InfralinePlus January 2017 Edition by infralineenergynoida

January 2017 Volume 5 | Issue 9 | `100 www.InfralinePlus.com

The Complete Energy Sector Magazine for Policy and Decision Makers

2017 : Energy sector set for a bull run

CEAâ&#x20AC;&#x2122;s draft national electricity plan spells trouble for thermal power industry

Prakash Chandraker MD & Vice President, Schneider Electric Infrastructure Limited

Darshan Hiranandani MD & CEO H-Energy Private Limited

Union Budget 2017-18: Sops crucial to energise power and coal sector

Richard Slater

V P Mahendru

Director, Research, Development & Learning, IPE Global Group

Chairman & Managing Director, EON Electric Ltd

Intelligent Transport System “A gAme ChAngeR”

Its topics Which are Unexplored in the Indian market

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InfralinePlus

January 2017 | Volume 5 | Issue 09

The Complete Energy Sector Magazine for Policy and Decision Makers

Editor’s Letter

Editorial

2016 was an eventful year in more ways than one. India laid the foundation of a carbon-free economy by ratifying the Paris Agreement on climate change. This was followed by action on ground with the country taking rapid strides in renewable energy capacity addition. Infact, for the first time, renewables overtook hydro power in terms of total installed capacity which is a reflection of the shifting focus of the policy makers towards non-conventional energy sources. There was more. The country overshot its power generation capacity targets during April-November period, with a generation capacity of 5463 MW, as against a target of 3,655 MW. What was heartening to see was that the private sector contributed a major share to the commissioned projects during the year, thanks to the fuel supply issues addressed by the Government through coal allocation and auction of coal and RLNG for power plants. This led to talks of India achieving a ‘power surplus’ for the first time which, however, is more to do with reduced demand for power rather than the country actually being self sufficient in electricity. The discom financial restructuring package, UDAY, also made steady progress with as many as 15 states already being a part of the bandwagon, which augurs well for the power sector. The energy sector also benefitted immensely from falling prices of coal, oil and gas, which worked in favour of oil refining companies, also reducing coal imports in the process. However, what came as a rude shock was the CEA’s estimation in its draft National Electricity Plan (NEP) that the country does not need new coal plants from 2022 till 2027. This, surely, has dealt a body blow to the thermal power sector and all investments made in this industry over the years are staring at an uncertain future. Going into 2017, there is still a lot to look forward to, especially the Union Budget 2017-18. The Budget is definitely unique even historic in many ways. Not only will it be presented on a much earlier date of 1st February as opposed to the usually date of 1st March, for the first time, the Railway Budget will not be a separate event and will be incorporated into the General Budget. A lot is expected from this budget. Just when the Indian economy was growing at a rapid pace registering GDP growth of around 7.6%, the brakes came on due to the sudden announcement on demonetization. The decision, though commendable, has caused significant liquidity crunch in the economy. As of now, demonetisation is expected to have lasting impact on a number of segments. In this regard, the upcoming Budget provides an opportunity to put in place levers to strengthen the demand situation in the economy. This is important to impart momentum to the capex cycle and put GDP back on high growth track. The rollout of GST from April 2017 is another keenly anticipated development. Power is the critical infrastructure on which the socio-economic development of any country depends. Hence, a clear and stable tax regime is bare minimum requirement of the investors engaged in development of power plants. The same will be expected from finance minister, Arun Jaitley when he presents the budget on 1st February and steer the economy back on growth path.

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InfralinePlus

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

Cover Story

35 Energy market set for a bull run in 2017

After touching new lows in January, world energy prices have partially recovered lost ground and now look set for a bull run in 2017. While hardening prices would help energy-exporting countries to balance their budgets, which have been under stress since June 2014 crash in the global energy market, big energy-importing countries like India could face serious macroeconomic challenges.

35 Power News Briefs Expert Speak: Prakash Chandraker, