InfralinePlus February 2017 Edition by infralineenergynoida

February 2017 Volume 5 | Issue 10 | `100 www.InfralinePlus.com

The Complete Energy Sector Magazine for Policy and Decision Makers

Infrastructure

push to drive growth

Future auction of coal blocks hinges on growth in power demand

Dr. Arup Roy Choudhury Former CMD NTPC Ltd

Alok Perti Chairman (CPSI) and Former Secretary, Ministry of Coal

Lowering of custom duty to propel LNG sector

Sandeep Chaturvedi

DV Giri

President Biodiesel Association of India

Secretary General, IWTMA

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InfralinePlus

February 2017 | Volume 5 | Issue 10

The Complete Energy Sector Magazine for Policy and Decision Makers

Editor’s Letter

Editorial Shashi Garg, Editor

On February 1, Union Finance Minister, Arun Jaitley presented the first combined budget of independent India that included the Railways also. This was done to synergise investments in railways, roads, waterways and civil aviation. For the energy sector, it was a mixed bag. While the focus of the budget was clearly on rural electrification, concessions for solar power and gas-based power plants, the wish-list for thermal power, wind and nuclear was not addressed. Rather, the discontinuation of tax holiday for projects in the power sector came as a big jolt for developers.

News Team Chetan Gupta Expert Opinion Alok Perti Analyst Ankit Kumar

The finance minister has also done well to bolster confidence of private players in public private partnership (PPP) projects by proposing to clear the legal hurdle to ensuring quicker resolution of contractual disputes. Further, the proposal to abolish the Foreign Investment Promotion Board, an agency that is tasked with vetting applications of overseas investors, augurs well for foreign investments in the country. The focus on rural electrification is a welcome move as it will be critical for the government achieving 24x7 power by May 1, 2018. This is also expected to create additional demand for power which is good news for power developers, who currently are struggling to sell their surplus power. Similarly, the decision to reduce customs duty on LNG to 2.5% will lead to committed LNG supply to gas-based power plants, which are running below their capacity due to lack of availability of gas. It may be noted that the grid connected gas-based power generation capacity in the country is around 23,075 MW, of which 14,305 MW had no supply of domestic gas. The solar sector reaffirmed its image of being the government’s blue eyed boy, with the sector receiving significant duty cuts to sustain the momentum and ensuring that the low tariffs continue to remain at a sustainable level. In this regard, we bring to you our outlook for the renewable energy sector in 2017. There is an increasing realization that renewables can be a major contributor in India’s future energy mix. A significant push and preference for renewable energy this year will see a tremendous growth of the sector and will confirm India’s role as one of the world’s leading renewable sector marketplaces alongside the likes of United States and China. However, thermal power and coal were completely ignored in the budget. There is still a lot of clarity is needed as far as the energy sector is concerned. While the Centre 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. In a more drastic step to reduce coal imports, the 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. However, recent coal block auction process is expected to fetch coal bearings states a lion’s share of the revenue, in addition to providing relief to consumers with reduction in power tariffs.

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Outside, we have also seen power diplomacy taking shape in recent times. Trade in general and electricity trade in particular can play an important role in facilitating peace prosperity and promote harmony in the region. Electricity trade transactions between India and its neighbors, Nepal, Bhutan and Bangladesh in recent years have highlighted the advantage of cross-border electricity trade. Total volume of electricity trade between the South-East Asian nations is likely to exceed 20 BUs by 2020. No doubt, it has significant socio-economic and political advantages in the long run.

Periodicity of its Publication: Monthly Printer’s / Publisher’s / Mrs Shashi Garg Editor’s / Owner’s Nationality Indian Address

14-D, Atmaram House, 1, Tolstoy Road New Delhi - 110001

Now that the budget has been announced, all eyes will now be on the government to walk the talk and ensure the proposals are executed on ground.

Place of Publication

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SHASHI GARG Managing Director and Editor InfralineEnergy Research and Information Services Registered Office

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14th Floor, Atmaram House, 1, Tolstoy Road, New Delhi - 110001 Email: business@infraline.com

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February 2017 www.InfralinePlus.com

InfralinePlus

Contents Editorâ&#x20AC;&#x2122;s Letter

Cover Story

35 Union budget 2017-18: Infrastructure push to drive growth

Given the element of history attached with this yearâ&#x20AC;&#x2122;s Union Budget and the macro economic scenario preceding it, the setting was perfect for the government to make big bang announcements. Rather, the budget was weaved in such a manner so to provide respite to all sections of the economy. What stood out was the strong focus on infrastructure which is likely to be the key trigger which would propel growth in the energy sector.

35 Power News Briefs

Coal

News Briefs p22

In Conversation: Dr. Arup Roy Choudhury, former CMD, NTPC Ltd p10

Expert Speak: Alok Perti, Chairman Coal Preparation Society of India (CPSI) and Former Secretary, Ministry of Coal p25

In Depth: Can UDAY be the elixir for power sector in 2017? p12 In Depth: Cross border electricity trade to play a crucial role in regional harmony in South Asia p16 Statistics

In Depth: Future auction of coal blocks hinges on growth in power demand p29 Statistics

p20

Topics Covered

Thermal power

Coal stocks

Power distribution

Coal demand

Power trade

Coal auction

p33

February 2017 www.InfralinePlus.com

Oil and Gas

Renewable

News Briefs p44

News Briefs p55

In Conversation: Sandeep Chaturvedi, President, Biodiesel Association of India p47

In Conversation: DV Giri, Secretary General, Indian Wind Turbine Manufacturers Association p60

In Depth: Budget 2017: Lowering of custom duty to propel LNG sector p49

In Depth: Indiaâ&#x20AC;&#x2122;s renewable energy sector on the cusp of giant leap in 2017 p64

Statistics p53

Statistics p68

Topics Covered

Biofuel market

Wind turbines

LNG growth

Taxes and duties

Marketing of fuel

Growth projections

Expert Speak/Interview

Dr. Arup Roy Choudhury,

Alok Perti,

Former CMD, NTPC Ltd

Chairman (CPSI) and Former Secretary, Ministry of Coal

Off Beat

Intelligent Transport System: A game changer

Sandeep Chaturvedi,

DV Giri,

President, Biodiesel Association of India

Secretary General, Indian Wind Turbine Manufacturers Association

Reports & Studies

People in News

February 2017 www.InfralinePlus.com

NewsBriefs | Power Power ministry extends domestic manufacturing rule by 3 years

The Ministry of Power has extended by three years a clause whereby companies inviting bids for boilers and turbine generators of supercritical projects need to incorporate a condition of setting up of phased indigenous manufacturing facilities. The period of advisory

had expired on October 2015 and the ministry has now extended it by three more years with minor changes in the guidelines, Central Electricity Authority said in a report. The advisory said, for a foreign bidder, the company should have a registered subsidiary or a joint venture (JV) company for manufacturing of super critical boilers or turbine in India. It further said the bidder in this case must maintain an equity participation of minimum 51 per cent in the subsidiary or minimum 26 per cent in the JV company during the lock-in period of seven years. For an Indian company, it has to have an experience of 500 Megawatt supercritical boiler or turbine and it should have a valid ongoing collaboration and technology transfer agreement, the document said.

Economic survey paints a bleak picture of power sector

The Economic Survey 2016-17 tabled in Parliament by Finance Minister Arun Jaitley has painted a bleak picture of the power generation sector saying private firms are reeling under cost-overrun pressure and PLFs and tariffs in the short-term market are not likely to rise in the near term.”There is scant sign on the horizon that PLFs and tariffs might improve,” the survey said. Private power generation companies are reeling under cost-overrun pressure and this, coupled with low electricity prices are hurting their profitability, according to survey. It said plant load factors (PLF) in India are ‘exceptionally low’ and falling merchant tariffs and power purchase agreement

(PPA) rates have led to slower cash flow for private power generation companies. As per the survey, PLF tumbled to just 59.6 per cent during April-December 2016 from 62 per cent during the same period last year.

National Power ministry working on mega push for village electrification next fiscal

The power ministry has worked out a mega expansion plan for village electrification in the coming financial year that is likely to require spending upwards of Rs 16,500 crore through a slew of central schemes including the flagship Deen Dayal Upadhyay Gram Jyoti Yojana (DDUGJY).The blueprint of the plan has been worked out as part of the efforts to fulfill Prime Minister Narendra Modi’s announcement of 100 per cent village electrification and round-the-clock power for all by 2019. The idea is to cover 2,984 villages under DDUGJY apart from extending electricity connections to 4 million Below Poverty Line (BPL) households in the coming year. Apart from Rs 16,500 crore needed for village electrification schemes, the ministry has projected separate fund requirement under other central schemes – Rs 5,700 crore for Integrated Power Development Scheme (IPDS); Rs 1,548 crore for power system improvement in the North-East excluding Arunachal Pradesh and Sikkim; Rs 1,500 crore for transmission system strengthening in the two states and Rs 312 crore for setting up a 220 Kilovolt transmission line from Srinagar to Leh.

Investment by Power Ministry PSUs down 8.3 % at Rs 62,000 crore in 2017-18 Investments by state-run firms under the Power Ministry have been budgeted slightly lower by 8.3 per cent at Rs 62,600.37 crore in 2017-18 compared to the budget estimates of this fiscal. The government had estimated an expenditure of Rs 68,256.80 crore by these central public sector undertakings, including NTPC, NHPC, PGCIL and NEEPCO, in this fiscal but it was revised down to Rs 67,532.04 crore in the budget. According to the expenditure budget, the government had budgeted Rs 30,000 crore investment by power giant NTPC for the current fiscal which has been reduced slightly to Rs 28,000 crore for next fiscal. Similarly,

investment by state-run hydro power generator NHPC is pegged at Rs 3,089.36 crore for 2017-18, lower than revised

budget estimates of Rs 3,103.25 crore. For Damodar Valley Corp, the investment has been budgeted at Rs 2,167.15 crore for next fiscal against revised estimate of Rs 1,362.54 crore in the budget. Last budget had pegged the expenditure at Rs 3,302.67 crore. However, the investment by North Eastern Electric Power Company (NEEPCO) has been pegged at Rs 1,561.25 crore for next fiscal against revised estimate of Rs 1,741.79 crore. Similarly, the investment by Satluj Jal Vidut Nigam Ltd has also been increased to Rs 1,068 crore for next fiscal from Rs 1000 crore provided in Budget of last year which was later revised to Rs 600 crore.

February 2017 www.InfralinePlus.com

NewsBriefs | Power Reliance Power’s exit dampens spirits of other players

The decommissioning of the Reliance Power’s 2,400-MW Samalkot project has dampened the spirits of other players who have set up gas-based power plants with a capacity of 20-MW to 470-MW in East Godavari district and been waiting for allocation of gas by the government for several years. Considered to be India’s largest gas-based power project after Dabhol, the plant is shifting its base

to Bangladesh even before the commencement of power generation to its capacity. The decommissioning work is in full swing at the project site, where the operations commenced in March, 2012. Reliance waited for five years for allocation of adequate gas prompting the managements of other power plants to follow the suit. Corporate bigwigs such as GVK, GMR, Spectrum and others established power plants but kept them nonfunctional in the absence of adequate supply of gas. After Reliance’s exit, there will be 10 plants in the field with a capacity of about 2,500 MW. While a majority of them have stopped operations long back, a few others function for a couple of months every year, depending on the sanction of fuel.

China power firm seeks to enter power transmission sector China Southern Power Grid International (HK Company Limited), in a consortium with CLP India Private Limited, is set to enter the power transmission sector in India. In bids called for projects totalling Rs 3,000 crore, state-owned China Southern Power has submitted a proposal of interest to build, own and operate power transmission networks. Three projects for which the bids were called are transmission system for an ultra-mega solar park in Jaisalmer, Rajasthan (Rs 536 crore), ERSS-XXI (Rs 1,321 crore) and the New WR-NR InterRegional Corridor (Rs 916 crore). Among the other bidders were Power Grid Corporation of India Limited (PGCIL), Sterlite Power,

Adani Transmission Limited, Tata Power, GMR Limited and L&T. Chinese powers companies have been active in the India power sector space at the engineering, procurement, construction (EPC) level.

National Nepal to increase power import from India to plug demand-supply gap

Hydropower rich, Himalayan country Nepal is going to increase its power import from India to plug up own winter time demand-supply gap. In addition to its existing 350MW import, Nepal will take additional 25MW from India as per a power purchase agreement signed between Nepal Electricity Authority (NEA) and NTPC Vidyut Vyapar Nigam Ltd. of India. As NEA Deputy Managing Director Rajeev Sharma puts it, “This 25 MW is quite significant for the small power system of Nepal.” The additional intake will take place through a cross country transmission line between Dhalkebar in Nepal and Muzaffarpur in Indian state Bihar. At existing tariff of INR 3.6 per unit, the increased import is likely to continue till arrival of rainfall in the Himalayan terrain in May. Against total theoretically gigantic hydropower potential of over 83,000 MW, Nepal’s economically feasible potential is 43,000 MW. But its existing capacity is less than 1000MW.

Power Ministry misses target despite rise in output for November-December Demonetisation may have negligible impact on power sector as output grew by 8.53 per cent in November and 6.13 per cent in December year-on-year but Power Ministry could not achieve the targeted electricity generation during the respective months. There was a fear that junking high value currency notes of Rs 1,000/500 will lead to slowdown in all segments in the economy including power sector. According to the Central Electricity Authority monthly report, total power generation in the country was 95.123 billion units (BUs) in December 2016, which was 6.13 per cent higher than 89.625 BUs electricity generation in the corresponding month previous year. However,

as per the report, the electricity generation target of 96.999 BUs could not be achieved in December. Similarly, the CEA report said power generation grew 8.53 per cent in

November, 2016 to 93.235 BUs compared to 85.904 BUs in same month year ago. However, the target of 93.236 could not be achieved. “The generation in the month of November was almost on track as there is not much difference in the actual output and target. But power generation is 1.8 BUs short of the targeted output in December,” said an expert. According to the CEA data, the per capita consumption of electricity was 1,075 units in 2015-16 as per provisional estimates. Therefore, output of 1.8 billion units could have lit thousands of houses in the country where a large number of people either live without electricity or face outages due to shortages in supply.

February 2017 www.InfralinePlus.com

NewsBriefs | Power Jharkhand electricity board continues to lose despite distribution reform scheme UDAY

The Jharkhand Bijli Vitran Nigam Ltd, despite joining the centre’s ambitious UDAY scheme aimed at bringing state-run power discoms out of losses, is again saddled with huge arrears to be paid to DVC and Coal India. Jharkhand was the first state to join the scheme in September 2015. Under the scheme, in January 2016, Rs 5,553 crore was taken as loan from the

central government, of which Rs 4,770 crore was paid to the DVC and Rs 783 crore to Coal India. However, within an year, it again suffered heavy losses and the company owes DVC Rs 1,500, while Coal India is owed Rs 83 crore. At the time of joining the scheme, the Union Power Ministry had categorically asked the power utilities to improve their performance. It was said that the power distribution company was getting loan at the interest rate of 12-13 per cent but if the same loan is taken from the state government, it would be provided at 8 per cent resulting in immediate profit of 4-6 per cent. To reduce the losses, JBVNL was asked to improve its capacities within a fixed time frame and had to bring T&C loss to 15 per cent by 2019.

Himachal surpasses J&K in power generation, development

Himachal Pradesh – a state having half geographical area than Jammu and Kashmir- has surpassed J&K in power generation with HP generating 6370 MW of electricity in comparison to 3263 MW by J&K, while government blames “conflict and uncertainties” in the state for lagging behind in developmental aspects, an official report reveals. The Economic Survey Report-2016, this year has first time included ‘Conflict Economy’ chapter to give understanding of the fact that how the economy of the state gets affected by “uncertainties and conflict area”. The report mentions that Hydel Power potential of both J&K and HP is estimated

at 20,000 MW each. “HP has harnessed capacity to the extent of 6370 MW which is 32 percent of the estimated potential till now while J&K has only exploited 3263 MW which is only 16 percent of potential,” the report states.

States UP dithering on 24X7 power supply document: Piyush Goyal

Union Power Minister Piyush Goyal has charged the Akhilesh Yadav government in Uttar Pradesh with dithering on the central plan to provide 24-hour electricity to all households. Goyal claimed all the state governments and Union Territories had signed the 24X7 power document mooted by the Centre except for UP.”We had proposed that the Centre and states could work together as a team to provide 24-hour power supply to all households,” he said and lamented while all the state governments and Union Territories had agreed with the proposal and came on board, the UP government has still not signed it. He claimed about 15 million rural and 3 million urban households in UP or roughly 40 per cent of the state’s population was deprived of power connection. He castigated the successive Samajwadi Party (SP) and Bahujan Samaj Party (BSP) governments in UP, which have been ruling the state for the last 15 years for the sorry state of affairs, especially in power sector.

Jindal Steel and Power in talks to sell Chhattisgarh power plant for over $1.5 billion Jindal Steel & Power Ltd, seeking to cut debt after eight straight quarters of losses, is in talks with companies including billionaire Gautam Adani’s Adani Power Ltd about selling a 2,400-megawatt Indian electricity plant. The New Delhi-based company has been in discussions about selling the plant to Adani Power as lenders led by State Bank of India pressure the company to make divestments. Jindal Steel is seeking to value the asset, located in Tamnar in the central Indian state of Chhattisgarh, at more than Rs10,000 crore ($1.5 billion). The company has also reached out to other potential buyers for the plant. Jindal

Steel, controlled by Naveen Jindal, has the second-highest borrowing level among Indian steelmakers, according to data compiled by Bloomberg. The company, which had Rs46,300 crore of net debt as of December, started a leverage reduction plan in May after agreeing to sell a 1,000-megawatt power plant in central India to JSW Energy Ltd. Jindal Steel needs about Rs2,000 crore to buy coal, which the company’s lenders have agreed to fund only after it makes progress on asset sales. Bankers have told Jindal Steel they may need to introduce new equity investors if the company isn’t able to reduce its debt, the people said.

February 2017 www.InfralinePlus.com

NewsBriefs | Power Argentina raises electricity prices again, now up to 148%

The government of President Mauricio Macri in Argentina announced the prices of electricity will rise, once again, between 61 and 148 percent for residents, as the country faces another utility hike as part of a broad austerity plan. Argentine Energy and Mining Minister Juan Jose

Aranguren, former CEO of oil company Shell, announced the hike at a press conference.”We are pleased to be able to rebuild the reality” of the prices, said the minister. In this “process of normalization of the electricity market,” the increase in the price of electricity will be split between February and March to reach 620 Argentine pesos, about US$39, per megawatt-hour.”We are going to split the increase so that the incidence in February is lower, because it is a month of high residential consumption, and will be completed in March,” said Aranguren. The government of Mauricio Macri is set to gradually reduce subsidies for large consumers until 2019.

Iran signs power plant deals worth over $10bn Iran has signed agreements valued at around €10 billion ($10.7 billion) companies for the construction of new power plants with German, Russian, Chinese, South Korean and Turkish companies. The preliminary agreement with Turkey’s Unit International is one of the biggest of its kind after the international sanction were lifted, Alireza Daemi, Deputy Energy Minister for Planning and Economic Affairs was quoted as saying. Unit International signed a $4.2-billion preliminary deal with Energy Ministry in June to build gas power plants in seven regions in Iran. The power stations would have a combined installed capacity of 6,020 MW, the report said.”The deal

with Unit International is an agreement in principle … it is expected to be approved as a full and final contract by March,” the deputy minister said.

International Siemens, Marubeni to build 1,200MW combined cycle power plant in Thailand

Siemens and its Japanese consortium partner Marubeni have been awarded a engineering, procurement, construction and commissioning contract for 1,200MW combined cycle power plant in Thailand. The contract has been awarded by state-owned utility Electricity Generating Authority of Thailand (EGAT). Planned to be built in the Mueang District of Samut Prakan Province, South Bangkok, the gas-fired power plant will feature two units in a single-shaft configuration and two H-class gas turbines. The project will replace an existing thermal power plant. Under the contract, Siemens will deliver two SGT5-8000H gas turbines, two SGen5-3000W generators and two steam turbines of model SST5-5000. It will also supply two heat recovery steam generators engineered by NEM and the SPPA-T3000 control system. Marubeni will be responsible for the civil and erection works, cooling tower, high voltage gas insulated switchyard and some balance of plant equipment.

GE secures $1.4bn power plant orders in Iraq General Electric (GE) has secured more than $1.4 billion in orders from Iraq’s Ministry of Electricity to set up power plants as well as provide technology upgrades and maintenance services. The announcement further strengthens GE’s collaborations in Iraq to support the country’s power infrastructure and meet the growing need for electricity, said a statement from the company. GE signed agreements that will add over two gigawatts (GW) of power and secure the delivery of ~1.75 GW of existing power to the national grid. GE will set up the Samawa and Dhi Qar Power Plants, adding 1,500 megawatts (MW) to the grid. In the first phase of the project, GE will

install four 9E gas turbines in simple cycle at each site by 2018. The second phase will entail the combined cycle conversion of the 9E units. GE is also supplying advanced

heat recovery steam generators (HRSG) and steam turbine technology, as well as serving as the engineering, procurement and construction (EPC) contractor for the projects. Under Phase II of the Power Up Plan – a plan with the Iraqi Ministry of Electricity (MoE) for critical electricity generation and maintenance projects throughout the country - GE will add over 580 megawatts (MW) to the national grid through upgrade and rehabilitation works at four power plants. Additionally, under Power Up Plan Phase II, GE will sustain ~1.75 GW of existing power generation through the maintenance of 9E gas turbines across six different power plants in Iraq.

February 2017 www.InfralinePlus.com

InConversation

‘Only through cheap coal can we deliver affordable power’ Dr. Arup Roy Choudhury is currently the Chief Commissioner, Right to Public Service Commission, in West Bengal. He was previously the CMD of NTPC Limited, India’s biggest power generating utility. In this interview, Choudhury shares his views on coal sector in India, issues being faced and whether moving away from coal is the right strategy for India in the long run?

Please share your outlook on the coal sector. We have one of the biggest coal reserves in the world. Efforts have to be made for supplying the required quantity and quality of coal to our generating plants. Installing crushers and coal washeries are the only way for making our coal compatible with international coal. India is a poor country and it is only through cheap coal that we can deliver affordable power (< Rs. 3/- per unit) to each and every citizen. Once we raise our level economically; there will be a substantial segment of the society who will willingly buy costlier cleaner power from solar, wind, and hydro sources. We should create a “green grid” on the likes of outlets for organic food items that has now become so popular with the affluent. How has the doubling of clean energy cess on coal, lignite and peat year impacted power developers? Unfortunately we are still looking at the power sector in silos. Royalty for coal, different type of cess and taxes on coal, cost of railway freight, constant increase in coal prices etc are decided and announced by different authorities without the least concern about the cost of the end product;

which is the cost at which power can be provided to the citizens. According to the draft National Electricity Plan formulated by CEA, the country does not need any fresh coal capacity till 2027. What are your views on the same? Probably we need a nationwide debate on this and somewhere I feel we are missing the larger picture up to the 12th Plan and even projection of 13th Plan, we have massive plans for developing our indigenous power capacity with our own fuel i.e. coal. I see no reason to change that national plan. We should rather make efforts to reduce emission by coal generating stations and fully exploit every mega watt of our hydro potentials by installing mega, mini and micro hydro electric generating units all over the country. Worldwide, there has been a perceptible change in perception against coal and towards clean energy sources like solar. In this context, what should be the future growth strategies of companies like NTPC? Should they look at diversifying into renewable? NTPC should add solar, synergizing the same with the release of its old

Dr. Arup Roy Choudhury, former CMD, NTPC Ltd

plant (which are still efficiently running because of the strong operational capabilities of NTPC) and the 10,000 mega watt solar it has committed is linked to the 2000 megawatt Singrauli project. The power from these depreciated coal plants once bundled with solar will provide affordable energy and popularize solar and cleaner power. Further solar expansion should be done by NTPC when older units like Korba etc are released back to NTPC. With regard to the worldwide concern, I would ask the reader to collect the per carbon emission globally and in our neighborhood and come to a conclusion. It will take atleast 25 years for us to become a developed country and that can happen only when we develop on our own resources. If we do not use up our coal reserves either it will burn below the soil or become technologically barred; thus we lose the natural advantage.

February 2017 www.InfralinePlus.com

Can a country like India, which is heavily dependent on coal and has one of the largest deposits of coal, move away from coal? What is the ideal energy mix that India should look at? Coal and Hydro should remain the major source of energy since any other generating mode will entrain depending on foreign technology and products and would be a huge dent on our foreign currency reserves. Can India adopt clean coal technologies and how? Companies like NTPC are already working on clean coal technology and all generating stations of the country should make contribution for developing clean coal technology. The entire amount of coal cess as collected by the government should be diverted towards clean coal technology. There is high stock of coal at thermal power stations

due to low demand. In this scenario, donâ&#x20AC;&#x2122;t you feel that the Government should instruct power utilities to only consume domestic coal and not look for imports, and why? Our per capita consumption of power is around 1/3 of China. The low demand is nothing but high cost to the consumer and poor distribution networking. Someone has to look at power accessibility and whose domain is that? In our federal system, we seem to be passing this essential infrastructure development between central and state budgets. There are power cuts enforced, not because there is inadequate power, but because the states are unable to support the losses being incurred on account of political subsidies without financial provisions in the budgets of the states. Government also must find ways to make investment from its infrastructure budgets and not load this cost

to the tariff or expect the discoms to bear these costs. After all there is no â&#x20AC;&#x153;free lunchâ&#x20AC;? and cost is ultimately passed to the consumer who is at the end of the chain. There have been growing incidences of mining accidents in India in the recent past. How, in your opinion, can India ensure highest safety standards for its coal mines? I am unable to comment on this because whereas internationally the underground mining is done to avoid any disturbance to the environment and habitation, in India we are doing open cast mining where the chances of accident have to be remote unless there is human failure. (These are the personal views of Dr. Arup Roy Choudhury as a professional and have no link to the responsibility and position that he currently holds.) For suggestions email at feedback@infraline.com

February 2017 www.InfralinePlus.com

InDepth

Can UDAY be the elixir for power sector in 2017?

►► Financial stress does not allow DISCOMs to make fresh purchases ►►Strong monitoring at all levels is crucial to achievement of operational and financial targets By Team InfralinePlus

A complete overhaul of the power distribution sector is on the cards and financial recovery for debt-laden state electricity distribution companies (DISCOMs) is underway since the advent of Ujwal Discom Assurance Yojana (UDAY) scheme. The progress of the scheme can be gauged from the reports that the Haryana DISCOM (8th state to join the UDAY scheme) have reported profits in the first half of the current financial year (FY 2016-17). However, there is a word of caution. According to ratings agency CRISIL, “States implementing the UDAY scheme for revival of their electricity distribution companies will likely miss

the target to bring their losses down to zero by 2019 but they could achieve a significant reduction in the under-recoveries on every unit of electricity supplied.” It also states, “The 15 states that have signed MoUs under UDAY will reduce the gap between the discoms’ cost of supply and revenue realised per unit to 28 paise in FY 19 from 64 paise in the last fiscal.” In that case, the aggregate losses of these DISCOMs are seen declining 46% to ~INR 20,000 Crore from INR 37,000 Crore. Even though the scheme can be seen as one aiming to achieve efficiency in the last mile distribution sector, its success depends upon better coordi-

nation between the centre and state, more responsibility and independence at the state level and an unbiased and transparent approach to remove inefficiencies from the distribution sector and consequently inefficiency from the Indian power sector. DISCOMs have been historically plagued by transmission and distribution (T&D) losses (arising mainly from theft of electricity, subsidized tariff for agricultural consumption, leakages in transmission and distribution systems, etc.) and aggregate technical and commercial (AT&C) losses (primarily due to billing and collection inefficiencies). Electricity distribution companies (DISCOMs) are

February 2017 www.InfralinePlus.com

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 of power (MoP). 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). UDAY Scheme, 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.

Current Scenario A total of 21 states had decided to participate in UDAY, a scheme to facilitate the financial turnaround and revival of power distribution companies (discoms). The scheme was launched in November 2015 and the states have committed to reduce their AT&C losses to 15% and eliminate the cost-revenue gap by the end of FY19. The UDAY scheme intends to achieve this through (a) improving operational efficiencies of discoms, (b) reducing the cost of power generation by discoms, (c) financial turnaround of discoms through state(s)’ takeover of the discoms’ debts, and (d) financing future losses and working capital of discoms by state(s). UDAY may seem to be a more comprehensive scheme than any other SEB restructuring scheme seen till date. It talks about cost-side efficiency such as immediate reduction of interest service burden, reduction in fuel cost through coal swapping, time-bound loss reduction, etc. On the revenue side, it talks about a strict discipline of quarterly fuel cost adjustment, annual tariff increase, taking regulators on board and finally including discom losses in the

fiscal responsibility and budget management (FRBM) limits for the states. However, improvements in all these areas reflect on the broader issue of cost-revenue gap and AT&C losses, as depicted in the graph.

Recent states to join UDAY So far, 21 states have signed agreements under UDAY including of Jharkhand, Chhattisgarh, Rajasthan, Uttar Pradesh, Gujarat, Bihar, Punjab, Jammu & Kashmir, Haryana, Uttarakhand, Goa, Karnataka, Andhra Pradesh, Manipur, Madhya Pradesh, Maharashtra, Himachal Pradesh and Puducherry. Recently,

A total of 21 states had decided to participate in UDAY, a scheme to facilitate the financial turnaround and revival of power distribution companies (discoms). The scheme was launched in November 2015 and the states have committed to reduce their AT&C losses to 15% and eliminate the costrevenue gap by the end of FY19 Telangana, Assam and Tamil Nadu have also joined the scheme. The Government of India, Government of Maharashtra and the MAHADISCOM have entered into tripartite MoU in order to improve the operational and financial efficiency of the MAHADISCOM to enable financial turnaround of the DISCOM. The MAHADISCOM had the revenue deficit during the FY 2013-14 and FY 2014-15 amounting to INR 280.42 Crore and INR 356.70 Crore. The outstanding debt level of MAHADISCOM has reached to INR 22097 Crore at the end of September, 2015.

▪▪ The Government of Maharashtra shall take over the Medium Term and Short Term debt of INR 4960 Crore (75% of INR. 6614 Crore, Outstanding Medium Term and Short Term debt of MAHADISCOM as on 30th Sept. 2015). This shall be take over in the following manner (Table 1): ▪▪ For the rest 25% of the Medium and Short Term Debt, MAHADISCOM shall issue State Government guaranteed bonds or get them converted by Banks/FIs (Financial Institutions) into loans or bonds with Interest not more than the Banks base rate plus 0.10%. ▪▪ The MAHADISCOM shall also reduce the AT&C Losses from 18.71% in FY 14-15 to 14.39% by FY 2018-19.

Telangana, Assam & Tamil Nadu join UDAY • With Telangana, Assam and Tamil Nadu joining UDAY scheme in January, over 90 per cent of the debt of state electricity distribution companies will be covered by the debt restructuring scheme for discoms. • The total number of states covered under the Uday scheme has now reached 21. • The Telangana government will take over Rs 8,923 crore of the total Rs 11,897 crore of discom debt. • The Assam government will take over Rs 928 crore out of total Rs 1,510 crore discom debt, being 75 per cent of their respective discom debt outstanding as on September 30, 2015, as envisaged in the scheme, and the balance debt would be re-priced or issued as state-guaranteed discom bonds. • States and discoms collectively have issued bonds worth Rs 1.83 lakh crore so far to pay off their accumulated debt. • Tamil Nadu would receive a benefit of about Rs 22,000 crore in the first three years from the scheme and about Rs 7,000 crore every year after that.

February 2017 www.InfralinePlus.com

InDepth Cost-Revenue Gap (INR/unit)

Figure 1: Cost-Revenue DISCOMs 30, (As2016 of September 30, 2016) As onofSeptember 0.45

Haryana

Rajasthan

0.83 0.83

0.42

Punjab

1.06

0.61 0.88

Bihar

Achievement

1.33

Target

Source: Ministry of Power (MoP)

Technical & Commercial (AT&C) Losses FigureAggregate 2: Aggregate Technical & Commercial (AT&C) Losses (AsSeptember on September 30, 2016) of DISCOMs (As of 30, 2016) Haryana

25.3

29.8

Uttar Pradesh

47.9

33.6

Rajasthan

24.2

29.4

Conclusion

21.2

Punjab

20.7

Bihar

43.9

36.3 Achievement

Target

Source: Ministry of Power (MoP)

â&#x2013;Şâ&#x2013;Ş As on FY 14-15, the Distribution Losses for the State is 14.17% and Collection Efficiency in the range of 94.71%. Note: It is also projected that there shall be Tariff Reduction for the FY

The Government of India, Government of Maharashtra and the MAHADISCOM have entered into tripartite MoU in order to improve the operational and financial efficiency of the MAHADISCOM to enable financial turnaround of the DISCOM. The MAHADISCOM had the revenue deficit during the FY 2013-14 and FY 2014-15 amounting to INR 280.42 Crore and INR 356.70 Crore

16-17 as compared to FY 15-16 and Tariff shall increase for the subsequent years. MERC Notified the Tariff Order for MSEDCL dated 03.11.2016 and the Energy Charge for the Industrial Category of Consumer is decreased.

Despite rise in generation capacity over the years, there is weak demand for power, especially from distribution companies (discoms) due to deteriorating finances. Poor financial health of discoms and inability to abide tariff agreements by them are some of the main causes of poor physical performance of private power projects in the country. The robust capacity addition that the government has been projecting has actually aggravated the problem as several independent power producers (IPPs) have been forced to

Table 1: Takeover of DISCOM debt by the state government of Maharashtra as per the MoU with MoP Financial Year

75% of MT and ST Debt

Transfer to DISCOM in the form of Grants (0.20*4960) Crore

Transfer to DISOCM in the form of LOAN

Outstanding State LOAN of DISCOM

2016-17

20% of DISCOM Debt take over

992

3958

3968 (4960-992)

2017-18

20% of DISCOM Debt take over

992

2976 (3968-992)

2018-19

20% of DISCOM Debt take over

992

1984 (2976-992)

2019-20

20% of DISCOM Debt take over

992

2020-21

20% of DISCOM Debt take over

992

Source: Ministry of Power (MoP)

February 2017 www.InfralinePlus.com

Power Ministry’s update on UDAY UDAY scheme has already addressed 62% of DISCOMs debt existing at the end of 2014-15. With the recent addition of Maharashtra, and more states likely to join in future, almost 78% of State Sector DISCOM debt (excluding power departments) would be covered under UDAY. Bonds to the tune of INR 1.68 Lakh Crore, constituting almost 76% of the debt, of UDAY states have been issued and successfully subscribed. The ensuing lowering of interest costs have led to savings of approximately INR 2,236 Crore over Q1 of FY 2016-17 for the states of Rajasthan, Uttar Pradesh, Haryana, Chhattisgarh & Bihar and also ensures operational sustainability of participating DISCOMs. Challenges: • RBI’s directives on regulatory treatment of 25% balance DISCOM debt poses a challenge in lowering the cost of debt. • Monitoring of UDAY through an exhaustive list of parameters poses a challenge of collection and processing of information due to legacy issues. Source: Ministry of Power (MoP)

scale down output as demand continues to be muted from states. Under UDAY, every DISCOM is expected to eliminate losses by 2019-20 with potential savings of over INR 180,000 crore every year from 2019. The scheme was designed through extensive stakeholder consultations and has been projected as a game changer for States. Strong monitoring at all levels is crucial to achievement of operational and financial targets under the scheme. Certainly, the central government and the power ministry are relying heavily on UDAY scheme to bring about a holistic change in India’s beleaguered distribution sector. For suggestions email at feedback@infraline.com

February 2017 www.InfralinePlus.com

InDepth Cross border electricity trade to play a crucial role in regional harmony in South Asia

►► Regional interconnection of electrical systems can bring economic & environmental benefits ►► Ministry of Power recently notified the guidelines for “Cross Border Trade of Electricity” By Team InfralinePlus

For the growth of India’s burgeoning economy and to meet the demands of its growing population, energy needs have become the focal point in the formulation of policies and regulations. The quest for energy security has no doubt become an important element of India’s diplomacy and is shaping its relations with neighboring countries. South East Asian nations, namely India, Nepal, Bhutan, Bangladesh, Pakistan, Afghanistan and Sri Lanka, have so far lagged behind their developing counter-

parts in terms of access to reliable and affordable energy, especially electricity. The energy resources in South Asia are limited and dispersed across the region, with large unexploited hydro-electric potential in some parts and growing dependence on fossil fuels in others. Various studies and international experiences related to energy cooperation have established that regional interconnection of these South Asian electrical systems with diverse generation mix and demand

characteristics can bring operational, economic, as well as environmental benefits to the respective countries as well as to the region as a whole. Trade in general and electricity trade in particular can play an important role in facilitating peace prosperity and promote harmony in the region. Electricity trade transactions between India and its neighbors, Nepal, Bhutan and Bangladesh in recent years have highlighted the advantage of crossborder electricity trade. Total volume

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of electricity trade between the South-East Asian nations is likely to exceed 20 BUs by 2020. The focus is on improving cross-border power transmission connectivity, promoting power trade and cooperating in energy efficiency and development of clean energy projects which will provide fillip to the fight against climate change. Cross-border interconnections had a very long history, the first being witnessed in Europe. Regional electricity markets have evolved across the Americas, Europe, Africa and Asia. These include the Central American Electrical Interconnection System (SIEPAC), the European Network of Transmission System Operators for Electricity (ENTSO-E), the Greater Mekong Sub-region (GMS), Association of South East Nations (ASEAN) Grid, the Gulf Cooperation Council Interconnection Authority (GCCIA), the Energy Community of South East Europe (ECSEE), the Southern Africa Power Pool (SAPP) and the West African Power Pool (WAPP).

Current Scenario The first interconnection project enabling export of up to 500 MW from India to Bangladesh, which commenced in 2013, has already begun reducing power shortages in Bangladesh, providing alternative markets for Indian power suppliers, and improving grid stability in the sub-region. According to the South Asia Sub-Regional Economic Cooperation (SASEC), the growth in export of Bhutan’s hydro-

power to India contributes to increasing the share of more environment-friendly and sustainable power sources in the total energy mix of the sub-region. At present, Cross Border Trade of Electricity has been taking place with Bangladesh, Bhutan and Nepal under bilateral Memorandum of Understanding/ Power Trade Agreement (PTA). Bhutan, with a hydroelectric potential of 30 GW, has derived significant benefits from export of electricity by not only earning a substantial portion of the export income of the country, but by also being able to provide widespread access to affordable electricity to most of its population. In contrast, Nepal, with a hydroelectric potential of over 80 GW, continues to face power shortages and has become a net importer of electricity from India. While an upcoming 400 kV transmission line between India and Nepal may initially

Table 1: Regional Interconnection in the SAARC Region Countries

Connection

Inter-Connection

Bhutan

Punatsangchu (Bhutan) – Alipurduar (India)

400 kV DC

Bangladesh

Baharampur (India) – Bheremara (Bangladesh)

400 kV DC and 500 MW HVDC (upgradable to 1000 MW)

Nepal

Approx. 20 linkages exporting power from India to small isolated markets in Nepal.

Various lines at 132/33/11 kV

Sri Lanka

Muzaffarpur (India) – Dhalkebar (Nepal)

125 km 400 kV, interconnection

Madurai (India) – Anuradhapura (Sri Lanka)

130 km (India); 91 km (undersea cable); 150 km (Sri Lanka) / 500 MW

Source: Ministry of Power (MoP), Government of India

support import of electricity from India, but is expected to support electricity export through development of hydro resources in the Himalayan country. As indicated by many stakeholders in the past, any cross-border transactions between India and neighboring country shall be allowed through bilateral agreements between Indian entity and an entity of that country under the overall framework of agreements signed between the countries. On the view of the above and to facilitate Cross Border trade of electricity between India and neighboring countries, Ministry of Power (MoP) recently notified the guidelines for “Cross Border Trade of Electricity”. According to the guidelines, Ministry of Power, Government of India shall designate an Authority (Designated Authority) for facilitating the process of approval and laying down the procedure for cross border transaction and trade in electricity. The Designated Authority shall coordinate with the Nodal Agency of the neighboring country for all purposes as stated in the Rules and Regulations. The roles defined for the Designated Agency are: facilitating the process of approval and laying down the procedure for cross border trade; planning, monitoring and coordinating

February 2017 www.InfralinePlus.com

InDepth

the commissioning of cross border transmission lines for cross border transactions; the grid security, safety and operation; and any other function as assigned by Government of India, Ministry of Power. Ministry of Power has described official from Central Electricity Authority (CEA) as the Designated Authority for the aforesaid purpose in the guidelines. The functions of the Designated Agency as stated in the guidelines are: (i) Coordinating with the respective Nodal Agency of the neighboring countries on cross border trade of electricity, (ii) Planning, monitoring, coordinating and commissioning of cross border transmission lines for cross border transaction in consultation with CEA and CTU, (iii) the Grid security, safety and operations in consultation with CEA and CTU, (iv) accord of approval of for participating entity for cross border between India and the neighboring countries, (v) Examining and certifying surplus capacity of electricity for export by Coal Based Thermal Power Projects and (vi) Notifying the quantum of electricity from time to time that can be traded through Indian Power Exchanges or any other mode as specified by the Ministry of Power. According to the guidelines, â&#x20AC;&#x153;The Designated Authority will frame its own rules for Conduct of Business (CBR) for facilitating the process of approval and laying down the procedure of Cross Border.â&#x20AC;?

Determination of Tariff Tariff for import of electricity by Indian entities (including traders, distribution licensees) from generating stations (directly or through trader) located outside India may be determined, under long term/ medium term/ short term agreement, through a process of competitive bidding, which shall be adopted by the Appropriate Commission. Provided that in case of hydro projects, the tariff may be determined by the CERC as per its Regulations, if approached by the generator through the Government of the neighboring country and agreed by the Indian entities, including Public Utilities/ DISCOMs. Tariff for export of electricity to entities of neighboring countries by Indian entities through long term/ medium term/ short term agreements may be as mutually agreed

Table 2: Eligible criteria for Cross Border Trade of Electricity Sr. No. Description 5.2.1 (a) Import of electricity by Indian entities from Generation projects located outside India and owned or funded by Government of India or by Indian Public Sector Units or by private companies with 51% or more Indian entity (entities) ownership. 5.2.1 (b) Import of electricity by Indian entities from projects having 100% equity by Indian entity and/ or the Government / Government owned or controlled company(ies) of neighboring country. 5.2.1 (c) Import of electricity by Indian entities from licensed traders of neighboring countries having more than 51% Indian entity(ies) ownership, from the sources as indicated in para 5.2.1 (a) and 5.2.1(b) above. 5.2.1 (d) Export of electricity by distribution licensees / Public Sector Undertakings (PSUs), if surplus capacity is available and certified by the concerned distribution licensee or the PSU as the case may be. Source: Ministry of Power (MoP) Guidelines on Cross Border Trade of Electricity

or through competitive bidding, subject to payment of the charges as applicable for transmission/ wheeling of electricity through the Indian grid. The transmission charges, scheduling, accounting, deviation settlement involving Indian Grid and any other related operational mechanism and matters involving inter connected grids of electricity shall be governed in accordance with the applicable CERC Regulations.

Conclusion Continuous efforts to expand cross border electricity cooperation and trade in South Asia needs to address several barriers. Some of these may arise due to regional-level political climate, while a lot will depend on how the policies and regulations on cross-border electricity trade are framed in individual countries of the region. The electricity laws, rules and regulations of the South Asian countries currently in place may be reviewed to take cognizance of generation w.r.t to cross-border trade, interconnections and coordination amongst regional grid operators. This will go a long way in harmonizing policies and regulations for facilitation of cross-border trade. For suggestions email at feedback@infraline.com

February 2017 www.InfralinePlus.com

StatisticsPower Details of Upcoming InterstateTransmission Projects (As on Janâ&#x20AC;&#x2122;2017) SI. No.

Project Name

Estimated Cost (in Crores)

Region

Type

Remarks

DataÂ Unavailable

Southern

Interstate

Regulated

400kV QMDC line from Munigalveedu to proposed 400kV SubStation at Jangaon in Warangal Dist. of length 90 Kms.

Provision of One no. of 220 kV bay at Roorkee under NRSS XXXVI

Northern

Interstate

Regulated

Transmission System for Banaskantha (Radhanesda) Ultra Mega Solar Power Park in dist. Banaskantha, Gujarat (700 MW)

186

Western

Interstate

Regulated

Transmission system for Ultra Mega Solar Parks in Bhadla, Distt. Rajasthan

1429

Northern

Interstate

Regulated

Transmission System for Tumkur (Pavgada) Ultra Mega Solar Park Phase-I & II

1330

Southern

Interstate

Regulated

Installation of Bus Reactors at Cuddapah, Nellore, Kurnool, Raichur and Thiruvalam

100

Southern

Interstate

Regulated

Augmentation of Transformation Capacity in Southern Region

Southern

Interstate

Regulated

Conversion of Fixed Line Reactors to Switchable Line Reactors in Southern Region

Southern

Interstate

Regulated

Eastern Region Strengthening Scheme - XX (ERSS-XX)

363.38

Eastern

Interstate

Regulated

400kV line bays at Bhinmal(PG) & Sikar(PG) along with 50 MVAr line reactor at Sikar(PG)

Northern

Interstate

Regulated

Provision of 765kV line bays at 765/400 kV Ajmer Substation for 765 kV D/C line Korna (RRVPNL) S/S to Ajmer (Pg) 765/400 kV S/S

Northern

Interstate

Regulated

Eastern Region Strengthening Scheme XXI (ERSS-XXI)

1321

Eastern

Interstate

TBCB

Connectivity and Long Term Access (LTA) to HPPCL 450 MW from Shongtong Karcham HEP.

318

Northern

Interstate

TBCB

Inter State Transmission system strengthening in Chhatarpur area in Madhya Pradesh

392

Western

Interstate

TBCB

Connectivity System for Lanco Vidarbha Thermal Power Ltd. (LVTPL)

351

Western

Interstate

TBCB

Additional System for Power Evacuation from Generation Projects pooled at Raigarh (Tamnar) Pool

269

Western

Interstate

TBCB

Additional 400kV feed to Goa

594

Western

Interstate

TBCB

Transmission system for Ultra Mega Solar Park in Fatehgarh, distt. Jaisalmer Rajasthan

536

Northern

Interstate

TBCB

New WR- NR 765 kV Inter-regional corridor

916

Northern

Interstate

TBCB

February 2017 www.InfralinePlus.com

Tariff Revised by State ERCs during 2016-17 State Andhra Pradesh

Tariff in 2016-17 There is no general increase in tariff for domestic consumers. Tariff hike by 2-4 per cent for industrial and commercial consumers. Energy charges hike for non-domestic consumers is restricted to 2 per cent. The regulator has also spared railway traction while also reducing the existing tariffs for sugarcane crushing units, lift irrigation schemes, aquaculture and animal husbandry (pisciculture / prawn culture, poultry units and dairy farms), poultry hatcheries, religious places and energy intensive units such as ferro alloys units Arunachal No increase in tariff for domestic & commercial consumers, increase of 10 paise per unit for industrial consumers and 15 paise per Pradesh unit for temporary consumers Bihar No hike in tariff for 2016-17 across all consumers categories Chhattisgarh Power tariff increase for domestic users is average 12 percent and high tension consumers from 12 to 16 percent Delhi No Tariff Revision for Discoms of Delhi for 2016-17 Gujarat Gujarat Electricity Regulatory Commission (GERC) has reduced power tariff by 10 paise per unit for all residential consumers and 14 paise of HT consumers in Gujarat. For the consumers of private sector power producer, Torrent Power Limited, the latter revised power tariff downwards by 18 paise per unit for power consumers of all the categories in Ahmedabad, Surat and Gandhinagar cities J&K The Power Development Department of Jammu & Kashmir has proposed 17% Tariff hike for 2016-17, Order awaited from JKSERC Karnataka Average 9% increase over the existing prices or an average 48 paise per unit. Across the consumer categories, the raise falls in the range of 15 paise to 50 paise per unit Madhya The average electricity rate for low-tension category connections, which include domestic users, small shops and business Pradesh establishments, is increased by 6-7%. Average 8% tariff hike for industries (overall charges for high-tension electricity consumers are increased from Rs 5.6 to 6.10 per unit, fixed charges are also increased) Maharashtra MERC has rejected MahaVitaran’s proposal for an average 5.5% increase in the electricity tariff for 2016-17 but has allowed a moderate hike of 1% to 1.3% for residential consumers for the current year and also for 2017-18, 2018-19 and 2019-20. The Below Poverty Line residential tariff category has been extended to consumers with a sanctioned load upto 0.25 Kw, as against the limit of 0.1 Kw earlier. For low tension (LT) residential the tariff has been hiked to Rs 6.41 per unit from Rs 6.33 per unit, for LT non-residential to Rs 11.23 from Rs 11.19, for LT power looms to Rs 6.57 from Rs 6.54 and for LT industry general to Rs 8.03 from Rs 7.99. For industries, MERC has reduced energy charges with a marginal increase in demand charges. The government has made budgetary allocation of Rs 1,011 crore to provide subsidy to MahaVitaran to compensate its loss. The reduction in tariff will be done by offering load factor incentive and cut in the fuel adjustment cost. The tariff will be reduced by Rs 1.25 to Rs 1.75 per unit in Vidarbha while Rs 1.50 in Marathwada and 50 paise to Re 1 in north Maharashtra and backward areas of western Maharashtra. The tariff for Agriculture category has increased slightly but will still meet only a little above the 50% of the Average Cost of Supply (ACoS). However, around 36% of agricultural consumers are still un-metered. Tata Power has proposed an average tariff hike of 6% for 2016-17 while Reliance Infrastructure has pleaded for an average 5.26% tariff hike for 2016-17. Order awaited from MERC Manipur MSPDCL seeks 10 percent increase in the power tariff for 2016-17, order awaited from Joint Electricity Regulatory Commission for Manipur and Mizoram Odisha No hike in tariff for 2016-17 across all consumers categories Punjab Average Tariff Hike of -0.98% for 2016-17 Uttar Pradesh Average Tariff Hike of 3.18% for 2016-17 Uttarakhand Tariffs hiked by nearly 5% in both domestic and commercial categories. On an average a hike of 26 paise per unit has been effected for consumers in the domestic category while an increase of 28 paise per unit has been made for consumers in the commercial category West Bengal Average power tariff for consumers of West Bengal State Electricity Distribution Company Ltd (WBSEDCL) increased by 23 paise per unit for consumers consuming more than 300 units. West Bengal Electricity Regulatory Commission (WBERC) has allowed only four paisa increase in average tariff per unit of power to CESC for financial year 2016-17 against 38 paisa rise allowed in the multi-year tariff order. WBERC has fixed average tariff of Rs 7.02 paisa per unit in 2016-17 over last year’s Rs. 6.98 paisa. An analysis predicts a negative revenue impact of Rs 30-40 crore a year. WBERC had approved an average tariff of Rs 7.36 per unit in the multi-year tariff order issued earlier. Haryana No increase has been made in power tariff for any category in the State, the tariff for consumers of all categories has been reduced by 37 paise per unit Rajasthan An average tariff hike of 9.6% in various consumer categories, to be effective from September 1,2016. The commission (RERC) cleared the full tariff increase sought by state discoms, which led to 11 to 12% increase in all consumer categories except for agriculture, where the hike is 5.5%. The power tariff for domestic consumers has been hiked between 35 paise and 75 paise in different categories. In the nondomestic category, the commission announced a revised rate of Rs 7.55 per unit from the earlier Rs 6.75 for consumption up to first 100 units per month, and from Rs 7.15 to Rs 8 per unit for consumption from 101 to 200 units a month. The consumers using 201 to 500 units per month will have to pay Rs 8.35 per unit instead of Rs 7.45 earlier, whereas for those consuming above 500 units, the rate has been hiked from Rs 7.85 to Rs 8.80 per unit. For those in the same non-domestic category but with a power consumption of 5 KW, charges have been fixed at Rs 7.55 per unit for up to 100 units, Rs 8 for up to 200 units and Rs 8.80 till 500 units. For small industries, the hike is up to 70 paise, medium 75 paise and large industries 80 paise per unit. Telangana Telangana Discoms (TSSPDCL & TSNPDCL) have proposed an average tariff hike of 7.5% for consumers. Domestic consumers using upto 100 units of energy per month have been spared the hike.There is also no tariff hike for agriculture category consumers (20 lakh consumers), except for horticulture nurseries.

