEW
Renewable energy based mini-grids is being seen as a possible solution to meet the electricity demand of vast rural population of India which addresses the climate change issues. Various renewable based mini-grid models have emerged in India. They have been able to set examples of how mini-grids can bring an end to energy poverty in India. But mini-grids developed so far in the country are facing several challenges geography and the current state of economy and village habitations, grid connectivity is neither feasible nor cost effective. Therefore, off-grid solutions like Decentralized Distributed Generation (DDG) facilities stand as an ideal mode for supply of electricity. DDG can be based on either conventional or renewable sources and is usually implemented in remote
villages where connectivity to the grid is not feasible or cost effective. DDG enables electricity generation at the local level using locally available resources ensuring reduced dependence on external resources. Local distribution networks or mini-grids are set up over a cluster of villages and powered by a local generating plant which may be based on conventional fuels such as diesel, natural gas, fuel oil or on renewable energy such as wind energy, solar energy, hydro power, and biomass. RE mini-grids have distinct advantages over central grid extension and other decentralized energy options in providing access to reliable and affordable electricity. 1. Compared to central grid extension, RE mini-grids can be less expensive due to lower capital cost of infrastructure (depending on distance) and lower cost of operation by avoiding transmission and distribution losses. 2. In countries with power shortages, electricity supply through the central grid, especially in rural areas, may not be reliable. In such regions, RE mini-grids that can be designed and operated effectively, can be more reliable than the central grid in providing electricity access and can ensure local energy security.
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September 2016 www.InfralinePlus.com
InDepth
Mini-grid policies to boost rural electrification Case Study: Uttar Pradesh
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Uttar Pradesh government released its mini-grid policy in March this year to provide thrust to the rural electrification. Under the scheme, the state government will facilitate the private players to set up solar plants to power rural households and recover tariff from the users. The policy has limited the size of mini-grid to 500 kW. It also states conditions to qualify for state government’s subsidy. • Developers need to procure their own land for the projects. • It mandates minimum eight hours of electricity supply - three hours in the morning and five hours in the evening to all households willing to pay in the chosen area. • Supply for production and commercial needs for six hours. There is also an alternative of not opting for government subsidy. In that case, the developers have no obligation of a minimum supply and can charge a mutually-agreed tariff. One of the most important concerns of the mini-grid developers has been the uncertainty of the plant when conventional grid arrives. The state has, hence, laid out two exit policies for the developers: • The energy generated from the plant will be received in the grid by Power Distribution Companies (DISCOM) at the tariff decided by Uttar Pradesh Electricity Regulatory Commission/ tariff decided on mutual consent. Project developer will be given priority for authorisation as a franchisee by DISCOM, or • Based on the cost benefit analysis of the installed project, the project will be transferred to the DISCOM at the cost determined on mutual consent between DISCOM and developer by the estimation of cost / profit or loss of the project installed by the developer.
3. Mini-grid developers have the potential to access capital beyond the traditional power sector, and may be able to provide quicker access to electricity than central grid extension that may be prone to bureaucratic hurdles and slow implementation. 4. Unlike other decentralized energy options like solar home lighting systems and off-grid lighting products, mini-grids (depending on their size) can provide electricity to not only residential loads like lighting and phone charging, but also to commercial loads like mills and oil presses. 5. RE mini-grid developers have strong incentives to pursue demand-side management, to keep capital cost of generation equipment low. 6. Development and operation of minigrids can create local jobs. For decentralized renewable energy (DRE) solutions to play a role in the larger development and electrification conversation, a supportive ecosystem
In India today, there exist approximately 237 (World Bank, 2014) million people still without basic access to electricity and no matter how the GDP figures continue to grow, there will be no link established between such an increase and an increase of the most basic standard of living of such people. This highlights the need to look beyond metrics such as possessing an electricity connection to meaningfully describe the energy access situation
needs to be fostered and strengthened. In addition to technology and project finance, affordable end-user financing through local banking and credit institutions, entrepreneur development and capacity building programmes, and a supportive policy and planning framework are critical.
Conclusion Access to energy is a cornerstone for development and essential for a better quality of life. When this access does not exist or is very poor, it has negative impacts on everything from education, to health, employment and irrigation - touching all aspects of life and livelihood.In India today, there exist approximately 237 (World Bank, 2014) million people still without basic access to electricity and no matter how the GDP figures continue to grow, there will be no link established between such an increase and an increase of the most basic standard of living of such people. This highlights the need to look beyond metrics such as possessing an electricity connection to meaningfully describe the energy access situation. Households face severe challenges of quality, reliability and duration of supply which then drive their classification in the low energy access regions. The challenge gets even more complicated when confronting the fact that energy access to people, if based on existing models will only be adding value to one aspect of their lives while taking away from many others. It is imperative to design energy access to those without it in such a way that it leaves a very low carbon and ecological footprint. Thus, it is most crucial to design inclusive growth models where a low carbon and ecological footprint remain important with the collateral advantage of a stimulated economy, good standard of living plus access to a clean and healthy life. For suggestions email at feedback@infraline.com
September 2016 www.InfralinePlus.com
StatisticsPower Details of state-wise and Utility-wise AT&C losses for 2012-13 to 2014-15 Details of state-wise and Utility-wise AT&C losses for 2012-13 to 2014-15 State Utility 2012-13 2013-14 Bihar BSEB 59.4 NBPDCL 50.85 41.93 SBPDCL 45.77 48.7 Bihar Total 54.64 46.33 Jharkhand JSEB 47.49 26.3 JBVNL Jharkhand Total 47.49 26.3 Sikkim Sikkim PD 53.51 71.23 Eastern Sikkim Total 53.51 71.23 West Bengal WBSEDCL 34.43 32.05 West Bengal Total 34.43 32.05 Odisha NESCO 39.61 36.47 SESCO 49.36 41.18 WESCO 41.87 41.24 CESU 43.43 38.48 Odisha Total 42.88 39.19 Eastern Total 42.04 36.24 Arunachal Pradesh Arunachal PD 60.26 68.2 Arunachal Pradesh Total 60.26 68.2 Assam APDCL 31.85 30.25 Assam Total 31.85 30.25 Manipur Manipur PD 85.49 43.55 MSPDCL Manipur Total 85.49 43.55 Meghalaya MePDCL 41.71 39.77 North Eastern Meghalaya Total 41.71 39.77 Mizoram Mizoram PD 27.55 32.53 Mizoram Total 27.55 32.53 Nagaland Nagaland PD 75.3 38.37 Nagaland Total 75.3 38.37 Tripura TSECL 34.45 41.81 Tripura Total 34.45 41.81 North Eastern Total 39.97 35.92 Delhi BSES Rajdhani 15.16 16.19 BSES Yamuna 17.94 15.51 TPDDL 13.12 9.75 Delhi Total 15.22 14.09 Haryana DHBVNL 28.31 30.89 UHBVNL 36.97 38.61 Northern Haryana Total 32.55 34.33 Himachal Pradesh HPSEB Ltd. 11.9 14.82 Himachal Pradesh Total 11.9 14.82 Jammu & Kashmir J&K 60.87 49.14 PDD Jammu & Kashmir Total 60.87 49.14 Punjab PSPCL 17.52 17.87 Punjab Total 17.52 17.87 Rajasthan AVVNL 19.9 22.06 Region
JDVVNL
18.97
25.71
2014-15 41.76 45.28 43.99 47.01 47.01 42.37 42.37 35.35 35.35 38.36 42.57 41.03 37.08 39.28 39.64 67.83 67.83 26 26 49.62 49.62 34.69 34.69 33.51 33.51 78.48 78.48 38.02 38.02 35.29 10.76 19.68 10.31 12.9 30.71 34.83 32.52 15.21 15.21 59.04 59.04 17.56 17.56 28.13 26.99
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September 2016 www.InfralinePlus.com
StatisticsPower
JVVNL Rajasthan Total Uttar Pradesh
29.28
45.69
36.47
40.18
37.61
34.29
32.02
MVVN
45.83
14.43
35.18
Pash VVN
33.39
23.49
22.19
52.37
20.09
42.91
42.85
24.67
33.82
Uttarakhand Ut PCL
23.18
19.01
18.82
Uttarakhand Total
23.18
19.01
18.82 28.06
Northern Total Andhra Pradesh
28.89
24.86
APCPDCL
15.64
17.54
-
APEPDCL
10.15
6.57
7.67
APNPDCL
13.09
20.8
-
APSPDCL
12.74
11.77
12.01
13.7
14.77
10.55
BESCOM
20.45
18.93
17.59
Andhra Pradesh Total Karnataka
CHESCOM
30.42
33.92
21.64
GESCOM
18.28
30.45
21.25
HESCOM
20.44
20.42
19.49
MESCOM
14.57
14.83
15.72
20.78
22.02
18.71
KSEB
12.32
11.45
-
KSEBL
-
22.99
17.64
12.32
16.48
17.64
9.13
16.18
16.64
Puducherry Total
9.13
16.18
16.64
Tamil Nadu TANGEDCO
20.71
22.35
24.74
Karnataka Total Kerala Kerala Total Puducherry
Puducherry PD
Tamil Nadu Total Telangana
20.71
22.35
24.74
TSNPDCL
-
-
16.49
TSSPDCL
-
-
11.91
-
-
13.23
17.4
19.08
18.22
Telangana Total Southern Total Chhattisgarh
CSPDCL
Chhattisgarh Total Goa
Goa PD
Goa Total Gujarat
Western
32
26.77
DVVN
Poorv VVN
18
31.08
20 KESCO
Uttar Pradesh Total
Southern
20.91
23.17
27.84
23.17
27.84
14.14
10.72
13.31
14.14
10.72
13.31
DGVCL
10.4
10.83
10.81
MGVCL
14.94
14.77
11.47
PGVCL
30.41
24.12
25.18
UGVCL
14.37
9.1
10.21
Gujarat Total Madhya Pradesh
25.12 25.12
19.87
15.93
16.06
MP Madhya Kshetra VVCL
29.97
29.6
32.47
MP Paschim Kshetra VVCL
28.16
21.15
30.79
MP Purv Kshetra VVCL
36.4
34.83
27.09
Madhya Pradesh Total
31.15
28.03
30.26
Maharashtra MSEDCL
21.95
14.39
19.75
21.95
14.39
19.75
Western Total
Maharashtra Total
23.36
18.37
21.59
Grand Total
25.48
22.58
24.62
September 2016 www.InfralinePlus.com
NewsBriefs | Coal
Land acquisition issues hit Uppur thermal plant
Odisha to get two coal blocks
The state government is in the process of getting two more coal blocks from the Centre after state energy minister Pranab Prakash Das recently had a discussion with Union coal minister Piyush Goyal in New Delhi. It is learnt that the Centre has agreed to allocate
a coal block to the Odisha Thermal Power Corporation Limited (OTPCL) for its proposed coal-based power plant at Kamakhyanagar in Dhenkanal district. The Union coal ministry is also believed to have agreed to the state’s demand for allocation of another block to the state-owned Odisha Mining Corporation (OMC), said a reliable source. The OTPCL, a joint venture between the OMC and Odisha Hydro Power Corporation (OHPC), is planning to set up a 3,200 MW (4x800 MW) power plant with an estimated investment of over Rs 24,000 crore. Land acquisition for the project is in advanced stage and the government has asked the departments to expedite the process to get all statutory clearances.
NTPC awaits coal linkage to start work on Pudimadaka project Work on 4x1000 megawatt NTPC Pudimadaka Super Thermal Power Project is likely to gain pace once the Ministry of Coal finalises the Policy for Long-term Coal Linkage. Work on the ultra-modern project envisaged with an investment of about Rs.26,500 crore – the largest single investment post bifurcation in Andhra Pradesh will be launched after getting green nod from the Ministry of Environment and Forests. MoEF is awaiting details on coal linkage. The tendering process, which is kept on hold, will be revived once long-term coal linkage is finalised. The project, located about 60 km from here, was originally conceived to generate power by importing coal. However, due to Government of India’s decision to encourage power generation to curtail
National
foreign exchange expenditure with domestic coal, the project is being redesigned. The coal requirement will be around 15 to 16 million tonnes per annum. NTPC is making preparation to ensure 100 per cent ash utilisation for construction work and exports.
Six months after Chief Minister Jayalalithaa laid the foundation stone for the 1,600 MW Uppur supercritical thermal power plant and handed over the Rs. 5,580-crore contract order to it, Bharat Heavy Electricals Ltd. (BHEL) has been unable to make much headway, apparently because of official apathy. After receiving the order, BHEL began establishing boiler, turbine and generators, but the work has come to a standstill as there is delay on the part of the government in issuing notification under Section 3 (1) of the Tamil Nadu Acquisition of Land for Industrial Purposes Act for taking over 767.83 acres of patta lands. The District Collector, after issuing a notification under Section 3 (2) of the Act in November 2015 and hearing objections from landowners, passed an order overruling their objections in January and paving the way for takeover of the land. However, the government was yet to issue the notification under Section 3 (1) of the Act and publish it in the gazette for taking over the land.
Coal India to give up Mozambique mining licences completely Coal India Ltd (CIL) has submitted its application to National Institute of Mines of Mozambique for complete surrender of prospecting licences which were awarded to its wholly-own subsidiary Coal India Africana Limitada (CIAL) as mining would be “technically not feasible” in the licence areas, its latest Annual Report said. “A mineability study has been undertaken based on the findings of the geological report. The findings of the mineability study revealed that it is technically not feasible to do mining in the licence areas of CIAL. Accordingly, CIL board accorded its approval for surrender of prospecting licences ... to
the Government of Mozambique.” “Pursuant to this decision, applications for complete surrender of prospecting licences have been submitted to the National Institute of Mines
(Instituto Nacional de Minas), Ministry of Mineral Resources and Energy, Government of Mozambique,” company’s latest report said. CIL said in its report that the “response of the Government of Mozambique” is awaited. For extraction of coal, two prospective licences covering a total area of 224 sq.km. were awarded to CIL’s African subsidiary with validity from August 2009 to August 2014. Out of 224 sq.km. of the total licence areas, 170 sq.km. area having no occurrence of coaly horizons till a depth of 500 metre, as revealed in the geological report, was already surrendered to the Mozambique government.
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September 2016 www.InfralinePlus.com
NewsBriefs | Coal Kamarajar Port records dip in handling of coal cargo
Going by the phrase that one person’s gain could be another’s loss, the well-planned coal supply management executed by the Tamil Nadu Generation and Distribution Corporation (TANGEDCO) has resulted in a dip in coal handling at Kamarajar Port in Ennore and other ports. Kamarajar Port in Ennore
has reported a 15 per cent drop in cargo volume till August 20 compared to the same period a year ago as power producers have slashed their coal imports. However, this was only a temporary phenomenon with the port recording a minimal slump in cargo volume for July 2016. The official said coal imports by TANGEDCO had come down this year through better inventory management and by giving priority to power generated by wind mills. Chettinad Coal Terminal, which handles coal for private players, has assured that the import would increase in a month as four vessels are expected to call soon.
CIL board okays pact with S African firm for mines acquisition
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Coal India’s board has approved signing of a pact with African Exploration Mining & Finance Corporation SOC Ltd (AEMFC), owned by the South African government, for acquisition of coal mines in that country. “The CIL board has accorded approval to the proposal for execution of MoU between CIL (Coal India) and African Exploration Mining & Finance Corporation, SOC Ltd (AEMFC), an entity owned by the government of South Africa for identification, acquisition, exploration, development and operation of coal assets in South Africa,” a recent report of the PSU said. The decision of the CIL board, it said, has been communicated to AEMFC requesting them to finalise the date and
venue of signing of the agreement. Coal and Power Minister Piyush Goyal had informed Parliament that CIL is looking at entering into a pact with a South African government miner to jointly acquire coal mines in that country.
National Odisha demands grants for Pump Storage Projects from NCEF
Noting that coal bearing states face the adverse effect of mining, reduction in forest area, risks of environmental pollution and strain on water resources, Odisha Chief Minister Naveen Patnaik has asked the Centre to provide financial assistance for Pump Storage Projects (PSP) from the National Clean Energy Fund. “It is requested that financial assistance (grant) to the tune of 75 per cent, the estimated coast of each PSP, may be provided from the NCEF to bring down the cost of power from these projects in order to make the tariff affordable,” Patnaik said in his letter to Prime Minister Narendra Modi. Patnaik further said “Once the institutional mechanism is established and in-principle clearance is accorded by the government of India, specific proposals will be submitted by the state government for execution of renewable energy projects including hydro-electric projects, more particularly, the PSPs.”
Coal imports in July dip 11 percent to 18 MT Coal imports during July declined by 11.1 per cent to 18.03 million tonnes (MT) on the back of higher domestic availability of the fossil fuel. The figure stood at 20.29 MT during the same month last year, according to mjunction services, an online procurement and sales platform jointly floated by SAIL and Tata Steel. “The decline in July imports this year against (the same month) last year can be attributed to number of factors, including monsoon, when imports generally come down,” Viresh Oberoi, CEO and MD of mjunction, said “In addition, firmness in international coal prices since beginning of June and higher availability of domestic coal also impacted
imports,” added Oberoi. PwC’s Kameswara Rao said that thermal coal imports, after a dip last year, will be at similar levels. So, on the whole, the broader trend remains flat. The
real change is that with surplus generation capacity and adequate supplies of domestic coal, imported coal-based power plants are largely filling in the marginal gaps in demand requirement, taking opportunistic advantage of price movements, he said. Further, with many imported coal-based load power plants operating at lower utilisation, the overall volume of imports is likely to remain flat. Of the 18.03 MT of coal imported, non-coking coal was highest at 12.39 MT, followed by coking coal at 3.76 MT, pet coke at 1.05 MT, among others. However, coal imports in June had gone up by 20.19 MT against 19.63 MT in the same month of 2015.
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NewsBriefs | Coal Thermal coal market analysts pinpoint Southeast Asia region for standout growth
Southeast Asian countries including Malaysia, Thailand and Vietnam are seen as growth markets for the consumption of imported thermal coal in the years out to 2020, as
coal-fired electricity is used to fuel their fastgrowing economies according to analysts. In a 10-year outlook for the Asia seaborne thermal coal market, Mark Gresswell, chief analyst at Australian mining consultancy group HDR Salva said three-and-a-half billion people are living on electricity consumption below the level in Japan. “Eight of the most populous countries are in Asia, and 54% of the world’s population live in Asia,” he said. To move these people to Japanese levels of power consumption will require an extra 4,300 TW of electricity generation. This step change in levels of power generation in Asia will require an 80% increase in global coal production.
China’s Inner Mongolia cuts coal output by 10 pct in Jan-July Inner Mongolia, China’s biggest coal producing region, cut its output of the commodity by just over 10 percent in the first seven months of the year as part of its efforts to close 3.3 million tonnes of capacity this year. By the end of August, the region had shut seven coal mines, Wang Binjun, the director of Inner Mongolia’s Economic and Information Commission, was cited as saying. The region plans to close a total of 65 mines by 2020 to curb crippling overcapacity in the sector. Authorities have allotted output cuts to ten companies, who will be responsible for implementing the cuts by the end of October to help the region meet its capacity reduction target for the year, an official document released by the Coal Industrial Bureau (CIB)
of Inner Mongolia said last week. Coal companies in the region have posted a combined loss of 4 billion yuan ($600.41 million) in the first half, up 17 percent year-on-year, due to the supply glut caused by China’s economic slowdown, according to the CIB.
International Vietnam’s July coal imports surge 141% on year to 1.31 million mt
Vietnam’s coal imports surged 141% year on year to 1.31 million mt in July. Traditionally a coal exporter, Vietnam turned into an importer amid rising domestic demand, particularly from the power sector. Australia was the largest supplier in July at 463,131 mt, compared with 112,092 mt a year earlier; followed by Russia with 410,449 mt, up 168%; and Indonesia with 172,099 mt, up 37.1% year on year. In the first seven months, Vietnam imported 8.38 million mt of coal, compared with just 2.72 million mt a year ago. Australia was the top supplier over January-July too with 2.67 million mt, up almost five times from 586,761 mt; followed by Russia with 2.59 million mt, up from 551,849 mt a year earlier; and Indonesia with 1.5 million mt, up 57.2% from 955,878 mt a year ago. Vietnam National Coal Mineral Industries Holding Corp., or Vinacomin, had to reduce its sales target to 36.5 million mt from 39 million mt this year due to competition from cheaper imports, Chairman Le Minh Chuan said in July.
Thailand’s July coal imports plummet 41% on year to 1.23 million mt Thailand imported 1.23 million mt of coal in July, down 41.2% from a year earlier. It imported 527,313 mt of bituminous coal, down 43.8% from 937,401 mt a year earlier. The top suppliers in July were Indonesia with 378,028 mt, down 22% year on year, and Australia with 148,082 mt, down 67.2%. Thailand imported 4,270 mt of anthracite coal in July, down 22.8% year on year, all from China. Imports of other coals were 701,081 mt, down 39.3% from July 2015. They came mainly from Indonesia (644,220 mt, down 41.5% year on year) and Russia (56,810 mt against none last year). In the first seven months, Thailand imported 12.36
million mt of coal, down 3.8% from 12.86 million mt during January-July 2015. Of this, 6.13 million mt were bituminous coal, down 0.9% year on year. The major supplier was Indonesia with 3.79 million mt, down 1.9% year on year, followed by Australia with 2.26 million mt, down 2.3% from the
same period last year, according to the data. Thailand’s anthracite coal imports in the first seven months declined 34.9% from a year ago to 51,629 mt and came from Russia (19,718 mt, from none a year earlier) and China (16,333 mt, up 42.6% year on year). It imported 6.18 million mt of other coals during January-July, down 6.2% from 6.59 million mt a year ago, mainly from Indonesia with 5.8 million mt, down 9.6% year on year. Thailand produced 8.25 million mt of lignite in the first half of the year, up 7.7% from 7.66 million mt in the same period last year, according to data released August 12 by the Energy Policy and Planning Office.
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ExpertSpeak
Ultra Mega Power Plants should be located at pitheads VK Arora, Chief Mentor, Karam Chand Thapar & Bros. (Coal Sales) Ltd., discusses two important issues facing the country’s coal sector – steps required to achieve affordable and low cost power in every corner of the country and the issue of compulsory washing of coal for transport beyond 500 kms. At the same time, he feels that despite huge investment in renewables, India will continue to depend on fossil fuel (mainly coal) for generation of power for the next two decades.
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Mr K S R Chari, an eminent mining engineer and former Coal Secretary, had submitted a report to the Central government in April 1996 which, among other things, included two important recommendations: Power stations should be located at pitheads instead of near the cities. This would save transportation costs for coal. Secondly, instead of selling power to SEBs, the stations should sell them directly to power grids. Extending this to the present times, what is being recommended is to establish Ultra Mega Power Plants (> 5000 MW) near the pitheads. The possible locations would be in Singrauli (NCL), Talcher, IbValley (MCL) and Korba (SECL). These places have large reserves of low grade coal, which can be exploited to set up large mines to produce upto 20 MMT /year each. These Ultra Mega Power Plants will be set up in vicinity where coal could be fed by belt conveyors. We have seen from a recent Ultra Mega Power Plant set up at Sasan by Reliance alongwith a captive coal block, where power is being produced and sold at rates less than Rs. 1.5 per unit. If this power is transported over long distances, this would be better any day than transporting coal by rail over such long distance which puts a constraint on the rail capacity and is also more expensive. Instead, what is ideal is to invest in the transmission lines, where power could
be transmitted upto longer distances for a maximum cost of Rs. 1/- to Rs. 1.5 per unit leading to a landed cost of maximum Rs. 3/- per unit with minimum effect on environment and Despite infrastructure. This huge would investment in also avoid renewables, India setting will continue to up washdepend on coal for eries to next 2 decades reduce ash percentage to less than 34% for complying with MOEF guidelines. In any case, the washing has a cost of about Rs. 150/- per MT which eventually adds to the cost of the coal as the recovery is only 80%. Pithead Ultra Mega Power Plants can be designed to use high ash coal with latest technologies to achieve much better efficiency of combustion, with minimum impact on environment. This system of having Ultra Mega Power Plant would ensure availability of power in the Northern India as well as Southern India at a maximum rate of Rs. 3/- per unit which incase a power plant is set up in Northern India or Southern India would be much higher due to higher cost of fuel, because of the high cost of transportation by rail. Ofcourse, this may not be preferred
VK Arora, Chief Mentor, Karam Chand Thapar & Bros. (Coal Sales) Ltd.
by SEBs as generally, a power plant situated even away from the coalfields is a symbolic industrial unit in the State generating employment for the local population and also catering to the popular sentiment of the people.
Compulsory washing of coal for transport beyond 500 kms As per the directive from the Supreme Court from June 2016 onwards, coal of over 34% ash will not be allowed to be transported by rail beyond a distance of 500 kms. The recent notification also puts the responsibility of ensuring this not only on purchasers but also on the sellers. It is not understood how is this going to be implemented as the washing capacity is still inadequate. CIL is still a long way off from establishing its 17 washeries for which they have been talking for a long time. The early directive of transporting less than 34% ash for distances below 1000 kms was not being complied with because of inadequate washing capacity by
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CIL. A number of washeries were set up in the private sector. Except for a few, rest of the washeries have been for long inoperative as the rates quoted for washing were inadequate resulting in genuine washing not being done. This brought about the notoriety and a bad name for the washeries and some of them are still fighting their cases with the power companies. An honest washing plant has to be paid remunerative washing charges, failing which there would be an attempt to enforce a shortcut in the system benefitting no one. It is expected that commissioning of CIL washeries would bring some sanity into the system. Unfortunately, this commissioning is still 2/3 years away. It is yet to be seen whether such mega washeries can be set up to conform to the parameters set by the CIL tenders at prices quoted by them.
Increasing investment in renewables – Will it come at the cost of coal? India’s total installed power capacity is 298 GW (as on March 31, 2016), out of which renewables capacity forms 28% (including hydro) and non renewable as 72%. The present per capita consumption of electricity is ranging around 1000 kwh which is expected to rise upto 2000 kwh in a few years. Demand for power is expected to surpass 300 GW over the next 10 years. This would
involve 5-10 fold ramp up in capacity addition along with matching investments in distribution and transmission. In line with the pressure on government to discourage the use of fossil fuel, India has taken up very ambitious targets for renewables. The target for green energy is 175 GW by 2022. This includes solar at 100 GW, comprising 60 GW as large and medium grid connected power and 40 GW as rooftop solar. Target for wind is 60 GW,
Despite huge investment in renewables, India will continue to depend on fossil fuel (mainly coal) for generation of power for the next 2 decades. Coal production in the country has been in the range of 500-550 MMT per annum. There have been signs of increase in the last year by about 9-10%, which has brought some relief for the beleaguered power plants who were earlier depending on imported coal or whatever little coal that was made available by CIL
for bio fuel at 10 GW and hydel forming the balance 5 GW. If we achieve these targets, we shall become one of the largest green energy producers in the world. Present renewable energy installed capacity is 27,000 MW for wind and 6,700 MW for solar. With abundance of sunlight in major parts of the country, investments in solar will far exceed investments in any other sector. Despite huge investment in renewables, India will continue to depend on fossil fuel (mainly coal) for generation of power for the next 2 decades. Coal production in the country has been in the range of 500-550 MMT per annum. There have been signs of increase in the last year by about 9-10%, which has brought some relief for the beleaguered power plants who were earlier depending on imported coal or whatever little coal that was made available by CIL. CIL has done well in the last one and a half years. CIL may be able to achieve its target of 1000 MMT by 2020 but the target of 500 MMT by the captive coal blocks looks rather doubtful. With increase of availability of coal, shortage of power would be virtually over by next year. The country has enough capacity based on coal and renewables meeting the power demand of the country. The problem of shortage is only on account of the poor financial health of the discoms. The government has tried to address this issue by promoting UDAY (Ujjwal Discoms Assurance Yojana) whereby the States will take over 75% of the discom debt and also expecting them to reduce the TDS losses from 25% to 15%. If all these well intended schemes are implemented, India should no longer be a country with shortage of power. All credit goes to the government, Ministry of Coal, Coal India Ltd. NTPC, Power Grid Corporation and renewable energy producers who have achieved what looked like impossibility sometimes ago. The views in the article of the author are personal For suggestions email at feedback@infraline.com
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InDepth Under utilisation of thermal power plants cause of worry for power producers
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►►Currently about one-third of India’s 211 GW of installed thermal power capacity lying idle ►►Stranded power capacities of 22-28 GW may have to wait for 2-3 years for securing PPA
By Team InfralinePlus
With the advent of the ambitious renewable energy programme in the country, it seems thermal power producers have a cause to worry. While the Central Government has repeatedly promoted the goal of tripling domestic coal production by 2020 to fuel a dramatic increase in coal power generation, the goal looks increasingly fanciful.Significantly, in a more drastic step to reduce coal imports, the Indian government has scrapped plans for the construction of
at least four large thermal power plants categorised as ultra-mega thermal power plants (UMPPs) with aggregate generating capacity of 16 GW. The four proposed plants to be located in the provinces of Chhattisgarh, Karnataka, Maharashtra and Odisha would together have required 46-million tons a year of coal, half of which would have been sourced through imports. Currently about one-third of India’s 211 GW of installed thermal power
capacity – predominantly coal plants but including some gas units as well – is lying idle. The reasons for India’s vast amount of idle capacity are varied. Some plants have long been shut because of a lack of cooling water. 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. A Greenpeace India analysis of a report released in March this year
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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) people. Others plants have been shut because of technical problems requiring maintenance or idled because they are uneconomic. In other cases, some plants have coal supply agreements but not power purchase agreements while other plants have the opposite problem. Other plants which have been built have neither fuel supply agreements nor power purchase agreements. Compounding the thermal power generators’ problems has been sluggish power demand and debt-laden distribution utilities (‘discoms’) preferring to buy limited power because of their dire financial circumstances. Electricity distribution companies (DISCOMs) are facing financial stress due to accumulated losses to the tune of INR 3.8 Lakh Crores (as on March, 2015) and increasing @ 12% p.a. as reported by the ministry. Such financial stress does not allow DISCOMs to make fresh purchases and prevents them from floating tenders for Long Term Power Purchase Agreements (LTPPA). Over the past four years, PPAs of only 12 GW have been signed under the competitive bidding route (Case 1 bids). The Ujwal Discom Assurance Yojana (UDAY), launched by the government for financial turnaround and revival of
power distribution companies, will have definite impact on the buying capacity of the distribution utilities. But that’s going to be more long term and sustainability would depend on the overall turnaround of the distribution segment. India’s regional electricity distributors (state-owned distribution companies) are curtailing purchases, forcing generators to leave at least a third of the country’s power plant
Electricity DISCOMS are facing financial stress due to accumulated losses to the tune of INR 3.8 Lakh Crores (as on March, 2015) and increasing @ 12% p.a. as reported by the ministry. Such financial stress does not allow DISCOMs to make fresh purchases and prevents them from floating tenders for Long Term Power Purchase Agreements (LTPPA). Over the past four years, PPAs of only 12 GW have been signed under the competitive bidding route (Case 1 bids)
More concern for thermal power producers: Railways hikes cost of freight for coal consumers Indian Railways recently hiked the cost of freight for several consumers of coal, the commodity that accounts for 45% of its receipts from transportation of goods: it raised the freight rates by 7-14% for distances between 200-700 km and imposed a INR 55/tonne extra charge on both loading and unloading. At the same time, it reduced the freight for long-lead traffic by 4-13%. The tariff increase will increase the fuel costs of power stations and cement units closer to pitheads, while units far away from coal mines could see their fuel/input costs decline. Electricity from plants less than 700 km from pitheads could become costlier by 8-10 paise/unit, according to industry estimates. Coal freight rate increase comes after the recent increase in clean energy cess and coal price which may further increase end user power cost. Inability to pass on such tariff may further deteriorate financial condition of distribution companies and power generators.
capacity unused. Distributors had unpaid loans of almost 4 trillion rupees as of last year and are in the process of transferring 75 percent of that debt to states as part of a federal effort to make the companies profitable (UDAY scheme). In the last 13 years, generating capacity to the tune of 1,50,000 MW has been successfully commissioned, effectively doubling the country’s installed capacity to 3,03,000 MW (by July 2016). However, recent years have seen tardy growth in electricity demand, especially industrial load, has led to a sustained drop in the plant load factor (PLF) — an indicator of capacity utilisation — of the country’s power plants. In the last one year the average PLF of thermal capacity has plummeted by about 8 percentage points, with the PLF of generating stations in the central and private sector estimated at just a tad above 60 per cent. Leading state electricity boards (SEBs) of Maharashtra, Gujarat and even Tamil Nadu have become power surplus and may not require additional contracts for the next couple of years. Other utilities who need power are taking full advantage of the prevailing low spot power prices in exchanges (less than INR 2.5/unit), rather than entering into long-term contracts. The plant load factor (PLF) of the existing coal-based capacity for private independent power producers with a contract was less than 60% in FY 2015-16. While Coal India Ltd’s stellar performance over the past two years has taken away fuel-related worries to some extent, legacy issues such as new coal block auctions at aggressive prices still haunt some generators.
Curious Case of Stranded Capacity
There is a huge amount of generation capacity lying undispatched due to unavailability of coal which is due to the policy that only plants with long term contracts will get coal linkage, thereby rendering installed transmission
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InDepth
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capacity under-utilised. On the other hand, state distribution companies are not pursuing long term contracts resulting in a Catch-22 situation for the generation and transmission capacity addition and a utilization mismatch. Recently coal availability for medium term has been suggested which will go some way but the transmission capacity already laid for projects which do not have a long term / medium term PPA are stuck because they are unable to run economically since imported and e-auction coal prices make them noncompetitive thereby, causing a national waste of state transmission infrastructure. This is resulting in a dead end situation for them. Interestingly the coal stocks at the pit head have swelled with few off takers. Maybe it is time to allow coal linkages for all power plants and not hold the sector through an unnecessary and counter-productive situation creating a huge and growing liability for the banks. Demand would come back within the next few quarters with successful monsoon and overall recovery in the economy. Untied capacity would get tied up in the next two years and the power plants will be running at better utilisation. India will continue to depend on coal-based thermal generation for the next few decades, but it will become increasingly difficult to attract fresh investments from the private sector in the next few years. Investments could be further hampered by the Central Electricity Authority (CEA) projecting that India could become power surplus for the first time in the financial year 2017. Stranded power capacities of 22-28 GW may have to wait for 2-3 years for securing Power Purchase Agreement (PPAs). The Ministry of Power (MoP) has come up with a good idea to capitalize on this – it has started promoting the short-term power market. Coal is being made available in a separate e-auction window for the power sector. At the same time, states have been asked
Table 1: Stranded Capacity (without PPAs) (comprising coal and gas-based capacity as well as hydro power capacity Stranded Capacity (without PPAs) Already Commis- Under Construction sioned (in MW) (in MW) Coal bearing states 10873 3270 Chhattisgarh 4636 990 Madhya Pradesh 1824 1200 Odisha 1315 Maharashtra 3098 1080 Hydro 1270 855 Himachal Pradesh 1174 244 Sikkim 96 535 Uttarakhand 76 Demand centers 4137 2368 Andhra Pradesh 1150 2020 Gujarat 945 Tamil Nadu 942 150 Karnataka 980 Rajasthan 120 Uttar Pradesh 198 Gas 5000 Total 21280 6493
Total (in MW) 14143 5626 3024 1315 4178 2125 1418 631 76 6505 3170 945 1092 980 120 198 5000 27773
Source: Motilal Oswal Securities Limited (MOSL) update on power sector (July 2016)
India will continue to depend on coal-based thermal generation for the next few decades, but it will become increasingly difficult to attract fresh investments from the private sector in the next few years. Investments could be further hampered by the Central Electricity Authority (CEA) projecting that India could become power surplus for the first time in the financial year 2017 to come to the electronic platform for meeting their short-term requirements. Many generating companies have
high variable costs because of high transportation costs, low operating efficiencies, coal pilferage and corruption. Variable cost ranges as high as INR 3-4/unit. These plants do not get scheduled in merit order dispatches. On the other hand, new efficient merchant power plants are able to supply power at total cost as low as INR 2.2/unit. There is nearly 14GW of stranded capacity without PPAs near coal mines in the states of Madhya Pradesh, Chhattisgarh, Odisha and Maharashtra. These capacities have lowvariable cost and they sell to states like Delhi and Rajasthan (where variable cost is high due to transportation of coal) or to states in the south that have to either pay high transportation cost or import coal. Similarly, 2.2 GW of hydro capacity can supply to states in north India. The growth of coal-based installed capacity is on a decline. Touching a three year-low, last year the installed
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No generation from 6 plants in 2015-16! Overall, 26 power plants have shut down since June 2015 across the country totalling 5,574 MW in several states with Maharashtra topping the list of states with maximum power plants that have not generated electricity over the last one year.The details of these closed plants were revealed by Minister of State for Power, Coal, New & Renewable Energy and Mines Piyush Goyal in reply to a question in the Lok Sabha last month. Of these 26, Maharashtra accounted for a lion’s share of six power plants, which together had an installed capacity of 3,026 MW. Andhra Pradesh comes second with two plants with a capacity of 614 MW not producing any power for the last one year. A couple of power producers had to close because of lack of fuel supply – both coal and gas. The biggest among them all, Parli TPP (MAHAGENCO) with a capacity of 1,380 MW had to shut down because of a lack of water..
capacity grew by 10.77 per cent against 12.48 per cent in 2012. The more worrying aspect is that the 2016 pipeline for thermal power looks bleak. The thermal power cycle takes four years. Even if 10,000 MW comes up by 2018-19, there will still be a mismatch with demand when the economy grows as is being envisaged. Against a target of installing an additional capacity of 88,537 MW from conventional sources during the XII Plan (2012-17), the country has achieved 86,565.72 MW which is 97.77 per cent, up to July 2016. Private sector alone has added 50,817.50 MW. The share of hydro in the total installed capacity has been on a downward trajectory for long and government may be looking to compensate this loss in the XII plan targets by adding more coal based capacity (currently envisaged at 72,340 MW). At a time when several Independent Power Producers (IPPs) are locked into power purchase agreements (PPAs) that have become unviable because they do not allow the high costs of imported fuel to be passed through. Indian power generators’ capacity utilisation will likely be limited by the financial weakness of off takers, in turn constraining offtake electricity demand.Due to India’s commitment to reduce carbon dioxide emission intensity by 33-35% by 2030, the government has also come out with stringent norms on sulphur oxides and
nitrogen oxides for thermal plants, adding to the cost of setting up thermal capacity. A clean energy cess on coal, amounting to INR 400/tonne, was announced in the last Union budget, further adding to the cost of coal-based power
Gas-based power plants not faring any better
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.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.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%. Gas-based power projects are second only to renewables and hydro power in generating clean energy.
So, ensuring fuel supplies for such projects will help the Independent Power Producers (IPPs) to avail CDM (clean development mechanism) benefits / credits and will go a long way in meeting India’s obligations under the climate change commitments and reduce green-house emissions substantially. Also, dedicated plants operating in open cycle in proximity to load centers can meet peak demand.
Conclusion
At the 21st Conference of the Parties to the UN Framework Convention on Climate Change (UNFCCC), COP 21 in Paris, a resolution on limiting the use of coal across countries was one of the proposals put up for consideration. In the Indian context, this is of particular relevance as coal-fired power stations form the backbone of the Indian power generation sector and will continue to remain so in the foreseeable future, the Centre’s concerted efforts to ramp up renewables such as solar notwithstanding. Coal-powered thermal power plantsaccount for 70% of total electricity generated in the country and represents 61% of the installed power capacity.Till the thermal generating capacity utilisation improves to 80-85%, PLF levels (to the existing 60% PLF level) and the existing untied capacities are contracted, it’s unlikely that there will be any private sector interest in the coal-based thermal generation sector. Coal has always been the mainstay of the Indian power sector and it is a view shared by most policymakers that it must remain the primary source of electricity generation for at least the next three to four decades. This view is based on the belief that a centralised electricity system based on an ever-expanding coal power generation base will ensure energy security, provide affordable energy for all and, importantly, address the issue of energy scarcity in India. For suggestions email at feedback@infraline.com
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InDepth
Coal freight rate hike a mixed bag
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►►To lead to better utilization of empty stabled rakes ►►Likely to reduce import of coal for power stations near ports
By Team InfralinePlus
The coal sector has been subjected to a plethora of new levies which has left the power companies a worried lot. The most recent instance has been the revision in freight rates for coal by the railway ministry, which has increased transportation cost for plants located 200-700 km away from the mines, at the same time reducing it for those situated further away. According to Railway Board member (traffic) Moham-
mad Jamshed, the freight rates were raised by 8-14% for transporting coal between 200 km and 700 km and were lowered by 4-13% for distances above 700 km. Freight rates for distances up to 200 km were kept unchanged.