February 2017 www.InfralinePlus.com

NewsBriefs | Coal Govt to open commercial coal mining in FY18

The government will open up commercial mining of coal next fiscal and four dry fuel mines will go under the hammer in the first phase. “Next year (2017-18) in coal sector, we will allocate 25 mines. Of these, 2 will be alloted and 23 will be auctioned, some for the coking coal and some for sectors other than power, like cement and four for

commercial mining,” coal secretary Susheel Kumar said.“We are preparing that plan of action but we will initiate that process and conclude it in the next financial year,” he said. A group of secretaries suggested recently that government create competition for state-run Coal India Ltd (CIL) by opening up commercial coal mining. On non-coal mines’ auction, mines secretary Balvinder Kumar said: “We hope that nearly 250 mining areas will be put to auction in coming year (2017-18) by the major mineral producing states.” Among these, he said there are iron ore mining areas in Karnataka which were cancelled by the Supreme Court in category C mines. Besides mining areas in Odisha, Chhattisgarh and Jharkhand would also be auctioned.

Coal India production grows 5.5 percent in January

Coal India Ltd (CIL) reported that its production grew by 5.5 per cent to 55.99 million tonnes (mt) in January as compared to 52.86 mt in the corresponding month last fiscal, but the production during April 2016 to January 2017 remained flat. According to provisional data, the production stood at 433.76 mt, up by a meagre 1.7 per cent during the first ten months of the current fiscal (2016-17). It achieved 91 per cent of the target which was set at 478.57 mt for the period. CIL, which produces 84 per cent of the country’s coal production, was targeting 61.04 mt during the last month of the current fiscal, achieving 92 per cent of the target. It also reported that its off-take during this period was up by a marginal 1.3 per cent at 443.13 mt as against

a target of 489.71 mt. Its off-take for January stood at 51.35 mt achieving 92 per cent of the target. In 2015-16, the state miner produced 538.75 mt of coal against a target of 550 mt and its off- take was at 534.5 mt. During the current fiscal, the coal production target has been pegged at 598.61 mt is expected to be 660.7 mt in 2017-18.

National CIL unions seek Rs 20 per tonne levy for company’s pension fund

Coal India’s unions are demanding a levy Rs 20 per tonne on the dry fuel to help the company’s pension fund get enough cash. The state-run company is likely to send this proposal soon to the central government. “We would want the Centre to impose a levy on each tonne of coal sold to save the pension fund. It would go into inflating the fund size and help reduce the large liability gap it is facing today,” said DD Ramanandan, president of the All India Coal Workers’ Federation. Employees also want to increase their contribution to the fund to 7% of their salary from 4.91% and the company to contribute a similar percentage. Currently, Coal India doesn’t make any payment. But the government contributes Rs 324 per person every year which also the unions want to be enhanced. There are around 3 lakh Coal India pensioners. The pension fund may not suffice to pay pensions to all retired employees in the future. Two studies in 2014 showed the fund had an about Rs 26,000 crore deficit and that it was widening.

Most Australians oppose government’s $1bn Adani loan for coal railway line Three-quarters of Australians, including most Liberal voters, oppose the government giving a $1bn loan to Adani to build a rail line between its proposed Carmichael coalmine and the Abbot Point shipping terminal. The government’s Northern Australia Infrastructure Fund (Naif) granted Adani “conditional approval” for a $1bn loan in December last year. The rail line, if built, would allow Adani to build the country’s biggest coalmine and open up the Galilee Basin to further mines by linking them to an export terminal. Coral scientists have argued the coal needs to stay in the

ground if the Great Barrier Reef is to be protected from the impacts of climate change. The government has argued there is no definite link between the coal from the Adani mine being burned and climate change, and the resources minister, Matthew Canavan, has said the mine would “be a good thing for the environment”. But a ReachTel poll of 2,126 people across Australia conducted on 12 January, commissioned by GetUp, found 74.4% of respondents said “no” when asked whether “lending $1bn to an offshore mining company to build a coal rail line is a good use of public money”.

February 2017 www.InfralinePlus.com

NewsBriefs | Coal ICVL to restart operations at Mozambique mine as coking coal prices rise

After suspending operations at its Benga mine in Mozambique in May last year, International Coal ventures (ICVL), the SAIL-led consortium of five state-run units, will soon restart the mine hoping that it will be able to recover variable costs and make some profits as coking coal prices are running high. ICVL

acquired 65% stake in the Benga mine and two green-field coal assets (Tete East and Zambeze) in 2014 from Rio Tinto. The assets have an estimated coal resource of 2.6 billion tonnes and huge CBM potential. SAIL, RINL and NMDC took part in the acquisition while NTPC and Coal India opted out. Tata Steel has the remaining 35% stake in Benga mine. The Benga asset can produce 5.3 million tonne coal per annum. However, given the losses, running up to $7.5 million each month, owing to high mining & transportation costs and subdued prices of coking coal; the promoters were producing only 3 lakh tonne per month before operations were discontinued.

India cedes top coal importer spot back to China as growth trend stalls India has surrendered its status as the world’s top importer of coal back to China, with its overseas purchases in 2016 falling to less than 200 million tonnes. The question now is whether lower Indian coal imports are the new reality, or if last year was just a blip. India’s coal imports last year totalled 194.93 million tonnes, according to vessel-tracking and port data compiled by Thomson Reuters Supply Chain and Commodity Forecasts. This was 5.4 percent lower than the 206.6 million tonnes recorded for 2015, and also less than the 255.5 million tonnes imported by China last year, according to official customs data. It should be noted that despite the decline, India is still

importing nearly four times as much as it did a decade ago, and almost double the amount from five years back. India’s rapid growth in coal imports came amid strong economic growth and struggles by state miner Coal India to lift output to meet its ambitious targets.

National Neyveli Lignite Corp to increase power generation by 2,640 Megawatt

Neyveli Lignite Corporation (NLC) India Limited has proposed to enhance power generation at its Neyveli complex by 2,640MW, said chairman and managing director Sarat Kumar Acharya. Acharya said the company’s project to increase lignite-based power generation by 1,320MW (two units of 660MW) has reached the advanced stages of completion. He said the company has also proposed to add another 1,320MW (two units of 660MW) in the second phase at Neyveli. He said the company has awarded contracts for enhancing coal-based power generation by another 1,980MW through its joint venture Neyveli Uttar Pradesh Power Limited (NUPPL) at Kanpur in Uttar Pradesh and for enhancing lignite-based power generation by another 500MW through Barsingsar expansion and Bithnok green field project in Rajasthan.”With the government allotting 20.5 metric tonne of coal per annum from Talabira mine blocks in Odisha, we have taken up a plan of 4,000MW capacity addition in coal-based power generation in two phases,” he said.

Coal India losing interest in underground mining Higher capital costs, the geological parameters of new reserves and the group’s inability to stop production from underground mines falling have compelled the miner to plan future incremental production entirely from opencut mines. Production from CIL’s underground mines had been steadily declining from 9% of its total output in 2012 to below 6% in 2016. According CIL officials, there has been natural depletion of reserves at existing operational underground mines. The absence of contiguous new deposits is said to be a major hurdle to developing new underground mines, as fragmented blocks

made the installation of long-wall mining technology unviable in such deposits.

Currently, opencast mines comprise 93% of CIL’s total production, although only 42% of the company’s 413 operational mines are opencut operations. However, CIL officials were quick to point out that there was no “official strategic policy” to bury underground mining, despite underground mining losing its prominence in future CIL production plans. In fact, late last year a business delegation from Poland held preliminary talks with CIL wherein it offered to provide the latest state-of-the art underground mining technology to India for development of reserves below 300 m.

February 2017 www.InfralinePlus.com

NewsBriefs | Coal Deutsche Bank pulls out of coal projects to meet Paris climate pledge

Deutsche Bank, the biggest bank in Germany, has said it will stop financing coal projects as part of its commitments under the Paris agreement to tackle

global warming.“Deutsche Bank and its subsidiaries will not grant new financing for greenfield thermal coal mining and new coal-fired power plant construction,” it said. Existing exposure to such projects will be gradually reduced, it added. The lender said the decision was in line with the pledges it made at last year’s Paris climate conference, along with 400 other public and private companies, to help fight global warming. The bank pulled out of a deal to finance the controversial expansion of a coal port in Australia in 2014 because it said there was no consensus about how it would impact the Great Barrier Reef.

Coal could get clean-energy subsidy under new Turnbull focus

Australia’s Prime Minister, Malcolm Turnbull has opened the possibility of using clean-energy subsidies to build new-generation, coal-fired power stations as he branded Labor’s heavy focus on renewables “mindless”, and a recipe for more expensive, less reliable electricity. Flagging a policy switch sure to provoke anger from anti-coal environmentalists, but set to please fossil-fuel enthusiasts in the Coalition partyroom, Turnbull said technological advances had made new coal-fired generators viable as a potential foundation in the overall energy mix.”The next incarnation of our national energy policy should be technology agnostic – it’s security and cost that matter most,

not how you deliver it,” he said. This called for a policy approach that was non-ideological, using “all of the above technologies” - coal, wind, solar, pumped hydro, and improved battery storage.”

International Japan 2016 thermal coal imports fall from record, LNG purchases down for 2nd year

Japan’s coal imports for power generation fell in 2016 from four years of successive record highs and liquefied natural gas (LNG) purchases dropped for a second year as an energy crisis brought on by the 2011 Fukushima disaster eased, official data showed. Rising supplies of homegrown renewable energy and the return of some nuclear power, amid falling demand as Japan’s population declines, mean the world’s third-largest economy has more diversity in its sources of energy. Thermal coal imports declined to just below 110 million tonnes in 2016, down from a record-high 113.84 million tonnes in 2015, the Ministry of Finance said. Import costs fell 20 percent from a year earlier. Shipments of liquefied natural gas (LNG) dropped for a second year last year, down 2 percent to 83.34 million tonnes, while their value fell 40 percent. Japan is the world’s biggest importer of LNG.

Sembcorp fully commissions 1,320MW coal-fired power plant in China Sembcorp Industries has commissioned the second 660MW unit at the 1,320MW coal-fired power plant in Chongqing, China, marking the start of full commercial operations at the facility. Located in Anwen, Qijiang district, the approximately RMB4.67bn (S$966.5m) power plant is developed by ChongQing SongZao Sembcorp Electric Power. ChongQing SongZao Sembcorp Electric Power is owned by Sembcorp’s wholly-owned subsidiary Sembcorp (China) with 49% stake and Chongqing Energy Investment Group’s subsidiary Chongqing Songzao Coal and Power with 51% interest. The power

generation facility features supercritical technology and is said to be one of the most efficient power plants in Chongqing. The first 660MW unit of the power plant was commission in November 2016. In

addition to helping in meeting rising power demand in Chongqing, the power plant supports the development and growth of Chongqing’s economy. Sembcorp group president and CEO Tang Kin Fei said: “The successful completion of the power plant marks an important milestone for Sembcorp in our expansion of our energy portfolio in China.“The project, which was completed ahead of schedule, bears testimony to the successful cooperation between Sembcorp and Chongqing Energy Investment Group. The power plant will also help to meet the increasing power needs in Chongqing.”

February 2017 www.InfralinePlus.com

ExpertSpeak

Excessive coal stocks: Is it an advantage? In the wake of low power demand and falling PLFs, Alok Perti, Chairman Coal Preparation Society of India (CPSI) and Former Secretary Ministry of Coal, analyses the reasons for the huge coal stock pile up at thermal power stations and at the mine heads. He feels that while increase in coal production by CIL and SCCL is a positive factor, a more judicious approach needs to be adopted to ensure that the excessive stock piling does not take place. Supply of coal to thermal power stations for electricity generation has been a contentious issue for quite some time. In the years from 2010 to 2013-14, the general impression was that power stations were starved of coal supply and that the imports of Non-coking coal were increasing rapidly. During 2009-10, the coal production saw a fairly good growth of about 7-8%, but this growth was constrained in the next few years, and in 2011-12, the final year of the 11th plan, CIL’s production was only 436 million tons (MT) against the projected target of 520 MT (11th plan document). The main reason for this slow growth stated at that time was the delay in environment clearances as the Ministry was intensely engaged in determining the “go and no-go areas” and no clearances were forth coming for new projects or expansions. But from 2012-13, the situation has been improving. With improved supply of domestic coal, the imports should naturally reduce and that is what is being witnessed today. Over the last four years, some interesting changes have been observed in the supply and usage of coal. Way back in 2012-13, several states were requesting CIL to restrict supply of coal as stocks were piling up at the power stations and electricity demand from distribution companies

was not increasing. In this article there is an attempt to understand the reasons for having huge stocks piled up both at the thermal power Alok Perti, Chairman Coal Preparation Society of Answer stations and India (CPSI) and Former Secretary, Ministry of Coal lies in at the mine bringing in heads and from 2012-13 to 2015-16. In the whether commercial mining year 2013-14, CIL and SCCL this is a supplied 385.157 MT of coal and inducing desirable to various power stations in the competition in situation. country. It implies that about 78. 8 the sector MT of non-coking coal was supplied to non-power sector presuming that Trend in all coal produced was transshipped last four years out of the mines to users. Since there To begin with, it would be appropriate was a perceived shortage of fuel in the to look at the data for the last four years power sector, all additional production which would be adequate to understand was intended to be supplied only to the current dynamics of the sector and the thermal power stations during the to study the trends which may help in 12th plan period. In the year 2015-16, predicting the future (Table 1). CIL and SCCL supplied 443. 585 MT The data shows an increase of about coal to thermal power stations. This 90 MT of non-coking coal production amounted to an increase of 58.428 MT from CIL and SCCL inthe four years

Table 1: Production of Non-coking coal by Coal India and SCCL Year

Production by CIL (million tons)

Production by SCCL (million tons)

Total Production (million tons)

2012-13

401.52

53.19

454.71

2013-14

413.495

50.469

463.964

2014-15

443.670

52.536

496.204

2015-16

484.93

60.389

545.312

February 2017 www.InfralinePlus.com

ExpertSpeak Table 2: Vendible coal stock at pitheads as on 31st March for 2013-2016 (million tons) Year

CIL

SCCL

Others

Total

2013

58.17

3.02

1.86

63.05

2014

48.68

5.55

1.28

55.51

2015

53.47

5.35

0.52

59.39

2016

57.67

6.98

0.46

65.12

over the last three years. The closing stocks at the power stations on March 31, 2014 and 2016 stood at 22.763 MT and 43.235 MT, respectively. In other words, the actual increase in supply was about 38 MT.

Stock piling of coal in CIL mines at the end of financial year has been going up and down. In the year 2010-11, the stock reached to about 70 MT on March 31. The Central Electricity Authority

Table 3: Coal stocks at Power stations on March 31 in last four year Year

Stock At TPSs (million tons)

No. of TPSs monitored

Critical

Super Critical

Number of TPSs with stock above norm

2013

19.00

2014

20.30

100

2015

26.103

100

2016

39.00

101

(CEA) is monitoring the coal stock position in about 100 power stations on a daily basis. If the stock goes below 4 days requirement, it is categorized as super critical and below 7days as critical. The CEA has also prescribed the norm on amount of coal which

can be stocked at the power stations, though there appears no uniform method in this prescription. The data (Table 3) shows that coal stocks at the power stations have been improving. The number of critical and super critical power stations

Table 4: Super critical TPS in 2012-13 Name of the TPS Mahatma Gandhi Badarpur Dadri Anpara Khaparkheda Wardha Simadhri Sipat Khalgoan Koderma Talcher Farraka Durgapur

Norm in terms of days 25 30 30 25 25 29 25 9 15 20 15 15 20

Stock as on Stock as on Stock as on Stock as on 31stMarch 31stMarch 31stMarch 31stMarch 2013 in days 2014 in days 2015 in days 2016 in days 4 21 24 67 2 0 2 1 3 3 1 2 0 1 0 2

28 4 16 3 2 2 4 25 22 6 24 5

39 12 21 6 0 25 18 25 39 20 17 24

18 25 18 24 30 31 16 25 43 12 24 44

has become zero as on March 31, 2016. This is a notable achievement. However, the number of power stations having stocks far above the norm has increased and this may not be desirable in several cases. The list of the critical and super critical stations is not the same over the three years. In fact, it varies year to year quite significantly.

Implications To be able to arrive at any meaningful implication of having large stocks of coal at the thermal power stations and at the mines one must consider the various limitations. Firstly, coal kept exposed to air in the open for long period leads to deterioration and often in hot summer months quickly catches fire. Ideally, coal should be used as soon as possible after it is beneficiated and delivered to the user. However, since the power stations consume fairly large quantities, the quantity required to be kept in stock depends upon the efficiency of the delivering mechanism and the ability of the miner to produce adequate quantities so that disruptions in the supply do not take place. Secondly, most thermal power producers would like to run the plants at high PLFs so that their sale of power is maximum and debt servicing is not hampered. Coal companies supply coal on the basis of the Annually Contracted Quantities (ACQ) which for old power plants is based on the average supply made over previous years, and for new plants the ACQ is based on the requirement for running the plant at 85% PLF. Power plants would be happy having good amount of stocks all the time, but if stocks are kept of long periods and the quality deteriorates then the specific consumption would increase, resulting in increase of cost of power. Further, the space available for stacking the coal should be sufficient for keeping huge stocks. Normally, the quantity indicated as the norm for stocks to be maintained at the power stations gives an indication as

February 2017 www.InfralinePlus.com

Table 5: Super critical TPS in 2013-14 Name of the TPS

Norm in terms of days

Raichur Bellary Kakatiya Simadhri Rayalseema Dr. N. Tata Rao Parli Khaparkheda Kolaghat

30 30 15 25 25 20 25 25 25

Stock as on 31st March 2014 in days 3 2 3 2 1 0 0 3 3

Stock as on 31st March 2015 in days 3 7 NA 25 7 7 4 6 12

Stock as on 31st March 2016 in days 23 20 19 31 34 31 78 24 24

Super critical TPS in 2014-15 Name of the TPS Korba Satpura Warora Raichur North Chennai Muzaffarpur

Norms in terms of days 15 20 20 30 30 20

Stock as on 31st March 2015 1 2 0 3 3 1

Stock as on 31st March 2016 9 42 30 23 17 10

A stock which would be meant for use over 25 days would last for over 40 days. Where ever there is a case of low PLF and huge stocks, the situation is not a very desirable one. It would lead to wastage, may be some thefts and some of the coal being destroyed by fire. There are several cases where the power station authorities have been requesting for curtailing the supply not only in the current year but also during the previous three or four years. to the capacity of the power station to stack up. In the earlier years of the 11th plan, there was a serious problem of getting the required number of railway rakes

at the loading points. Unfortunately, the season for maximum production and consequently higher requirement of railway rakes happen to be during October to March when all other

mining and industrial production activities tend to peak and there is a bit of a competition. Often, the railway authorities have pleaded with the coal companies to restructure their production schedules, but this is not possible. Over the last three or four years, the rake availability and turnaround time for coal movement has seen a reasonable improvement. With improved performance of the railways, it is perhaps now time to re-examine the norms set for stacking at the power stations. Management for maintenance of excessive stocks at power stations entails costs and higher risks of theft. For new power plants, particularly Independent Power Producers (IIP) who have built up the project on funds from financing institutions and have to service the debt regularly, it would be very comforting if the supply of coal is adequate and regular. For them, having higher coal stocks would be preferred provided they are able to maintain a PLF of 85%. Unfortunately, the demand for power is low and the average PLF in the country has declined from 73-74% in the years 2009-10 to around 60% at present. In such a situation, a stock which would be meant for use over 25 days would last for over 40 days. Where ever there is a case of low PLF and huge stocks, the situation is not a very desirable one. It would lead to wastage, may be some thefts and some of the coal being destroyed by fire. There are several cases where the power station authorities have been requesting for curtailing the supply not only in the current year but also during the previous three or four years. As on March 31, 2016, there were about 25 power stations having excessive stocks, in most cases two to three times the norm set by the CEA. The position as of January 10, 2017 indicates that there are still about 12 such power plants having stocks much more than the norm. These are: Ropar, Panki, Tanda, Sabarmati, Koradi, Parli, Dahanu, Bokaro, Chandrapur (DVC), Kodarma,

February 2017 www.InfralinePlus.com

ExpertSpeak

15, 2016. The production target in 12th plan document for the most optimistic scenario was 615 MT for CIL. Even if CIL reaches 580 MT for the year2016-17, it is likely to result in a similar situation as it was on March 31, 2016. It is necessary for CIL and SCCL, the two coal producing companies, to examine all aspects of the issue and work in a coordinated manner ensuring that unnecessary exposure of coal does not take place.

Way forward

South REPL and Durgapur. The other interesting fact is that the number of super critical power stations as on January 10, 2017 is 9 and critical 22 (includes 9 super critical). This situation is very similar to the position on March 31, 2014. It is apparent that the position of critical and super critical keeps varying and requires constant monitoring which the Ministry of Coal does through a committee under one of the Joint Secretaries. The coal production peaks during the last quarter and the stock tend to pile up and the position on March 31 should invariably look satisfactory. The other important factor is the stock piling of coal at the pit heads of mines. Coal production can be increased in existing mines through more intensive mining. In other words, the mine capacity can be enhanced to the maximum approved by Ministry of Environment, Forest and Climate Change while giving the Environment clearance. The coal companies have resorted to such action in the past. In the zeal to show greater achievements, the coal companies step up the production activity in the dry months of October to March. In the year 2015-16, the international prices of coal dropped and cheap imports were available resulting in availability of cheaper power through the power trading companies. The Power Distribution Companies (Discoms) avoided buying power through the signed PPAs resulting in low power generation in several plants.

Departments and Ministries do compete to show better performance but it is necessary to recognize the external factors which may influence the performance of one branch and this may require some changes in strategy to avoid wasteful expenditure, be it by any of the portions of this chain Added to that was the low demand for power essentially due to sluggish growth in industrial production. All these factors combined to lower the PLF of powers stations leading to a fair degree of stock piling of coal at the power stations and at the pitheads of coal mines.The coal companies increased production in 2015-16 showing a growth of about 9% over 2014-15, resulting in excessive stocks being stacked up at power stations and at pitheads of coal mines. During the year 2016-17, from April 1 to January 10, the position of the total stocks at power stations monitored by the CEA was 20.9 MT with 9 super critical power stations. The stock at pitheads was 39.8 MT on November 15, 2016 and increased to 42.2 MT on December

The new government in 2014 having realized that there is a dire need for proper coordination between the power ministry and the main supplier of fuel, the Coal Ministrymade one common minister. From power distribution and consumption to supply of coal, the fuel required, there is a need to fully appreciate each stage of this chain and constantly modify the strategies to suit the need of the hour. The situation as on March 31, 2016 is an example of lack of this effort. Departments and Ministries do compete to show better performance but it is necessary to recognize the external factors which may influence the performance of one branch and this may require some changes in strategy to avoid wasteful expenditure, be it by any of the portions of this chain. While it is appreciated that increase in coal production by CIL and SCCL is a positive factor, a more judicious approach should be adopted to ensure that the excessive stock piling does not take place both at the mine Pitheads and the power plants, since coal is a commodity that deteriorates overtime when exposed to air. Perhaps, the answer lies in bringing in commercial mining and inducing competition in the sector, forcing the coal companies to value every saving in production and getting the most competitive price for their product. The views in the article of the author are personal For suggestions email at feedback@infraline.com

February 2017 www.InfralinePlus.com

InDepth Future auction of coal blocks hinges on growth in power demand

►►Country does not need to build any new power plants for at least next three years: CEA ►►Dependence on coal imports is likely to remain high in the near to medium term

By Team InfralinePlus

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. Coal India Ltd’s (CIL) expansion plans are part of India’s overall efforts to ensure energy security by cutting crude oil imports by 10 percentage points over the next six years—the country now imports 80% of its crude oil requirement— and boosting domestic production of

natural gas. 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. However, recent coal block auction process is expected to fetch coal bearings states a lion’s share of the revenue, in addition to providing relief to consumers with reduction in power tariffs.

The three rounds of mines auction were held after the Supreme Court in 2014 cancelled the allotment of 204 coal blocks. In compliance to the Hon’ble Supreme Court order dated 24.09.2014, 83 coal mines have been allocated to private and public sector under the provisions of the Coal Mines (Special Provisions) Act 2015. In a reply to the Parliament, it was stated that “31 coal mines out of the 83 have been allocated through auction. These mines will be used for specified

February 2017 www.InfralinePlus.com

InDepth

end-uses other than power such as Iron & Steel, Cement and Captive Power Plants have been clubbed as NonRegulated Sector.â&#x20AC;? The auction proceeds from 83 coal mines allocated so far are estimated at over INR 3.95 lakh crore over the life of the mines, which will be available to the coal bearing states. According to Ministry of Coal (MoC), revenue of INR 2,779.36 crore (approx.) has already been generated (up to October 2016). Adverse market conditions, depressed commodity prices and poor response from sectors like steel contributed to the axing of the fourth tranche of coal block auction process by the government. The slowdown has affected the steel industry so badly that the auction process had to be called off due to lackluster response from bidders, especially from non-regulated sectors like captive power plants, cement and iron and steel.