Impact on railways
Jamshed said the rate revision is expected to be revenue-neutral for railways because the hike for some
distances is being complemented by the tariff reduction on long routes. “We are trying to encourage long-distance coal freight through this move, and it will benefit several industries and thermal power plants,” said Jamshed adding a coal terminal surcharge at the rate of Rs.55 per tonne at both the loading and unloading terminals for traffic of coal for the distance beyond 100 km will also be levied.
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New railways lines being constructed for additional capacities in coalfields In order to evacuate/transport coal from pithead three critical railway lines have been identified in the three potential coalfields • Tori-Shivpur-Kathautia Railway Line (90.7 kms) in North Karanpura in Jharkhand • Jharsuguda-Barpalli-Sardega Railway Line (53 kms) in Ib Valley, Odisha • Bhupdevpur-KorichaparDharamjaigarh (180 kms) in MandRaigarh Coalfield, Chhattisgarh
This would lead to better utilization of empty stabled rakes as this would result in encouraging long lead traffic and thus reduce terminal handling frequently. “The aim is to increase the coal loading volume so we have reduced the rate for the long distance transportation,” Jamshed said, adding, “Coal rakes are lying idle so there is a need for rate rationalisation.” More rationalization of freight rates by bringing innovative schemes like
liberalized Station to Station Rates, Long Term Tariff Agreements at predetermined price escalation principles and further liberalized Empty flow direction policies would be introduced in near future. Coal is the single-largest commodity in Indian Railways’ freight basket and any tinkering with freight tariffs creates ripple effect on electricity prices and the cost of other industrial goods including steel and cement.
Tariff rationalization would result in reducing import of coal for power stations near ports by making coal transportation from mines cheaper over long distances. Tariff rationalization in the freight rates for coal would facilitate more generation schedules for long lead power plants by making long distance power plants competitive in the Merit Order
Impact on power sector
Tariff rationalization would result in reducing import of coal for power stations near ports by making coal transportation from mines cheaper over long distances. Tariff rationalization in the freight rates for coal would facilitate more generation schedules for long lead power plants by making long distance power plants competitive in the Merit Order. The decision has evoked mixed response from the industry with many expecting an increase in power tariff. According to Lalit Jain, Group Chief Commercial Officer & CEO (Solar International & Wind), Hindustan Power Projects (HPP), “Railways has increased the rail freight by 25-35% including Additional Coal Terminal Charge of Rs. 55/ MT has been levied on both loading and unloading terminal. With so much increase in the railway freight, energy tariff from coal-based power plants shall increase by 8-10 paise/ kWh. This is yet another increase for coal based power plants after recent increase in Clean Energy Cess and Coal Price which shall further increase end user power cost. Inability to pass such tariff shall further deteriorate financial condition of distribution companies and power generators.” According to Sushil Maroo, executive vice-chairman at Essar Power Ltd, “About 60% of the power plants in India need to transport coal for 200-700km, where there is an increase in the freight rate. For them, there is a likely cost increase of 6-7 paise per unit of power. For the others, the impact is negligible,” said. However, according to union power and coal minister, Piyush Goyal, rationalisation of the coal freight tariff will have minimal impact on power tariff and the move would gradually lead to domestic fuel replacing imported coal. Supporting the move, the minister said railways have reduced the freight for long distances so that the domestic coal becomes more viable
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September 2016 www.InfralinePlus.com
InDepth
Coal sector reels under increasing levies • In February 2016, the Government proposed to raise the cess on coal, lignite and peat from Rs 200 a tonne to Rs 400 per tonne. • The purpose of clean energy/environment cess was for financing and promoting clean energy initiatives, funding research in the area of clean energy, or for any other purpose relating thereto. • According to official data, the estimated amount of clean environment cess to be collected by Coal India and deposited with the government of India for the year 20116-17 based on the budgeted estimated production of CIL is Rs 23,944.4 crore • The government had increased the Clean Energy Cess from Rs 100 to 200 per tonne of coal to finance clean environment initiatives for 2015-16.
in front of imported coal. “This year we are hoping that we reduce the coal imports by Rs 40,000 crore. That is our mission which is why railway freight rationalisation is a very positive step,” the minister said.
Impact on other sectors 30
According to experts, hike in coal freight charges by Railways will adversely impact the domestic cement industry with a hit of over Rs 2,000 crore and is likely to force companies to pass on the burden to consumers. According to Edelweiss Securities, in near term, increase in freight rates is negative for cement and power utilities (merchant players). Commenting on the rate hike, it said railway data suggests that average lead distance of coal shipments is declining and stands at around 486 km versus 545 km in 2014-15 fiscal. “Hence, one can infer that such moves may bolster revenue for Indian Railways in the short term, however, we are unsure if this tariff structure will arrest the long-term declining market share trend of rail in shipments,” it added. On doubts over the move helping railways to check the declining market share in the long term, it said that overall leads in freight movements both in bulk/ container have been structurally declining. “Probably, in the short run none of the bulk cargo shipments may move from rail to road. But, as seen in the cement sector, over
a period of time the shift does take place,” the firm said. Cement Manufacturers’ Association President, Shailendra Chouksey said the move will have an inflationary impact on the sector. Coal, which is the main raw material for cement will on an average suffer a 20 per cent increase in freight that would
translate into increase in input cost for the manufacturers, he added. Besides, the coal freight hike will impact the cost of power as its generation is coal dependent, he said. “With power being another major cost centre for cement production, the effect on the sector would be cascading. It is expected that cement industry will suffer a combined impact of over Rs 2,000 crore. “In the current situation, cement players would find it difficult to absorb this increase and therefore, I will not be surprised if the cement prices go up,” Chouksey said. With increase in freight rates for railways, the cost of road transportation may reduce. Railway, no doubt, needs more investment but the government must ensure that burden of the same should be shared by everyone and not just the power sector. For suggestions email at feedback@infraline.com
September 2016 www.InfralinePlus.com
StatisticsCoal Trends in Industry wise Consumption of Raw Coal in India (FY’06 - FY’15) (Million tonnes) Year
Electricity
Steel & Washery
Cement
Paper
Textile
Sponge Iron
Fertilizers &chemicals
1
2
3
4
5
6
7
8
2005-06
306.04
19.66
14.97
2.77
0.29
-
-
Brick
Others *
Total
9
10 = 2 to 9
51.85
395.59
-
2006-07
321.91
17.3
14.71
2.5
0.3
-
-
-
63.08
419.8
2007-08
350.58
16.99
15.27
2.64
0.37
-
-
-
67.72
453.57
2008-09
377.27
16.58
13.12
2.16
2.53
-
-
-
77.52
489.17
2009-10
390.58
16.45
14.66
2.34
0.27
-
-
-
89.5
513.79
2010-11
395.84
17.26
15.08
2.43
0.28
-
-
-
92.58
523.47
2011-12
437.67
47.86
26.36
2.03
0.26
21.69
2.82
0.13
69.36
608.17
2012-13
485.47
51.7
31.79
2.12
0.3
20.9
2.86
2.01
116.24
713.39
2013-14
493.25
53.05
32.46
1.91
0.36
18.49
2.64
4.01
133.19
739.34
2014-15(p)
527.1
66.37
37.95
1.54
0.42
14.68
2.69
0.11
169.46
820.31
Distribution (%)
64.26
8.09
4.63
0.19
0.05
1.79
0.33
0.01
20.66
100
Growth rate of 2014-15 over
6.86
25.11
16.91
-19.15
16.39
-20.64
2.05
-97.18
27.23
10.95
2013-14(%) CAGR 2005-06 to201415(%)
5.59
12.94
9.75
-5.71
3.82
-9.3
-1.17
-3.26
12.57
7.57
31
(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.
Trends in Industry wise Consumption of Lignite in India (FY’06 - FY’15) (Million tonnes) Year
Electricity
Steel & Washery
Cement
Paper
Textile
Others *
Total
1
2
3
4
5
6
7
8 = 2 to 7
2005-06
23.36
-
0.79
0.23
1.11
4.86
30.34
2006-07
23.92
-
0.77
0.22
0.84
5.06
30.8
2007-08
26.76
-
0.96
0.35
0.77
5.83
34.66
2008-09
25.71
-
0.34
0.36
-
6.01
32.42
2009-10
28.14
-
0.38
0.82
-
4.09
33.43
2010-11
29.9
-
0.36
0.84
1.18
6.25
38.53
2011-12
32.06
0.03
1.01
0.63
3.67
4.48
41.88
2012-13
37.2
0.05
1.1
0.69
0.3
3.81
43.15
2013-14
36.34
0.03
1.49
1.29
0.73
4.02
43.9
2014-15(p)
39.47
0.02
1.27
0.69
2.89
2.6
46.94
Distribution (%)
84.09
0.05
2.7
1.47
6.15
5.54
100
Growth rate of 2014-15 over 2013-14(%)
8.63
-23.33
-14.78
-46.51
293.86
-35.33
6.93
(P): Provisional * Includes Sponge Iron, colliery consumption., jute, bricks, coal for soft coke, chemicals, fertilisers & other industries consumption. From 2008-09 onwards cotton is also included in others. Note: Industry wise breakup of consumption for the period 1970-71 to 1999-2000 are not readily available, hence estimated by production data as it is observed, approximately for lignite, production= despatch= consumption.
September 2016 www.InfralinePlus.com
StatisticsCoal Trends in Production of Coal and Lignite in India during 2005-15 (Million tonnes) Year
32
Coal
Lignite
Grand Total
4=(2)+(3)
5
6=(4)+(5)
375.53
407.04
30.23
437.27
32.1
398.74
430.83
31.29
462.12
2007-08
34.46
422.63
457.08
33.98
491.06
2008-09
33.81
457.95
491.76
32.42
524.18
2009-10
44.41
487.63
532.04
34.07
566.11
2010-11
49.55
483.15
532.69
37.73
570.43
2011-12
51.65
488.29
539.94
42.33
582.27
2012-13
51.83
505.87
557.71
46.6
604.31
2013-14
56.82
508.95
565.77
44.27
610
2014-15(p)
57.45
554.98
612.44
48.25
660.69
Growth rate of 201415 owner 2013-14(%)
1.11
9.04
8.25
8.99
8.31
CAGR 2005-06 to 2014-15(%)
6.19
3.98
4.17
4.79
4.21
Coking
Non-coking
Total
1
2
3
2005-06
31.51
2006-07
(P): Provisional
September 2016 www.InfralinePlus.com
CoverStory
Make in India: Limited impact on energy sector so far
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►►High on ease of doing business, but private investments still trickling in ►►Power, coal and renewable have high potential for domestic manufacturing By Infraline Bureau
The ‘Make in India’ programme is yet to make an impact on the ground despite a series of measures taken by the Modi government to improve the ease of doing business. Two years after the campaign was launched by Prime Minister Narendra Modi in September 2014, private investment is still trickling in. The government is banking on public spending to drive the growth. However, this strategy has its own limitations and cannot substitute for private investment. In the absence of strong
investment flows, GDP growth is being led by consumption. The government has envisaged raising share of the manufacturing in the GDP to 25 per cent by 2022 from the current level of 16 per cent. The sector continues to remain in the doldrums after posting anaemic growth of 2.4 per cent in 2015-16. Measures taken by the government have failed to rekindle the animal spirit in the economy. The Business Confidence Index of National Council of Applied
Economic Research (NCAER), which had reached 148.4 in January 2015, slipped back to 121.6 in April 2016. “The key factor holding the acceleration of industrial growth is investment recovery,” India Ratings and Research said in a recent update on the economy. It stated that corporates, particularly those engaged in infrastructure, power, iron and steel and textile sectors, are either repairing their balance sheets or saddled with stagnation or even decline in capacity utilisation. “It
September 2016 www.InfralinePlus.com
CoverStory
Make in India Week • The Make in India week held in Mumbai during February elicited investment proposals worth Rs 15.20 lakh crore. • Jharkhand government and Adani group signed pact to set a up 1,600 MW thermal plant for supplying electricity to Bangladesh. The two sides also entered into an agreement to a coal-based methane fertiliser plant. • Yes Bank and IREDA joined hands to finance green power projects. • Tar Kovacs and Karnataka government signed agreements to set up ocean based renewable energy project. • Gujarat state and Denmark’s Vestas came together to set up windmill blade manufacturing in Ahmedabad.
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expects investments to grow 5 per cent in FY17, mainly driven by the government capital expenditure,” the rating agency added. The good monsoon is expected to boost rural demand which has been sluggish due to two consecutive years of drought. The urban demand is likely to get a lift from the implementation of the Seventh Central Pay Commission which will benefit nearly 1 crore employees and pensioners. However, all this might not be enough to drive up GDP growth rate, say analysts. But things might start changing soon with the prospect of early implementation of landmark indirect tax reform getting brighter after the passage of the GST Bill. Besides, the government has unveiled capital goods policy which should bring momentum to the Make in India campaign.
The process of applying for industrial license and industrial entrepreneur memorandum has been made online. Initial validity period of industrial license has been increased to three years from two years, also, two extensions of two years each in the initial validity of three years of the industrial license will now be allowed up to seven years, which would give enough time to licensees to procure land and obtain the necessary clearances and approvals from authorities
National capital goods policy unveiled
The government has for the first time unveiled the National Capital Goods Policy to boost manufacturing. The policy aims to increase production of capital goods from Rs 2.30 lakh crore in 2014-15 to Rs 7.50 lakh crore in 2025 and create direct and indirect employment of nearly 2.2 crore. The policy envisages increasing exports from the current 27 to 40 per cent of production while increasing share of domestic production in India’s demand from 60 to 80 per cent, thus making India a net exporter of capital goods. The policy also aims to facilitate improvement in technology depth across sub-sectors, increase skill availability, ensure mandatory standards and promote growth and capacity building of micro, small and medium enterprises.
Ease of doing business: moves on taxation, regulations and clearances
The government will bring down corporate tax rate for companies registered in India from 30 to 25 per cent of net profits in a phased manner over the next four years starting from FY 16-17. An expert committee has also been set up to examine the possibility and prepare a draft legislation where the need for multiple prior permission can be replaced by a pre-existing regulatory mechanism. The process of applying for industrial license and industrial entrepreneur memorandum has been made online. Initial validity period of industrial license has been increased to three years from two years, also, two extensions of two years each in the initial validity of three years of the industrial license will now be allowed up to seven years, which would give enough time to licensees to procure land and obtain the necessary clearances and approvals from authorities. Through eBiz portal, a business user can fill the eForms online and offline,
September 2016 www.InfralinePlus.com
upload the attachments, make payment online and submit the forms for processing of the department. A dedicated Shram Suvidha portal set up, which would allot Labour Identification Number (LIN) to nearly 6 lakhs units and allow them to file online compliance for 16 out of 44 labour laws.
Goods and Services Tax (GST)
The government is gearing up to implement the GST from next fiscal after securing parliamentary for the draft legislation. According to analysts, implementation of the new indirect tax regime will go a long way towards boosting domestic manufacturing which is hobbled by flawed tax system. The current tax structure fragments Indian markets along state lines and undermines domestic manufacturing. The GST would rectify flaws not by increasing protection but by eliminating the negative protection favouring imports and disfavouring domestic manufacturing, say experts. The 2 per cent central sales tax on inter-state sales of goods leads to inefficiencies in supply chain of goods. Goods produced locally within the jurisdiction of consumption attract lower tax than those produced outside, which encourages geographic fragmentation of production. It is insufficiently appreciated that India’s border tax arrangements undermine Indian manufacturing and the “Make in India” initiative. Eliminating exemptions in the countervailing duties (CVD) and special additional duties (SAD) levied on imports will address this problem. It is a well-accepted proposition in tax theory that achieving neutrality of incentives between domestic production and imports requires that all domestic indirect taxes also be levied on imports. So, if a country levies a sales tax, VAT, or excise or GST on domestic sales or production, it should also be levied on imports. In India, this is achieved through the CVD/SAD
The government is gearing up to implement the GST from next fiscal after securing parliamentary for the draft legislation. According to analysts, implementation of the new indirect tax regime will go a long way towards boosting domestic manufacturing which is hobbled by flawed tax system. The current tax structure fragments Indian markets along state lines and undermines domestic manufacturing which is levied on imports to offset the impact of the excise duty levied on domestically manufactured goods. However, CVD/SAD exemptions act perversely to favour foreign production over domestically produced goods; that is, they provide negative protection for Indian manufacturing. When there are no CVD/SAD and excise exemptions (Scenario 1), neutrality of incentives between domestic
goods and imports is achieved which is desirable. In scenario 2, there is no excise exemption but there is a CVD/ SAD exemption which results in a large penalty on domestic producers. But the important and subtle point relates to scenario 3 when the excise and CVD/SAD are both exempted. This may seem apparently neutral between domestic production and imports but it is not. The imported good enters the market without the CVD/SAD imposed on it; and, because it is zero-rated in the source country, is not burdened by any embedded input taxes on it, analysts point out. The corresponding domestic good does not face the excise duty, but since it has been exempted, the input tax credit cannot be claimed. The domestic good is thus less competitive compared to the foreign goods because it bears input taxes which the foreign good does not. In the example, the penalty on domestic producers is over 6 per cent. In effect, a policy designed to promote domestic manufacturing through excise exemption creates a perverse incentive for the exempt industry and its eventual decline, say taxation experts. The CVD/SAD, which is levied to offset the excise duty imposed on domestic producers, is not applied on a whole range of imports. These exemp-
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September 2016 www.InfralinePlus.com
CoverStory
tions can be quantified. The effective rate of excise on domestically-produced non-oil goods is about 9 per cent. The effective collection rate of CVDs should theoretically be the same but is in actual fact only about 6 per cent. The difference not only represents the fiscal cost to the government of Rs 40,000 crore, it also represents the negative protection in favour of foreign produced goods over domestically produced goods. In a sense, India finds itself in a de facto state of negative protection on the one hand, and calls for higher tariffs on the other. It is win-win to resist these calls that would burnish India’s openness credentials and instead eliminate the unnecessary and costly penalty on domestic producers.
Energy sector 36
The government has tweaked policies to promote domestic manufacturing for meeting equipment requirements of the energy sector. However, industry experts say that local manufacturing has failed to keep pace with demand, impacting capacity addition in nuclear, renewable energy and transmission and distribution industries. Kameswara Rao, leader, power and mining, PwC, says that the government’s attention has been on successfully addressing some of the policy
issues in these sectors, but concurrent actions in localising manufacturing have not kept pace. “This has been a particular drawback in certain sectors like renewable energy and nuclear, which are capital intensive, and overreliance on imported equipment places significant additional costs in terms financing cost, exchange rate variation and risk premiums,” Rao said.
“India, as a large energy user, with ongoing investments to change energy mix and provide inversely access, should have a broad based local manufacturing capability to support it, which is currently lacking in both, generation and in higher end T&D power equipment,” he added.
Power sector is expected to benefit most from the Make in India as it would entail a significant increase in electricity consumption. Demand for electricity will increase manifold due to programmes like Make in India and Rural Electrification, says Union power minister, Piyush Goyal. Thanks to intervention by the NDA government, coal production has seen a significant increase in recent years, which has helped in reducing dependence on imported coal
Power sector is expected to benefit most from the Make in India as it would entail a significant increase in electricity consumption. Demand for electricity will increase manifold due to programmes like Make in India and Rural Electrification, says Union power minister, Piyush Goyal. Thanks to intervention by the NDA government, coal production has seen a significant increase in recent years, which has helped in reducing dependence on imported coal. India is also looking at deepening energy partnership with Japan in clean coal technology with eye on Make in India campaign. Back home, the government has targeted to ensure 24X7 power supply from 2018-19 and unveiled mega investment plans to boost transmission and distribution. The government has also targeted to increase coal production to 1.5 billion tonnes by 2019-20. However, the power sector continues to reel under sluggish demand and as a consequence, generating stations are operating at sub-optimal plant load factor (PLF). For example, the overall PLF of thermal plants in the country during June stood at the low level of 60.67 per cent. A big chunk of coal-based generating capacity is facing viability issue due to absence of long-term electricity buyers, inadequate fuel supply and under-recovery on account of tariff due to aggressive bidding. While record capacity has been added during the 12th Plan period, the government is in no hurry to line up more projects for implementation. An official
Power and coal have high potential
September 2016 www.InfralinePlus.com
moratorium on capacity addition looks likely. That means ultra mega power projects too will also have to wait for take-off.