No need for coal power plants in future: CEA

Recent assessments made by the Central Electricity Authority (CEA) in drafting the national electricity plan reveals that the country does not need to build any new power plants for at least the next three years, while also projecting a subdued demand for power with a 20.7 per cent lower peak demand in 2026â&#x20AC;&#x201C;27. Given the massive capacity addition plans in the renewable sector, CEA estimates there is no requirement for new coal plants from 2022-27. Based on demand projections, CEA estimates new coal-based capacity requirement of 44,085 MW in 2022-27. Since, 50,025 MW of coal power projects are already in different stages of construction and are likely to yield benefits in 2017-22, CEA does not foresee any immediate requirement for fresh capacity addition from coalbased source up to 2027. Seeing the muted demand from state electricity distribution companies (DISCOMs) owing to recurring financial troubles

Adverse market conditions, depressed commodity prices and poor response from sectors like steel contributed to the axing of the fourth tranche of coal block auction process by the government. The slowdown has affected the steel industry so badly that the auction process had to be called off due to lackluster response from bidders and increasing preference towards buying power through the exchange route, it will become impossible for the

government to auction all the cancelled coal blocks while also factoring in the record production by CIL.

Coal requirement in future With the provisional demand projections and likely Renewable Energy Sources (RES) capacity addition, the coal-based generation has been estimated and accordingly provisional coal requirement has been worked out by CEA in the draft national electricity plan. The likely capacity addition of RES has been considered in three cases viz., Case-I: 1,15,326 MW, Case-II: 90,326 MW and Case-III: 65,326 MW by the terminal year 2021-22. With this estimate, the total capacity of RES would be 175 GW in Case-I, 150 GW in Case-II and 125 GW in Case-III respectively. Accordingly, in the year 2021-22, the estimated generation from coal-based power plants would be around 1018 BU, 1071 BU and 1122 BU respectively. The details of coal requirement for the year 2021-22 have been worked out by CEA considering 30% reduction in Hydro generation due to failure of monsoon and being supplemented by coal based generation. During 2026-27, the total capacity of RES has been estimated to 275 GW capacity, considering 175 GW of total capacity at the end of the year 2021-22 and 100 GW capacity addition of RES during 2022-27. With the capacity addition of 50,025 MW coal based power plants, the generation from coal based power plants is estimated as 1246 BU. The details of coal requirement for the year 2026-27 have been worked out considering 30% reduction in hydro generation due to failure of monsoon and are being supplemented by coal-based generation.

February 2017 www.InfralinePlus.com

Table 1: Schedule-II bids for coal blocks earmarked for auction in the regulated sector Sr. No.

Coal block

Location

Peak-rated capacity (MTPA)

Award price (INR/tonne)

New allottee

Sarisatolli

West Bengal

460

CESC

Talabira-I

Odisha

3.5

474

GMR Chhattisgarh

Tokisud North

Jharkhand

2.32

1,110

Essar Power

Trans Damodar

West Bengal

1.0

940

Durgapur Projects

Amelia (North)

Madhya Pradesh

2.8

712

Jayprakash PVL

Source: Ministry of Coal (MoC), MSTC Ltd.

Schedule-III bids for coal blocks earmarked for auction in the regulated sector Table 2: Schedule-III bids for coal blocks earmarked for auction in the regulated sector Sr. No.

Coal block

Location

Peak-rated capacity (MTPA)

Award price (INR/tonne)

New allottee

Jitpur

Jharkhand

2.50

302

Adani Power Ltd

Mandakini

Odisha

7.50

650

Mandakini Exploration and Mining Ltd

Ganeshpur

Jharkhand

4.0

704

GMR Chhattisgarh Energy Ltd

Utkal-C

Odisha

3.37

770

Monnet Power Company Ltd

Source: Ministry of Coal (MoC), MSTC Ltd.

Schedule-II bids for coal blocks earmarked for auction in the non-regulated sector Table 3: Schedule II bids for coal blocks earmarked for auction in the non-regulated sector Sr. No.

Coal block

Location

Peak-rated capacity (MTPA)

Award price (INR/tonne)

New allottee

Gare Palma IV/1

Chhattisgarh

1,585

BALCO

Gare Palma IV/4

Chhattisgarh

3,001

Hindalco

Gare Palma IV/5

Chhattisgarh

3,502

Hindalco

Gare Palma IV/7

Chhattisgarh

1.2

2,619

Monnet Ispat

Marki Mangli III

Maharashtra

0.21

918

BS Ispat

Chotia

Chhattisgarh

3,025

BALCO

Kathautia

Jharkhand

0.8

2,860

Hindalco

Belgaon

Maharashtra

0.27

1,785

Sunflag ISCL

Sial Ghoghri

Madhya Pradesh

0.3

1,402

Reliance Cement

10.

Bicharpur

Madhya Pradesh

0.75

3,003

UltraTech Cement

11.

Mandla North

Madhya Pradesh

1.5

2,505

Jaiprakash Associates Ltd

12.

Ardhagram

West Bengal

0.4

2,302

OCL Iron and Steel Ltd

13.

Marki Mangli I

Maharashtra

0.3

715

Topworth Urja and Metals Ltd

Source: Ministry of Coal (MoC), MSTC Ltd.

February 2017 www.InfralinePlus.com

InDepth Schedule-III bids for coal blocks earmarked for auction in the non-regulated sector Table 4: Schedule III bids for coal blocks earmarked for auction in the non-regulated sector Sr. No.

Coal block

Location

Peak-rated capacity (MTPA)

Award price (INR/tonne)

New allottee

Moitra

Jharkhand

1,512

JSW Steel Ltd

Brinda Sasai

Jharkhand

0.68

1,804

Usha Martin Ltd

Meral

Jharkhand

0.44

727

Trimula Industries Limited

Nerad Malegaon

Maharashtra

0.36

660

Indrajit Power Pvt Ltd

Dumri

Jharkhand

1.00

2,127

Hindalco Industries Ltd

Mandla South

Madhya Pradesh

0.30

1,852

Jaypee Cement Corporation Ltd

Gare Palma IV/8

Chhattisgarh

1.20

2,291

Ambuja Cements Ltd

Lohari

Jharkhand

0.20

2,438

Araanya Mines Pvt Ltd

Bhaskarpara

Chhattisgarh

1.00

755

Crest Steel and Power Pvt Ltd

10.

Majra

Maharashtra

0.48

1,230

Jaypee Cement Corporation Ltd

Source: Ministry of Coal (MoC), MSTC Ltd.

Amid an improving trend in domestic coal production and the measures being taken by CIL to augment domestic coal output, the dependence on coal imports is likely to remain high in the near to

medium term (till FY19) and moderate gradually after that, due to the overall challenges in coal mine development along with risk of delays in ramping up of coal output by the allottees of

According to CEA’s draft national electricity plan, “there would be no shortage in the availability of coal for the power plants during 2021-22 and 2026-27. In addition, coal production from the captive coal blocks allotted to power utilities would also supplement the availability of domestic coal.”

schedule II and schedule III mines. Improved domestic supply, better quality and swapping of linkage are helping reduce variable cost for coal-based power plants. However, there are other inflationary pressures that DISCOMs currently face. Environmental cess on coal has increased dramatically over the past few years (INR 400/tonne). Coal-powered thermal power plants account for 70% of total electricity generated in the country and represents 61% of the installed power capacity. According to CEA’s draft national electricity plan, “there would be no shortage in the availability of coal for the power plants during 2021-22 and 2026-27. In addition, coal production from the captive coal blocks allotted to power utilities would also supplement the availability of domestic coal.” While the recent auctions are targeted to bridge the gap on a sustainable basis, MoC has proposed that the 500 MT target from non-CIL sources is difficult to achieve if only mining for end use is considered, which gives way to the need for commercial mining and also anticipating auction of coal blocks for commercial mining in future for different end use sectors. For suggestions email at feedback@infraline.com

February 2017 www.InfralinePlus.com

StatisticsCoal FOB Thermal Coal Prices - Australia & South Africa - FY 2017 Month

Australia (FOB Newcastle 6700 kcal/ kg) (USD/Ton)

South Africa (FOB Richards Bay 6000 kcal/kg) (USD/Ton)

16-Apr

50.8

52.7

16-May

51.2

53.7

16-Jun

53.4

57.3

16-Jul

62.3

62.5

16-Aug

67.4

16-Sep

72.9

67.4

16-Oct

93.2

83.5

16-Nov

100

89.4

16-Dec

86.6

82.1

Indonesian Coal Prices - HBA - FY 2016-17 (till Dec’16)

Month

HBA 6322 kcal/kg (USD/ton)

HPB MARKER (kcal/kg GAR) (USD/Ton) Gunung Bayan I 7000

Prima Coal 6700

Pinang Coal 6150

Indominco IM East 5700

Melawan Coal 5400

Envirocoal 5000

Jorong J-1 4400

Ecocoal 4200

16-Apr

52.32

55.87

57.84

52.29

43.06

43.25

41.6

33.45

30.87

16-May

51.2

54.66

56.7

51.26

42.16

42.44

40.89

32.88

30.35

16-Jun

51.81

55.32

57.32

51.82

42.65

42.88

41.28

33.19

30.63

16-Jul

62.42

63.97

57.8

47.95

47.6

45.45

36.57

33.64

16-Aug

58.37

56.61

58.53

52.9

43.61

43.74

42.04

33.8

31.18

16-Sep

63.93

68.45

69.61

62.87

52.45

51.6

48.99

39.43

36.18

16-Oct

69.07

74.01

74.82

67.55

56.6

55.3

52.26

42.07

38.53

16-Nov

84.89

91.15

90.85

81.97

69.39

66.68

62.32

50.21

45.77

16-Dec

101.69

109.35

107.88

97.28

82.98

78.77

73.01

58.85

53.46

CIL’s Monthly Coal Production details in FY16 and FY17 (in million tons) Month

2016-17

2015-16

April

40.35

41.52

May

42.58

40.97

June

42.72

38.83

July

36.74

34.83

August

32.43

36.21

September

35.24

37.17

October

43.51

44.37

November

47.47

December

54.20

52.07

January

52.86

February

51.01

March

59.19

Total (Apr-Dec)

377.77

373.45

Total (Apr-March)

377.77

536.51

February 2017 www.InfralinePlus.com

StatisticsCoal Coking Coal FOB Prices - Australia (in $/ton) during Sep’16 to Nov’16

Date 1-Sep-16 2-Sep-16 5-Sep-16 6-Sep-16 7-Sep-16 8-Sep-16 9-Sep-16 14-Sep-16 15-Sep-16 16-Sep-16 19-Sep-16 20-Sep-16 21-Sep-16 22-Sep-16 23-Sep-16 26-Sep-16 27-Sep-16 28-Sep-16 29-Sep-16 30-Sep-16 3-Oct-16 4-Oct-16 5-Oct-16 12-Oct-16 13-Oct-16 14-Oct-16 17-Oct-16 18-Oct-16 19-Oct-16 20-Oct-16 21-Oct-16 24-Oct-16 25-Oct-16 26-Oct-16 27-Oct-16 28-Oct-16 31-Oct-16 1-Nov-16 2-Nov-16 3-Nov-16 4-Nov-16 7-Nov-16 8-Nov-16 9-Nov-16 10-Nov-16 11-Nov-16 14-Nov-16 15-Nov-16 16-Nov-16 17-Nov-16 18-Nov-16 21-Nov-16 22-Nov-16 23-Nov-16 24-Nov-16 25-Nov-16 28-Nov-16

HCC Peak Down Region 141 142 142.5 143 142 175 178 185.5 187 188 190 190 200 205 205 210 213 213 215 215 215 215 215 215 217 217 217 230 233 233 243 243 243 245 250 254 255 260 262 262 262 270 270 270 300 300 300 300 298 298 295 300 304 304 304 309 311

Premium Low Vol 140 141 141.5 142 141 175 177 184.5 186 187 189 189 199 204 204 209 212 212 214 214 214 214 214 214 216 216 216 219 232 232 242 242 242 244 249 253 254 259 261 261 261 269 269 269 298 298 298 298 297 297 294 299 303 303 303 308 307

Semi Soft 83.5 87 88.5 88.7 88.75 92 93.5 95 95.5 96 97 97 95 95 95 105 110 110 112 112.5 112.5 112.5 112.5 112.5 113.5 113.5 113.5 120 125 125 135 135 135 137 140 142 143 145 146 146 146 153 153 153 178 177 177 177 176 176 176 177 178 178 178 150 145

February 2017 www.InfralinePlus.com

CoverStory Union budget 2017-18: Infrastructure push to drive growth

►►Rural electrification to drive power growth, no mention of coal ►►Some relief for solar, wind overlooked By Infraline Bureau

Given the element of history attached with this year’s Union Budget and the macro economic scenario preceding it, the setting was perfect for the government to make big bang announcements. The industry was all ears to Finance Minister, Arun Jaitley, as he began to read out the budget provisions in the Parliament on February 1. However, 30 minutes into his speech, it was clear that the government was, indeed, steering away from making any major announcements. Rather, as it stood out, the budget was weaved in such

a manner so to provide respite to all sections of the economy. Nonetheless, what stood out was the strong focus on infrastructure, which, judging by the announcements made for other sub sectors in the energy sector, is likely to be the key trigger which would propel growth in the energy sector. Finance Minister Arun Jaitley has, in the Union budget 2017-18, kept focus on NDA government’s priority areas of infrastructure, rural development and poverty alleviation while offering tax relief to the salaried class

and small enterprises impacted by cash crunch in the wake of demonetisation. In a fine balancing act, Jaitley has hiked total spending to Rs 3.96 lakh crore while raising fiscal deficit target to 3.2 per cent from 3.5 per cent in the current fiscal. However, this is the second time that Jaitley has deferred the fiscal consolidation deadline. “By restraining the fiscal deficit to 3.2 per cent and promising to prune it down to 3 per cent in the next year, FM has delivered on Fiscal prudence. All this has come about amidst 25 percent hike

February 2017 www.InfralinePlus.com

CoverStory

in government spending and a 19 per cent reduction in government borrowing. This also increase chances of a rate cut,” said Dhiraj Relli, MD & CEO, HDFC securities. Jaitley has presented the budget at a time when the outlook on the global economic growth is darkening. Under the Donald Trump presidency, the US seems ready to abandon the policy of multilateralism and withdraw into isolation, with dire implications for the global economy. That does not bode well for India’s exports. There is an anxiety that the US Federal Reserve will hike interest rate at a quicker pace than expected earlier to combat inflation, which could spark capital outflows from India and put pressure on rupee. The situation could further aggravate if oil prices surge.

Rural electrification to drive power growth, no mention of coal

The budget has rightly focused on rural electrification as the government’s chief priority and has committed to achieve 100% village electrification by May 1, 2018. Accordingly, the allocation for Deen Dayal Upadhayaya Gram Jyoti Yojana (DDUGJY) scheme has been increased by 44 per cent to Rs 4,814 crore, while Integrated Power Development Scheme (IPDS) allocation has been increased by 29 per cent,

from Rs 4,524 crore to Rs 5,821 crore. The budget has also hiked allocation for the power ministry by 33 per cent to Rs 13,881 crore. Commenting on the budget provisions for the power sector, Anil Sardana, MD & CEO, Tata Power, said, “The government’s commitment to rural electrification and the announcement of an additional 20,000 MW of solar target is a welcome step that gives a much needed boost to the renewable sector. However, we believe that for renewable sector to achieve its potential strengthening the Renewable Purchase Obligations (RPO) mech-

Jaitley has presented the budget at a time when the outlook on the global economic growth is darkening. Under the Donald Trump presidency, the US seems ready to abandon the policy of multilateralism and withdraw into isolation, with dire implications for the global economy. That does not bode well for India’s exports

anism is essential and should be part of government’s larger vision for renewable energy. The move towards improving electricity access to rural India will be instrumental in contributing to the social and economic development of the country. The increased budget for the Deen Dayal Gram Jyoti Yojana will strengthen and uphold the ongoing work of feeder separation and sub-transmission & distribution infrastructure. This is a positive step towards augmenting the reliability and quality of supply distribution network which is affected due to poor financial health of discoms.” Similarly, Sabyasachi Majumdar, Group Head and Senior Vice President Corporate Ratings ICRA Ltd, felt that the Union Budget has favorable proposals for the power sector which include increased allocation towards rural electrification scheme under the Deendayal Upadhyaya Gram Jyoti Yojana (DUGJY) & measures to augment solar project capacity addition. Anil Chaudhry, Country President and Managing Director, Schneider Electric India, said, “While access to energy is a basic human right, we need to make it sustainable. The budget gave a clear indication of the government’s focus to achieve ‘sustainable energy for all’, with two of its critical steps; firstly, by providing a boost to rural electrification with a 25 percent increase in the outlay for key power schemes like Integrated Power Development Scheme and Deen Dayal Upadhyaya Gram Jyoti Yojna. This is expected to fast track the rural electrification drive of the government, which is now planned to be completed by May 1, 2018.” Ratul Puri, Chairman, Hindustan Powerprojects, said, “By providing infrastructure status to the housing segment, the government has given a further impetus to address suppressed power demand which is critical to providing 24X7 power to all.” Also, Sunil Misra, Director General, Indian Electrical and Electronics

February 2017 www.InfralinePlus.com

Manufacturers Association (IEEMA), feels that the increase in allocation to the rural sector such as MNERGA, providing 1 crore housing for poor, thrust in Pradhan Mantri Gram Sadak Yojna and government’s commitment to electrify all villages by May 2018, will result in an increase in domestic demand. However, what has come as a major shocker for the industry has been the decision to discontinue tax holiday on infrastructure projects, including power, which is likely to increase power tariffs, albeit marginally. Commenting on the decision, Jasmeet Khurana, associate director at Bridge to India, estimated a higher impact on solar power generation. “Earlier, companies were expecting an extension of the tax holiday and had made representations to the government. We are expecting solar generation costs to go up by 20-30 paise per unit,” he said. Further, the fact that power sector has not been considered as part of the infrastructure sector has not gone done well with certain stakeholders, with some claiming that it may severely dampen the impressive growth initiated in the electricity installed capacity of the previous years. For example, electricity finance expert D. Shina, observed that while the budget gave a boost to the infrastructure sector, it had given a shock to the power industry. The sidelining of the sector in the budget could lead to its disorientation at the very crucial stage of high expectations of growth.“This is because the power industry pivoted around many sops. In fact, the ambitious steps taken by the government in the past years succeeded in eliminating the supply-demand gap to a considerable extent. But an abrupt end to these now can divert many investors from the scene thereby arresting the growth,” Dr. Shina said. The budget has not made any new announcement for the coal. However, coal secretary Susheel Kumar has said the government could finally allow private players’ into commercial coal mining in 2017-18.

A plan to merge five big oil PSUs including IOC, ONGC and BPCL was first broached during the previous NDA government when Ram Naik was the oil minister. Later, Mani Shankar Aiyar revived the plan during the UPA-I regime. But in September 2015, a panel disfavoured the idea of mergers, and instead suggested greater autonomy by transferring government shareholding to a professionally managed trust Oil and gas: The big merger envisaged

One of the biggest take away from the budget for the oil and gas sector is the proposal to create an integrated public sector ‘oil major’ to match the performance of international and domestic private sector oil and gas companies. After dithering for more than a decade, the government has finally decided to go ahead with the plan to merge oil PSUs to create a behemoth that would

be able to take on global competition. The proposal has been welcomed by energy experts. However, its details are yet to be fleshed out by the government. A plan to merge five big oil PSUs including IOC, ONGC and BPCL was first broached during the previous NDA government when Ram Naik was the oil minister. Later, Mani Shankar Aiyar revived the plan during the UPA-I regime. But in September 2015, a panel disfavoured the idea of mergers, and instead suggested greater autonomy by transferring government shareholding to a professionally managed trust. The Advisory Committee on Synergy in Energy, headed by V Krishnamurthy, said M&A worldwide occurred during times of low oil prices and is used as an instrument for eliminating excess workforce and remove duplication of facilities. It is not yet clear what model the government will follow. Anyway, this proposal is in sharp contrast to the plan to hive off Coal India subsidiaries as separate companies. “There is a clear benefit of a large balance-sheet in the global oil industry, where wildly fluctuating oil prices have become a norm. But care should be taken to ensure that we end up compromising on governance and nimbleness in decision making. It is heartening to note from petroleum minister Dharmendra Pradhan’s media interactions that Government is well advanced in

February 2017 www.InfralinePlus.com

CoverStory

preparation for creation of this entity, considering all these aspects.” said Debasish Mishra, Partner Deloitte Touche Tohmatsu India. There are 13 oil PSUs at present. The top eight listed PSUs have a combined market cap of $80 billion, and a merged entity would become the ninth largest globally. The idea sounds nice but its practicability has to be established. Because, well-intentioned mergers have failed to measure up to expectations in the past and tripped over practical hurdles like incompatibility between employees coming together from different work cultures. Commenting on the proposal, K Ravichandran, Senior Vice President, ICRA, said, “Historically such amalgamation have been successful for international companies like Exxon Mobil, Shell, Chevron etc as it results in strengthening of balance sheets as margins improve due to economy of scale. It also gives PSUs an edge due to sovereign ownership. However such integration will have challenges when it comes to manpower strength due to differing HR policies of PSUs.” According to Deepak Mahurkar, Partner and Leader, Oil & Gas Industry Practice, PwC India, “The move will not have an immediate impact on the sector as the planning and setting up of such a corporation will take 2-3 years and the results will be apparent in a 4-5 years’ time. The other format could be an overall integration resulting in one big corporation which will be a challenging task but will result in far reaching benefits as synergies will be strengthened across value chains leading to sharing of skills, research and development, infrastructure, increase in overall capacity and an edge during bidding for E&P assets.” In a significant move, the Union budget 2017-18 has also halved 5 per cent customs duty on LNG, offering a great relief to refineries and petrochemicals who mostly rely on imported gas due to domestic shortage. The

In a significant move, the Union budget 201718 has also halved 5 per cent customs duty on LNG, offering a great relief to refineries and petrochemicals who mostly rely on imported gas due to domestic shortage. The move is also expected to be beneficial for Petronet LNG’s utilizations and will also be positive for gas distributors move is also expected to be beneficial for Petronet LNG’s utilizations and will also be positive for gas distributors such as Indraprastha Gas Ltd and Mahanagar Gas Ltd who are likely to see an increase in their profit margins. Overall, decline in LNG custom duty is expected to encourage the use of natural gas, which is considered a relatively cleaner fuel. Commenting on the reduction of custom duty on LNG, Lalit Kumar Gupta MD & CEO, Essar Oil, said, “The reduction in LNG duty is welcome as it will reduce the cost of energy in

the system. The idea of an integrated oil major as originally floated by UPA I, which was not found viable, is now being reconsidered by the present government. I would think that creation of more refining capacity would be better rather than the new strategic reserve of crude oil. As the new refining capacity will not only achieve the same objective of creating Strategic reserve but will also lead to socio-economic development and creation of huge employment opportunities.” The government has further decided to set up strategic crude oil reserves at two more locations. In the first phase, 3 such reserves facilities have been set up at Visakhapatnam (1.33 million tonnes), Mangalore (1.5 MT) and Padur (2.5 MT). “For strengthening our energy sector, Government has decided to set up Strategic Crude Oil Reserves. In the first phase, three such Reserves facilities have been set up. Now in the second phase, it is proposed to set up caverns at two more locations, namely, Chandikhole in Odisha and Bikaner in Rajasthan. This will take our strategic reserve capacity to 15.33 million tons,” Jaitley said in his Budget speech. “With this, India will move to the high energy table of the world,” Oil Minister Dharmendra Pradhan told the media. “We have a lot of learning from the first phase construction. We plan to do the second phase in 3-4 years.”

February 2017 www.InfralinePlus.com

Some relief for solar, wind overlooked

Renewable energy continues to remain high on government’s agenda with finance minister, Arun Jaitley announcing substantial relief in Customs and Excise Duties for the sector. The budget proposes to slash Customs and Excise duties on several items related to the sector. This includes all items of machinery required for – fuel based power generating system to be set up in the country for demonstration purposes; systems operating on biogas/ biomethane/ byproduct Hydrogen; LED lights or fixtures etc. Further, duties have also been removed on solar tempered glass for use in the manufacture of solar cells, panels and modules. Both these moves are expected to incentivize domestic value addition under Make in India initiative of the government. In line with achieving the 100 GW target by 2022, Jaitley also announced plan to set up solar parks of 20,000 mw capacity in the second phase. Jaitley also proposed to feed about 7,000 stations with solar power in the medium term.