Oil and gas sector
The petroleum ministry has envisaged enhancing India’s crude oil refining capacity through 2040 by setting up a highlevel panel, which will work towards aligning India’s energy portfolio with changing trends and transition towards cleaner sources of energy generation. The Hydrocarbon Sector Skill Council (HSSC), set up by the government under Skill India initiative, plans to train over 1.9 million people in the oil and gas sector over the next 10 years, to cater to the rising skill needs of the industry. The Union Cabinet has allowed state-owned oil firms to evolve their own crude oil import policies which involve freedom to choose source companies as well as pricing for their crude oil imports, thus allowing them to compete in the market effectively. In a major drive to enhance the petroleum and hydrocarbon sector, the government has introduced initiatives like the Hydrocarbon Exploration Licensing Policy (HELP), marketing and pricing freedom for new gas production, grant of extension to the Production Sharing Contracts and assigning the Ratna offshore field award to ONGC for development. The petroleum ministry has released the Hydrocarbon Vision 2030 for North East India, with the objective of leveraging the north-eastern region’s hydrocarbon potential to enhance access to clean fuels, improve availability of petroleum products, facilitate economic development and to involve local population in the economic activities in this sector. The government has also unveiled a new policy to incentivise gas production from deep-water, ultra deep-water and high pressure-high temperature areas which are presently not exploited on account of higher cost and risk, and also to augment the
The petroleum ministry has envisaged enhancing India’s crude oil refining capacity through 2040 by setting up a highlevel panel, which will work towards aligning India’s energy portfolio with changing trends and transition towards cleaner sources of energy generation. The Hydrocarbon Sector Skill Council (HSSC), set up by the government under Skill India initiative, plans to train over 1.9 million people in the oil and gas sector over the next 10 years, to cater to the rising skill needs of the industry
investment in nuclear power generation in the next 15 to 20 years. The petroleum ministry has announced a new Marginal Fields Policy which aims to bring into production 69 marginal oil and gas fields with 89 million tonnes or Rs 75,000 crore worth of reserves by offering various incentives to oil and gas explorers such as exemption from payment of oil cess and customs duty on machinery and equipment. The government has entered into bilateral discussion with Norway to extend co-operation between the two countries in the field of oil and natural gas and hydrocarbon exploration. To strengthen the country`s energy security, oil diplomacy initiatives have been intensified through meaningful engagements with hydrocarbonrich countries. The government has approved a mechanism for procurement
Domestic manufacturing of LNG ships makes little progress • As part of the Make in India initiative, the Government had planned to construct three liquefied natural gas (LNG) carriers at Indian shipyards to allow GAIL to ferry gas from the US to India for 20 years, starting 2017. • However, the plans fell flat as there were no takers for the tender issued by GAIL, since local yards inexperienced in building such ships failed to get expert LNG shipbuilders to share technology for the same. • Eventually, GAIL has to postpone the bidding deadline several times. • Only Cochin Shipyard, which has acquired full certification from GTT to built LNG carriers, is now the only company looking to compete for the tender in partnership with Samsung Heavy Industries.
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September 2016 www.InfralinePlus.com
CoverStory
of ethanol by public sector oil marketing companies to implement ethanol blending programme.
Renewable energy
38
The RE-INVEST 2015 hosted by the Ministry and New and Renewable Energy attracted commitments from investors to set up green energy projects worth 2.66 lakh MW. Encouraged by the positive responsive, the MNRE is hosting similar RE-INVEST 2017 in Ahmedabad. During RE-INVEST 2015, 14 banks and financial institutions, 8 PSUs and private manufacturers, 15 private sector companies gave their Green Energy Commitments. 2800 delegates from 42 countries participated in the three day RE-INVEST 2015 . 202 speakers addressed various sessions, out of which the 40 international speakers were from 29 countries. MNRE Secretary Upendra Tripathy Secretary said 14 companies from seven countries have their Green Energy Commitments for 58 GW. Similarly, 22 PSUs for 18 GW, 257 private companies for 190 GW and the Railways for 5,000MW have submitted their commitments for renewable energy. In addition, 27 banks have also submitted their
High potential in Renewable Energy • India is the fourth largest importer of oil and the 15th largest importer of petroleum products and LNG globally. The increased use of indigenous renewable resources is expected to reduce India’s dependence on expensive imported fossil fuels. • The government is playing an active role in promoting the adoption of renewable energy resources by offering various incentives, such as generation-based incentives (GBIs), capital and interest subsidies, viability gap funding, concessional finance, fiscal incentives etc. • The National Solar Mission aims to promote the development and use of solar energy for power generation and other uses, with the ultimate objective of making solar energy compete with fossil-based energy options. • The objective of the National Solar Mission is to reduce the cost of solar power generation in the country through long-term policy, large scale deployment goals, aggressive R&D and the domestic production of critical raw materials, components and products. • Renewable energy is becoming increasingly cost-competitive compared to fossil fuel-based generation.
commitments for financing 72 GW renewable energy projects. India is already an exporter of wind power equipment. The focus on ‘Make in India’ has led to increase in domestic manufacturing capacity for solar equipment. However, domestic manufacturers are unable to compete with imports. The government has taken several initiatives to increase usage of renewable energy, including enactment of an offshore wind energy policy and support of generationbased incentives and accelerated
depreciation. The government has also amended the Electricity Act and Tariff Policy for strong enforcement of Renewable Purchase Obligation (RPO) and for providing Renewable Generation Obligation (RGO). It has also envisaged setting up of exclusive solar parks; development of power transmission network through Green Energy Corridor project; identification of large government complexes/ buildings for rooftop projects; provision of roof top solar and 10 percent renewable energy as mandatory under Mission Statement and Guidelines for development of smart cities. The government has also amended building bye-laws for mandatory provision of roof top solar for new construction; provided infrastructure status to solar projects; granted permission for raising taxfree solar bonds and extended long tenor loans. Initiatives like Make in India are definitely a progressive move to boost domestic economy and all related sectors. However, it is still early days for the programme and its actual results may only be visible after few more years. For suggestions email at feedback@infraline.com
September 2016 www.InfralinePlus.com
NewsBriefs | Oil & Gas OMCs bullish on renewable energy segment
In a bid to reduce carbon footprint and look at avenues beyond the conventional sources of energy, oil marketing companies (OMCs)—Indian Oil Corp. Ltd (IOCL), Bharat Petroleum Corp. Ltd (BPCL) and Hindustan Petroleum Corp. Ltd (HPCL)—are looking
at expanding their renewable energy plans. IOCL, the country’s largest oil marketing company, plans to generate 260 megawatt (MW) of renewable power in the next five years. HPCL, on the other hand, has plans to generate 1,000 MW in the same time period. “IndianOil has ambitious plans to broaden its energy basket with alternative energy options. The corporation envisages setting up 260 MW of renewable energy (wind and solar) over the next five years,” IOCL said in its annual report for 2015-16. IOCL has installed wind power systems totaling 69.3 MW in Gujarat and Andhra Pradesh. A 5 MW grid-connected solar power plant at Rawra, Rajasthan, is also in operation since 2012.
LPG market gets ready for private oil firms With the central government restricting liquefied petroleum gas (LPG) subsidy to consumers earning less than Rs 10 lakh per annum, a ready-made market is now available for private oil companies. This, coupled with the lure of higher margins, is pushing them to aim for a larger pie of the cooking gas market in India. India’s total LPG consumption rose from 18 million tonnes (mt) in 2014-2015 to 19.6 mt in 2015-2016, according to Petroleum Planning and Analysis Cell (PPAC) data. The three state-run oil marketing companies (OMCs) have 274,000 connections in the waiting list across the country, PPAC data show. This shows that there is a huge market to tap. Essar Oil and Reliance Industries are
two private refiners vying for the LPG market in India. Mahesh Advani, head of direct sales at Essar Oil, says they have a potential market in the non- subsidised LPG customers and commercial users.
National
HPCL in $8 billion drive to boost oil refining margins
India’s fastest-growing fuel seller will spend $8 billion over the next five years to help its 60-year-old refineries earn profit margins closer to modern processors such as billionaire Mukesh Ambani’s Reliance Industries Ltd. “You can definitely expect $2 to $3 addition to the refining margin,” Mukesh Kumar Surana, chairman and managing director at Hindustan Petroleum Corp., said. “These projects will improve distillate yields and improve our margins. This will bring our margin much closer to other complex refiners.” Governmentowned HPCL, sold 34.2 million tons of oil products in the year ended in March, an increase of 7%, the fastest pace among the country’s top three fuel retailers. Indian Oil Corp. and Bharat Petroleum Corp.’s volumes increased 5.3% and 6%, respectively. HPCL reported a gross refining margin of $6.68 a barrel last financial year. In comparison, Reliance, which operates the world’s largest refining complex at Jamnagar in western India, reported a refining margin of $10.80 in the same period.
Oil ministry seeks uniform taxes on LPG for domestic, commercial use The oil ministry is seeking to rationalise taxes on cooking gas sold to all types of consumers in order to block diversion of cylinders meant for domestic use. It has written to the finance ministry to impose uniform taxes on cooking gas, or liquefied petroleum gas (LPG), used for domestic and commercial consumption. The finance ministry will take a final call on the demand that was also made in the past. Gas cylinders meant for domestic use attract no taxes at present while commercial users have to pay a basic customs duty of 5 per cent, additional customs duty of 8 per cent and a central
excise duty of 8 per cent. In addition to central taxes, commercial users have to pay local levies imposed by states. All these duties together make commercial
LPG about a third more expensive than domestic. In Delhi, non-subsidised cooking gas costs about Rs 34 per kilogram while the commercial LPG costs about Rs 45 per kg. About 90 per cent of the total LPG consumed in the country is used by households, although it is suspected that some subsidised cylinders meant for household use are diverted for commercial purpose. Besides not having to pay taxes, households also get subsidy on 12 cylinders of gas they consume in a year. The subsidy has sharply shrunk to Rs 64 per cylinder due to a nearly two-thirds fall in crude oil price in the past two years.
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September 2016 www.InfralinePlus.com
NewsBriefs | Oil & Gas
India’s crude production down 3 per cent in first quarter current fiscal
State-run oil firms to form JV for jet fuel
State-run oil marketing companies Indian Oil Corporation (IOC), Bharat Petroleum Corporation (BPCL) and Hindustan Petroleum Corporation (HPCL) are set to form a joint venture to manage fuelling facilities at all airports controlled by the Airports Authority of India (AAI) by the
end of this year. AAI is also likely to be an equity partner in the JV. The public sector OMCs have, however, spurned private fuel retailers. This comes at a time when Mukesh Ambani-led Reliance Industries (RIL) approached the petroleum ministry and the AAI to be part of the JV. The venture will cover majority of the fuelling facilities in India, except Delhi, Mumbai, Hyderabad and Bengaluru, where private parties are also involved. IOC, which owns more than 60 per cent of the aviation turbine fuel market, is likely to hold 37.5 per cent stake in the venture, while AAI will get 25 per cent and the remaining two oil companies will have 18.75 per cent each.
ONGC hires consultant to assess reserves in GSPC KG gas block
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State-owned ONGC has hired US-based consultant Ryder Scott to assess natural gas reserves in Gujarat State Petroleum Corp’s (GSPC) Deendayal block before deciding to buy a stake in it. Since the BJP-led government came to power at the Centre, the Gujarat government firm GSPC has been seeking to sell a majority stake in its KG-OSN-2001/3 (Deendayal) block in Bay of Bengal to ONGC to avoid defaulting on loans. ONGC initially was not keen to buy stake in the block as it felt the block had reserves far less than what GSPC was claiming and the asking price for the stake was not commensurate with the returns. Ryder Scott Petroleum Consultants has
National
been asked to evaluate gas properties in the GSPC block and independently certify the reserves quantities.
The country’s total crude output decreased 2.9 per cent in the first quarter current financial year (2016-17). Also, natural gas output was down 3.8 per cent. Crude production has dropped to 12078.34 thousand metric tons(tmt) this year compared to 12445.18 tmt for the first quarter last year. Natural gas production is also down by 3.8 per cent to 10449.30 Million Metric Standard Cubic Meters (mmscm) compared to 10862.42 mmscm for the same time period last year said the report. The government is attempting to increase domestic oil production to reduce its dependence on imports, and also boost infrastructure development in the country. The ministry stated closure of oil wells due to repair, replacement, strikes, and blockades are stated as the reasons for lower crude production. Sick older wells, power shutdown & less gas injection pressure have also contributed to the decline of crude. The ministry said 24 oil wells were closed in the Kadali-Tatipaka & Endamuru-Oduru GAIL pipelines.
RIL focuses on domestic market for refined products Mukesh Ambani-led Reliance Industries (RIL) is looking to increase focus on the domestic market for its refined products. On July 15, in its results, RIL said its exports of refined products from India were at Rs 28,610 crore during the April-June 2016 quarter, compared to Rs 32,352 crore in the same period a year ago. In terms of volume, exports of refined products were at 9.8 million metric tonnes (MMT) during the April-June 2016 quarter, compared to 8.5 MMT in the corresponding period a year ago. RIL expects growth in India’s diesel and gasoline consumption for the next 10-15 years, as the country’s economy
and disposable income increase. For the financial year 2015-2016, India’s industry sales for petrol rose 15 per cent, to 21.84 million tonnes (MT), and sales for diesel
rose eight per cent to 74.63 MT, according to data available with the Petroleum Planning and Analysis Cell. Ratings agency India Ratings & Research (Ind-Ra), in its outlook for FY17, said, “Growth was driven by strong pick-up in automobile sales, particularly passenger vehicles. Ind-Ra expects petrol consumption to further increase by eight to 10 per cent in FY17, driven by strong passenger vehicle sales.” Diesel consumption, the rating agency said, is likely to grow by five to six per cent on improved sales of commercial vehicles, however, offset to some extent by lower consumption of diesel in power backup.
September 2016 www.InfralinePlus.com
NewsBriefs | Oil & Gas Indonesia offers 10 blocks for exploration to Petronas
Petronas has been offered to explore 10 new blocks of oil and gas (O&G) fields in Indonesia, said Deputy Prime Minister Ahmad Zahid Hamidi. He said the invitation involving seven exploration blocks in the Exclusive Economic Zone and three in Natuna Island was made by Indonesia’s Coordinating Minister for Maritime
Affairs Luhut Binsar Panjaitan in a meeting. Zahid said with the invitation, Petronas had the opportunity to participate in the open tender by Pertamina, Indonesia’s state-owned oil company, for the exploration of new blocks in other locations. “This is a good offer as Petronas is basically focusing on exploration in Asean countries.” Zahid said the meeting also opened a new chapter for Tenaga Nasional Bhd (TNB) as the utility company had now been allowed to negotiate directly with coal suppliers in Indonesia to ensure a continuous supply of high-quality coal. He said the two countries also agreed that the cooperation between TNB and Perusahaan Listrik Negara (PLN) Indonesia be done on a business to business deal.
Shell assessing possibility of supplying LNG to Pakistan Shell Exploration Company BV is assessing the possibility of supplying Liquefied Natural Gas (LNG) to Pakistan, as it keeps a vigilant eye on developments regarding construction of the second LNG import terminal in the country. “At the moment, the possibility and options of providing LNG to Pakistan are being assessed,” Shell Pakistan said. Recently, Shell Exploration Company BV, Engro Corporation’s Elengy Terminal Limited and Pakarab Fertilizers Limited (a Fatima Group company) signed a joint cooperation agreement to assess the ‘development’ of a liquefied natural gas receiving and re-gasification terminal at Port Qasim, Karachi. “The three parties will continue work to assess the ‘technical
and commercial’ feasibility of the fast-track project before moving it to the final investment decision (FID) to provide the cleanest fossil fuel to help meet the country’s growing energy demands,” it added. Royal Dutch Shell remains an active trader of the gas internationally.
International Australian state to permanently ban onshore gas fracking
The state of Victoria plans to ban shale and coal seam gas fracking in what would be Australia’s first permanent ban on unconventional gas drilling, citing the concerns of farmers and potential health and environment risks. However the government left the door open to allowing onshore conventional gas drilling after 2020. The decision was made despite the fact that most of eastern Australia’s gas supply is produced from coal seam gas and comes as a blow to manufacturers who have been clamouring for more gas supply to help keep prices down. “Our farmers produce some of the world’s cleanest and freshest food. We won’t put that at risk with fracking,” state Labor Premier Daniel Andrews said. Farmers are worried that groundwater reserves could be depleted or contaminated by onshore gas drilling. “Victorians have made it clear that they don’t support fracking and that the health and environmental risks involved outweigh any potential benefits,” Andrews said.
Chevron LNG supply deal with China’s ENN may boost spot market growth Chevron Corp’s LNG supply deal with China’s ENN LNG Trading Co may boost the formation of a spot market for the fuel in Asia. Chevron signed a 10-year term supply deal with ENN to supply up to 650,000 metric tons per annum of LNG with first delivery expected in 2018 or in the first half of 2019, Chevron said. ENN is a subsidiary of ENN Energy Holding, which is one of China’s largest gas distribution companies and operates in 150 Chinese cities. The firm is also constructing a LNG import terminal in the northeastern city of Zhoushan that is planned to start by 2018. Chevron expects to supply
ENN through its existing LNG assets, “including the company’s Australian LNG interests at Gorgon, Wheatstone
and the North West Shelf”, the company said. Companies such as Chevron with the flexibility to match their supply with customers around the world are growing in dominance. By depending on a number of supply terminals rather than simply one site to supply ENN, the deal may help the formation of so-called spot market for LNG. This would help to replace the dominant sales model of multi-year contracts from one supply site to a buyer, said Sophie Corbeau, a research fellow at the King Abdullah Petroleum Studies and Research Center.
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September 2016 www.InfralinePlus.com
InConversation Slow dispute resolution eroding confidence of foreign investors in India Timely and efficient dispute resolution arising out of commercial contracts is key in today’s era where our country is looking to increase investments. Arbitration disputes in India have been rampant in the major sectors including construction, infrastructure, and oil and gas sectors. This is primarily due to the nature of these businesses and exigencies attached in running the business. Ravi Singhania, Managing Partner, Singhania & Partners, LLP and governing member of the Indian Council of Arbitration having a vast experience of more than two decades in handling Arbitration related matters, talks to InfralinePlus on various issues involved in arbitration in these sectors. 42
Please share your outlook towards Arbitration as a mode of dispute resolution in the Infrastructure Sector. Most Infrastructure and Construction projects include Arbitration as a dispute resolution process in their contracts owing to various factors such as speedy disposal, availability of expert panels etc. The Infrastructure sector has gained importance owing to its key role in Economic Growth. However, today the government is facing the challenge of lack of confidence in Foreign Investors to infuse funds in the Infrastructure Sector. Since 2006, 50% of the total inbound private-equity has been made to the infrastructure sector but these projects have seen a lot of delays due to various factors including slow dispute resolution processes. In such a scenario the importance of Arbitration increases manifold and it is important to select the right mode and method of Dispute Resolution while drafting and negotiating these Agreements.