“A beginning has already been made in 300 stations. Works will be taken up for 2,000 railway stations as part of 1000 MW solar mission,” Jaitley said. Commenting on the Budget, Ashish Khanna, ED & CEO, TATA Power Solar, said, “The budget does focus on a few areas for the solar sector and demonstrates the Government’s commitment to being a frontrunner in renewables. The proposed solarization of railway stations is a positive step and will boost the demand for infrastructure going green. The announcement of 20 GW

In line with achieving the 100 GW target by 2022, Jaitley also announced plan to set up solar parks of 20,000 mw capacity in the second phase. Jaitley also proposed to feed about 7,000 stations with solar power in the medium term

for the second phase of solar mission and focus on pushing for the solar projects is very heartening. However, we need more clarity in the coming days on its roll out. We also anticipate some indirect impact for solar with the Government’s ambition of 100% electrification of villages, and we hope this to have a solar component. A set timeline for rolling out GST is a welcome move, however requires further clarity on its implementation and how much it will impact the solar sector.” Tulsi Tanti, CMD, Suzlon Group, said, “With a special mention about the drive towards 100 per cent electrification, the renewable industry was hopeful that there would be an announcement to support the achievement of the Government’s RE target 175 GW, and long-term policy framework to achieve our INDCs and commitment made at COP-21 to reduce carbon emission to 30-35 per cent by 2030.” According to Jaideep N. Malaviya, Secretary General, Solar Thermal Federation of India, “It is heartening to note the announcement of ambitious

February 2017 www.InfralinePlus.com

CoverStory

target of 20,000 MW of solar power during 2017-18. If we look back 7 years before when the National Solar Mission was announced the target until year 2022 was kept as 20,000 MW. Finance Minister has played a T20 cricket match rather than the old fashioned test cricket. To aid this development further the incentives for electronics manufacturing is at a record Rs750 crore which should stimulate invertor and battery manufacturing. Any Smart city as well as Solar city should find start-ups and entrepreneurs stimulating for manufacturing.” Andrew Hines, Business Development Head, South India, CleanMax Solar Pvt. Ltd, feels there are no major surprises in the budget for the solar industry. “Reductions in Accelerated Depreciation and Section 80-IA benefits had been announced last year, and the budget is consistent with those announcements. While removal of those incentives can be expected to increase solar tariffs across the board, we are still expecting very strong growth in the industry in FY 2017-18, and particularly in the commercial and industrial rooftop and open access segments, based on strong fundamental economics for solar power, as well as a push from governments for solarisation of government rooftops and educational institutions.” According to Gagan Vermani, CEO, MYSUN, the budget bodes well for the solar rooftop segment. “The target to build 1 crore new homes should mandate usage of a 1KW solar system per home, as each of these homes will need power. That itself will add 10GW of rooftop solar. Enhancement of the carry forward duration of MAT from 10 years to 15 years and the rationalisation of corporate tax for companies with a turnover of less than Rs 50 crore would lead to increased profits for a lot of small solar installers, which could potentially lead to passing on of some of this benefit to the end users, effectively reducing solar system prices.” However, Sarvesh Kumar,

Chairman, Indian Wind Turbine Manufacturers Association (IWTMA), is not too happy with the budget. “There is nothing concrete on the renewable energy sector, considering it is one of the growing sectors in the country. The Government has completely overlooked the wind energy division. The sector is in a developing phase and needs attention from the government as we are facing various issues. Service tax could have been rationalized and at least some state level reforms and policies should have been introduced

LED lighting industry at crossroads

The government’s decision to levy 5% basic customs duty on all parts and inputs used in manufacturing of LED lights has received a mixed reaction from LED lighting manufacturers. “The budget should have also targeted incentives and concessional interest rates for manufactures of LED Lighting products and projects keeping in mind that LED lighting can play a big role in enabling

implementation of our government’s vision of 100 per cent rural electrification, and energy conservation. Establishment of special economic zones for the LED lighting industry continues to be a critical priority for the industry,”, VP Mahendru, Chairman & Managing Director, Eon Electric, noted. Saurabh Kumar, Managing director, Energy Efficiency Services Limited (EESL) that implements the government’s LED lamp distribution scheme, said, “Duty cuts in LED manufacturing will encourage further innovation and support our ongoing efforts to reduce the cost of cutting-edge technology. This is a stepping stone towards India becoming a global leader in energy efficiency programmes.” “A course correction in CVD (countervailing duty) and BCD (basic customs duty) structure on renewable energy and LED products and components will give the necessary impetus to local manufacturers, aligned to government’s ‘Make in India’ vision,” Anchor Electricals said in a statement issued post budget.

Infrastructure receives funding push

The government hiked public spending on infrastructure to boost sagging economic growth and generate employment. The budget has hiked allocation for highways from Rs 57,976 crore to Rs 64,900 crore. The budget has also proposed to build 2,000 km of coastal roads, which would facilitate better connectivity with ports and remote villages. “The total length of roads, including those under PMGSY, built from 2014-15 till the current year is about 1,40,000 km which is significantly higher than previous three years,” Jaitley said in his budget speech. Metro rail is emerging as an important mode of urban transportation. The finance minister has also proposed to announce a new Metro Rail Policy with focus on innovative models of implementation and financing, as well as standardisation

February 2017 www.InfralinePlus.com

and indigenisation of hardware and software, which would create job on a massive scale. He also announced that the Airport Authority of India Act will be amended to enable effective monetisation of land assets. The resources, so raised, will be utilised for airport upgrade, Jaitley said. “Overall good signals for infrastructure sector and companies with significantly higher allocation for all subsectors. It is heartening to see a significant safety fund in Railways and good allocation of capex for roads, railways and other infrastructure, including irrigation (including for water efficient micro irrigation),” said Amrit Pandurangi, partner, infrastructure, Deloitte Touche Tohmatsu India. Cooperative and joint investments with the states are a good indication. Giving Affordable Housing Infrastructure status is also a good sign for mainstreaming investments in that sector, he further said. “Indication of encouraging PPPs in all infra sectors will give a boost to potential new investors. O & M PPPs in Tier 2 City Airports will improve services and consequently the air traffic to such cities aided by recent regional air connectivity programme of the ministry,” Pandurangi added. According to R Shankar Raman, L&T’s whole-time director and Chief Financial Officer, the Budget endorses the criticality of resource allocation to infra sector for achieving sustained economic and inclusive growth. Abolition of FIPB, retaining the tax structure for capital gains and flexible mind set towards recapitalisation of banks hold hope for flow of funding for the priority programmes. But he emphasised the economy needs to address the requirements for competitive manufacturing and employment generation.

Affordable housing in spotlight

The real estate sector, which was hit hard by demonetisation, has a lot to

The real estate sector, which was hit hard by demonetisation, has a lot to cheer in the budget. Affordable housing has been given infrastructure status, which will ease financing to the sector and boost the sector, spurring job creation in the construction sector cheer in the budget. Affordable housing has been given infrastructure status, which will ease financing to the sector and boost the sector, spurring job creation in the construction sector. The Union budget 2017-18 has offered several incentives including ‘infrastructure status’ to the real estate sector, preparing the ground for revival of the industry which was hit hard by the cash crunch in the wake of demonetization. Analysts said the infra tag would help lower financing cost for the sector by 4-5 per cent and give an impetus to the NDA government’s “housing for all by 2022” programme. Flush with funds, banks are likely to step up funding to the sector. Credit off-take towards affordable segment of housing will augment supply especially for both stake holders – the first home buyer and developer — who will now

have access to cheaper funding, said analysts. The budget has also increased allocation under the PM Awas Yojana to Rs 23,000 crore from Rs 15,000 crore. Besides, the National Housing Board will refinance individual housing loans of Rs 20,000 crore in 2017-18. In his last budget, Jaitley had earlier announced a profit-linked income tax exemption scheme for developers of affordable housing scheme. To make this scheme more attractive, this year’s budget has introduced some changes. For example, for extension of benefits under the affordable housing scheme, carpet area, not the built up, will be considered. The 30 sqm limit will apply only in case of municipal limits of 4 metropolitan cities while for the rest of the country including the peripheral areas of metros, limit of 60 sqm will apply. Earlier, to be eligible for benefits, developers had to complete projects in 3 years from the date of commencement. The budget 2017-18 has increased the period to 5 years, offering more flexibility to builders. Currently, if houses remain unoccupied after getting completion certificates, they are subjected to tax on notional rental income. But the budget 2017-18 has clarified that the rule will apply after one year of the end of the year in which completion certificate is received, offering breathing space to builders to clear their inventory.

February 2017 www.InfralinePlus.com

CoverStory

Union Budget 2017-18: Key highlights Power ▪▪ 100% village electrification by May 2018 ▪▪ Allocation for Integrated Power Development Scheme (IPDS) and Deen Dayal Upadhyaya Gram Jyoti Yojna stepped up by Rs 4,814 crore, from 8,500 crore to Rs 10,635 crore

Renewable Energy ▪▪ To feed about 7,000 stations with solar power in the medium term. A beginning has already been made in 300 stations. Works will be taken up for 2,000 railway stations as part of 1000 MW solar mission. ▪▪ To take up the second phase of Solar Park development for additional 20,000 MW capacity ▪▪ Basic Custom Duty (BCD) on solar tempered glass for use in the manufacture of solar cells/panels/modules reduced from 5% to nil ▪▪ Countervailing Duty (CVD) on parts/raw materials for use in the manufacture of solar tempered glass reduced from 12.5% go 6% ▪▪ Basic Custom Duty, Countervailing Duty and Special Additional Duty (SAD) slashed on resin and catalyst for use in the manufacture of cast components for Wind Operated Energy Generators (WOEG) ▪▪ The Budget Estimate for Ministry of Renewable Energy kept at Rs 5,473 crore as against Rs 5,036 crore in 2016-17 ▪▪ Basic Custom Duty and Countervailing Duty on all items of machinery required for fuel cell based power generating systems to be set up in the country slashed ▪▪ Basic Custom Duty and Countervailing Duty on all items of machinery required for balance of systems operating on biogas/ biomethane/ by-product hydrogen reduced

Oil & Gas

▪▪ Uncertainty around commodity prices especially that of crude oil, has implications for the fiscal situation of emerging economies. However, increase, if any, in oil prices would get tempered by quick response from producers of shale gas and oil which would have a sobering impact on prices of crude and petroleum. ▪▪ Subsidy provided for the oil sector is about Rs 25,000 crore for 2017-18. This includes Rs 2,500 crore towards liquified petroleum gas (LPG) connection to poor households. ▪▪ Basic custom duty on liquefied natural gas (LNG) cut to 2.5% from 5%. ▪▪ Proposed to create an integrated public sector “oil major”. This will be able to match the performance of international and domestic private sector oil and gas companies. ▪▪ Decision to set up two more Strategic Crude Oil Reserves namely, Chandikhole in Odisha and Bikaner in Rajasthan. This will take the country’s strategic reserve capacity to 15.33 MMT. ▪▪ In case of foreign company, sale of leftover stock of crude oil in case of strategic petroleum reserve after the expiry of agreement or the arrangement, subject to fulfilment of certain conditions, shall not be liable to tax in India. ▪▪ Steps would be taken to promote and possibly mandate petrol pumps to have facilities for digital payments, including BHIM App. ▪▪ Basic Custom Duty on petrochemicals like Medium Quality Terephthalic Acid (MTA) & Qualified Terephthalic Acid (QTA) reduced from 7.5% to 5%

Infrastructure ▪▪ Outlay for infrastructure sector increased to Rs 396,135 crore as against Rs 348,952 crore in 2016-17, of which that of Transport increased from Rs 216,268 crore to Rs 241,387 crore. ▪▪ Budget allocation for highways increased from Rs 57,976 crores in BE 2016-17 to Rs 64,900 crores in 2017-18. ▪▪ 2,000 kms of coastal connectivity roads identified for construction and development ▪▪ A specific programme for development of multi-modal logistics parks, together with multi modal transport facilities, to be drawn up and implemented ▪▪ Allocation for Pradhan Mantri Gram Sadak Yojna (PMGSY) unchanged at Rs 19,000 crore. Together with the contribution of States, an amount of Rs 27,000 crores will be spent on PMGSY in 2017-18. Committed to complete the current target under PMGSY by 2019. ▪▪ Allocation for AMRUT & Smart Cities Mission increased from Rs 7,296 crore to Rs 9,000 crore ▪▪ Allocation for Sagarmala project increased from Rs 450 crore to Rs 600 crore ▪▪ Select airports in Tier 2 cities will be taken up for operation and maintenance in the PPP mode. Airport Authority of India Act will be 19 amended to enable effective monetisation of land assets. The resources, so raised, will be utilised for airport upgradation

Real Estate & Housing ▪▪ Changes in profit-linked income tax exemption for promoters of affordable housing scheme. Instead of built up area of 30 and 60 sq.mtr., the carpet area of 30 and 60 sq.mtr. will be counted. Also the 30 sq.mtr. limit will apply only in case of municipal limits of 4 metropolitan cities while for the rest of the country including in the peripheral areas of metros, limit of 60 sq.mtr. will apply. The scheme to be completed in five years as against 3 years stated earlier ▪▪ Outlay for Ministry of Housing and Urban Poverty Alleviation increased from Rs 5,411 crore to Rs 6,406 crore

February 2017 www.InfralinePlus.com

Meanwhile, the budget has also reduced the holding period for longterm capital gains tax to 2 year from 3 year earlier. Also, the base year for indexation has been shifted from 1.4.1981 to 1.4.2001 for all classes of assets including immovable property, which will significantly reduce the capital gain tax liability while encouraging the mobility of assets. Jaitley said that the government plans to extend the basket of financial instruments in which the capital gains can be invested without payment of tax. This year’s budget has also clarified that for joint agreement signed for development of property, the liability to pay capital gain tax will arise in the year the project is completed. Commenting on these proposals, Hiranandani Group’s MD, Niranjan Hiranandani, said, “The Government has provided infrastructure status to the affordable housing finally. We have been demanding this for the past 25 years. The move will help investments in form of long-term funding to the sector.” “I personally believe that Government should declare all such housing units, whether in metros or in any other part of the country with 60 sq metre as carpet area across the country.”

Other pro-business measures

To bolster confidence of private players in public private partnership (PPP) projects, the finance minister has also

proposed to clear the legal hurdle to ensuring quicker resolution of contractual disputes. “I had stated in my last Budget speech that a Bill will be introduced to streamline institutional arrangements for resolution of disputes in infrastructure related construction contracts, PPP and public utility contracts,” Jaitley said in his budget speech. “After extensive stakeholders’ consultations, we have decided that the required mechanism would be instituted as part of the Arbitration and Conciliation Act 1996. An amendment Bill will be introduced in this regard,” he added.

To bolster confidence of private players in PPP projects, the finance minister has also proposed to clear the legal hurdle to ensuring quicker resolution of contractual disputes. “I had stated in my last Budget speech that a Bill will be introduced to streamline institutional arrangements for resolution of disputes in infrastructure related construction contracts, PPP and public utility contracts,” Jaitley said

The budget has also proposed to implement structural reforms in the payment eco system, including amendments to Payment and Settlement System Act 2007 as recommended by the committee on digital payments. “Government will undertake a comprehensive review of this Act and bring about appropriate amendments. To begin with, it is proposed to create a Payments Regulatory Board in the Reserve Bank of India by replacing the existing Board for Regulation and Supervision of Payment and Settlement Systems. Necessary amendments are proposed to this effect in the Finance Bill 2017,” Jaitley said in his budget speech. To attract foreign investors, Jaitley has proposed to abolish the Foreign Investment Promotion Board, an agency that is tasked with vetting applications of overseas investors. “Our government has already undertaken substantive reforms in FDI policy in the last two years. More than 90 per cent of the total FDI inflows are now through the automatic route. The Foreign Investment Promotion Board (FIPB) has successfully implemented e-filing and online processing of FDI applications,” Jaitley said while presenting the budget. He added, “We have now reached a stage where FIPB can be phased out. We have therefore decided to abolish the FIPB in 2017-18. A roadmap for the same will be announced in the next few months. In the meantime, further liberalisation of FDI policy is under consideration and necessary announcements will be made in due course.” All in all, even though the budget seems to have missed a lot of finer points which needed to be addressed in the energy sector, the government is banking on strong infrastructure growth, the benefits of which are expected to trickle down to other sectors. For suggestions email at feedback@infraline.com

February 2017 www.InfralinePlus.com

NewsBriefs | Oil & Gas ONGC to invest Rs78,000 crore in KG basin, signs deal with Andhra Pradesh

State-owned explorer Oil and Natural Gas Corp. Ltd (ONGC) said it will invest Rs78,000 crore in the Krishna Godavari basin for producing hydrocarbons and has signed an agreement with the Andhra Pradesh government for smooth execution

of the projects. ONGC has been pursuing exploration in the basin and had last March announced a $5 billion (Rs34,000 crore) investment over the next three years in two of its fields there after the central government earlier that month announced a liberal pricing formula for natural gas from deep sea blocks. The investment figure is for the entire basin. The agreement with Andhra Pradesh to “take forward all critical exploration and production activities in the state” was signed on the sidelines of the Partnership Summit, 2017 jointly organized by the state government and industry chamber Confederation of Indian Industry (CII) in Visakhapatnam.

India to become the fastest oil consumer by 2035

Having pipped Japan to become world’s third largest oil consumer, India’s oil consumption growth will be the fastest among all major economies by 2035, BP Statistical Review of World Energy said. India, Asia’s secondbiggest energy consumer since 2008, had in 2015 overtaken Japan as the world’s thirdlargest oil consuming country behind US and China. “We project that India’s energy consumption grows the fastest among all major economies by 2035. As a result, the country remains import dependent despite increases in production,” it said. While energy consumption will grow by 4.2 per cent per annum -- faster than all major economies in the world -- India’s consumption growth of

fossil fuels would be the largest in the world. India, it said, will overtake China as the largest growth market for energy in volume terms by 2030. Oil consumption will rise from 4.1 million barrels per day in 2015 to 9.2 million bpd in 2035.

National India’s 2016 Iran oil imports hit record high

India’s annual oil imports from Iran surged to a record high in 2016 as some refiners resumed purchases after the lifting of sanctions against Tehran, according to ship tracking data and a report compiled by Thomson Reuters Oil Research and Forecasts. The sharp increase propelled Iran into fourth place among India’s suppliers in 2016, up from seventh position in 2015. It used to be India’s second-biggest supplier before sanctions. For the year, the world’s third biggest oil consumer bought about 473,000 barrels per day (bpd) of oil from Iran to feed expanding refining capacity, up from 208,300 bpd in 2015, the data showed. In December, imports from Iran trebled from a year earlier to about 546,600 bpd. In 2015 refiners slowed purchases due to sanctions which choked payment routes, insurance and halved Iran’s exports. Indian refiners Reliance Industries, Hindustan Petroleum, Bharat Petroleum and HPCL-Mittal Energy (HMEL) last year resumed imports from Tehran, attracted by the discount offered by Iran.

India to fill half of Mangalore strategic reserve with UAE crude oil India signed a deal with the United Arab Emirates that allows the Gulf nation to fill half of an underground crude oil storage facility at Mangalore that is part of New Delhi’s strategic reserve system. New Delhi announced a series of pacts with the UAE ranging from defence, trade, maritime cooperation to energy after a meeting between Prime Minister NarendraModi and Abu Dhabi’s Crown Prince Sheikh Mohamed bin Zayed al-Nahyan. UAE’s Abu Dhabi National Oil Co will store about 6 million barrels of oil at Mangalore, taking up about half of the site’s capacity, said Sunjay Sudhir, joint secretary for

international cooperation at the Indian oil ministry. India, hedging against energy security risks as it imports most of its oil needs, is building emergency storage in underground caverns to hold 36.87 million barrels of crude, or about 10 days of its average daily oil demand in 2016. “This will ... help to ensure India’s energy security and enable us to meet the nation’s growing demand for energy,” said Indian oil minister Dharmendra Pradhan. UAE is India’s fifth biggest oil supplier. The crude supplies will begin in the last quarter of this year.

February 2017 www.InfralinePlus.com

NewsBriefs | Oil & Gas Economic Survey: Rising energy prices could stoke inflation going ahead

The Economic Survey tabled in Parliament by Finance Minister Arun Jaitley said the recent increase in global crude oil and coal prices could stoke inflationary trends threatening trade and fiscal balances going ahead.“After remaining fairly stable for

much of the last two years, international prices of crude oil have started to trend up. The price of crude oil (Indian basket) has increased from $39.9 per barrel in April 2016 to $52.7 in December 2016. The Economic Survey said the global commodity and energy prices have increased by 18 per cent and 23 per cent respectively in the first eleven months of 2016 as per International Monetary Fund (IMF) price indices. The WPI inflation stood at 3.4 per cent in December 2016 and the average inflation was 2.9 per cent during April-December 2016. According to the Survey, geopolitics could take oil prices up further than forecast.

India’s high petroleum taxation helped gain edge on climate front The Economic Survey 2016-17 tabled in Parliament said the high petroleum taxation imposed by the government in the backdrop of the historic decline in crude oil prices helped India in gaining in edge over other major economies in the fight against climate change. The Survey said the large decline in petroleum (oil) prices since June 2014 has proved to be a major setback to the cause of climate change. However, India has increased excise duty on branded petrol from Rs 15.5 per liter in June 2014 when the oil price decline began to Rs 22.7 per liter in December 2016. Also, the excise duty on branded diesel has been raised from Rs 5.8 per liter to Rs 19.7 per liter during the period. “The increase in petrol tax has been over 150

percent in India. In contrast, the governments of most advanced countries have simply passed on the benefits to consumers, setting back the cause of curbing climate change. As a result, India now outperforms all the countries except those in Europe in terms of tax on petroleum and diesel,” the Survey said.

National

IOC’s Rs 34,555 crore Paradip refinery faces withdrawal of sops

In a setback to Indian Oil Corp (IOC), the Odisha government has slapped a notice seeking withdrawal of fiscal incentives given to the PSU’s Rs 34,555 crore Paradip refinery in the state. In the notice, Odisha government has asked why the fiscal incentives like 11-year deferment of sales tax on petroleum products sold in the state should not be withdrawn considering that the refinery was delayed by over six years. The state government had in February 2004 signed an agreement with IOC to give fiscal incentives for setting up a 9 million tonnes a year oil refinery at Paradip by 2009-10.However, the project was delayed and started only in early 2016.The delay is now being cited by Odisha to seek withdrawal of the incentives, and the state government feels the delay has pushed back the payback time of deferred taxes by few years. Also, the state government says that the refinery was originally planned for a 9 million tonnes per annum capacity but the actual size commissioned was 15 million tonnes.

IFFCO eyes 10percent stake in Swan Energy’s LNG terminal After Tata Group, India’s largest fertiliser producer IFFCO has envisaged interest in taking 10% stake in Rs5,900 crore floating LNG import terminal being set up by Nikhil Merchant-led Swan Energy in Gujarat. Earlier, Tata Realty and Infrastructure (TRIL), a wholly-owned subsidiary of Tata Sons set up in 2007, had expressed interest in taking 10% stake in Swan LNG Pvt. Ltd that is setting up the Floating and Regasification Unit (FSRU) near Jafrabad in Gujarat. In a stock exchange filing, Swan said: “Indian Farmers Fertiliser Cooperative Ltd (IFFCO) are willing to invest up to 10% of the equity”

in the project. Ahead of the move, the authorised share capital of Swan LNG Pvt Ltd “has been increased from Rs5 lakh to Rs2,000 crore,” Swan Energy said. Gujarat government had previously

taken 26% equity the LNG project. The Gujarat government participation in the project was through Gujarat State Petronet Ltd and Gujarat Maritime Board jointly. State-owned Oil and Natural Gas Corp (ONGC), Indian Oil Corp (IOC) and Bharat Petroleum Corp Ltd (BPCL) have already booked 60% of the capacity of 5 million tonnes a year LNG terminal. The three firms have signed an agreement to import 1 million tonnes per annum of their own liquefied natural gas (LNG) at the Swan terminal. Gujarat State Petroleum Corp Ltd (GSPC) too is in talks to take 1.5 million tonnes capacity in the FSRU.

February 2017 www.InfralinePlus.com

NewsBriefs | Oil & Gas BP forecasts slowdown in oil demand growth over next two decades

World oil demand growth will slow gradually over the next two decades, British energy giant BP forecast in its annual outlook for the industry. Total global energy demand was set to increase by about 30 percent through 2035, “driven by increasing prosperity in developing countries, partially offset by rapid gains in energy efficiency”, BP said

in its Energy Outlook 2017. For oil alone, “demand grows at an average rate of 0.7 percent a year, although this is expected to slow gradually over the period”, the study added. In comments published alongside the findings, BP chief executive Bob Dudley noted that “traditional centres of demand are being overtaken by fast-growing emerging markets.” The energy mix is shifting, driven by technological improvements and environmental concerns. More than ever, our industry needs to adapt to meet those changing energy needs,” he said. According to BP, all of oil’s demand growth between 2015 and 2035 will come from emerging markets and half from China alone.

Saudi Arabia may raise U.S. crude oil investments

Saudi Arabia may increase its oil investments in the United States due to a more fossil fuel-oriented energy policy by the U.S. administration of President Donald Trump, the kingdom’s energy minister said. Trump had campaigned on a promise that Washington should boost U.S. energy independence from oil cartels such as OPEC, of which Saudi Arabia is its de facto leader and by far the group’s biggest producer. But Saudi Arabia’s Minister of Energy, Industry and Mineral Resources, Khalid al-Falih, said that “there are huge areas of alignment” in interests between the two traditional allies.”President Trump has policies which are good for the oil industries and I think

we have to acknowledge it ... He has steered away from excessively anti-fossil fuels, unrealistic policies,” Falih said.”I think he wants a mixed energy portfolio that includes oil, gas, renewables, and make sure that the American economy is competitive.

International PetroChina aims to meet a third of China’s shale gas target by 2020

China’s biggest energy giant PetroChina plans to step up shale gas development in Sichuan province this year, aiming to meet a third of a 2020 government target for the unconventional resource. News agency Xinhua reported that PetroChina will step up drilling in southern parts of Sichuan province, China’s top gasproducing region and a key area for early shale gas development. PetroChina’s plan to build 10 billion cubic metres (bcm) of shale gas output capacity by 2020 in Sichuan province would represent a third of Beijing’s production target for the resource that year. Domestic rival Sinopec Corp, which has been leading the sector with China’s largest commercial shale gas discovery in nearby Chongqing municipality, aims for 10 bcm of output by the end of the decade as well.”PetroChina is playing catch-up with Sinopec, as its understanding of the geology deepens and its technology improves,” said a government official who oversees shale gas development.

Bangladesh to bid for Chevron gas fields after assessing reserves Bangladesh is hiring an international firm to assess reserves at Chevron Corp’s natural gas fields in the country before placing a formal bid to buy the assets, its energy minister said. Energy-starved Dhaka meets half of its gas needs through the three Chevron-operated fields at Bibiyana, Jalalabad and Moulavi Bazar in the northeast of Bangladesh, highlighting their importance for the poor country. Bangladesh will make Chevron an offer once the reserves and other details have been assessed, Nasrul Hamid, state minister for power, energy and mineral resources, said. Chevron, the second-

largest United States-based oil producer, said in 2015 it planned to sell about $10

billion of assets by 2017 amid a prolonged slump in energy prices. Last year, Chevron said it was in discussions about the potential sale of the three fields with an estimated value of $2 billion. Bangladesh Gas Fields Co Ltd will select the company that will assess the reserves, Hamid said, adding that it might need the help of an international oil firm to further develop the fields. Chevron sells its entire output from these fields to state oil company Petrobangla under a production-sharing contract. Under the terms of the contract, the Bangladesh government has the right of first refusal in any asset sale.