A step forward in this direction has been shown by the legislature by recently introducing appropriate Amendment to the Arbitration and Conciliation Act, 1996 in January 2016. It includes various important changes including an endeavor to complete the arbitration within a year of the commencement. Such modifications are sure to make Arbitration in India as a favorable mode of dispute resolution in this sector. What would you suggest as a preferred mode of Arbitration? There are normally two modes for the conduct of Arbitration, Institutional and Ad-hoc. In Institutional arbitration, the entire arbitration process is administered by a specialized institution like Delhi International Arbitration Centre, Indian Council of Arbitration, Construction Industry Arbitration Council, Singapore International Arbitration Centre, International Chamber of Commerce, etc. Amongst the several advantages of Institutional Arbitration, the most important ones are, having a predetermined procedure in place and
Ravi Singhania, Managing Partner, Singhania & Partners, LLP and governing member of the Indian Council of Arbitration
also the choice of the parties to select an arbitrator possessing the necessary skills, experience and expertise to provide a quick and effective resolution of disputes. Such expertise is useful to the parties in sectors such as Infrastructure, Construction and Energy owing to the technicalities and nuances involved. The major disadvantage of Institutional Arbitration is the heavy costs involved. An Ad-hoc arbitration in comparison is usually less expensive, but the parties are left to determine all aspects of the arbitration themselves, from the number of arbitrators, to the procedure for conduct of arbitration etc. Therefore, where claims are smaller, ad-hoc arbitrations are the preferred form of dispute resolution. The choice of the mode thus would really vary depending on the intention of the parties and the desired results. How important is it to choose the right seat of Arbitration? Identification of the seat of arbitration (which is different from the location
September 2016 www.InfralinePlus.com
where the hearings take place ie the venue), is one of the most important features of an arbitration clause. This is because the selection of the seat determines the law governing the arbitration procedure and often, more importantly, the process and rights relating to seeking of interim relief and enforcement of arbitration award. In view of the same, it is best to specifically mention the seat in the arbitration clause itself and avoid ambiguity. In India, the law of arbitration provides for a simple procedure of enforcement if the seat is located in a country which has signed the New York Convention and with which India has a reciprocal arrangement. However, foreign awards are difficult to enforce in India if the country where the award has been passed has not signed the New York Convention and
does not have a reciprocal arrangement with India. These factors always need to be kept in mind while drafting the Agreement between the parties. Please share your views on Investment Treaty Arbitration? Today Foreign Investors enjoy international legal protection through various investment treaties. The trend of having various Bilateral Investment Treaties (BITs) had begun in India since the 1990’s and has gained greater momentum now. The most important advantage that a foreign Investor enjoys under Investment Treaties is the option to initiate arbitration against the State, with which it has entered into an agreement without approaching their own government. As far as India’s BITs are concerned, most of them have an option of approaching the World Bank’s
In India, the law of arbitration provides for a simple procedure of enforcement if the seat is located in a country which has signed the New York Convention and with which India has a reciprocal arrangement. However, foreign awards are difficult to enforce in India if the country where the award has been passed has not signed the New York Convention and does not have a reciprocal arrangement
International Centre for Settlement of Investor Disputes (ICSID) ICSID or initiating arbitration under the United Nations Commission on International Trade Law (UNCITRAL) rules. A growing number of countries are getting engaged in this mode of dispute resolution and treaty based arbitration is likely to gain more importance in the time to come. What do you think about the dispute resolution under PPP models? Do you think any changes need to be made in the existing regime? As a firm we are dealing with innumerable disputes arising out of PPP projects. The most common form of dispute resolution clauses in Highway projects that we have come across are, that initially the disputes are endeavored to be amicably resolved between the parties, failing which, the Engineer/ Independent Consultant has to give its finding on the disputes. The next step is that the disputes are referred to a Dispute Review Board which places its recommendation within a specified period. If the recommendations are not acceptable to either party, the dispute is referred to arbitration. PPPs in infrastructure are a valuable instrument to speed up infrastructure development in India. For the PPP model to be most effective, the dispute resolution process under these contracts needs to be improved. One method of doing this could be to make the dispute resolution process institutionalized, which could lead to enhanced efficiency. Inspiration can be taken from the National Highways Authority of India which has formulated the Society for Affordable Redressal of Disputes (SAROD) with its own rules for all cases of domestic arbitrations which has lead to evidently faster disposal rates. For suggestions email at feedback@infraline.com
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September 2016 www.InfralinePlus.com
InDepth
Gas-based power plants: Gas-ping for fuel!
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►► Close to 25 gigawatts of gas-based capacity running at less than a quarter of their potential ►► Fourth reverse e-auction to provide subsidy to buy gas likely after October By Team InfralinePlus
With natural gas accounting for just about 9% of India’s overall energy mix, the government is trying hard to increase its 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. Under the government´s revival plan for stranded gas-based power plants, LNG will be imported and cash-strapped state power distribution companies will be financially
supported to buy electricity from them. Though generation from such plants has significantly picked up in the last couple of months, it’s the offtake of power by DISCOMs that is a big challenge. Power plants seldom use high-priced imported LNG as power produced from this fuel would cost much more than the power produced from a domestic gas-fired or coal-fuelled plant and there would be no takers for such expensive power. The fourth reverse e-auction to
provide subsidy to buy gas for running stranded power projects and those operating at sub-optimal level is likely to be conducted after October once the current phase (June to September) ends on September 30. As basic fuel costs increase, especially in thermal coal, more expensive fuels such as LNG will emerge as more viable alternatives. Auctions for the 1st phase (June 1 to September 30, 2015) of PSDF Support to gas-based power plants was
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held in the months of May, 2015. A combined total of 10,270 MW plants were able to secure gas allocation. The entire process was completed in less than a month and gas supply by GAIL started on June 1, 2015. Auctions for 2nd Phase (October 1, 2015 to March 31, 2016) were held in the month of September 2015 and helped in revival of gas-based generation plants with installed capacity of 11,717.72 MW. The country’s gas-fired plants, with nearly 25 gigawatts of generation capacity, are running at less than a quarter of their potential. Transportation costs and taxes have countered the 27% decline in spot LNG prices in the past year. Companies such as NTPC, Essar, GMR, Lanco, GVK, Tata Power, Torrent Power, GSEC, RGPPL (Dabhol) and CLP India are expected participate in the future auction for as many 31
stranded projects and 24 domestic gas-based plants. However, falling price of LNG in the global markets has enabled the government to launch a subsidy scheme to revive gas-based power plants. Recent spot LNG contracts were struck at prices as low as $10.5 per MMBtu, nearly 45% down from year ago period and 25% down from those struck in August 2014. These contracts are for delivery after two months and hence deliveries will be effective from January 2015. There are indications the trend will continue well in future. However, LNG imports will subject these companies to the vagaries of foreign exchange markets, besides natural gas ones. The cost of power generation may go up in the coming years due to low plant load factor (PLF) of thermal plants. The capacity utilization of plants has been going down in the last few years.
Falling price of LNG in the global markets has enabled the government to launch a subsidy scheme to revive gas-based power plants. Recent spot LNG contracts were struck at prices as low as $10.5 per MMBtu, nearly 45% down from year ago period and 25% down from those struck in August 2014. These contracts are for delivery after two months and hence deliveries will be effective from January 2015. There are indications the trend will continue well in future.
According to the Central Electricity Authority, the average PLF has come down to 60% in June 2016 from a high of more than 70% a couple of years back. The position is really worrisome for state units and private entities for whose plants the factor was about 54-57%. Given the limited financial capacity of states, this cannot be a viable power generation unit performance on a sustained basis. There are still a very large number of gas-based plants which continue to be particularly poor performing in view of lack of fuel, which is natural gas, at affordable prices. Fortunately, the international prices of liquefied natural gas are coming down and this should help them improve their performance.
Pricing Policy Another major constraint is the distorted retail pricing structure in the power sector that currently limits the competitiveness of gas-fired generation. As per the Central Government´s Gas Utilisation Policy, NELP producers cannot sell gas on purely commercial basis. The gas is allocated by the government, limiting upstream investments as the high cost of off-shore exploration cannot be recovered from the priority sectors that are highly price sensitive. Power producing companies cannot raise tariffs without the consent of the state electricity boards. If the latter do not agree to an increase, the power company has to either reduce the quantity of power generation or bear the losses. In addition, under subsidy mechanisms, power tariffs are kept artificially low, which fails to send proper pricing signals to those who can adjust consumption to price changes. Similarly, it undermines the cost-recovery prospect of the investors. Hence there has been a demand from the industry for rationalisation of the pricing mechanism to attract investors into this sector. 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
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InDepth
have already been felt in the power sector where the PLF of gas-fired plants during the year averaged only 18.64% (May 2015) 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.
Infrastructural challenges 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
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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% PLF but at the required optimal levels of 80–85%. As the economy grows, it is inevitable that our requirements for natural gas will also grow at a much faster rate than our domestic production. However, our capability to enhance imports is seriously crippled by the capacities of LNG terminals (India currently imports 40 mmscmd of gas annually, while the existing capacity to handle imports is only 60 mmscmd). Hence, it is pertinent for the government to support expansion plans and new greenfield investments on new LNG terminals. According to industry estimates, the gas demand will rise to ~275 mmscmd by 2019-20 and ~330 mmscmd by
As the economy grows, it is inevitable that our requirements for natural gas will also grow at a much faster rate than our domestic production. However, our capability to enhance imports is seriously crippled by the capacities of LNG terminals. Hence, it is pertinent for the government to support expansion plans and new greenfield investments on new LNG terminals Figure 1: State-wise distribution of gas-based power plants in India State-wise distribution of gas based power plants
Others, 3574 MW (15%)
Andhra Pradesh, 7579 MW (31%)
Delhi, 2208 MW (9%)
Gujarat, 7579 MW (31%)
Maharashtra, 3207 MW (13%)
NTPC not keen on buying ‘expensive’ RLNG power State-run NTPC Ltd., India’s biggest power producer, is said to be seeking to terminate a long-term supply contract for imported natural gas as it says the fuel is too expensive to be used in power generation. NTPC signed a 20year contract with GAIL in 2009 to buy 2 million metric standard cubic meters a day of gas. NTPC’s combined 4 GW of gas-fired generation account for about 9% of its total capacity. Its seven gas plants ran at 25% of their capacity in the year ended 31 March, compared with 33% in the prior year. Petronet LNG, India’s biggest gas importer, renegotiated a contract with Qatar’s RasGas Co. for 8.5 million tons of LNG annually through 2025. Petronet sells the fuel to companies including GAIL and Indian Oil Corp., which have their own deals to sell it on to end consumers, such as NTPC.
2024-25, from the current demand potential of more than 225 mmscmd. Natural gas power has the potential to play an important role in meeting India´s energy demand, but some reforms have to be in place if the country has to realise this potential. Several suggestions have been put forward like having an attractive gas pricing to attract investments, development of fully-integrated national gas grid that assures effective third party access etc. Gas supply contracts are characterised by high level of take or pay obligations on fuel buyer. It also needs to be ensured that gas-based plants do not face dispatch risks during their intended hours of operation (peak/intermediate load).Gasbased peaking power if integrated into the total electricity generation system can lead to carbon reduction efficiencies even higher than renewables like wind or solar power. Hence it is suggested to extend the fiscal benefits to gas based peaking power projects at par with the renewable energy projects or Ultra Mega Projectsspecifically, zero customs duties and taxes and interest rate subsidy. For suggestions email at feedback@infraline.com
September 2016 www.InfralinePlus.com
StatisticsOil & Gas Month Wise Crude Oil Processed by Refineries (2016-17) (As on July, 2016) (‘000 MT) OIL COMPANIES Indian Oil Corporation Ltd.(IOCL) IOCL-KOYALI, GUJARAT IOCL-MATHURA, UTTAR PRADESH IOCL-PANIPAT, HARYANA IOCL-HALDIA, WEST BENGAL IOCL-BARAUNI,BIHAR IOCL-GUWAHATI,ASSAM IOCL-DIGBOI,ASSAM IOCL-BONGAIGAON,ASSAM IOCL-PARADIP,ODISHA IOCL TOTAL
APR
MAY
JUN
JULY
TOTAL
1215 797 1316 692 559 75 52 212 394 5313
1240 814 1386 713 577 73 46 215 538 5602
1233 797 1357 682 547 68 43 200 257 5183
1273 755 1400 659 576 86 24 215 697 5686
4962 3163 5459 2747 2259 302 164 841 1887 21784
Hindustan Petroleum Corporation Ltd.(HPCL) HPCL-MUMBAI,MAHARASHTRA HPCL-VISAKH,ANDHRA PRADESH HMEL-GGSR, BATHINDA, PUNJAB HPCL-TOTAL
714 804 920 2438
725 815 945 2485
623 798 878 2299
689 731 909 2329
2751 3148 3652 9552
Bharat Petroleum Corporation Ltd (BPCL) BPCL-MUMBAI, MAHARASHTRA BPCL-KOCHI, KERALA NRL-NUMALIGARH, ASSAM BORL-BINA BPCL-TOTAL
1146 895 217 534 2791
1169 933 238 617 2957
1163 897 233 532 2825
1210 923 237 502 2872
4688 3647 925 2184 11444
Chennai Petroleum Corporation Ltd (CPCL) CPCL-MANALI, TAMILNADU CPCL-NARIMANAM,TAMILNADU CPCL-TOTAL
821 56 877
807 50 856
878 33 911
951 48 1000
3457 187 3644
Oil & Natural Gas Corporation Ltd.(ONGC) ONGC-TATIPAKA,ANDHRA PRADESH MRPL-MANGALORE,KARNATAKA ONGC TOTAL
7 1166 1173
6 1232 1239
8 1274 1282
7 1332 1339
28 5004 5032
Reliance Industries Ltd. (RIL) RIL,JAMNAGAR,GUJARAT RIL-(SEZ), JAMNAGAR,GUJARAT RIL TOTAL
2732 3115 5846
2856 2183 5039
2727 3215 5942
2814 3425 6239
11129 11937 23066
ESSAR OIL LTD.,VADINAR,GUJARAT
1719
1779
1720
1760
6978
20157
19955
20162
21224
81499
GRAND TOTAL
Production of Petroleum Products by Refineries and Fractionators (Apr-July,2016) (‘000 MT) PRODUCTS LPG NAPHTHA MS-III MS-IV MS Others ATF SKO HSD-III HSD-IV HSD Others LDO LUBES FO LSHS BITUMEN RPC/Petcoke Others TOTAL
APR 841 1361 815 762 1392 1159 507 2805 2448 2784 35 79 1037 18 590 979 1937 19548
MAY 870 1364 887 804 1525 1057 583 3004 2501 2602 37 87 1131 29 578 962 2068 20090
JUN 906 1529 867 734 1436 1170 586 2932 2421 3303 25 94 925 28 475 1065 1705 20201
JULY 954 1738 799 831 1438 1114 616 2893 2719 3426 30 93 1038 22 268 1104 1624 20707
TOTAL 3572 5992 3369 3131 5792 4500 2292 11634 10089 12116 127 353 4131 97 1911 4110 7333 80547
REFINERIES
19295
19796
19924
20406
79421
FRACTIONATORS
253 19548
294 20090
277 20201
301 20707
1126 80547
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StatisticsCoal Production and consumption of petroleum products (Million Metric Tonnes) Products LPG MS NAPHTHA ATF SKO HSD LDO LUBES FO/LSHS BITUMEN OTHERS ALL INDIA Growth (%)
April-March 2016 (P) ConProdn sumpn 10.6 19.6 35.3 21.8 17.7 13.4 11.8 6.2 7.5 6.8 98.6 74.6 0.4 0.4 1 3.2 10.7 6.7 5.2 5.8 32.5 24.9 231.3 183.5 4.80% 10.90%
15-Jul Prodn Consumpn 0.8 1.6 3 1.7 1.4 1.2 0.9 0.5 0.7 0.6 7.9 5.7 0.04 0.03 0.08 0.3 1.1 0.5 0.3 0.3 3 2 19.2 14.4 8.50% 8.00%
July 2016 (P) Prodn Consumpn 1 1.7 3.1 1.9 1.7 1.1 1.1 0.6 0.6 0.5 9 5.8 0.03 0.04 0.09 0.3 1.1 0.6 0.3 0.3 2.7 2.2 20.7 14.9 8.00% 3.90%
April-July 2015 Prodn Consumpn 3.2 6 10.9 7.1 5.7 4.4 3.3 2 2.4 2.3 32.1 24.9 0.1 0.1 0.3 1.1 3.7 2.1 1.7 1.9 10.7 7.6 74.2 59.3 3.90% 6.90%
April-July 2016 (P) ConProdn sumpn 3.6 6.5 12.3 7.8 6 4.4 4.5 2.2 2.3 2.1 33.8 25.9 0.1 0.1 0.4 1.1 4.2 2.4 1.9 2.1 11.4 8.8 80.5 63.7 8.50% 7.30%
Note: Prod” - Production; Consump” - Consumption
Refineries: Installed capacity and crude oil processing (MMTPA/ MMT) Crude oil processing July April-July Refinery 2015 2016 2016(P) 2015 2016 (Actual) (Target) (Actual) (Target) IOCL Barauni (1964) 6 5.9 6.5 0.5 0.4 0.6 2.1 2.1 Koyali (1965) 13.7 13.3 13.8 1.3 1.3 1.3 4.2 4.8 Haldia (1975) 7.5 7.7 7.8 0.7 0.7 0.7 2.6 2.7 Mathura (1982) 8 8.5 8.9 0.8 0.7 0.8 2.9 2.9 Panipat(1998) 15 14.2 15.3 1.2 1.3 1.4 5.1 5.2 Guwahati (1962) 1 1 0.9 0.1 0.08 0.09 0.37 0.32 Digboi (1901) 0.7 0.6 0.6 0.05 0.01 0.02 0.18 0.18 Bongaigaon(1979) 2.4 2.4 2.4 0.2 0.2 0.2 0.9 0.8 Paradip (2016) 15 1.8 0 0.9 0.7 0 3 IOCL TOTAL 69.2 53.6 58 4.7 5.5 5.7 18.3 22 HPCL Mumbai (1954) 6.5 7.4 8 0.7 0.7 0.7 2.3 2.6 Visakh (1957) 8.3 8.8 9.2 0.5 0.5 0.7 2.6 2.7 HMEL Bathinda (2012) 9 7.3 10.7 0.9 0.8 0.9 3.6 3.1 HPCL-TOTAL 23.8 23.5 27.9 2.1 1.9 2.3 8.6 8.4 BPCL Mumbai (1955) 12 12.8 13.4 1.1 1.1 1.2 4.5 4.6 Kochi (1966) 9.5 10.4 10.7 0.9 0.9 0.9 3.7 3.6 BORL Bina (2011) 6 6.2 6.4 0.6 0.5 0.5 1.8 2.1 BPCL-TOTAL 27.5 29.4 30.5 2.7 2.6 2.6 9.9 10.3 CPCL Manali (1969) 10.5 10.2 9.1 0.7 0.9 1 3.4 3.5 CBR(1993) 1 0.5 0.5 0.05 0.05 0.05 0.18 0.2 CPCL-TOTAL 11.5 10.8 9.6 0.8 1 1 3.6 3.7 NRL Numaligarh (1999) 3 2.8 2.5 0.3 0.2 0.2 0.7 0.9 ONGC Tatipaka (2001) 0.1 0.1 0.1 0.005 0.004 0.007 0.019 0.013 MRPL Mangalore (1996) 15 14.6 15.5 1.1 1.1 1.3 5 5 ONGC TOTAL 15.1 14.7 15.6 1.1 1.1 1.3 5 5 RIL* Jamnagar(DTA)(1999) 33 30.9 32.4 2.8 2.8 2.8 10.3 10.3 Jamnagar(SEZ)(2008) 27 37.2 37.1 2.5 2.5 3.4 11.6 11.6 EOL Vadinar (2006) 20 20.5 19.1 1.8 1.7 1.8 6.9 6.8 All India 230.1 223.3 232.9 18.7 19.3 21.2 74.9 79 * RIL target for 2016-17 is previous year crude processing. Note: Some sub-totals/totals may not add up due to rounding off at individual levels. Company
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Installed capaci2014-15 ty (1.4.2016)
201516 (p)
2016(P) 2.3 5 2.7 3.2 5.5 0.3 0.16 0.8 1.9 21.8 2.8 3.1 3.7 9.6 4.7 3.6 2.2 10.5 3.5 0.19 3.6 0.9 0.03 5 5 11.1 11.9 7 81.5
September 2016 www.InfralinePlus.com
NewsBriefs | Renewable
International
Govt mulling subsidised solar water pumps for farmers in all states
In a move to promote farm activities using solar power in the country, mostly in rural areas, the Central Government is mulling subsidised solar water pumps of different capacities (horsepower or HP) for farmers in almost all states soon. The subsidy of such pumps is expected to raise upto 95 per cent for farmers and it will vary from state to state, depend-
ing upon their agricultural production and demand. The cost of the rest amount will be borne by both Central and State Governments. “The Government is in process to provide solar water pumps in subsidised rates to the farmers of almost all states in the country. Haryana has already started this initiative, and I think other states will follow soon. The aim of Government is to ease the farm activities in productive way and ease the farm activities across the country, mostly in rural areas,” said officials in the Ministry of New and Renewable Energy. It is expected that the subsidy may vary from 75 to 95 per cent to meet the demand of the farmers, while the cost of pumps from 5 to 25 per cent will be borne jointly by both Central and State Governments.
Adani’s solar equipment mfg facility may commence by year-end Gautam Adani-led Adani Enterprises is expecting to commission the first phase of its solar power equipment facility being set up in Gujarat by year-end. In the first phase, the company, which has set up a special purpose vehicle (SPV) Mundra Solar PV for the project, is setting up 1,200 MW of manufacturing capacity and will invest Rs 2,000 crore. In the second phase, the company will not only enhance the capacity to 2,000 MW but also manufacture other components like silicon wafers, PV back sheets among others. The second phase of the project is likely to go operational in the second quarter (April-June) of 2017. This facility will vertically integrate all aspects
of solar panel production on site, including polysilicon refining, ingots, wafers, cells, PV back sheets and panels production, with a broader ecosystem involving extended supply chain for raw materials and consumables.