February 2017 www.InfralinePlus.com

InConversation

‘GST will be a disaster for biofuels’ Sandeep Chaturvedi, President, Biodiesel Association of India, talks about the green fuel market in India, how biodiesel can play an important role in addressing pollution and health issues and what the Government needs to do to support this industry. Excerpts: There has been lot of concerns over air pollution in India. What is your outlook on Green fuels in India? According to a recent survey from IIT Mumbai, almost 83000 people die premature deaths each year in Mumbai and Delhi alone due to air pollution. The amount of financial loss to the public in general is almost 90,000 crore per year in terms of respiratory ailment, loss of opportunity, days off etc. If you have to cross a gorge, you have to jump 100%. If you take half hearted measures, you will fall in that gorge. The problem is that we need a green fuel policy that addresses all these issues. The policy that was made by the UPA government in 2009 doesn’t say anything. It is actually not implementable. It was expected that the current government will understand things in a year and will bring out the policy. But that has not happened. There is lot of support at the top from the Prime Minister, who says that 10% blending needs to be achieved and lot of financial support is there. I think that the message is loud and clear to the nodal ministry i.e. Ministry of New and Renewable Energy (MNRE) that they should come out with a policy which addresses all these issues for next 10 years. If this industry has to develop in the country, investment has to come up under Make in India. For that investor

has to have a clear horizon that this is the policy of the Government of India for next 10 years. If I am going to put up a project now, it takes me two years to get off ground. After that it takes five years to break even. The signal that we get right now is that yes there is lot of support right at the top, but then there is no policy at the ground from the nodal ministry. The policy should address key issues immediately that India needs green fuels, and steps that need to be taken to create feedstock, processing capacity etc. See there are three things in biofuels. First is the market which head up to the Petroleum Minister who has given a tremendous push and created market for green fuels. All the oil marketing companies (OMCs) today are in the market to buy green fuels. Second is the processing capacity in the country to convert raw material into green fuel. As far as biodiesel is concerned, we have 1.2 Million Ton (MT) of installed capacity. Third is the raw material and taxes. Problem is that if the policy doesn’t step in, you will never create enough raw materials, and if you don’t streamline the taxation, inspite of market and processing capacity, you will never achieve your targets. What according to you should be the main contours of the Green

Sandeep Chaturvedi, President, Biodiesel Association of India

Fuel Policy that are required today in India? The country consumes 22 MT of vegetable oil each year. This oil generates 3 to 4 MT of used cooking oil which goes into our food cycle again which is not a good thing. We may be spending lakhs and crores of rupees just on health related ailments due to adulteration happening in the country. Because used cooking oil is polymerized, it is not good for heart, causes obesity, cancer and all sorts of problems, and hence should not be permitted. But unfortunately, there is no law that governs and controls this particular item. The Government may say that we have banned it, but there has to be a mechanism to check it. This could a very good raw material for bio diesel. So you need a policy on that immediately. By this, you are doing two things. You are saving the masses and giving healthy life. Second, India has a huge tribal wealth where lots of oilseeds are being generated. You can provide reasonable and gainful employment to people in

February 2017 www.InfralinePlus.com

InConversation tribal belts that could be another raw material for bio diesel. So opportunities are available in the country, but someone has to take interest and drive the policy. We have made made a submission that 10% diesel needs to be substituted by 2022. Is 10% diesel substitution by biodiesel blending doable? Yes, it is doable. The domestic consumption of diesel is 80 MT and 4 MT you can do with feedstock I have already specified and another 1-2 MT can also be done through other sources. In terms of diesel blending, can you increase it from 10%? Are there any demand and supply side issues? You can even do 20% and that is not a problem. The key issue here is lack of policy and taxation. Bio diesel tax is zero 48

percent of five percent; Excise Duty is zero till April 1, 2017. On diesel the taxes are almost close to 30%. The moment someone blends it and buy it, state governments are not ready to budge even an inch. They will tax the entire thing. And biodiesel is being taxed at 24% which is a great concern. By doing so you are discouraging a green fuel. So a policy needs to come out specifying how much blending needs to be done. There are no supply side constraints. Demand for biodiesel is huge. The key trigger is environment, health of people. As per me, handling supply side issues is a minor thing if the major issue is sorted out as far as policy is concerned. Nothing goes on a start-stop button, every market needs to develop. These are learning curves. This is not an issue at all and it can be sorted out at the level of supply managers.

Demand for biodiesel is huge. The key trigger is environment, health of people. As per me, handling supply side issues is a minor thing if the major issue is sorted out as far as policy is concerned. Nothing goes on a start-stop button, every market needs to develop. These are learning curves. This is not an issue at all and it can be sorted out at the level of supply managers.

How will coming of GST impact the biodiesel market in India? It will be a major disaster for biofuels. Petroleum products are not in GST, but biodiesel will be under GST. The oil marketing companies (OMCs) who want to blend will take at an additional cost and they cannot pass it on. It is very discouraging. We have made a submission to the Finance Ministry, and we keep doing that. But it is the policy which should have addressed it. For next 10 years, there should be a mechanism to address the taxation related issues and a policy should have come by now. Is pricing an issue when it comes to adoption of biodiesel as a green fuel? Price is not an issue as most of the purchase is done through public tendering and prices are well discovered and is not a problem. And also in future there should not be a problem. If you address all these issues, you will have the industry up and running. It can go very well for Make in India and Swachh Bharat. All that is required is a policy which incorporates these things, sets timeline of five to 10 years for making investments, creating jobs. We are currently doing blending right from Haldia, Paradip, Vizag, Vijayawada, Kakinada etc and the eastern belt. It is happening since last one year. 5% diesel is blended with bio diesel. But issues of taxation, raw material not being available etc are cropping up. If there is extra 24% tax, who will buy it? If you need a product to mitigate pollution, will it come for free? You have killed your rivers, polluted your environment to such an extent, there should be sense of responsibility to address this issue. You have to pay to get something better in life. If government is not willing to relent on taxes, probably polluters will have to pay. For suggestions email at feedback@infraline.com

February 2017 www.InfralinePlus.com

InDepth

Budget 2017: Lowering of custom duty to propel LNG sector

►►LNG imports crucial for sustaining existing power generation capacity ►► PLF of gas-fired plants averaged only 18.64% in May last year By Team InfralinePlus

India’s Liquefied Natural Gas (LNG) sector is set to undergo a major transformation and play a crucial part in the country’s energy portfolio once the central government approves the reduction in custom duty on LNG imports. The move to reduce the customs duty to 2.5% (as present to 5% at terminals) will lead to committed LNG supply to gas-based power plants, which are running below their capacity due to lack of availability of gas. The grid

connected gas-based power generation capacity in the country is around 23,075 MW. Of this, a capacity of 14,305 MW had no supply of domestic gas. The power sector is the leading end user of natural gas in India along with the fertilizer sector and consumes nearly one third of the total natural gas produced in the country. With natural gas accounting for just about 9% of its overall energy mix, the central government is expected to come out

with slew of measures in 2017 to increase domestic production and provide respite to Independent Power Producers (IPPs) who have been under the cosh since 2013-14. 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%. Moreover, central

February 2017 www.InfralinePlus.com

InDepth

government is increasing its focus on gas-based power projects due to their high efficiency, low gestation period, environmental factors, and requirement of less water and land compared to other fuel based power plants. Various other policies such as recent updates in ‘Gas Allocation Policy’ have also been implemented to encourage use of gas in different end user segments. Other policies that are expected to have a positive impact on the country’s LNG market include E-bid RLNG for smoothing the supply of imported spot RLNG to power plants and fertiliser industries.

Current Scenario

The uncertain future of Indian domestic gas production has cascading effects on the overall role of gas in the country’s energy sector. The impact has 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 20.66% (December 2016) due to unavailability of gas. During the year 2015-16, gas based plants were running at a PLF of around 23%. To run gas plant at a PLF of 85%, normative gas requirement would be about 108 MMSCMD. This is significantly more than the present availability of 28.26 MMSCMD. Normative Gas requirement to operate the existing Power plants of

The uncertain future of Indian domestic gas production has cascading effects on the overall role of gas in the country’s energy sector. The impact has 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 20.66% (December 2016) due to unavailability of gas capacity of 23,075 MW at 90% PLF is about 113 MMSCMD. However, the total domestic gas allocated to power projects is 87.46 MMSCMD and average gas supplied to these gas based power plants during the year

2015-16 was only 28.26 MMSCMD. The gas grid connected capacity had received 18.75 MMSCMD gas during the year 2015-16 and achieved average PLF of 19.55% only and gas based capacity connected with

Table 1: Average Gas Supply and Shortfall from 2007-08 to 2015-16 Sr. No.

Financial Year

Gas Based Capacity at the end of year (MW)

Gas Requirement (MMSCMD)

Average Gas Supplied (MMSCMD)

Shortfall (MMSCMD)

(1)

(2)

(3)

(4)

(5)

(6)=(4)-(5)

2007-08

13408.92

65.67

38.14

27.53

2008-09

13599.62

66.61

37.45

29.16

2009-10

15769.27

78.09

55.45

22.64

2010-11

16639.77

81.42

59.31

22.11

2011-12

16926.27

81.78

55.98

25.80

2012-13

18362.27

90.70

39.95

50.75

2013-14

20385.27

97.90

27.13

70.77

2014-15

21665.57

104.00

25.20

78.80

2015-16

23075.57

113.63

28.26

85.37

Source: CEA Draft National Electricity Plan

February 2017 www.InfralinePlus.com

Figure 1: Average PLF of Gas-based power plants from 2007-08 to 2016-17 Average PLF of Gas-based Power Plants (in %) (from 2007-08 to 2016-17) 2010-11, 66.94 2008-09, 55.43

2011-12, 62.06 2009-10, 66.97

2007-08, 55.18

2013-14, 24.28 2012-13, 37.25

2014-15, 20.93

2016-17 (up to December 2016), 23.07

2015-16, 23.40

Source: CEA Draft National Electricity Plan

isolated gas field had received 9.51 MMSCMD gas and achieved average PLF of 50.57%. Therefore, the average PLF of gas based generation capacity in the country during 2015-16 was about 23%.

LNG auction through PSDF: Current scenario Under the government´s revival plan for stranded gas-based power plants, LNG will be imported and cashstrapped state power distribution com-

The country’s gas-fired plants, with nearly 23 GW 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 are expected to participate in the future auction for as many 31 stranded projects and 24 domestic gas-based plants

panies will be financially supported to buy electricity from them. Auctions for the 1st phase (June 1 to September 30, 2015) of PSDF Support to gas-based power plants were 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 23 GW 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 to participate in the future auction for as many 31 stranded projects and 24 domestic gas-based plants.

Gas infrastructure 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 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. As per the Draft National Electricity

February 2017 www.InfralinePlus.com

InDepth

Plan by Central Electricity Authority (CEA), the regasification capacity in the country is also a matter of concern for gas basedpower plants, particularly those who are connected with RGTIL East-West pipeline. Due to technical constraints like directional flows etc., imported RLNG from west coast cannot be transported to power plants located in the East Coast. Therefore, facility of re-gasification capacity may be suitably created at East coast also. Mideast Gulf states are among the world’s largest LNG producers and Middle Eastern and Indian buyers are turning away from term contracts to the spot market to procure gas for power generation and fertilizer and chemical production. The ability of buyers in the Middle East and India to import gas from around the world has encouraged growth in the region’s spot LNG trade. Cargoes from a range of traditional suppliers have

moved to the region, as has gas from some of the newest LNG producers, including coal-bed methane operations in Australia and one of the first exports from the new US liquefaction plant at Sabine Pass on the Gulf coast. Shell, the world’s top LNG trader after buying BG Group, expects to produce around 30 million tonnes of LNG this year and trade nearly 50 million tonnes, accounting for about a sixth of global trading volume. Global output capacity is expected to rise by half by 2020, potentially adding some 150 million tonnes of LNG to the market.

Gas projects vis-à-vis Climate change obligations 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 IPPs to avail CDM (clean development mechanism)

As per the Draft National Electricity Plan by Central Electricity Authority (CEA), the regasification capacity in the country is also a matter of concern for gas basedpower plants, particularly those who are connected with RGTIL East-West pipeline. Due to technical constraints like directional flows etc., imported RLNG from west coast cannot be transported to power plants located in the East Coast

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. The role of gas based plants during evening to meet the balancing power and ramping requirement is vital for the national grid. Flexible natural gas plants show similar improvements, with minimum output limits of 15-30% compared to 40-50% for inflexible plants. A “fast-acting” gas turbine plants on the market today can offer start-up times of just 40 minutes. As per CEA’s draft national electricity plan, it is proposed to run that gas based power stations at 85% PLF during the 6 hours in the evening. It is estimated that about 20 MMSCMD additional gas would be required over and above 28.26 MMSCMD already being supplied to gas based power stations. Also, it is proposed that, to cater to intermittence of RES generation, a capacity of about 2000 MW gas based may be kept as reserve during off peak hours. Gas requirement for this capacity to run at 50% PLF would be about 5.3 MMSCMD. Therefore, for effective utilisation of available gas based plants in India to meet the balancing and ramping requirement of the grid, availability of minimum quantum of gas to the tune of 53.56 MMSCMD needs to be ensured. 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. For suggestions email at feedback@infraline.com

February 2017 www.InfralinePlus.com

StatisticsOil & Gas Production and consumption of petroleum products (December, 2016) (MMT) Products

April’16-March’17

December 2015

December 2016

April-December 2015

April-December 2016

Prodtn.

Consump.

Prodtn.

Consump.

Prodtn.

Consump.

Prodtn.

Consump.

Prodtn.

Consump.

LPG

10.6

19.6

0.9

1.8

1.1

1.9

7.6

14.3

8.3

15.9

35.3

21.8

3.1

1.8

16.1

27.1

NAPHTHA

17.9

13.3

1.6

1.1

1.7

1.1

13.1

9.9

14.7

10.1

ATF

11.8

6.3

0.5

1.2

0.6

8.2

4.6

10.3

5.1

SKO

7.5

6.8

0.6

0.4

5.6

5.1

4.6

4.2

HSD

98.6

74.6

8.6

6.5

9.1

6.5

72.8

55.2

76.6

57.2

LDO

0.4

0.04

0.07

0.04

0.3

0.4

0.3

3.6

0.08

0.3

0.08

0.3

0.8

2.5

0.8

2.5

FO/LSHS

10.7

6.6

0.8

0.5

1.3

0.6

8.3

4.7

9.5

5.5

BITUMEN

5.2

5.9

0.5

0.6

0.4

0.6

3.5

3.7

4.1

OTHERS

32.2

25.6

2.7

2.1

2.7

2.5

23.8

17.9

25.6

23.4

LUBES

ALL INDIA

231.2

184.7

15.8

21.1

16.5

169.9

134.6

181.5

146.4

Growth (%)

4.80%

11.60%

2.40%

8.30%

5.60%

4.30%

2.90%

9.80%

6.80%

8.80%

Natural Gas at a Glance (As on December, 2016) (MMSCM) December Details

2014-15

2015-16

2015

2016 (Target)

April-December 2016 (Actual)

2016 (Target)

2015

2016 (Actual)

(a) Gross Production

33,657

32,249

2,737

3,030

2,737

24,697

25,152

23,885

- ONGC

22,023

21,177

1,819

2,041

1,927

16,272

16,724

16,420

- Oil India Limited (OIL)

2,722

2,838

266

247

246

2,120

2,261

2,212

- Private / Joint Ventures (JVs)

8,912

8,235

652

743

564

6,305

6,168

5,254

(b) Net Production (Excluding flare gas and loss)

32,693

31,138

2,648

1,903

15,637

18,755

(c ) LNG Import

18,536

21,309

1,960

2,643

23,836

23,087

(d) Total Consumption including internal consumption (Net production+Import) (b+c)

51,229

52,448

4,608

4,546

39,472

41,842

(e ) Total Consumption (In BCM)

51.23

52.45

4.61

4.55

39.47

41.84

(f) Import Dependency based on Consumption (C/d*100)

36.18

40.63

42.53

41.86

39.61

44.82

LPG consumption (As on December, 2016) (TMT) LPG category 1. PSU Sales: LPG-Packed Domestic LPG-Packed Non-Domestic LPG-Bulk Auto LPG Sub-Total (PSU Sales) 2. Direct Private Imports Total (1+2)

2014-15

2015-16

16,040.40 1,051.00 315.7 163.8 17,570.90 429.2 18,000.10

17,181.70 1,464.40 317.2 170.9 19,134.20 489 19,623.20

2015

December 2016

Gr (%)

2015

April-December 2016 Gr (%)

1568 142.2 24.5 14.2 1,748.90 46.9 1,795.90

1696.4 159.5 30.4 14.4 1,900.70 37.5 1,938.10

8.2 12.1 23.8 1.8 8.7 -20.2 7.9

12559.2 1058.1 240.5 127.5 13,985.20 333.5 14,318.80

13900.1 1304.5 269.7 124.5 15,598.80 290.6 15,889.40

10.7 23.3 12.2 -2.4 11.5 -12.9 11

February 2017 www.InfralinePlus.com

StatisticsOil & Gas Â Refineries installed capacity and crude oil processing (December, 2016) (MMTPA / MMT) Crude Oil Processing

Installed capacity (April 2016)

201415

201516

Company

Refinery

IOCL

Barauni (1964)

5.9

Koyali (1965)

13.7

Haldia (1975)

December

April-December

2015 (Actual)

2016 (Target)

2016 (Actual)

2015 (Actual)

2016 (Target)

2016 (Actual)

6.5

0.6

0.5

0.6

4.9

4.7

4.9

13.3

13.8

1.2

0.9

1.1

10.2

10.7

7.5

7.7

7.8

0.7

0.5

5.8

5.9

5.8

Mathura (1982)

8.5

8.9

0.8

0.7

0.8

6.5

6.6

6.9

Panipat (1998)

14.2

15.3

1.3

11.3

11.4

11.7

Guwahati (1962)

0.9

0.07

0.08

0.07

0.7

Digboi (1901)

0.7

0.6

0.04

0.06

0.05

0.4

0.5

0.4

Bongaigaon(1979)

2.4

0.2

1.8

1.9

Paradip (2016)

1.8

1.1

6.8

5.2

IOCL TOTAL

69.2

53.6

4.9

5.6

5.7

41.7

48.5

48.1

Mumbai (1954)

10.5

10.2

9.1

0.5

0.9

0.7

6.5

7.8

Visakh (1957)

0.5

0.02

0.05

0.04

0.4

0.5

0.4

Bathinda (2012)

11.5

10.8

9.6

0.5

0.9

0.7

6.8

8.3

8.2

HPCL-TOTAL

12.8

13.4

1.1

1.2

1.3

9.9

10.6

10.8

Mumbai (1955)

9.5

10.4

10.7

0.9

0.7

8.5

Kochi (1966)

6.2

6.4

0.5

0.6

4.7

4.4

4.7

Bina (2011)

2.8

2.5

0.2

0.3

1.8

BPCL-TOTAL

30.5

32.2

2.8

2.7

3.2

24.4

25.1

ONGC

Tatipaka (2001)

0.1

0.007

0.004

0.007

0.05

0.03

0.06

MRPL

Mangalore (1996)

14.6

15.5

1.5

11.1

11.3

11.9

ONGC TOTAL

15.1

14.7

15.6

1.5

11.2

11.3

Mumbai (1954)

6.5

7.4

0.7

0.8

5.8

6.1

6.3

Visakh (1957)

8.3

8.8

9.2

0.8

0.9

6.7

6.9

Bathinda (2012)

7.3

10.7

0.9

0.8

0.9

8.3

7.1

HPCL- TOTAL

23.8

23.5

27.9

2.5

2.3

2.6

20.8

19.8

21.2

Jamnagar (DTA) (1999)

30.9

32.4

2.8

24.2

24.8

Jamnagar (SEZ) (2008)

37.2

37.1

3.2

27.6

27.9

Vadinar (2006)

20.5

19.1

1.8

1.7

1.8

13.9

15.3

15.8

230.1

223.3

232.9

20.2

20.8

21.4

170.6

180

183.9

HPCL

54 HMEL

BPCL

BORL

HPCL

HMEL

RIL*

EOL

All India

February 2017 www.InfralinePlus.com

NewsBriefs | Renewable

International

Govt mulls introducing fixed-cost component in renewable energy tariff

The government is exploring a change in the tariff structure for electricity from clean energy sources to boost India’s efforts to promote a green economy. The ministry of new and renewable energy is contemplating a fixed-cost component to the tariff for electricity generated from renewable energy sources such as solar or wind. The idea is to prevent distribution companies (discoms)

shying away from procuring electricity generated by such projects, as they will have to pay the fixed tariff component even if they don’t buy the electricity contracted for. Such a tariff mechanism already exists for electricity from conventional sources such as coal and gas which has two parts—a fixed cost, which is the investment incurred towards power generation equipment, and a variable cost or the cost of fuel.“The government is contemplating introducing a fixed component in the renewable energy tariff to prevent states from backing down from buying electricity from renewable energy sources,” an industry expert said. Experts say this is an important step for promoting green energy.

$1.77 billion FDI equity came into Indian renewable sector between Apr 14 to Sep 16 India witnessed a total of $1.77 billion equity investment in the form of foreign direct investment (FDI) in the non-conventional energy sector between April 2014 and September 2016, the Modi government said in an “Achievement Report” of its flagship Make in India initiative. As per the data available, a majority of the bigger investments have come from Mauritius, Malaysia, Philippines, Singapore, Japan, Germany, Spain, US and Seychelles. Under automatic route for projects of renewable power generation and distribution, 100 per cent FDI is allowed subject to provisions of the Electricity Act, 2003. The UN Environment Program’s “Global Trends in Renewable Energy Investment 2016” report

ranks India among the top ten countries in the world investing in renewable energy. The government plans to achieve 40 per cent installed capacity of power from non-fossilfuel-based energy resources and reduce emissions by 33-35 per cent by 2030.

National

NLC draws up big plans for solar power

Buoyed by the success of its pilot solar plant, NLC India Ltd. has unveiled plans for installing power plants with net capacity of 500 MW at an estimated cost of Rs. 2,170 crore at various places in Tamil Nadu. The rollout was part of NLC’s Solar Mission of adding 4,000 MW through installation in various parts of the country. The NLC’s solar power thrust ties in with Government of India’s National Solar Mission which planned to establish solar power plants with an installed capacity of 1,00,000 MW by 2022. The NLC, had, on an experimental basis, launched a pilot project of solar power generation with a capacity of 10 MW at the cost of Rs. 75 crore near the Neyveli Air Strip. The success of the project has now paved the way for adding 130 MW (65 MW x 2) Solar Power Units at Neyveli and the work had been assigned to BHEL and Jackson Engineers Ltd., each with 65 MW. About 650 acres in north and west side of the Neyveli Township were apportioned for this purpose.

Major Ports to go green, to save Rs. 75 crore annually The Ministry of Shipping, as a part of its Green Port Initiative has been emphasizing on use of renewable sources of energy to power Major Ports across the nation. The Ministry aims to set up 91.50 MW of solar energy capacity at the twelve Major Ports and 45 MW of wind energy capacity by the two Major Ports of Kandla and V. O. Chidambaranar. Major Ports have started the process of setting-up renewable energy projects by investing Rs.704.52 crores (Solar Rs. 412.02 Cr and Wind Rs. 292.50 Cr) in these projects. When completed, these renewable energy projects will help in the reduction of carbon dioxide emission

by 136,500 MT annually. These projects will also help to reduce cost of power purchased by utilization of renewable energy for power generation, resulting in estimated saving of Rs 75 crores annually, when fully commissioned. The wind energy

projects will be executed by two Major Ports namely Kandla Port and V.O. Chidambaranar Port. The total capacity of the wind energy projects is 45 MW out of which 6 MW has already been commissioned by Kandla Port. A total of 15.20 MW of solar projects has also been commissioned with Visakhapatnam Port leading the way with 9 MW, while the other ports in which solar projects have been commissioned are Kolkata Port (0.06 MW), New Mangalore Port (4.35 MW), V.O. Chidambaranar Port(0.5 MW), Mumbai Port (0.125 MW), Chennai Port(0.1 MW), Mormugao (0.24 MW) & JNPT(0.82 MW).

February 2017 www.InfralinePlus.com

NewsBriefs | Renewable Narayan Karthikeyan company looks to buy Inox Windfarms

A clean energy company promoted by India’s first Formula One driver, Narain Karthikeyan, and his family is in talks to buy the wind power generation business of Inox Group for enterprise value of Rs 1,200 crore to consolidate, scale up and aid its own fundraising efforts. Inox Renew-

ables, an independent power producer, is a 99.98% subsidiary of listed Gujarat Fluorochemicals and has close to 300 MW of installed wind energy generation capacity across Rajasthan and Maharashtra. It has entered into long-term power purchase agreements (PPAs) with state electricity boards for the sale of wind energy. Coimbatore-based Leap Green Energy, founded in 2006, is pursuing funding options for the deal, which is at an advanced stage of negotiations and could be announced before the close of the current financial year. JP Morgan owns a majority stake in Leap Green Energy and has a significant management role in the company.

Green certificate sales shoot up 245percent to 15.68 lakh in Jan

Sales of renewable energy certificates (RECs) jumped about 245 per cent to 15.68 lakh this January, from 4.54 lakh in December last year. Power distribution companies as well as open access and captive consumers are under obligation to buy RECs from renewable energy producers under renewable purchase obligations (RPOs) as mandated by central and state regulatory commissions. RECs are aimed at providing an easier avenue for various entities, including power distribution companies, to meet their green energy obligations. Two power exchanges -- Indian Energy Exchange (IEX) and Power Exchange India Ltd (PXIL) -- approved by the Central Electricity Regulatory Commission hold auction of RECs last Wednesday of every month.

As per available data, the sale volume of RECs at the two exchanges in January was 15,68,192 as against 4,54,038 in December 2016. As many as 12,87,814 RECs were sold at IEX in monthly auction on January 25. Similarly 2,80,378 RECs were sold at PXIL.

National ReNew plans to raise $450 million with bonds sale

ReNew Power Ventures has launched a sale of bonds to overseas investors to raise $450 million in a uniquely structured deal where dollar denominated bonds will be issued by an offshore entity unrelated to the company that will in turn invest in masala bonds issued by ReNew Power of the same value. The bonds are being issued by a special purpose vehicle called Neerg Energy that will be held by a trust and its ownership is not linked to ReNew group, Fitch Ratings said which assigned a B+ (Expected) rating to the proposed issue but did not provide details on the fund raising plan. The rating on the proposed notes reflects the credit profile of a restricted group of operating entities under ReNew Power Ventures Private Ltd (ReNew Power), Fitch added in its note.