National
Gujarat becomes the first state to distribute 2 crore LED Bulbs under UJALA
Gujarat has become the first state to distribute 2 crore LED bulbs Under the Government’s Unnat Jyoti by Affordable LEDs for all (UJALA) scheme. Gujarat has reached this milestone in 96 days and over 42 lakh households have benefited from the scheme. Indian Prime Minister Narendra Modi while congratulating Gujarat on the achievement said, “There is competition between states to outdo each other in terms of LED distribution. Gujarat, in less than 100 days is now leading in terms of LED distribution across the nation. I congratulate the entire team for implementing the LED Bulb programme. I am confident that every household in Gujarat will adopt LEDs and save on electricity bills. The state will save a lot of energy and will also lead the way in helping protect the environment”. The distribution of 2 crore LED bulbs has led to an annual energy savings of 259 crore kWh which is equivalent to lighting up 5 lakh Indian homes for an entire year.
US assures to provide finances to India for renewable energy US has assured India of “doing more” by providing it finances for innovative renewable energy projects while asserting that it is the “only way” of meeting the challenge of climate change. US Secretary of State John Kerry said that the civil nuclear cooperation between both the countries will bring affordable and clean energy to tens of millions of Indian households. “To build on our shared leadership in combating climate change, the US is going to do more to help India upgrade its power grid and work with our private sector in order to help provide financing for innovative renewable
energy projects and clean energy entrepreneurs.”That is the only way we will have a chance of adequately meeting the promise of Paris and adequately meeting
the challenge of climate change,” Kerry said during the joint press interaction with External Affairs Minister Sushma Swaraj during Second India-US Strategic and Commercial Dialogue. He said that US will soon make the promise made by more than 190 nations at the Paris Climate change summit last year a “reality” by officially joining the global climate agreement. “Our civil nuclear cooperation will bring affordable clean energy to tens of millions of Indian households as we move closer in the use of safe, modern, latest generation nuclear power.”
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September 2016 www.InfralinePlus.com
NewsBriefs | Renewable Government plans two funds to charge up power sector
The power ministry plans to set up two funds of $1billion each to enable alternative financing options for stressed power assets and renewable energy projects. The two funds have been proposed under the ambit of the National Investment and Infrastructure
Fund (NIIF). “NIIF is the fund of funds within which we will set up a sub-fund which will focus on renewable energy projects and give investment support for faster ramp up of renewable energy. It is under our active consideration and we may launch it in the near future,” power minister Piyush Goyal said. “We are also in dialogue with certain bankers to see if we could look at a stressed power asset fund. It may take us some more months to put its framework in place.” Asked about the size of the funds, Goyal said, “Each of these funds could easily be of the size of $1billion.” The government set up the Rs 40,000 crore NIIF in as an investment vehicle to fund commercially viable greenfield, brownfield and stalled projects.
Govt to set up Rs 1.5k crore payment security fund for solar projects
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Government is in the process of setting up a Rs 1,500-crore fund to avoid delays in releasing viability gap funding (VGF) to solar power developers under the Jawaharlal Nehru National Solar Mission (JNNSM). “State-run Solar Energy Corporation of India (SECI) will set up a Rs 1,500 crore payment security mechanism (PSM) to ensure timely payment of VGF to the developers of solar power capacities under the JNNSM,” a senior official said. The official further said, “This fund will have a corpus to cover three months payment for the various VGF schemes approved by Ministry of New & Renewable Energy (MNRE) from time to time.” The fund is significant as the government has set the target of adding
100GW of solar power by 2022. The fund will also cover delays/defaults in payments to SECI by entities (discoms/state utilities/ bulk consumers), so that timely payment to developers could be ensured.
National MNRE seeks comments to standardise norms for solar equipment
In a bid to standardise norms for solar equipment, the Ministry of New and Renewable Energy has sought comments from various stakeholders on technical regulation for the sector. Toughening its stand on dumping of poor quality solar equipment, the government had earlier decided to regulate imports of such products under the Bureau of India Standards (BIS) Act. “In view of enhanced target of 100 GW Solar Power by 2022, the ministry has decided to bring out technical regulation for Solar Photovoltaic Systems/Devices/Components Goods,” a senior ministry official said. This exercise is part of the process of bringing out a Lab Policy for Renewable Energy Sector for Testing, Standardisation and Certification, he said adding that the comments can be provided by September 6, 2016. Once the standards are inserted in the rules of BIS Act, the importers would have to seek certified test reports of the products under the order.
ReNew Power targets 3.500 Mw extra capacity every year The Goldman Sachs-supported ReNew Power plans to add 3,500 Mw every year to maintain its share of 10 per cent green capacity by 2020. The company, which has 1,130 Mw of commissioned capacity, will require $10-12 billion funding, of which equity will be around $3 billion. India plans to add 175 Gw capacity by 2020, for which 35,000 Mw will need to be added every year. “Of this 35,000 Mw, we plan to take a 10 per cent share,” Sumant Sinha, founder and chief executive officer, ReNew Power said. ReNew Power would require $8-10 billion in debt funding over the next five years. The company is looking at funding options, including private
placement of equity and an initial public offer. ReNew Power had last year planned an IPO but put it on hold. Besides Goldman Sachs, which has invested $385 million in equity, the company has funding from the Asian Development Bank, the Abu Dhabi Investment Authority and the Global Environment Fund.
It has raised $650 million equity and has an asset base of $2 billion. Sinha said the Centre was promoting renewable energy but there were state-level issues like grid curtailment. He said the next stage of capacity addition in renewable energy would have to be driven by grid management through forecasting and scheduling. “Savings through this have to be understood better and transferred to bidders as an incentive, currently this goes to the states,” he said. He said with the roll-out of the debt restructuring scheme for power distribution companies, their finances were likely to improve, giving them more space to buy power.
September 2016 www.InfralinePlus.com
NewsBriefs | Renewable
International
Odisha targets 70 Mw rooftop solar projects by 2022
In an effort to harness the non-conventional sources of energy, Odisha targets to generate 70 Mw exclusively from rooftop solar projects by 2022. “The target to generate 70 Mw from rooftops is likely to see an investment of around Rs 500 crore. The
projects are likely to be taken by the government, private companies and individuals,” said a government official. In 2016-17 and 2017-18, the Green Energy Development Company Ltd (Gedcol), the nodal agency for implementation of renewable energy projects, will implement 10 Mw roof top projects at a cost of around Rs 80 crore. Recently, the Odisha government has signed implementation agreement with Azure Power Mercury Pvt Ltd for developing the country’s first grid connected Mw scale roof top project on net metering basis. It will be a four Mw project to be set up on about 190 government buildings in the twin cities of Cuttack and Bhubaneswar.
Madhya Pradesh to provide state guarantee for 750 Mw Rewa ultra mega solar project To ensure viability of its ultra mega solar park at Rewa, the Madhya Pradesh government is slated to extend state guarantee to the flagship project. This would ensure that there won’t be any default in payment to the Rewa Ultra Mega Solar Ltd (RUMS), a joint-venture of the state’s Urja Vikas Nigam and the Union government-controlled Solar Energy Corporation of India. The park is expected to have a capacity of 750 Mw. Nearly 75 per cent power generated would be procured by the Madhya Pradesh Power Management Company (MPPMC) and the balance 25 per cent by Delhi Metro Rail Corporation (DMRC). Besides, the implementation support agreement and coordination agreement would also be signed since
separate power purchase agreements (PPAs) would be signed for drawing power by each of the procurers. This apart, the land use purchase agreement will be signed for the 1,530 hectare of land required for the project.
States
43 per cent solar street lights nonfunctional in Gujarat, says CAG
Despite incurring huge expenditure, the purpose of installing solar photovoltaic street lighting system for the rural populace in Gujarat has been defeated, says the Comptroller and Auditor General of India (CAG) that not only found 43 percent of these systems non-functional, but also found several of them installed within the residential premises of elected gram panchayat members or private parties. The state government had executed the work of installation of solar street lighting systems under the Samras Yojana and MPLAD schemes. During field visits, CAG found that in three gram panchayats — Naglod, Ranela and Shanbar — four of the solar street lighting system were installed in the premises of private parties while in Dehari and (Umargaon) Ranela gram panchayat (Santrampur), it found 15 such systems installed in the residential premises of elected members of gram panchayat which was in contravention to the provisions of the scheme guidelines, stated a CAG report on local bodies.
UP becomes lab for green energy firms looking to tap rural market Uttar Pradesh, home to about 16% of India’s 1.2 billion population, many of whom have poor or no access to power, is emerging as the preferred testing ground for non-profits and companies trying out new business models as they seek to tap rising demand for electricity in rural India. Across the state, these organizations are testing the viability of supplying electricity from mini-grids and solar-powered lighting systems specially designed for villages and small enterprises. The first customers are telcos whose telecom towers in remote parts of the country have, until now, been powered by diesel generators;
and shops, even individual households, in villages that were hitherto illuminated by kerosene lanterns. According to Zia
Khan, vice-president, initiatives and strategy at the Rockefeller Foundation, which has committed $75 million of debt financing and early investment capital to energy services companies in India, the market for mini-grids in Uttar Pradesh is promising. “More consumers are signing up, no one has dropped out of the minigrid ecosystem and more energy service companies are coming up,” said Khan. The foundation provides finance for setting up micro-grids, helps these utilities in finding anchor customers (mostly telcos), and in marketing power to households and small commercial establishments.
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September 2016 www.InfralinePlus.com
NewsBriefs | Renewable Sri Lanka eyes 70% renewable energy share in power generation by 2030
Sri Lankan government intends to significantly increase the share of renewable energy in electricity generation by the end of the next decade. Sri Lankan Cabinet of Ministers has approved a ‘Battle for Solar energy’ program which aims to boost the
sustainable power generation in the country. The ‘Battle for Solar energy’ program aims to encourage the small consumers to install solar panels at their roof-tops and consumers will be paid for any excess energy exported to the grid. With this new program, government expects that at least 20% of the consumers produce electricity on their own. Deputy Minister of Power and Renewable Energy Ajith P. Perera said that, for excess energy exported to the national grid, electricity board is ready to pay feed-in tariff for power generated by the consumers. The scheme will be implemented in stages and first stage will cover Northern, Southern and Eastern Provinces.
Chile breaks Dubai’s record of solar power output at low cost
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Chile has broken Dubai’s record of promising to produce solar at the world’s cheapest rates. During June, Dubai announced that it would produce solar power at Rs 2.01 per unit in June, in August Chile broke the record with a new low of Rs 1.95 per unit. According to reports, SunEdison set a new record-low solar bid at 2.91¢ents per unit. This beats the 2.99 cent per unit Masdar Consortium’s bid for an 800 MW solar power project in Dubai. As part of an auction held in Chile this month, power producers were asked to bid on the price at which they could supply power irrespective of the generation source. Solar won the war that too at a new record low. “These new lows are increasingly turning out to be threat for thermal
power generation. However, the intermittent nature of these renewable sources would either require large power storage systems or thermal power to be the base load,” said an analyst. “Solar power plants does not generate power during cloudy days and at night. Wind power can suddenly stop.
International Indonesia will add 5 GW of solar over next 3 years through feed-in-tariffs
Solar electricity in Indonesia could grow markedly in the next few years, through the use of Fits. The Ministry of Energy & Mineral Resources (ESDM) has issued a Government Decree to provide support mechanisms for utility-scale solar photovoltaic systems, exhibition and management services. The driving support mechanism will be the solar FiT priced at up to USD 0.25 per kWh. The fundamental points of this decree involve Feed-in-Tariffs (FiTs) for solar power from USD 0.145 cents to USD 0.25 per kWh of solar power. The goal of this decree targets adding 5.000 MWp of solar PV capacity in 2-3 years. The ESDM is optimistic that projects will be implemented smoothly. This program will offer quotas to Independent Power Producers (IPPs). Through the regulation, Indonesia could get an additional investment of up to Rp 156 trillion (USD 12 billion). The government of Indonesia has set aside USD 100 million for subsidizing renewable energy in 2017.
Pakistan to add 1 GW of wind energy capacity by 2018 Pakistan is expected to see a huge jump in installed wind energy capacity over the next two years as 21 projects are lined up for commissioning. Government officials in Pakistan have revealed that almost two dozen wind energy projects are currently at various stages of development, and 1,012 MW capacity is expected to be added to the grid by 2018. All of these projects are being developed in the eastern province of Sindh, which shares an international border with the Indian states of Rajasthan and Gujarat. These states have some of the largest installed wind energy capacities among all Indian states. A number of foreign companies are planning these proj-
ects, including China Three Gorges Corporation, China Sunec Energy, and Tricon Boston Consulting Corporation. Nine projects with a cumulative capacity of 479 MW have already achieved financial closure and are currently
under construction. Six projects with 308 MW of capacity are already operational. The Sindh government has taken several measures to promote the renewable energy sector. Last year, it approved the allocation of 15,089 acres of land to set up 21 solar and wind energy projects, amounting to a total installed capacity of 1,880 MW. The government will also allocate an additional 6,622 acres land for 12 more renewable energy projects later. Several European and Chinese companies have already invested in Pakistan’s renewable energy market. Foreign investors poured over $3 billion into the renewable energy sector in Pakistan over the last year.
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September 2016 www.InfralinePlus.com
ExpertSpeak
The first signs of stress in solar power Shravan Sampath, CEO, Oakridge Energy - a specialized stressed asset re-construction company in the power sector – talks of how policy making in the solar power sector is currently driving growth but could result in substantial stressed assets due to various financial challenges facing the solar industry in India.
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The year that went by saw some pathbreaking achievements in solar capacity additions – over 3,019 MW of new capacity added, and tendering of over 21,000 MW. Large developers like Sun Edison, SoftBank and Fortum drove bidding to record lows, and tariffs have now settled at Rs. 4.3 / kWh, among the lowest in the world. Is it time to rejoice about the grand success of our solar mission? Is it time to make even grander targets for the coming year? Or does all this appear to be a prelude to another meltdown as was seen in the thermal power sector after years of aggressive growth up until 2012?
Structural flaws in bidding The present bidding framework for solar power suffers from several structural flaws. For starters, it is unclear why states are indulging in so much tendering, while it appears they really have no demand for such large volumes of power. Several bids have defied reason. For instance, on the one hand, the state of Jharkhand already has backed out of PPAs from several thermal power plants citing lack of demand. On the other hand, they have called and successfully concluded 1200 MW of solar bids. Telangana, a state with a total installed capacity of 5850 MW, has called and concluded bids for 2000 MW of solar power (over 35% of its total installed capacity). It is unclear why states need so much contracted long-term power, particularly when
spot power markets are trading at historic lows and power is available at Rs. 2 / kWh for the taking. In fact, several states like Haryana, Uttar Pradesh, Punjab and Rajasthan are backing down installed capacities due to lack of demand in Shravan Sampath, CEO, Oakridge Energy the backdrop of Solar an intersector national Local villagers and leaders take adneeds to evolve demand vantage of this pressure by making specialist lenders drop and land acquisition and transmission that are accurately line difficult. It would make far decline in able to identify commodmore sense for the government to risk and finance ity markets. stipulate upfront that the developIn addition, ment timeline is twenty-four months. projects over 20,000 Developers would be free to take MW of thermal advantage of any future likely drop in power capacity is lying idle and shut panel prices. In any case, distribution down due to lack of buyers and a longutilities are facing no great pressure term PPA. of power shortage for them to require construction of solar projects in such a tearing hurry. Stringent timelines Another area of concern is the stringent timelines for completion of solar power Need to impose adequate plants. Most bids stipulate financial bank guarantees closure within seven months of PPA Perhaps this solar hysteria is being signing, and commissioning within fuelled by the fact that most states are fifteen months. The stated rationale not imposing adequate bank guarantees appears to be that the government (bid bond guarantees) for bidders does not want the developers to take to participate. States like Telangana advantage of falling solar panel prices. had bank guarantees of only Rs. 10 However, this stringent timeline makes lakh / MW while calling for tenders proper appraisal by banks virtually imfor over 2000 MW. This brings in all possible, and lending is becoming more kinds of non-serious bidders who are and more ad-hoc. The fifteen-month only interested in picking up projects stipulation for project execution also to sell in the secondary market. It is puts undue pressure on the developer. precisely for this reason that the market
September 2016 www.InfralinePlus.com
is today flooded with over 3000 MW of solar power projects for sale where the bidders had won at attractive tariffs but have no intention to build. Since the PPA stipulates that these projects are not to be sold before achieving commissioning, complicated but frail option structures are suggested by bright lawyers to circumvent these provisions. Several of these structures are waiting to fail in case the original seller decides to play foul after the project is fully built. The biggest challenge in development of solar capacities is the payment risks of such high priced PPAs. Most states continue to be in a precarious financial situation, and it’s very likely that they may default on such high priced PPAs. This could have a trigger effect across the solar sector and result in a string of nonperforming assets.
Systemic risks to power sector As the size of our solar power sector increases in size, it poses several
systemic risks to the power sector. For instance, for all the path-breaking capacity additions, we do not have a long term proven track record as we do for wind power or hydro power. Such large capacity additions are being funded by banks without
While developers are equally in the dark, lenders and other stake holders are only to be content with manufacturer performance commitments that are supposedly valid for 25 years. However, in the volatile world of solar bankruptcies, it remains to be seen whether these manufacturers would be able to sustain themselves for 25 years in order to fulfill these commitments
adequate track record of stable performance. While developers are equally in the dark, lenders and other stake holders are only to be content with manufacturer performance commitments that are supposedly valid for 25 years. However, in the volatile world of solar bankruptcies, it remains to be seen whether these manufacturers would be able to sustain themselves for 25 years in order to fulfill these commitments. In the last five years, we have seen several new issues coming up in solar project performance, such as the potential induced degradation (PID) issue that could result in almost 50% degradation in 5 years. With loans of over Rs. 71,000 crore sanctioned to the green energy sector, with most of this to the solar sector, it appears that our solar power sector needs to evolve specialist lenders that are accurately able to identify the risk and finance projects in the solar power sector. The views in the article of the author are personal. For suggestions email at feedback@infraline.com
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September 2016 www.InfralinePlus.com
InConversation
Smart Cities are as much about infra as about citizens Cities are projected to be the primary growth drivers of the economy in coming years. But most of the Indian cities are overcrowded and their infrastructure overstretched to cope with the needs of growing population. The Modi government has launched ambitious projects to rejuvenate existing cities even as new urban centres are proposed on the North-East and North-West corridors. Pradeep Misra, CMD, REPL (Rudrabhishek Enterprises Pvt Ltd), a leading urban planner and infrastructure consultant, shares his views on Smart City mission and urban development. Excerpts:
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What are Smart Cities all about? A lot of new investment was expected to pour into such projects. But now it turns out states are passing off existing projects as Smart City projects. What is your take on that? See, it has always been so. States tend to restructure their existing projects to secure central government funding. So it would not be surprising if states are doing so under Smart City Mission. Smart City Mission is a positive thing. Infrastructure will improve in 100 cities that are to be taken up for rejuvenation under the Smart City Mission. When that happens, it would act as a catalyst for other cities. So overall, Smart City projects will have a positive effect on urban infrastructure. In what ways, Smart Cities will be different from traditional urban infrastructure? Smart City is not an alien concept. The purpose of the Smart Cities is to optimise infrastructure to match with the requirements of the population. If citizens can lead their lives in a hassle-free manner, then a city is called a Smart City.
Do you think not only existing cities should be rejuvenated but new ones too be developed under the Mission? Some new cities have come up on their own and some have been developed by governments. Ghaziabad was not there before 30 years but it has now become a city. Noida was just a just village of Ghaziabad tehsil then. But now Noida has overtaken Ghaziabad in importance. Urban development happens only under two situations – first, when there is a big city that acts as a magnet and the other, when development is induced through development of some mega project. Delhi is a magnet that attracts investment and it is an example of the first model. The other scenario in which development happens is when some big power plant or refinery is set up at a place that spurs development of urban infrastructure in the area. For example, along the North-east and north-west corridors being built with Japanese help, several large urban centres are proposed. If we look back at the 1947-2000 period of our country, we find that
Pradeep Misra, CMD, REPL (Rudrabhishek Enterprises Pvt Ltd)
the government focus was mostly on villages due to the political necessity of keeping in good humour rural population which was large in size. Because of this village-centric approach, urban centres got ignored. Existing infrastructure built by the Britishers in cities were meant for a certain population and had a certain life. Not surprising if these cities have become overcrowded. India has planned massive investment in urban infrastructure. What do you think are challenges in undertaking development? The biggest challenge is our legal set-up. Due to socialist mindset of our country, there are lots of challenges in infrastructure development. For any large scale infrastructure development, we need support from both the central and state government. Certain issues are central government issues, certain issues are state government issues. In
September 2016 www.InfralinePlus.com
a number of cases, their policies are not in alignment. The second concern is inconsistency in policy. Our governments take policy decision and people move on that. But when half of the work is completed, policy is relooked at by the government or by court or by media trial. Policy is again reworked. Credibility of policy is a big question mark on arrival of big investment. There is a sudden change in policy. Policy decisions taken by the government over the last 50 years
have been overturned, relooked or challenged. Most of the policies were either scrapped or amended. So there is a big question mark over the sanctity of the policy. Government has eased conditions for foreign direct investment inflows into real estate. What do you think will be its impact on the sector? FDI norms for the real estate sector were never so liberal. Permission has been allowed for foreign fund inflows
There is no fund shortage for smart city projects. World situation too is favourable as no other major economy is doing as well as India. If investors do not get return, they will never invest. If investors are unable to get their money out, then also they will not bring money. Municipalities in India are not groomed to handle largesized infrastructure projects
even into those projects which are otherwise not FDI-compliant. Hopefully results should be good. Policy change is a kind of revolution, which was not expected. In India, our cities are overburdened by population. If services are delivered to users in a hassle-free manner, then it is a smart city. Security concerns are electronically managed. Infrastructure is optimised to cater to the requirement of population. Smart cities are as much about infrastructure as about citizens. There is no fund shortage for smart city projects. World situation too is favourable as no other major economy is doing as well as India. If investors do not get return, they will never invest. If investors are unable to get their money out, then also they will not bring money. Municipalities in India are not groomed to handle large-sized infrastructure projects. Municipalities will never take unpopular decisions. For suggestions email at feedback@infraline.com
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September 2016 www.InfralinePlus.com
InDepth
As solar rooftop goes slow, govt doubles target for solar parks
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►► Presently 21 solar parks have been approved with a cumulative capacity of 19,900 MW ►► Govt banks on aggressive mode shown by the developers in recent solar auctions By Team InfralinePlus
The Ministry of New and Renewable Energy (MNRE) is planning a second phase of setting up solar parks across the country with comprehensive plans to increase the capacity to about 40 GW. The ministry is also said to have sanctioned plans to implement 10 ‘Solar Zones’ each consisting of at least 10,000 hectares of land to encourage solar PV project developers, manufacturers and investors to help achieve the country’s massive 100 GW by 2022 solar targets. This scheme, which will run up to 2020/21 using government or privately-owned
wasteland, uncultivable land or fallow land, will receive significant portion of the funding from the central government. Moreover, the U.S. Agency for International Development (USAID) and the Asian Development Bank (ADB) have already signed a memorandum of understanding (MoU) with the central government to provide $848 million of funding for the development of solar parks across the country. The zones will be able to cover more than one patch of land at a time. To count as a solar zone, it must be possible to install transmission
systems in an economically feasible manner on site. The difference between Solar Zones and Solar Parks is that the Government will only facilitate the purchase of land for the zones, but will not actually acquire it. Furthermore, instead of having transmission provided, solar zones will have several interconnection points set up in a manner that prevents any developer from having to build a line for more than 25 kilometres. JNNSM, Guidelines for Development of Solar Parks, which was released by the MNRE in Feb-
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ruary this year, states, “The solar park is a concentrated zone of development of solar power generation projects and provides developers an area that is well characterised with proper infrastructure and access to amenities and where the risk of the projects can be minimised. Solar Park will also facilitate developers by reducing the number of required approvals.”
Present status At present, the Ministry has approved solar parks in 21 states with a cumulative capacity of 19,900 MW. Phase II of the program will add another 20 GW of capacity. India plans to have 100 GW of operational solar capacity by March 2022. This includes 20 GW from solar parks and 40 GW from rooftop solar power projects. However, the
market response to rooftop solar has been rather weak compared to the solar park program. Industry watchers have expressed doubts about the huge rooftop solar target. This, perhaps, could be a reason for increasing the capacity addition target under the solar park program. Last year, Reliance Group had signed an MoU to develop Solar Park and Solar Projects of 6,000 MW capacity, spread over nearly 30,000 acres, over next six years, with a potential to attract investment of about INR 60,000 crore in Rajasthan. In the first phase, the MNRE provided financial support through viability gap funding (VGF) of INR 20 lakh per MW, or 30% of the cost of developing the park, whichever was lower. This may be increased in the second phase if storage is
Another encouraging measure has been the move to develop a separate project for evacuation of power from solar parks. The state-owned Power Grid Corporation of India (PowerGrid) aims at evacuating power from 20 solar parks planned by 12 states. Accordingly, inter-state lines will be laid by the corporation and the intrastate ones will be installed by state transmission utilities or by calling tenders.
included. Bids for the first ever solar projects to include storage at scale have been invited in the latest round of tenders in India. The preliminary program, first announced in March, involves the states of Andhra Pradesh and Karnataka, as well as the Solar Energy Corporation of India (SECI), who will implement 300 MW of solar and storage large-scale projects and will seek two initial, 50 MW bids in Andhra Pradesh. These solar projects will also be developed with a 5 MW/2.5 MWh battery storage system included, and the same specifications are also being outlined for four 50 MW solar parks in Karnataka. Each park under Phase-I has a solar power park developer (SPPD) —usually, a venture between the SECI and the nodal agency for renewable energy in the state where the project is coming up. The scheme has been conceived on the lines of ‘Charanka Solar Park’ in Gujarat which is a first-of-its-kind large scale solar park in the country with contiguous developed land and transmission connectivity. This scheme envisages supporting the states in setting up solar parks at various locations in the country with a view to create required infrastructure for setting up of solar power projects. The solar parks will provide suitable developed land with all clearances, transmission system, water access, road connectivity, communication network, etc.
Govt banks on aggressive bidding The government is banking on the aggressive mode shown by the developers in recent auctions for the success of solar park scheme. The latest Indian solar auction has seen wining tariffs return to extreme lows at INR 4.35/ kWh for 130 MW of PV in the Indian state of Rajasthan. The auction, held by NTPC, was for capacity outside solar parks and the three successful players were all Indian firms.
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September 2016 www.InfralinePlus.com
InDepth
Details of 130 MW PV solar project auction in Rajasthan Developer
Bid (INR/kWh)
Capacity (MW)
Shapoorji Pallonji
4.35
50
Mahindra Susten
4.35
60
Adani
4.36
20
Source: PV Tech, Bridge to India
Oil refineries plan to diversify into solar now! Indian downstream oil companies are the latest to express interest in developing large-scale solar power projects to meet electricity demand. Two of the leading oil refining companies in India — Indian Oil Corporation and Oil India — are planning to set up 1 GW of solar capacity in state of Madhya Pradesh to power their operations. Over the last few months, several entities across the country have express intentions to source electricity from solar projects. With the steep fall in tariff bids, they hope to sign long-term power purchase agreements (PPAs) with solar projects and bypass rising coal-based power costs. Solar PPAs will also help them fulfil their renewable purchase obligations (RPOs).
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Indian miner and power producer Neyveli Lignite Corporation Ltd (NLC), is interested in building a 300 MW solar power facility in Odisha state. NLC had earlier announced its intention to construct solar parks totalling 50 MW in Andaman under an action plan prepared by MNRE.
Under the scheme for the development of solar parks, another encouraging measure has been the move to develop a separate project for evacuation of power from solar parks. The state-owned Power Grid Corporation of India (PowerGrid) aims at evacuating power from 20 solar parks planned by 12 states. Accordingly, inter-state lines will be laid by the corporation and the intra-state ones will be installed by state transmission utilities
However, a total of 16 developers were all willing to put in bids below five rupees per unit. Tariffs below five rupees have divided industry commentators over the last six months as they speculated over just how bankable and viable such projects are. The guidelines for solar power parks also states that large projects have the potential to bring down the cost of solar power. It adds, “Therefore, ultra mega solar power projects having a capacity of 500 MW or above have been planned in India. Large chunks of land are available in some states for solar park development. Smaller parks in Himalayan and other hilly states where contiguous land may be difficult to acquire in view of the difficult terrain are also being considered. Smaller parks are also being considered in states where there is acute shortage of non-agricultural lands.” Under the scheme for the development of solar parks, another encouraging measure has been the move to develop a separate project for evacuation of power from solar parks. The state-owned Power Grid Corporation of India (PowerGrid) aims at evacuating power from 20 solar parks planned by 12 states. Accordingly, inter-state lines will be laid by the corporation and the intra-state ones will be installed by state transmission utilities or by calling tenders. Out of 20 capacity of ultra-mega solar power parks envisaged in 12 states, about 17 GW would be evacuated inter-state and the rest by state transmission utilities. As roof-top installations progress is slower than anticipated and U.S. company SunEdison’s projects are threatened by its bankruptcy, the ministry is banking on solar power parks to set the benchmark in achieving 100 GW solar target by 2022.
For suggestions email at feedback@infraline.com
September 2016 www.InfralinePlus.com
InDepth Government looks at providing impetus to small hydro programme
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►► Small hydro has a target of just 5 GW compared to 100 GW of Solar and 60 GW of Wind ►► MNRE estimates the potential of SHP in India to be about 20 GW By Team InfralinePlus
Clean power is the new buzzword in the Indian power sector. Keeping in mind India’s global commitment towards climate change obligations and increase of renewables in the total energy mix of the country’s installed capacity, several projects in solar and wind sectors have been planned over the course of next 5-6 years. Contrary to this, the share of hydropower in country’s energy mix is falling precipitously due to the rather slow pace of capacity
addition. As the Government of India (GoI) moves towards fulfilling its commitments under the COP21 of the United Nations Framework Convention on Climate Change (UNFCCC), the development of renewable energy with a view to provide “reliable, sustainable and affordable energy” to all consumers is becoming a top priority. The government has set ambitious targets for 2022 for renewable energy involving a huge expansion in the solar
and wind sector. However, this vision for the future does not accord the same priority to other sources of renewable energy, especially small hydro which has a target of 5 GW, compared to 100 GW of Solar and 60 GW of Wind.
Current Progress After unveiling its big plans for harnessing solar energy and wind energy, the government seems to have turned its focus on small hydro sector with
September 2016 www.InfralinePlus.com
InDepth
a draft mission document (National Mission on Small Hydro) already been prepared, with the aim of setting up 5000 MW of small hydro projects in the next five years. National Mission on Small Hydro is essentially to address difficulties being faced by the private developers. These require some policy changes and some fiscal facilitations more than direct financial benefits. However, some activities of the Phase I of the Mission would require financial investments. It is assessed that the financial requirements of Phase I of the Mission, which is more of a preparatory to the Phase II, can be met within the XII Plan allocations for the small hydro programme. The funds required for Phase II will be worked out in the second year of phase I and would be part of the XIII
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Plan budget for small hydro programme. No direct subsidy to private sector projects is envisaged in Phase II of the Mission.This gap in priority has to be looked at more closely because if small hydro projects (SHP) are implemented and planned with expertise, they can lead to a “non-consumptive and non-polluting use of the country’s vast water resources” to provide reliable power. Further, this power can be used to counter the infirm nature of other sources of renewable energy such as solar and wind. The MNRE estimates that the potential of SHP in India is about 20 GW and present installed capacity is 4.27 GW. Generally, all hydro projects under 25 MW are classified as small hydro, these are further subdivided into Micro – Up to 100 kW,
National Mission on Small Hydro is essentially to address difficulties being faced by the private developers. These require some policy changes and some fiscal facilitations more than direct financial benefits. However, some activities of the Phase I of the Mission would require financial investments. It is assessed that the financial requirements of Phase I of the Mission, which is more of a preparatory to the Phase II, can be met within the XII Plan allocations for the small hydro programme
Mini - 101 to 2000 kW and Small 2001 to 25000 kW.
An alternative to big dams? According to a new study, small hydropower projects (SHPs) (projects up to 25 MW) are considered safer than big dams in India’s quake-prone western Himalayas, but projects to build them get bogged down by administrative delays and other factors. While India‘s total installed capacity for small hydro power (SHP) units reported a significant increase from 1,909 MW as in March 2006 to 4,274 MW (as of May 2016) thereby taking up SHP‘s share of the country‘s total installed renewable energy (RE) capacity to almost 12%, considerable potential still remains untapped across states with favourable SHP potential. The low utilization of the country’s SHP potential is attributable to several factors, including: challenges in setting up plants in difficult and remote terrain; delays in acquiring land and obtaining statutory clearances; inadequate grid connectivity; and high wheeling and open access charges in some states. The further development of small hydro projects has been hampered mainly by rising costs, with the construction costs of these projects increasing to INR 8.5 Crore to 9.5 Crore per MW from between INR 5 Crore and 6 Crore per MW a few years ago. Small hydro projects usually do not require building a reservoir and therefore, mitigate the problems of resettlement and deforestation. They have the potential to meet the requirements of remote areas and have zero emissions while generating electricity. Further, they can either be connected to the grid or can be in the form of decentralised generation (micro hydel and watermills). According to research and ratings agency ICRA, small hydro plants have certain inherent advantages. They generate clean energy at a competitive cost; have features that make them suitable for peaking operations; are less affected by rehabilitation and reset-
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tlement (R&R) problems as against large hydro power plants. They can also meet the power requirements of remote and isolated areas apart from using mature and largely indigenous technology. These are typically run of the river hydro that just need a turbine to generate and can be easily maintained without causing a lot of hassles. Plus, something like a pumped storage can be used to shave power demand peaks, which would be very helpful as the peak load spikes further. Smaller hydro power projects require higher level of investments, which means higher tariffs to become economically viable. This is further compounded by the regulatory challenges to determine tariffs as costs can vary widely for similar projects under different geographical conditions. In terms of its positioning, its remoteness is often counterproductive as it leads to higher transmission costs and often there is an absence of high voltage transmission lines in such locations leading to heavy line losses. Operation and maintenance costs also rise as a result of the
aforementioned issues. Along with these, procedural delays have impaired the development of this segment to a large extent. These procedural delays are closely tied to the issue of acquiring land and environmental clearance that
Smaller hydro power projects require higher level of investments, which means higher tariffs to become economically viable. This is further compounded by the regulatory challenges to determine tariffs as costs can vary widely for similar projects under different geographical conditions. In terms of its positioning, its remoteness is often counterproductive as it leads to higher transmission costs
often leads to delay in installation and implementation of the project.
Conclusion To develop the sector sustainably, there is a need for specific policy and regulatory support for the promotion of small hydro. Also new technologies that maximises efficiency and minimize environmental damage (for example, damage to fish) have to be promoted along with ensuring that there is a single window system of clearances. A multi-stakeholder approach may be adopted before clearance of project which involves the local community, which will not only mitigate the social implications of such projects but also shield the developers from future bottlenecks relating to ecological and socio-political concerns. With greater policy and regulatory support for developers and a greater emphasis on minimizing socioecological damage, small hydro can go a long way in helping the country achieve its aim of 24x7 clean power. For suggestions email at feedback@infraline.com
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StatisticsRenewableEnergy 1) Programme/ Scheme wise Physical Progress in 2016-17 (& during the month of July, 2016) FY- 2016-17 Sector
Cumulative Achievements (as on 31.07.2016)
Achievement (April - July, 2016)
Target
I. GRID-INTERACTIVE POWER (CAPACITIES IN MW) Wind Power
4000.00
663.70
27441.15
Solar Power
12000.00
1299.14
8062.00
Small Hydro Power
250.00
30.30
4304.27
BioPower (Biomass & Gasification and Bagasse Cogeneration)
400.00
29.50
4860.83
Waste to Power
10.00
7.50
115.08
16660.00
2030.14
44783.33
Total
II. OFF-GRID/ CAPTIVE POWER (CAPACITIES IN MWEQ)
64
Waste to Energy
15.00
1.23
161.39
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
1.00
0.10
2.79
100.00
3.40
325.40
1 MW + 500 Water Mills
0.10 MW + 100 Water Mills
18.81
187.00
4.83
1342.69
1.00
0.05
48.60
SPV Systems Water mills/micro hydel Total III. OTHER RENEWABLE ENERGY SYSTEMS Family Biogas Plants (in Lakhs) Source: MNRE
2) REC Trading Volume and Price for August 2016 Through IEX REC Type
Buy Bids
Sell Bids
Cleared Volume
Cleared Price
(REC)
(REC)
(REC)
(INR/REC)
No. Of Participants
Solar
21,937
2,192,565
21,937
3,500
516
Non-Solar
136,352
7,336,837
136,352
1,500
853
Month of Auction August 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
122539
5407315
1500
122539
Solar
18041
1290791
3500
18041
Source: PXIL
Month of Auction August 2016
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3. Commissioning Status of Grid Connected Solar Power Projects (as on 31-07-16) Sr. No. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30
State/UT Andhra Pradesh Arunachal Pradesh Bihar Chhattisgarh Gujarat Haryana Jharkhand Karnataka Kerala Madhya Pradesh Maharashtra Odisha Punjab Rajasthan Tamil Nadu Telangana Tripura Uttar Pradesh Uttarakhand West Bengal Andaman & Nicobar Delhi Lakshadweep Puducherry Chandigarh Daman & Diu J&K Himachal Pradesh Mizoram Others (PSU/channel partner) under Rooftop TOTAL
4. State-wise installed capacity of grid connected solar rooftop systems Sl. No.
Total cumulative capacity till 31-07-16 (in MW) 935.800 0.265 80.100 123.780 1123.363 15.387 16.186 238.322 13.045 790.370 385.756 66.920 520.700 1294.600 1267.414 845.843 5.000 143.495 41.145 11.772 5.100 23.870 0.750 0.025 6.806 4.000 1.000 0.201 0.100 100.924
State
Capacity Commissioned (as on 30.06.2016) (MWp)
1
Andhra Pradesh
5.1
2
Assam
0.1
3
Bihar
0.6
4
Tamil Nadu
50
5
Chandigarh
8
6
Gujarat
37
7
Punjab
33.4
8
Jharkhand
0.4
9
J&K
10
Haryana
1 18.3
11
Himachal Pradesh
0.2
12
Kerala
1.2
13
Karnataka
18
14
Madhya Pradesh
4.1 11.7
15
Maharashtra
16
Mizoram
0.1
17
Odisha
0.9 29.5
18
Delhi
19
Rajasthan
6.2
20
Chhattisgarh
18.8
21
Telangana
15.9
22
Uttarakhand
6.1
23
Uttar Pradesh
17.8
24
West Bengal
A
Sub total
2.6
B
Others (Railways, Delhi Metro, Airport Authority of India, Other PSUs etc.)
287.2 28.6
Total (A+ B)
8062.039
Source: MNRE
315.8
Source: MNRE
5. Installed Capacity of Biogas Plants as on 31/07/2016 State Assam
Total nos. of biogas plants set up during the period (2012-13 to 2015-16)
Total nos. of biogas plants set up during 2016-17 (upto 31.07.2016)
28497
1500
Sikkim
718
NR
Odisha
15851
176
Rajasthan
2667
95
Gujarat
10821
300
Maharashtra
61303
870
Telangana
18999
806
Kerala
12689
178
Chhattisgarh
12715
269
Punjab Total Source: MNRE
33112
835
197372
5029
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September 2016 www.InfralinePlus.com
OffBeat
Infraline conducts India’s first legal conference for energy sector Conference was attended by prominent legal experts from the energy sector in the country Focused on developing more sustainable and efficient legal and regulatory framework for energy sector
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By Team InfralinePlus
Infraline Energy recently conducted “Law- Assemble India Summit” - India’s first legal conference for the energy sector. The two-day conference was attended by legal experts from the energy sector. The event focused on developing more sustainable and efficient legal and regulatory framework for the energy sector in India. Various legal issues were discussed such as litigation, compliance and risk, M&A, IP, Trademarks, patents, regulations driving the energy sector, taxation, fraud, management, e-discovery in energy sector etc.
September 2016 www.InfralinePlus.com
Sohail Barkatali, Partner, Hogan Lovells on the changing face of the energy sector and what does it mean for lawyers?