India to launch clean energy equity fund of upto $2 billion The Indian government and three staterun firms will jointly set up an equity fund of up to $2 billion for renewable energy companies to tap into to help New Delhi meet its clean energy goals. Private and public companies will be able to dip into an initial amount of more than $1 billion starting next fiscal year. India’s government hopes the Clean Energy Equity Fund (CEEF) will attract pension and insurance funds from Canada and Europe. Around $600 million of the initial pool will come from the National Investment and Infrastructure Fund, under the finance ministry, and the rest from state

entities NTPC Ltd, Rural Electrification Corp and the Indian Renewable Energy

Development Agency. Prime Minister Narendra Modi has set a target of raising India’s renewable energy target to 175 gigawatts by 2022, more than five times current usage, as part of the fight against climate change by the world’s thirdbiggest greenhouse gas emitter and to supply power to all of the country’s 1.3 billion people. The program will depend on getting as much as $175 billion in funding with 70 percent of that likely in bank loans and the rest as equity. The government reckons loans are not a problem but providing equity to investors may be difficult due to uncertainties over returns.

February 2017 www.InfralinePlus.com

NewsBriefs | Renewable

International States

Tamil Nadu receives most bids for wind energy projects

Tamil Nadu has received bids for setting up 1,794 MW of wind projects or 69 per cent of total bids, in India’s first ever competitive bidding for wind projects. The Solar Energy Corporation of India (SECI) had rolled out the tender for procuring 1000 MW of wind

power under competitive bidding. The power generated would be sold to the ‘non-windy’ States. The tender has been oversubscribed, with 13 developers submitting bids equivalent to 2.6 GW against the 1 GW called for, according to research firm Ambit Capital. As much as 69 per cent of the bids are for Tamil Nadu and 27 per cent were for Gujarat. According to the report, firms which bid for setting up 250 MW of projects each in Tamil Nadu include Inox Wind, Mytrah, Sembcorp and Leap Green. Firms like Gamesa, Adani and Hero bid for setting up 150 MW each of projects in the State. With bids from other firms, the overall bids received for setting up projects in Tamil Nadu totalled 1,794 MW.

Mytrah Energy signs pacts for 2000-MW renewable projects in Andhra Pradesh Mytrah Energy said it has signed pacts for 2,000 MW of renewable power projects worth Rs 13,000 crore in Andhra Pradesh. The MoUs were inked in the presence Chief Minister N Chandrababu Naidu on January 28. The MoUs are for 1,000 MW of wind power and 1,000 MW of solar power projects. These projects will involve a total investment of Rs 13,000 crore and will create employment for 4,000 skilled and unskilled workers. These projects will be spread across eight districts of Andhra Pradesh, of which five districts will be evaluated for wind power opportunities for the very first time. Mytrah is planning to implement and execute the projects within three years from the date of getting all statutory clearances

from the state government. Upon commissioning of all the assigned projects, Mytrah will become the state’s largest renewable power IPP (independent power producer). Andhra Pradesh government has targeted to add 18,000 MW capacity renewable power projects by 2021-22, which is 10 per cent of the national target.

West Bengal set to tap solar power for irrigation needs

The state water resource investigation and development department is planning to use solar power to supply irrigation water to the farmland. At present, farmers mainly use electric pumps for irrigation purposes. “The use of solar power will benefit the farmers by bringing down their electricity bill,” minister Soumen Mahapatra said. The department has already entered into an agreement with the West Bengal State Electricity Distribution Company Limited (WBSEDCL). The department will use high-grid engines to produce solar power for irrigating fields in places where shallow tube wells have been installed. The project has already been implemented in 28 enclaves of Cooch Behar. It has also been launched as a pilot project in North 24 Parganas, South 24 Parganas, Nadia, East Midnapore and West Midnapore districts. “Once we examine the feasibility of this project, we will introduce this throughout the state.

Gujarat discoms fail to meet purchase target for renewable power Gujarat Urja Vikas Nigam Ltd (GUVNL) affiliated four distribution companies (discoms) fell short of purchasing required renewable energy in 2015-16 on account of low supply of power from wind and other renewable energy sources. Under the Renewable Purchase Obligation (RPO), a distribution company is mandated to buy electricity from renewable energy at a defined minimum percentage of the total consumption of its consumers. The RPO target for 2015-16 was 9% (7% from wind, 1.5% from solar and 0.5% from other sources such as biomass and mini hydro projects). As against the stipulated target of 9%, GUVNL

could procure only 7.66% from renewable energy sources in 2015-16. This translated into a shortfall of 980 million units (MUs)

in 2015-16. The apex electricity company GUVNL has approached Gujarat Electricity Regulatory Commission (GERC) with a petition requesting revision of RPO for its four discoms -- Uttar Gujarat Vij Company Ltd (UGVCL), Madhya Gujarat Vij Company Ltd (MGVCL), Dakshin Gujarat Vij Company Ltd (DGVCL) and Paschim Gujarat Vij Company Ltd (MGVCL) -- and allow it to adjust purchase of excess (303 MUs) solar power against the shortfall in non-solar category. As directed by the state power regulator, GUVNL has invited suggestions or objections from all stakeholders pertaining to the compliance of RPO by obligated entities.

February 2017 www.InfralinePlus.com

NewsBriefs | Renewable Equis Energy to invest $300 mln in two solar plants in Australia

Equis Energy said it plans to build two solar power plants for A$400 million ($303 million) in Australia, marking the Singaporebased renewable energy developer’s first investments in the country. The two 100-megawatt solar plants would be in South Australia and Queensland, moving the country a step closer toward the federal government’s target for at least

20 percent of nationwide power to come from renewable energy by 2020.The South Australian plant, Tailem Bend, would be built next to a diesel-fired power station owned by Snowy Hydro, which had agreed to buy all the power from the solar plant, Equis said. Construction was due to begin in early 2017, it added. “By developing the Tailem Bend Solar Project and Snowy Hydro diesel projects together, the combined system will have the capability of providing stable power any time of the day across the entire year,” Equis Group Chief Executive David Russell said. The second solar plant would be built in Collinsville North, where construction would also begin this year.

Scotland eyes 50% renewable energy by 2030 in shift away from North Sea oil

The Scottish government has taken the first steps to heavily cutting the country’s reliance on North Sea oil and gas after calling for 50% of Scotland’s entire energy needs to come from renewables. In a subtle but significant shift of emphasis for the Scottish National party after decades championing North Sea production, ministers unveiled a new energy strategy intended to push motorists, homeowners and businesses into using low or zero-carbon green energy sources for half their energy needs by 2030. Currently, 47% of Scotland’s total energy use comes from petroleum products largely extracted from Scotland’s North Sea oil platforms, and 27% from domestic and imported natural gas needed for home heating. With opposition

parties and environment groups expressing scepticism about a lack of detail in the new strategy, Scottish ministers privately admit cutting oil use is their biggest challenge in hitting far tougher targets unveiled last week to reduce Scotland’s total greenhouse gas emissions by 66% by 2032.

International Renewable energy creating jobs 12 times faster than the rest of the economy

The solar and wind industries are each creating jobs at a rate 12 times faster than that of the rest of the U.S. economy, according to a new report. The study, published by the Environmental Defense Fund’s (EDF) Climate Corps program, says that solar and wind jobs have grown at rates of about 20% annually in recent years, and sustainability now collectively represents four to four and a half million jobs in the U.S., up from 3.4 million in 2011. The renewable energy sector has seen rapid growth over recent years, driven largely by significant reductions in manufacturing and installation costs. Building developers and owners have been fueled by state and local building efficiency policies and incentives, the report explains. But, these gains are in contrast to Trump’s support for fossil fuel production, his climate change denial and his belief that renewable energy is a “bad investment”.”Trump’s current approach is basically ignoring an entire industry that has grown up over the last 10 years or so and is quite robust,” Liz Delaney, program director at EDF Climate Corps, said.

Saudi Aramco said to weigh up to $5 billion of renewable deals Saudi Aramco, the world’s largest oil company, is considering as much as $5 billion of investments in renewable energy firms as part of plans to diversify from crude production. Banks including HSBC Holdings Plc, JPMorgan Chase & Co. and Credit Suisse Group AG have been invited to pitch for a role helping Aramco identify potential acquisition targets and advising on deals. The energy company is seeking to bring foreign expertise in renewable energy into the kingdom and first investments under the plan could occur this year. Saudi Arabia is planning to produce 10 gigawatts of power from renewable

energy sources including solar, wind and nuclear by 2023 and transform Aramco

into a diversified energy company. The kingdom also plans to develop a renewable energy research and manufacturing industry as part of an economic transformation plan announced by Deputy Crown Prince Mohammed bin Salman in April. The kingdom intends to become a global “powerhouse” of renewable energy including solar, wind and nuclear power, the country’s Energy Minister and chairman of Aramco, Khalid Al-Falih, said at the World Economic Forum in Davos, Switzerland. By 2030 the kingdom wants to produce 30 percent of its power from renewable energy sources.

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InConversation

‘Equating solar with wind is like comparing chalk and cheese’ DV. Giri, Secretary General, Indian Wind Turbine Manufacturers Association (IWTMA), shares his outlook for the wind sector, why it is not a good idea to compare wind with solar and the challenges which need to be addressed immediately. Excerpts:

Wind sector in India is going through a lot of positive developments especially in the context of how the renewable energy sector has shaped up in the last few years. We have a target of 60 GW of wind capacity by 2022. In the wake of this, what is your outlook for the wind sector? Yes you are right that we have a large target of 60 GW which is to be achieved by 2022. Couple of observation we have. One, this year, 2016-17, we would be crossing over 4500 MW of wind power, which perhaps is going to be one of the highest. One can say that this is going to happen because Generation Based Incentive (GBI) is going to be called off by March this year, and also that Accelerated Depreciation (AD) has been reduced from 80 percent to 40 percent. So there is a rush to install wind turbines. Andhra Pradesh alone is expected to see more than 2000 MW of installed wind capacity. So one can say that this is a peculiar year and this may not happen again. Now, having said that, let us face few things. One, wind turbine industry goes with Make in India program of the Government, with 75% localization. Two, 95% of the investment in this sector is coming from the private sector and not from the government undertakings. Now when you want to get the private investor to invest in wind turbine, especially when it is not a core

business and investor is looking it as a business opportunity, the investment decision will purely depend on the capital cost, on the interest, the PLF and the tariff. Let us face it, as far as the capital costs are concerned, we are the cheapest in the world. Interest cost in India is around 12-14%. We can work out the PLF depending on the site on which we are going to operate. With all this, finally the tariff is determined by the state electricity regulatory commission. If they are going to give a tariff which is going to give an IRR of less than 16%, who would be interested? Let us take the classical example of Madhya Pradesh which installed 1100 MW of wind capacity last year (2015-16) when the tariff was at Rs 5.92 per unit because it is a low wind region. Now, for some odd reason, this tariff was slashed to 4.78 per unit. Today, there are no wind projects coming up in Madhya Pradesh. How do you handle this kind of a situation? Then, we have huge problems in grid connectivity. The grid is congested. Now with green corridors under implementation, some kind of opportunity is there. But the problem is that the grid is absolutely congested. With the result that during high wind season when the wind is blowing at the best, the discoms are getting wind at say Rs 4.16 in Tamil Nadu, while the same is available from fossil fuel at Rs 2.50 per unit, then what do they do? They have to balance this load through the

DV. Giri, Secretary General, Indian Wind Turbine Manufacturers Association (IWTMA)

state load dispatch centres where the primary concern is the financial health of discom. So the load dispatch centre is asked to switch off all wind turbines to accommodate power produced from fossil fuels. So the generation is lost without any mistake of the generator. But does the discom pay for the units lost? No. When it comes to payment, be in Rajasthan, Madhya Pradesh, Maharashtra or in Tamil Nadu, the delay can range anywhere between six to 14 months. If a person is not getting paid for this long and he has to pull out money from his pocket to service his loans, the project again doesn’t remain viable. The PPA calls for payment of interest if payments are delayed beyond one month. Barring Gujarat, which not only pays on time but also take a cash discount by paying in seven days of raising the bill, rest of the states are in various stages of delay. Rajasthan is 10 months, Tamil Nadu is 13 months. Maharashtra is another peculiar case where PPA is signed and turbines are

February 2017 www.InfralinePlus.com

generating, but they have not been paid for the past 14 months. There are situations when machines are generating, PPAs have not been signed; machines are standing where evacuation has been given but they are not connected with the grid. If this is the situation we are going to have in the states, any policy of the Centre is absolutely of no use. So what we tell the Centre is you make the policies, but unless we have the engagement of the states where they must give a “must run” status to wind turbines, have payment security and perform their RPO. None of the states follow their RPO. If all the states perform their obligation under the National Tariff Policy, we can do something like 6,000 MW per annum. Today, we are purely dependent on nine wind states of which seven are operating because Telangana and Kerala nothing is happening. This is the situation we have, but what are we blamed for say high capital, which I have already said is not true. Then, it is claimed that while solar prices have come down, wind sector is still keeping its costs high. Our prices and costs will go up because we have lost all the wind sites, which are all occupied. So what is the alternative? We have to increase the hub height, increase the blade length to have a meaningful PLF to have a worthwhile

IRR. When you put hardware costs, the cost goes up. That’s why we tell the Centre and State governments to not look at wind from the view of capital cost. You look at levelised cost of energy over a 20 year period. Then you will find if it at grid parity or lower. We have a manufacturing capacity of 9500 MW as of today, with some more members joining; it can go up to 12,000 MW. We are chasing a market of about 3,000 MW. How can you have economy of scale and how can cost come down? We perform everything for the customer right from wind resource assessment, to connectivity, to getting their PPA signed. If there is no help from the government, what can we do?

I hope the competitive bidding goes off well. Still, there are many glitches in terms of payment, connectivity, who is going to take the long term access, what is the role of PTC, what is the role of discom, what happens when there is a grid congestion and machines are made to switch off, which have not been addressed

What are your views on the recent roll out of competitive bidding in the wind sector? The Government is today talking about competitive bidding. The government has put up a 1 GW interstate competitive bidding from wind to a non-wind state. I am very happy that the industry has responded with a 2.6 GW response. I hope the competitive bidding goes off well. Still, there are many glitches in terms of payment, connectivity, who is going to take the long term access, what is the role of PTC, what is the role of discom, what happens when there is a grid congestion and machines are made to switch off, which have not been addressed. I am sure they will be addressed when the bid opens which is expected in next two to three months. Implementation of projects, with all the improbable and the number of question marks to be addressed, projects will come up and perhaps the implementation will happen in December 2018, not before that. If that happens, what will happen in 2017-18? You are saying that Feed in Tariff (FiT) is a bad word. So what happens in 2017-18? We have submitted to the ministry that till competitive bidding stabilizes itself, allow FiT to continue, get the RPO implementation, and then if GBI has been a game changer, allow it to continue so that the meaningful IRR is achieved for IPPs. IPPs today are borrowing money from private equities abroad and if it doesn’t make sense for them, they will not make the investment. So we believe that if 60 GW is to be achieved, perhaps GBI needs to continue till 2022, or till such time competitive bidding comes in full play. Even if you take interstate competitive bidding, the PGCIL network is only about 4,000 to 5,000 MW. It will be completed in another two or three years, till then you have to depend on state utilities. State utilities have to move from the point of generation to interstate connectivity point where you

February 2017 www.InfralinePlus.com

InConversation have the STU charges which are very high and need to be rationalized. So I feel that if Government really wants to do something in a comprehensive way, there is no point just to go for competitive bidding and price discovery mechanism hoping price will come down and market will stabilize itself. How can the market stabilize itself without grid connectivity, payment security and achieving the national renewable portfolio obligation?

What are the other areas in the wind sector which need urgent attention by the Government? One area which the Government should look into is to see how we can export wind turbines out of the country. There are two major problems in exports. One, the exim line of credit is just not enough. They need to have a green line of credit separately for wind. Also, the logistics cost need to be addressed by Ministry of Commerce and Ministry of Shipping, whereby the freight cost from India as compared to say China, are about 17% higher. Some sort of intervention is required so that we can work on a level playing field. If these problems are removed, exports, looking at the quality of products we do in India, I am sure we can in 18-24 months, do about 2,000 to 3,000 MW per annum of exports alone which will add to the country’s overall turbine sales. Then there are some other issues. We move our goods by roads. Ours is an over dimensional cargo. Both at the state and national highway the cargo carrying critical equipment is stuck due to the way the state authorities operate. I feel we need to be given a special status in movement of over dimensional cargo. The other thing is when we put our transmission lines, unlike power and telegraphic lines, to put those on private land, the cost of the project runs into crores of rupees. We are forced to pay under the table,

One area which the Government should look into is to see how we can export wind turbines out of the country. There are two major problems in exports. One, the exim line of credit is just not enough. They need to have a green line of credit separately for wind. Also, the logistics cost need to be addressed

The Government is coming up with green corridors to expedite evacuation and transmission infrastructure. What are your views? The green corridor plans are on. But the point is that the green corridor is going to be in position not before 2018 or 2019. So there is a delay even from their side. If you take the state corridors, for example in Tamil Nadu, they have been planning a 4X400 KV substation for past three years, out of which only one has been commissioned. Now because of that, the entire grid is congested and they are not able to give any further permission to put up turbines.

whereas under Section 68 of the Indian Telegraphic Act there is a prescribed compensation that needs to be paid when you put lines on private or agrarian land. If this is available to us then our costs can come down.

The solar sector has seen tariffs plummeting in last few years. How do you compare this situation with the wind sector? Let us understand one thing. Solar is against India’s interest if you see what is happening in the country today. It is being imported, which means there is a cash outflow from India to other countries like China or Taiwan. I think import cost by value is beyond 78% of the entire solar project which is installed in the country. So in solar 78% of a project’s cost is being imported,

What is your take on GST? If GST comes in and we are put in a higher slab, we will break the chain and cost could go up from anything between 14 to 20%. So we have requested the Government to either give us zero rating or concessional rating so that the impact on cost can be minimised.

February 2017 www.InfralinePlus.com

as against wind, which has 75% localisation under Make in India. Two, why are we not buying solar panels from countries like USA? There are over capacity in countries like China and Taiwan and I donâ&#x20AC;&#x2122;t think I should mention the quality of Chinese equipment. Also, the actual ground reality is that PLF is not more than 16% in solar, while in case of wind, the average is around 21-22%, in areas of good wind, we are having a PLF of 30-35%. You have to look long term. What is the standardization for solar in comparison with wind? There are stringent standards for wind, else wind turbines cannot be put up. But is there any standard of any kind for solar? Not at all. Another problem of solar is that you require expensive water to clean the panels. India is a tropical country full of dust and heat. So when you have dust on the panel, the PLF is going to come down. Infact there are reports that in next six to seven years, the panels may have to be written off. In wind, we are giving assurance of generation without deration for next 20 years, whereas solar even at international standard, there is a deration of 0.5% year on year. If you are comparing solar with wind, it is like comparing chalk and cheese. What you require in renewable energy is long

term sustainable energy source with bankable policies which are friendly when private sector is investing. However, if solar of good quality can be achieved and there is a meaningful price, I think there is a great opportunity for wind and solar to work together as wind-solar hybrid. In this scenario, what is the viable tariff for wind developers? If you take a tariff of Rs 5 per unit, that would be the ideal tariff for people to bring in large investments. And once scale of economy goes up, letâ&#x20AC;&#x2122;s say instead of 3,000 MW we are able to do 10,000 MW per annum, if capital costs

Another problem of solar is that you require expensive water to clean the panels. India is a tropical country full of dust and heat. So when you have dust on the panel, the PLF is going to come down. Infact there are reports that in next six to seven years, the panels may have to be written off

can come down, transmission lines can be loaded better, then I see every reason why kilowatt hour cost can come down. How do you analyse possibilities for India in wind offshore segment? It is too premature as we do not yet know the potential of the country. The pilot projects are currently being undertaken at two locations in Tamil, Nadu and Gujarat to study wind speed and potential. However, considering the number of agencies required for taking permission, which is more than 25, the cost of offshore would be three time that of onshore. I really wonder if it will be viable at this point. We need to learn from countries like UK who have been successful in this area. However, there are a few things which go against offshore wind in India. One, our sea bed is very soft. Which means cost of foundation goes up. Then, is there steady wind like North Sea will be known only when the study is done. How has demonetization of currency impacted projects in wind sector? In rural India where we deal with petty contractors, water suppliers, contractors, petty labour and unskilled labour, their wages have to be paid in cash. We expect this year atleast 800 to 1,000 MW of wind projects missing commissioning by March due to demonetization. It will not impact generation, as it will start only in May or June, but if GBI is withdrawn from March 2017, these projects which are in pipeline and not able to catch the March deadline, would lose benefit of GBI, which is Rs 1 crore per MW. So we are talking of about a loss of Rs 800 to Rs 1000 crore to the developer. So we have approached the Government asking if the GBI is to be closed, the window should be kept open for atleast two more months. For suggestions email at feedback@infraline.com

February 2017 www.InfralinePlus.com

InDepth

India’s renewable energy sector on the cusp of giant leap in 2017

►►In 2017, solar tariffs are expected to fall below the critical INR 4.00/unit mark ►►An urgent need to adopt path breaking measures in the Grid operation to achieve target

By Team InfralinePlus

In the last couple of years, domestic/ foreign investors in various fields have grabbed the opportunity to mainstream into clean energy business and convert those opportunities into reality, simultaneously. It is expected that by 2020, annual solar power capacity additions and investments could surpass those in coal power projects. This is on the back of strong commissioning (4.5 GW), under construction projects (more than 5 GW), and new projects (more than 15 GW). Private sector interest is decisively

moving towards solar from coal power, already visible from numerous opportunities of fund-raising, and Mergers & Acquisitions (M&A) activity. Indian government has envisioned a ‘green economy’ going forward, with electricity generated from renewable energy (RE) sources dominating the fuel mix in their total energy mix. 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. [In its commitments to the United Nations Framework on Climate Change (UNFCCC), with an aim to generate about 40% cumulative electric power installed capacity from non-fossil fuel based energy resources by 2030 has contributed to the recent surge in solar capacity] A bigger shot in the arm for the government has been the upward

February 2017 www.InfralinePlus.com

trading in renewable energy certificate (RECs) sales, which saw a notable rise in the month of January – 245 percent. According to the Renewable Energy Certificate Registry of India, the sale volume at the two power exchanges (PXs) in January was 15,68,192. While 12,87,814 RECs were sold through India Energy Exchange (IEX) and 2,80,378 RECs were sold through Power Exchange India (PXIL).

Solar sector update India added around 4.9 GW of solar capacity, an increase of 101 percent over 2015 and crossed the 10 GW cumulative installed capacity mark. Around 14 GW of utility scale projects are in the pipeline by various central/ state agencies and independent power producers (IPPs), out of which 7.7 GW is expected to be commissioned in the year, a growth of around 90 percent over 2016. Around 40 GW capacity of solar capacity (from 100 GW by 2022) is envisioned through rooftop projects and this segment also crossed 1 GW capacity addition mark in September, 2016 which was a 135 percent jump as compared to 2015. Just five states — Andhra Pradesh, Gujarat, Rajasthan, Telangana, and Tamil Nadu — host more than 67% of the total solar power capacity operation in India. Southern states of Tamil Nadu, Telangana and Andhra Pradesh have been leading in terms of fresh capacity added this financial year (up to January 2017), as per the data available with Ministry of New and Renewable Energy (MNRE). The government has placed a strong focus on pushing hard in 2017, with the intention of more than doubling last year’s numbers. In order to achieve the target, the major programmes on implementation of Solar Park, Solar Defence Scheme, Solar scheme for Central Public Sector Undertakings, Solar photovoltaic (SPV) power plants on canal bank and canal tops, solar pump, solar rooftop among others have been launched in recent years.

In 2017, solar tariffs are expected to fall below the critical INR 4.00/ unit mark making solar power the cheapest new source of power. The fall in prices of solar equipment (modules, cells) is expected to drive down the tariffs further to the current level of INR 4.34/unit which will infuse more competition amongst industry players. After falling 30% last year, the price of ordinary multi-crystalline silicon modules is expected to fall another 20% in

India added around 4.9 GW of solar capacity, an increase of 101 percent over 2015 and crossed the 10 GW cumulative installed capacity mark. Around 14 GW of utility scale projects are in the pipeline by various central/ state agencies and independent power producers (IPPs), out of which 7.7 GW is expected to be commissioned in the year 2017, as per Bloomberg New Energy Finance (BNEF). Since 2009, solar prices are down 62%, with every part of the supply chain trimming costs. At the same time, improving financial health of state electricity distribution companies (DSICOMs) due to implementation of the UDAY scheme will also help in sustaining renewable energy demand. As per industry estimates, total installed capacity is expected to reach 18 GW by the end of 2017 which will likely keep the country on track for record capacity addition by 2022.

Wind sector update While the recent surge in solar capacity addition indicates the effort put by the Ministry of New and Renewable Energy (MNRE) in working towards achieving 100 GW solar target by 2022 (overall 175 RE capacity target by 2022) and are laudable, however, in order to achieve the overall targets, the problems affecting the wind power independent power producers (IPPs) need to be highlighted so that effective solutions are found. Due to inadequate forecasting, lack of inter-state transmission, grid availability and lower solar tariffs due to competitive bidding, the generation and capacity addition in wind is being affected negatively. This is being further compounded due to reduction in the tax incentives in the form of Accelerated Depreciation (AD) to 40%, announced in the Union Budget of 2016 and the proposed phase out of Generation based Incentives (GBI) post March 2017. India has had a phenomenal increase in wind capacity addition over the past decade due to the support of the government through favorable policy incentives and this need to be continued in some form, if India is to achieve its target of having clean, reliable and affordable energy for all. Lately, several steps have been taken by the government to ensure that this vigorous move to wind capacity addition. Some of these include the enactment of the National Off Shore Wind Energy Policy paving the way for offshore wind energy development. The Ministry of New and Renewable Energy (MNRE) wants all wind turbines of less than 1MW capacity and built before the year 2000 phased out and replaced by new ones. It has circulated a wind repowering policy saying that its financing arm, the Indian Renewable Energy Development Agency (IREDA) will provide an additional interest rebate of 0.25% on loans taken for such repowering, apart from the rebate already available for new wind projects. Hence, it is believed that new policies

February 2017 www.InfralinePlus.com

InDepth

will be a great boost to the state of Tamil Nadu considering its leadership position in wind installed capacity. The country has already crossed 26,700 MW of wind power installation till January 2017. Although the wind energy industry’s prospects in India are bright, there are certain challenges ahead. Notable among these are the lack of enforcement of the renewable purchase obligations (RPOs), the weak financial health of power distribution companies (DISCOMs), and inadequate grid infrastructure to accept new wind generation. The RPO mandates discoms to purchase a fixed percentage of total electricity supply from renewable resources. However, many discoms are failing to meet the required RPO, and they have not been penalized either. The lack of enforcement is undermining the intent of the RPOs and could impact investments in the wind power market. The poor compliance is reflected in the sharp increase in unsold Renewable Energy Certificates (RECs). The REC is a mechanism available for States with lower renewable energy potential to meet their RPOs through purchase of these certificates on the power exchange. Other causes for concern facing project development are the lack of sufficient transmission infrastructure to evacuate power, land availability, and delays in land acquisition and obtaining permits. Overcoming these challenges is vital to realizing the country’s full wind energy potential in the years ahead.

Revised Tariff Policy: Provisions related to solar RPO Under the amended provisions of the National Tariff Policy, it is stated that “Long term growth trajectory of Renewable Purchase Obligations (RPOs) will be prescribed by the Ministry of Power in consultation with MNRE” and “within the percentage so made applicable, to start with, the SERCs shall also reserve a minimum percent-

State-wise Solar RPO requirement (as on 2021-22) State Andhra Pradesh Arunachal Pradesh Assam Bihar Chhattisgarh Delhi Goa Gujarat Haryana Himachal Pradesh Jammu & Kashmir Jharkhand Karnataka Kerala Madhya Pradesh Maharashtra Manipur Mizoram Meghalaya Nagaland Odisha Punjab Rajasthan Sikkim Tamil Nadu Telangana Tripura Uttarakhand Uttar Pradesh West Bengal Chandigarh Daman & Diu Dadar & Nagar Haveli Puducherry Total

Solar RPO Required (2021-22) (%) 8% 8% 8% 8% 8% 8% 8% 8% 8% 8% 8% 8% 8% 8% 8% 8% 8% 8% 8% 8% 8% 8% 8% 8% 8% 8% 8% 8% 8% 8% 8% 8% 8% 8%

Solar RPO Required (2021-22) (MW) 5357 42 801 2969 2171 1870 369 9403 4030 521 1319 500 5961 1429 5636 12611 118 76 182 60 2200 3917 6556 5 8903 4457 123 561 13248 4603 50 189 502 229 100,000

Source: Ministry of New and Renewable Energy (MNRE)

Many discoms are failing to meet the required RPO, and they have not been penalized either. The lack of enforcement is undermining the intent of the RPOs and could impact investments in the wind power market. The poor compliance is reflected in the sharp increase in unsold Renewable Energy Certificates age for purchase of solar energy from the date of notification of this policy which shall be such that it reaches 8% of total consumption of energy, excluding Hydro Power, by March 2022 or as notified by the Central Government from time to time.”

Solar RPO targets (state-wise) have been calculated so as to reach 17 percent of total energy mix by the year 2022 and also meet 100 GW target fixed by the Government of India. This has been calculated after deducting the hydro power consumption. The calculation

February 2017 www.InfralinePlus.com

is based on certain assumptions on capacity utilization factor (CUF) including rooftop solar and growth in the total energy consumption. This may further change depending on the actual growth in the total consumption of energy in the respective States.

Challenges The availability of solar and wind energy is largely determined by the weather conditions, and therefore characterised by strong variability. As a result, power generation from these sources cannot easily be matched to the electricity demand, like power generated from conventional plants such as coal-fired units and gas stations. Integration of large amount of fluctuating RE in the grid is a serious technical challenge for grid managers to ensure smooth operations of the Indian grid - the fifth largest in the world. The level of RE penetration (in terms of energy generated) in India is presently around 5 to 6 percent. While the capability of generators to forecast generation and to provide timely

schedules are key requirements, it is equally important that other institutions involved, whether central level or state level are adequately prepared. Apart from wind/solar generators, the implementing institutions such as SLDC, RLDC, NLDC and RPC need to be geared up with adequate infrastructure and trained manpower. Implementation of full-fledged Scheduling mechanism and Settlement system within the States has been long pending and it will bring in synergy and optimization. Government of India has embarked on an ambitious mission to integrate 100 GW of solar power and 60 GW of wind power by 2022. For this to become a reality there is an urgent need to adopt path breaking measures in the Grid operation. Extending real time SCADA data from the Renewable Generators would provide Situational awareness to the System Operators about the ramp events. Establishment of Renewable Energy Management Centres (REMC) would facilitate trading of RE sources (market participation) across the states.

An implementation of all these and effective policy/regulatory framework both at the central as well as the state level in 2017 will enable India to be touted as a leader in the renewable energy space.

Conclusion There is increasing realization that RE can be a major contributor in India’s future energy mix. Given the volatility in international oil prices, and India’s growing dependence on imports, RE has an important role in India’s aspirations for energy security. Further, as RE can be deployed close to load centers and for decentralized power generation, it can help achieve the targets of 100% electricity access and 24x7 electricity supply. A significant push and preference for renewable energy in 2017 will see a tremendous growth of the sector and will confirm India’s role as one of the world’s leading RE marketplaces alongside the likes of United States and China. For suggestions email at feedback@infraline.com

February 2017 www.InfralinePlus.com

StatisticsRenewableEnergy 1) Cumulative Renewable Energy capacity addition achievement as on 31.12.2016 Program/ Scheme wise Physical Progress in 2016-17 (& during the month of December, 2016) Cumulative Achievements

FY- 2016-17 Sector

Achievement (April - December, 2016)

Target

(as on 31.12.2016)

I. GRID-INTERACTIVE POWER (CAPACITIES IN MW) Wind Power

4000

1922.99

28700.44

Solar Power

12000

2149.81

9012.66

Small Hydro Power

250

59.92

4333.85

BioPower (Biomass & Gasification and Bagasse Cogeneration)

400

101

7856.94

Waste to Power Total

7.5

114.08

16660

4341.22

50017.97

II. OFF-GRID/ CAPTIVE POWER (CAPACITIES IN MWEQ) Waste to Energy

4.47

163.35

Biomass(non-bagasse) Cogeneration

651.91

Biomass Gasifiers

18.34 168.54

-Rural

-Industrial

4.3

Aero-Genrators/Hybrid systems

0.38

2.97

100

98.5

405.54

1 MW + 500 Water Mills

0.10 MW + 100 Water Mills

18.81

187

107.75

1429.46

SPV Systems Water mills/micro hydel Total

III. OTHER RENEWABLE ENERGY SYSTEMS Family Biogas Plants (in Lakhs)

0.3

49.4

2. REC report January 2017 Indian Energy Exchange Month/Year January’ 2017

Type

Buy Bids (REC)

Sell Bids (REC)

Cleared Volume (REC)

Cleared Price(Rs/REC)

No. Of Participants

Solar

39,572

3,251,453

39,572

3,500

529

Non-Solar

1,248,242

9,199,168

1,248,242

1,500

870

PXIL Month/Year January’2017

REC Type

Buy Bid (No. of certificates)

Sell Bid (No. of certificates)

MCP (Rs. / Certificate)

MCV (No. of certificate) Qty (MWH)

Non-Solar

272051

4803397

1500

272051

Solar

8327

1172706

3500

8327

February 2017 www.InfralinePlus.com

3. Grid Connected Solar Power Capacity as on 31/12/2016 Sr. No.

State/UT

Total cumulative capacity till 31-03-16 (MW)

Capacity commissioned in 2016-17 till 31-12-16(MW)

Total cumulative capacity till 31-12-16 (MW)

Tamil Nadu

1061.82

529.15

1590.97

Rajasthan

1269.93

47.71

1317.64

Gujarat

1119.17

39.33

1158.5

Andhra Pradesh

572.97

406.68

979.65

Telangana

527.84

445.57

973.41

Madhya Pradesh

776.37

63.98

840.35

Punjab

405.06

140.37

545.43

Maharashtra

385.76

44.7

430.46

Karnataka

145.46

182.07

327.53

Uttar Pradesh

143.5

95.76

239.26

Chhattisgarh

93.58

41.61

135.19

Bihar

5.1

90.81

95.91

Odisha

66.92

10.72

77.64

Haryana

15.39

37.88

53.27

Uttarakhand

41.15

3.95

45.1

Delhi

14.28

24.5

38.78

West Bengal

7.77

15.3

23.07

Jharkhand

16.19

1.32

17.51

Chandigarh

6.81

9.39

16.2

Kerala

13.05

2.81

15.86

Assam

11.18

Andaman & Nicobar

5.1

0.3

5.4

Tripura

0.02

5.02

Daman & Diu

J&K

Lakshadweep

0.75

Dadar & Nagar Haveli

0.6

Nagaland

0.5

Himachal Pradesh

0.2

0.13

0.33

Arunachal Pradesh

0.27

Mizoram

0.1

Goa

0.05

Puducherry

0.03

Manipur

0.01

Meghalaya

0.01

Other/MoR/PSU

58.31

3.39

61.7

6762.85

2246.41

9012.68

TOTAL

February 2017 www.InfralinePlus.com

OffBeat

Intelligent Transport System: A game changer ITS market expected to reach $42.67 billion by 2022, growing at a CAGR of 12.21% To remove congestion from railway we need dedicated freight corridor or high speed trains

by Team InfralinePlus

Continuing with its exclusive series of conferences on the Roads and Transport sector, Whizabstracts organized its Annual Conference on â&#x20AC;&#x153;Intelligent Transport Systemâ&#x20AC;? in Transportation Sector on January 18, 2017, in New Delhi. The underlying objective of organizing this conference was to bring numerous stakeholders in transportation sector landscape together to brainstorm on many complex issues adversely impacting the sector and for jointly evolving workable solutions for consideration by policy makers. The conference was well received and we bring to you the key messages and

recommendations/ action points which emerged from this one day conference. Dr. Sudhir Krishna, Former Secretary, Ministry of Urban Development, delivered the inaugural address. The distinguished gathering included top industry experts, ministry officials, top research institutes, investors and representatives of industrial associations who had serious interactive deliberations on various aspects relating to the experience with the implementation of ITS in transportation sector and road safety concerns. Intelligent Transportation System (ITS) market is expected to reach $42.67 billion by 2022, growing

at a CAGR of 12.21%. It is estimated that 75 million lives will be lost and 750 million people injured in road crashes in the first half of the 21st century. ITS system helps us to improve quality of life and expectancy rate. Other prominent speakers included A.K Srivastava, AGM, Central Railways , Dr Adnan Rahman, Director General, International Road Federation, Serbjeet Kohli ,Director, Steer Davies Gleave India, Sudershan K Popli , Additional General Manager, RITES Ltd, Madhumita Ghosh, Practice Leader, Big Data, Advanced Analytics & Strategy, IBM, Sachin Bhatia, CEO,

February 2017 www.InfralinePlus.com

Metro Infrasys, Dr. Rajesh Krishnan, CEO, ITS Planners and Engineers Pvt. Ltd., Mohit Kochar, Head Global Marketing, KPIT Technologies Limited, Amit Bhardwaj, Senior Research Officer (Transport), NITI Aayog, Govt. of India, Dr Vijay Kovvali, Regional Manager, IBI group, Vishal Gupta, CEO, Ajeevi Technologies, Clay Strange, Director, Rocky Mountain Institute (USA), James Newcomb, Managing Director, Rocky Mountain Institute (USA). The Conference provided an overview of the technology implementation in transportation, safety recommendations, sector status and key challenges, risks profiles and their mitigation strategies, technological advancement, policy and regulatory reforms needed and the need for devising comprehensive framework for future of ITS.

The keynote ▪▪ Transportation sector is crucial for the growth of the economy and without proper and developed mode the advancement of transportation and urban infrastructure is not possible. Transportation is directly related to the development of nation as it helps in movement of passengers and goods, employment generation, GDP Contribution and ultimately to the economic prosperity

and social wellbeing of the nation. ▪▪ To strength urban transport and implement Intelligent Transport System, India needs large investment but there is a huge gap between demand and supply. Presently, the total investment gap is projected at Rs 39.2 lack crore. ▪▪ India is facing regional connectivity issues as we are only focused on intra city connectivity. Apart from connectivity issues safety, population, pollution and land acquisition problems are some major concern. ▪▪ We can learn from China to develop sustainable infrastructure. Chinese economy is estimated to increase by 6 percent by 2050. ▪▪ Have more focus on non fossil energy source of transportation as 32.8 million e-bikes were sold in 2016 in the Asia-Pacific region according to Navigant Consulting. Also, according to the report by BNEF, Electric vehicle would account for 35 percent of new cars worldwide.

Issues ▪▪ Cities in India occupy only 5 percent of total area but generate more than 60 percent GDP ▪▪ Lack of planned infrastructure to yield optimum potential of cities ▪▪ Fuel losses lead to GDP loss so

▪▪

use of more fossil fuel will lead to decline in GDP growth Weak financial condition of city municipalities is also responsible in ITS implementation. Also development control regulations are not very strong in India. India is among the top road fatality countries in the world and the reason is poor intermodal integration. Cities are very much dependent on surrounding areas and the integrated governance frame work is also weak. According to data, 17 deaths were caused every hour in 2015 due to road accidents. Road accident is the 8th leading cause of death, safety is a major concern. 10 % of the total car population falls in four metro cities. Hence, these cities should be accorded high priority. One more obstacle to make our ITS better is data availability. Most of the data which we get is synthetic and non reliable. Role of smart transportation in smart city is really crucial. People are ready to adopt changes but contribution from human part is also very important, such as awareness of traffic rules. Bus stop location at downstream leads to delay along with high fuel consumption and emission Every day 8.5 million commuters travel through Mumbai suburban which is growing with each passing day.

Major challenges ▪▪ World’s largest traffic jam was recorded in China in 2010. It was a 61 miles long jam and took 10 days to unsnarl. So more road cannot assure smooth traffic, it invites more vehicles. Hence, new roads are not the solution and can create new challenges for traffic management. ▪▪ Major challenge for smart cities in India is competition from municipal

February 2017 www.InfralinePlus.com

OffBeat

▪▪

leaders and their partners to promote economic opportunities, improve governance and procedure better results for residents. Indian railway is the biggest part of transportation. It has 67,112 km of track but capacity expansion as per rising passenger aspiration is a big challenge. India needs huge investments to promote ITS as lack of investment within interchange zones is a challenge Identification of black spots to reduce road fatalities as most of the accidents occur on that areas 70 percent of accidents happen in good condition roads and cause is behind over speeding

Key recommendations

▪▪ NITI Aayog (formerly Planning Commission) has vision plan which includes: o Universal connectivity under PMGSY by 2019 o To achieve top 10 ranking in logistics performance index by 2032 (right now on 36) o To establish automated integrated check post o Increase of electric vehicle travel by 30% by 2030 ▪▪ We need to focus on more electric buses to reduce pollution and traffic congestion as people are willing to pay for good service and transport system ▪▪ As investment requirement is very high, the returns are also several times more. Also efficient freight markets and IT enabled logistics alone can cut empty driving by 50%, avoiding 100 megatons of CO2 emissions annually. ▪▪ China is using non fossil energy sources (55 percent non emitting) which is 100 percent technically feasible, cost-effective and socially acceptable. India can follow the concept. ▪▪ Norway and France are EV (Electric

▪▪

Vehicles) leaders, with EVs capturing over ¼ of new car market in 2016. In India road ministry is focusing on electric vehicle concept and in near future we can expect pollution free convenient transportation mode. The experience and limitations faced by commuters using toll roads also came up for discussion. It emerged that adoption of Electronic Toll Collection techniques and latest software to forecast and monitor traffic on the roads would bring in many operational efficiencies. Globally, 80 percent of Toll collection takes place electronically and 20 percent manually but in India it is the other way around. After demonetisation government is more focused on cashless transaction and promoting RFID tag for toll payments , “Highway Saathi” is one example of smart application which is developed by Metro Infrasys to monitors toll services, incident report and useful to recharge tag while commuting. It is time to involve an educational institute in any project under ITS for smart cities that will definitely help to understand the ITS in Indian scenario. Government should take initiative for new projects and technologies as smart city is combination of smart governance, smart living, smart mobility and smart environment all together for smart citizen 3E’S (Education, Engineering and Enforcement) would be helpful. There is a need to educate people about traffic rules, make mobility smoother to reduce accidents and enforcement of law and policies. Use of cloud technology to share data in real-time between different mode of technologies through internet Better and quality engineering can’t fix lack of education or enforcement, but it can help to achieve “Vision

▪▪

Zero” accident along with smooth mobility and long term sustainability 88 percent of women in India feel unsafe in public buses. ITS is the only solution to provide CCTV cameras in buses and traffic routes. A well connected transport planning leads to well managed traffic and happy citizens. Also smart integrated ecosystem for smart mobility is the need of hour. To remove congestion from railway we need dedicated freight corridor or high speed trains to reduce timing and improve frequency, but has high cost solution. So only solution left is use of technology which will help to increase capacity and to reduce cost. With the help of technology, charting could be done automatically in trains. Also it will help to forecast rush hours and vacant seats. Another side use of ICMS (Integrated coach management system) is to manage coaches efficiently. Useful application can provide critical response to suburban issues. One of the success story shared by “Steer Davies Gleave” was from Pune bus ITS system. It includes GPS and real time monitoring of buses, real time tracking through mobile app and vehicle health monitoring. Speed traffic enforcement by CCTV, digital overage speed management system, use of RFID tags to measure delay in traffic, real time weather forecast and route diversion suggestion on congested roads on the go for commuters are some of the technologies under ITS which can improve safety, save time and secure happy journey. ITS has multipurpose uses like whatever is setup for monitoring the traffic can also be used in monitoring crime , accident cases and so on that will give more economic return besides social return.

For suggestions email at feedback@infraline.com

February 2017 www.InfralinePlus.com

Reports & Studies India’s gas targets would need $ 10 billion investments: CRISIL Report

The government’s plan to more than double the share of natural gas in India’s energy mix to 15 per cent would necessitate investments of at least Rs 65,000 crore just to augment gas import and pipeline infrastructure, a report said. Crisil Research said if the share of gas in India’s energy mix has to rise to 10 per cent by 2020, it would mean a doubling of gas

consumption to over 100 billion cubic meter (BCM) from current levels. But given that domestic gas production is limited, demand for imported LNG would surge three-fold to 65 BCM, or over 50 million tonnes. Collaterally, to import this LNG, India’s regasification capacity will have to increase to 60 million tonnes compared with 25 million tonnes now. Crisil Research said its analysis shows that would entail investments of Rs 30,00035,000 crore. And for all that gas to be consumed, 9,000 km of pipelines would have to be laid in east and south India, which would cost another Rs 25,000- 30,000 crore. The move to promote gas usage is in line with the commitment made at the Paris meeting on climate change to reduce the carbon intensity of India’s GDP by a third from 0.37 kg per capita of GDP in 2005, Crisil Research said.

Delays in payments by discoms in key states pose a challenge for wind energy sector: ICRA In ICRA’s view, continuing delays in the payments by the state-owned distribution utilities (discoms) in key states such as Maharashtra and Rajasthan pose a challenge for the wind energy sector, although some improvement has been seen lately. On the positive side, however, ICRA believes that the MNRE scheme for procurement of 1 GW through the auction route would facilitate the offtake for wind energy players. Sabyasachi Majumdar, Senior Vice President, ICRA Ratings said, “While there has been some improvement in the payment pattern by utilities in Rajasthan with the implementation of UDAY (Ujwal Discom Assurance Yojana)

as well as by the utility in Maharashtra in the last three month period, a build-up in receivable position is seen, which varies from 8 to 12 months as on November 2016 and thus remains quite significant.

World Bank study pegs India’s energy efficiency market at Rs. 1.6 lakh crores

Union Minister for State (IC) for Power, Coal, New & Renewable Energy and Mines, Piyush Goyal in a written reply in Lok Sabha said that a World Bank study has pegged India’s energy efficiency market at Rs. 1.6 lakh crores. The study titled, Utility Scale DSM Opportunities and Business Models in India, notes that the renewed Demand Side Management (DSM) market potential is estimated to be 178 billion kWh of energy savings per annum. This figure roughly translates into 18-20 percent of the current levels of all India annual electricity consumption and 150 million tonnes of annual CO2 emissions reduction potential. Further, the study has placed 5 states, namely, Andhra Pradesh, Rajasthan, Karnataka, Maharashtra, and Kerala, in terms of their overall energy efficiency implementation readiness. The Ministry of Power has fixed energy savings targets for XII Plan period (2012-17) as 60.5 BU (billion units) through various energy efficiency interventions.

Demonetisation is a positive event for power sector: Mercom Capital Demonetisation has turned out to be a positive event for the power sector with distribution companies recovering pending power bills from their customers, Mercom Capital Group said. The consulting firm also said that the power sector could also benefit from relaxed lending and lower rates, among other things. “Demonetisation has been chaotic and changing the way the Indian economy functions...banks suddenly flush with funds, all of which could relax lending to the power sector and potentially bring down interest rates,” it said. The government has mandated

that the old notes of Rs 500 and Rs 1,000 denominations can be used to pay pending utility bills which will help discoms due to their huge backlog of unpaid bills.

Discoms are expecting a substantial influx of payments prior to the December 31 deadline after which these currency notes will become invalid. For cash-strapped discoms this is unexpected good news, it said. “India is largely a cash economy so in the short-term demonetisation is going to hurt installations as small developers will find it tough to pay for land acquisition, but in the long-term it will be beneficial as dicoms will get paid, lending rates will fall and foreign investment will increase in the face of a falling rupee and rising dollar,” Mercom said.

February 2017 www.InfralinePlus.com

People in News Vikram Solar appoints Nimish Jain head of global module sales

Vikram Solar, a solar energy solutions provider, announced appointment of Nimish Jain as its new head of global module sales. In the new role, he would be responsible for driving sales in both domestic and international markets. He

would also supervise the accomplishments of targets and profit and losses of the year, along with recruiting and managing the sales team. Talking about Jain’s expertise and expressing his optimism for the days to come, Ivan Saha, president and chief technology officer at Vikram Solar said, “As we enter the next phase of growth, his appointment is anticipated to bring in a fresh perspective to our sales operations and our overall growth strategy. He is a result driven professional with proven success in P&L, Business Management, sales, marketing, strategic planning and International Business. We hope this association is a lasting one and is conducive not only for the growth of the company, but also helps him grow personally.”

Punjab govt gives two-year extension to power corporation CMD KD Chaudhari

The Punjab government has given two-year extension to KD Chaudhari, the chairmancum-managing director of Punjab State Power Corporation (PSPCL). Chaudhari’s term was to end on February 8, 2017, the day he turns 65, which now has been extended till February 8, 2019. A notification to put a formal stamp on the decision will be issued soon. Confirming the decision, Chaudhari said the government wanted him to continue and he will abide by the decision. Chaudhari joined the post on June 3, 2010. Though his stay at the post depends on which party forms the next government, if he completes the term, his will be the second longest tenure as CMD after NS Vasant, who was head of the erstwhile Punjab State Electricity Board (PSEB) for over 10 years. Chaudhari is the first CMD of PSPCL.

Counting the achievements during his tenure, Chaudhari said, state became power surplus, transmission and distribution losses came down to 15%, power meters of 90% consumers were shifted out of the premises and distribution system was refurbished to match outflow of power. This is Chaudhari’s fourth extension since he joined as the CMD in 2010.

Suzlon Energy appoints Sanjay Baweja as Chief Financial Officer

Suzlon Energy has appointed Sanjay Baweja as its Chief Financial Officer with effect from December 19, 2016. “Kirti Vagadia (Group CFO) will continue in his position and will focus on strategy, shareholder and board related matters at the Group level,” the company said. Sanjay Baweja is not related to any of the Directors of the Company. Baweja was previously CFO of Flipkart and prior to that the CFO of Tata Communications, Emaar MGF and North Circles for Bharti Televentures respectively. Suzlon Chairman Tulsi Tanti said, “We are delighted to be bringing someone with Sanjay’s credentials and experience as the CFO. Sanjay’s previous role as CFO with organisations across sectors like E-Commerce, Infrastructure and Telecom gives him a rich experience.”

DV Singh takes over as CMD of THDC India Limited Dhirendra Veer Singh has assumed charge as Chairman & Managing Director (CMD) of THDC India Ltd. (THDCIL), one of India’s premier hydropower generators with an installed capacity of 1450 Mega Watts. Prior to taking over as CMD, Singh was holding the charge of Director (Technical) in the company; Singh’s tenure as CMD shall be up to 30 April 2021. THDCIL is a ‘Mini Ratna - Category-I’, Schedule ‘A’ and ISO certified public sector undertaking, and currently has a portfolio of 18 projects totaling to an installed capacity of 6,374 MW in various stages of development. Singh takes over the company at a critical

juncture as it seeks to consolidate its position in the hydropower industry as well as strike out into the wider renewable energy space. “After a professionally fulfilling journey of

more than two decades with THDCIL, it is an honor to take up this new responsibility,” said D. V. Singh. “As CMD my objective would be to ensure that THDCIL continues to work as a responsible hydropower developer, and that we can take the same focus on sustainability to all our new endeavours.” Singh is a civil engineering graduate from NIT Rourkela (1983), and has more than three decades of exhaustive experience in underground works, powerhouse works, spillways, contracts, material management, rehabilitation and heavy civil construction. Before joining THDCIL, Mr Singh worked with Larsen & Toubro.

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