▪▪ A rapidly changing power sector with fewer ultra mega projects, higher demand for renewable energy projects, changing role of global utility companies and emergence of secondary market ▪▪ A very different global oil and gas environment with continued slide in crude oil prices, reduced spending on new upstream developments and limited M&A activity. ▪▪ Commodities have also been heavily impacted whereby mining and resources sector is also being directly impacted by continued downward pressure on prices. ▪▪ How it has impacted legal profession: ▪▪ Lesser deals means there is less to go around ▪▪ Smaller projects means lower legal budgets ▪▪ Opportunities in new areas such as rooftop solar, renewable energy projects, captive power plants, secondary markets and dispute resolution ▪▪ Softer fiscal forms of government support to help projects, with a much greater emphasis on local legal development and training of nationals, academia, etc. ▪▪ More broadly, the legal profession is also currently undergoing considerable reform on a global scale ▪▪ Clients are increasingly looking to build real partnerships with advisors, requiring their advisors to work on a “value added” rather than strict “time based” basis, are aware of the social impact of their projects, seeking diversity from their advisors and also interested in the CSR, pro bono and other activities of their advisors
Jatinder (Jay) Cheema, Partner, Cyril Amarchand Mangaldas on LNG Sale and Purchase Agreements
▪▪
▪▪ ▪▪
▪▪
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▪▪ Risk dynamics include global price volatility + Current over-supply situation, makings of a buyers’ market, deciding whether it’s a buyers’ market or sellers’ market, risk allocation in a dynamic world, game-changer - LNG regasification infrastructure and difference between “Business risk” and “Commodity risk” Delivery issues include who has the responsibility for arranging shipping and insurance, who must deal with import and export formalities, at what point does the commodity risk pass from the seller to buyer and has seller off loaded his business risk onto the buyer? Product specifications include agreed specification, extent of any flexibility and off-specification LNG deliveries. Defining the requirements and obligations regards loading and unloading facilities, including buyer’s and seller’s respective obligations at loading and unloading ports, requirements for notices (e.g. pre-arrival notices), vessel preparation for loading and unloading, responsibility for charges for delay and associated costs during loading and unloading and assumption of the buyer’s or the seller’s ship-or-pay obligations. Force majeure includes standard of care, termination rights and relief for the buyers, downstream events of force majeure, such as events affecting either parties’ vessel or its regasification facilities, non-natural force majeure events and “total loss” and “constructive loss”. Commercial issues like diversion rights – separate considerations for buyers and sellers, price and price reviews, base price and indexation, crucial difference between “data” and “information” in a non-transparent market and taxation
Mr. Alok Pandey, Deputy General Manager, Powergrid Corp. Ltd., on Arbitration
▪▪ The Arbitration & Conciliation Act enacted in 1996 regulates all the Arbitration in our county. ▪▪ The Arbitration and Conciliation (Amendment) Act, 2015 (‘Amendment Act’) was passed by both houses of parliament in the winter session, pursuant to which it has received Presidential assent on 31 December 2015. The Act was notified in the Gazette of India on 1 January 2016 and has now come in to force. ▪▪ The intent of the legislature both times seems to be clear and yet we seem to be already falling short in appreciating the same. ▪▪ First and foremost the issue as to who should be an arbitrator needs some insight. ▪▪ Secondly, the procedural aspects should be given some thought because as per Section 19 of the Act, if the parties are free to determine their procedure and are not bound by CPC, in which case is it not possible to dispense with hearings in every case except Cross-examination and Evidence? ▪▪ Thirdly, the issue of fee was and is still a major bone of contention between the parties as sometimes it appears that a fee higher than
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September 2016 www.InfralinePlus.com
OffBeat
S. Ravi Shankar, Arbitration lawyer & Senior Partner, Law Senate on The Impact Arbitration & Conciliation (Amendment) Act, 2015 in Energy Disputes
▪▪ ▪▪ ▪▪ ▪▪ ▪▪ ▪▪ ▪▪
Some of the attractions to foreign entities with respect to India seated international arbitrations include: ▪▪ Power to Chief Justice to designate an Institution to appoint arbitrators ▪▪ Arbitrator from a Neutral Country mandatory S.11(9) ▪▪ Fees fixed for the ad-hoc arbitrators on the basis of the value of the dispute (4th Schedule) (No sitting, reading & writing fee) Arbitral Institutions are allowed to have a higher Fee scale An arbitration has to be completed within 12 months Both parties can jointly extend the completion period by 6 months Fast Track Arbitration S.29B to be completed with in 6 months If Arbitrator can not complete the arbitration within the time limit he looses the mandate to continue the arbitration Interim orders can be granted by Indian Courts in support of Foreign seated International Arbitrations No automatic stay on filing of an appeal challenging an Arbitral award S.36, while granting stay courts can impose terms
Richa Pandey, Partner, Krishna & Saurastri Associates on Patent prosecution challenges in India
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▪▪ She discussed issues relating to patent filing trends in India, Section 8, working requirement, divisional application and claim amendments. ▪▪ Working requirement: Section 146 (2), every patentee …shall furnish …statements as to the extent to which the patented invention has been worked on a commercial case in India, 84. Compulsory licences, (1) at any time after the expiration of three years from the date of the grant of a patent, any person interested may make an application to the Controller for grant of compulsory licence, on patent on any of the following grounds, namely (c) that the patented invention is not worked in the territory of India.that a fee higher than
Mr. Prasad Shetty, Executive Director Ernst & Young (LLP)
Dr. Surat Singh, Managing Partner, Dr. Surat & Associates
Yogesh Singh, Partner, Trilegal on Mergers & Acquisitions in energy sector
▪▪ Investment routes – FDI, Portfolio investment, FVCI and ECB/loans ▪▪ M&A structures- share purchase and asset purchase ▪▪ Key transactional issues pertain to financial strength of counterparties, financing, land, regulatory, environment, HR, antitrust, deferred payment and anti-corruption ▪▪ Fund raising in M&A through internal accruals, issue of bonds, overseas leverage, NBFC deals and overseas funds
K. R. Nair, Director, President, Indian Wind Power Association (Northern Regional Council)
Anupam Sharan, Director, Sr. Leader – Legal, Contract, Compliance, American Express
Mr. Pranav Mago, Head (South Asia) Singapore International Arbitration Centre
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September 2016 www.InfralinePlus.com
Reports & Studies India’s current solar module capacity inadequate to meet annual demand: RBSA The government’s ambitious target of 60 Gw of solar power projects in the country is not void of challenges, especially in terms of funding and equipment. As per a latest report by consulting and advisory firm RBSA on solar power in India, the requirement of 5,00,000 MVA by 2022 will need an investment of Rs 43,000 crore. However, at 5.6 Gw per annum, India’s solar module manufacturing capacity would be inadequate to meet the annual demand for 15 Gw as of now. At the same time, India has mandated use of locally manufactured solar cells for 3,000 Mw installations (where developers have sought subsidies). The US has challenged these norms at the
World Trade Organization. Laying out other key challenges in meeting the target, the report states that low bidding levels through reverse auctions have been a major concern at a time when the Indian banking sector is going through its own challenges, which could make borrowing much more difficult
in the short-term. According to the Reserve Bank of India (RBI) data, bank loans worth Rs 7 lakh crore (about $103 billion) were under stress as of the end 2015. Currently, 19 developers have bid for 2.9 Gw of solar projects below Rs 5 (about $0.0735). About 1.2 Gw of these projects have signed power purchase agreements (PPAs), the report stated. As per the RBSA report, the ambitious target for solar power could also face funding blues. At a capital cost of Rs 5.30 crore per Mw, the cost of setting up 1,00,000 Mw of solar plants works out to Rs 5.30 lakh crore. Even at a debt-to-equity ratio of 1:3, this will require debt to the tune of Rs 3.5-4 lakh crore.
India will be oil’s next big growth centre: S&P Global Platts
Commodities price reporting agency S&P Global Platts has projected that India would become the next big growth centre for oil based on the fact that demand for most oil products hit record highs last year and
the recent rising momentum of demand for cleaner cooking gas or LPG. “For most of last year, demand has seen average of 10 per cent growth. Demand for most oil products hit record highs,” the American agency said in a report. “Market participants expect gasoline and gasoil to rebound to levels closer to double digits in the second half of the year,” said S&P Platts Oil News and Analysis Editor Sambit Mohanty. “In addition, the policy move last month lifting salaries of government employees could boost car demand, which in turn could lift gasoline consumption,” he said. Meanwhile, LPG has “added a silver lining” to the Indian growth story,” the report said. “A raft of government
initiatives to promote clean fuels lifted LPG demand to record highs in March. And the momentum continues. We saw demand growing by 9 per cent in June and around 10 per cent in the first half,” Mohanty added. The report noted that the government has plans to provide more subsidies for 50 million new LPG connections for lower income families. “This is leading analysts to believe that LPG demand growth will be closer to double-digits for the whole of 2016,” it said. “In addition to LPG, a booming petrochemicals sector has also come as a blessing for naphtha, which saw demand growth of 16 per cent in June,” it added.
Fitch sees no change in OIL rating post royalty math revision Fitch Ratings said it does not expect stateowned Oil India’s rating to change following revision in how royalties on crude oil produced from onshore fields are calculated. However, the resulting additional payments will lower the headroom under OIL’s ‘BBB-’ standalone credit assessment, Fitch said. The government recently announced that state-owned upstream oil producers must pay state royalties on the gross value of crude oil produced domestically instead of the previous method of using the net price after discounts to state-run refiners. The new formula applies retrospectively from February 2014, resulting in a back-payment to cover the period up to 2015-16. As per
Fitch estimate, OIL will need to pay a onetime royalty fee of around Rs 1,150 crore, amounting to about a quarter of its projected Ebitda for 2016-17 end. This, along with payments for acquisition of a share in Taas Yuriakh and Vankor from Russia’s national
oil company, Rosneft, is expected to weaken OIL’s leverage beyond what is comfortable for its standalone credit assessment. “However, Fitch believes OIL’s leverage will improve in 2017-18 in the absence of large M&A even though the higher royalty payments will reduce the company’s netback,” Fitch said. Netback is the revenue after all the costs for bringing one unit of oil to the market. Fitch estimates OIL’s royalty charges under the revised formula - and based on the existing subsidy-sharing mechanism between the state and state-owned upstream and downstream companies - to increase by around USD 0.2 per barrel (bbl) at a crude price of around USD 50 per bbl.
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September 2016 www.InfralinePlus.com
Reports & Studies 24x7 power for all, a humongous but achievable feat: PwC
Unrealistic power demand forecasting, lack of information on existing power assets, inadequate planning without systematic system studies, delays in approvals and competencies of electricity utility staff are some of the roadblocks that would heavily come in the way of
government’s aim to provide power 24x7, a joint study by PwC and CII pointed out. The study says achieving the objective of ‘Round- the-clock power supply’ programme will not be an easy task. But improved fuel availability scenario, achieving target capacity additions well within time or even earlier, increasing investments, and aggressive bids for renewable energy projects are some of the encouraging trends that indicate that India can achieve this humongous feat in the near future. Nevertheless, concerns related to fund availability due to poor financial condition of utilities, lack of standard specifications and utility centric tender conditions have been haunting the sector.
Shah panel says RIL must pay penalty to govt
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The A P Shah committee has asked the government to claim “restitution” from Reliance Industries (RIL) for “the unjust benefit” it received from the migration of gas from state-run Oil and Natural Gas Corporation’s (ONGC) block in the Krishna-Godavari basin to the adjacent fields owned by the Mukesh Ambani-led company. However, it states that ONGC has no right on the restitution and no
locus standi to bring a “tortious claim against RIL for trespass/conversion since it does not have any ownership rights or possessory interest in the natural gas.” The committee did not quantify the restitution, leaving it to the government to decide. It said whatever benefit RIL received in terms of the migrated gas is liable to be returned to the government. The panel said it faced limitations in providing a figure to the final value of the migrated gas produced by RIL during the term of its lease, because of the lack of data and the committee’s inherent technical limitations. “While the D&M (DeGolyer and MacNaughton) Report has to form the basis for the migration of gas up till 2015, subsequent migration of gas post2015 has to be inquired into by the Government of India,” it said.
Power prices at five years low
The short term prices of power bought through exchanges have dipped five years low, according to a report by Edelweiss. This has led an increase of 30 per cent in power bough through exchanges in the last 6-9 months. “A recent trend in the short-term power market is that exchange traded volumes (IEX and PXIL) have surged sharply — average 30 per cent year on year jump over the past 6-9 months,” said the report. The average power prices have touched lows of Rs 2.16 a unit (down to Rs 2.35 in South). “State discoms have been using this opportunity to buy cheaper power and back down the expensive medium/ long term power,” said Edelweiss. It said private independent power producer (IPPs) with some open capacity (Jindal Power, Derang, DB Power, JP Nigrie, among others) and located closer to coal mines have been supplying in the exchange market possibly earning some spread over their marginal cost — Rs 1.8- 1.9 a unit. Meanwhile, the report said that the onset of monsoon has resulted in decline in power off take over the past 45 days. “This year, rainfall has largely been normal, leading to subdued power demand from agricultural and cooling demand,” it said.
Power costs may reduce by 50 paise per unit for plants Coastal movement of coal could cut power costs by 50 paise per unit for power plants besides saving Rs 17,000 crore annually, a report under government’s ambitious Sagarmala project has said. Sagarmala is an ambitious port-led infrastructure development programme of the government to harness India’s 7,500 km coastline and its perspective plan was launched by Prime Minister Narendra Modi in April. “Using the right infrastructure and institutional support, India can coastally move 190 to 200 million tonne per annum (MTPA) of coal, and save around Rs 17,000 crore per annum, by 2025,” said the government’s final draft
report on cargo projections under Sagarmala. In 2013-14, nearly 740 MTPA of coal moved through the country predominantly through rail and of this barely 23 MTPA moved through coastal shipping even though
this mode costs one-sixth that of rail cost at about 20 paisa per tonne against about Rs 1.2 per tonne. More than 90 per cent of the rail routes relevant to coal are running at over 100 per cent utilization. “With the expected ramp-up in coal production by Coal India Limited, India may need to move 1,000 to 1,200 MTPA coal across the country by 2025, creating tremendous pressure on the already congested railways,” the report said. It carried out a logistics cost comparison for all modal mix combinations for India’s 400 thermal power plants. The report said that by using right infrastructure power costs to power plants could be cut by 50 paise.
September 2016 www.InfralinePlus.com
People in News Urjit Patel named as the new RBI Governor The Indian government has named insider Urjit Patel as the new governor of the Reserve Bank of India, to replace popular central banker Raghuram Rajan when his term ends in September. The promotion of deputy governor Patel ends weeks of feverish speculation by the Indian media since Rajan caught investors off guard in June by announcing he was leaving to return to academia. Patel is deft not just at monetary policy formulation and the larger economic policy reforms, the 52 year-old inflation fighter is an expert at handling energy sector’s issues too. Patel’s experience in the economic sphere boasts of an impressive connection with the country’s energy sector. From power distribution reforms to the economics of climate change and the contentious energy pricing issues to the intricacies of upstream oil and gas production - Raghuram Rajan’s lieutenant has dabbled in all. A product of the London School of Economics (LSE), Patel was part of several high
level committees between 2000 and 2004 in the previous National Democratic Alliance (NDA) regime including the Prime Minister’s Task Force on Infrastructure and the Expert Group on State Electricity Boards (SEBs). Prior to his appointment as the deputy governor at the RBI in January 2013, Patel was advisor (energy & infrastructure) at The Boston Consulting Group. His other assignments include president (business develop-
ment) at Reliance Industries (RIL); member of the Integrated Energy Policy Committee of the Government of India; and member of the Board, Gujarat State Petroleum Corporation Ltd. As part of the core team of experts selected to frame the country’s energy policy (IEP) in 2005 -- along with the likes of the then planning commission member Kirit Parikh, Administrative Staff College of India’s T L Sankar, and Department of Atomic Energy Secretary Anil Kakodkar - Patel played a key role in working out the blueprint of the policy that has guided India’s energy sector reforms over more than a decade. The policy formulation turned around the performance of the energy sector through multiple ambitious reform initiatives including market-linked resource allocation and pricing of fossil fuel-led energy generation, introduction of competitive energy markets for the first time, transparent and targeted subsidies, strengthening the role of independent regulators for tariff setting.
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Ashok Chawla is new Chancellor at Teri University
The Energy and Resources Institute (Teri) has officially appointed former Finance Sec-
retary Ashok Chawla as the new Chancellor of Teri University. The decision on the appointment was taken in its last meeting on August 19 by the governing council of Teri. With this, Teri ended its last association with former Chancellor and Head R.K. Pachauri. Pachauri stepped down as chairperson of the UN Intergovernmental Panel on Climate Change in February 2015 and proceeded on leave from Teri, where he was the director general. New Chancellor Chawla is also the Chairman of Teri since February 2016. A former head of the Competition Commis-
sion of India and Finance Secretary, Chawla is also the Chairman of the National Stock Exchange. His work experience of over 40 years spans various sectors in the Government of India and in international agencies. The Council also inducted three new members into the Governing Council, including Co-Chairman of Forbes Marshall Naushad Forbes, Prof. Basabi Bhaumik from Department of Electrical Engineering, IIT Delhi and Founder of Institute for Sustainable Development and International Relations (Paris) Prof. Laurence Tubiana.
Sekhar Basu gets 1-year extension as Atomic Energy Commission chief Noted scientist Sekhar Basu today got oneyear extension, till September next year, as Atomic Energy Secretary and Atomic Energy Commission Chairman. He was appointed to the posts in October last year and his tenure was to end next month. The Appointments Committee of Cabinet has approved extension of tenure of Basu for a period of one year beyond September 19, 2016, an order issued by Department of Personnel and Training (DoPT) said. Basu is an engineer of exceptional ability who has
played a lead role in multiple areas of nuclear science and engineering and is a major contributor in establishing India as a leader in nuclear field. He had been Director of Bhabha Atomic Research Centre (BARC) and chief executive of the Nuclear Recycle Board (NRB). Basu, who was instrumental in setting up reprocessing and waste management facilities at Indira Gandhi Centre for Atomic Research in Kalpakkam, is a recipient of Padma Shri award.
September 2016 www.InfralinePlus.com
People in News L&T’s Naik says Subrahmanyan to take over from him Oct 1, 2017 Larsen & Toubro’s head AM Naik said that SN Subrahmanyan, who is currently deputy managing director and CEO, will take over as his successor from October 1, 2017. Speculations regarding Naik’s successor have been doing the rounds since 2012, when Naik was scheduled to step down. Naik was given an extension and while earlier this year he hinted that Subrahmanyan could take the top job. “He will succeed me from October 1, 2017. There’s no doubt,” Naik said. It is learnt that Subrahmanyan will be elevated as Managing Director and will retain the post
of CEO. They added that decision on who holds chairmanship is yet to be taken. For years L&T’s succession plans have been in limelight amid speculations on whether Naik will finally hang his boots and announce a successor. In 2012, when he was to retire and new leadership was to be announced, the company surprised everyone by splitting the post of chairman and managing director.
Rathi Steel & Power Managing Director resigns
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Rathi Steel and Power recently informed that its Managing Director Pradeep Kumar Rathi has resigned from the post with effect from July 28, 2016. “The company, after due considerations, on August 24, 2016 has accepted Pradeep Kumar Rathi’s request to vacate his office as Director and
Managing Director of the company with effect from July 28, 2016,” it said. Rathi, who has been on company’s Board of Directors since August 27, 1994, was monitoring the day to day affairs of the company. Rathi Steel & Power (erstwhile Rathi Udyog Ltd) is a part of the Delhi-based P C Rathi
Group. In June, the firm had informed that its CEO Udit Rathi has also resigned from his post with effect from May 17, 2016. Besides, its Board in meeting held in June had considered and approved the demerger/or hiving of the Ghaziabad and Orissa units of the company on slump sale basis to unlock the value and to arrive at long term viability solutions. Its Ghaziabad unit consists of steel rolling mills having an installed capacity of 1.25 lakh tonnes per annum (LTPA), a wire rod mill and steel melting shop with 40,000 TPA installed capacity comprising for manufacturing high end value added stainless steel and alloy steel products.
GK Satish takes over as Director (BD), IOC G K Satish has taken over as Director (Planning and Business Development) of Indian Oil Corp (IOC). Prior to this, he was executive director in-charge (Gas Business) at IOC. He replaces Debasis Sen who superannuated on August 31, 2016. A Graduate in Mechanical Engineering from the National Institute of Technology, Surat and a Post-Graduate in Management from Management Development Institute, Gurgaon, Satish has over 30 years experience in IOC in the areas of marketing operations, logistics, business development, international trade, natural gas business and human resources. He is also Chairman of IndianOil-Adani Gas Pvt Ltd, which
is developing city gas distribution (CGD) networks in various cities across the country, and Chairman of IndianOil LNG Pvt Ltd, which is setting up an LNG import terminal at Ennore near Chennai. He is also a Director on the Boards of Green Gas Ltd, which is operating CGD networks in Agra and Lucknow, and GSPL IndiaGasnet Ltd and GSPL IndiaTransco Ltd, which are implementing cross-country natural gas pipelines. IOC also named Satish as its nominee director on Petronet LngLtd to replace Sen. IOC holds 12.5 per cent stake in Petronet and has right to nominate one director on board of India’s largest liquefied natural gas importer (LNG).
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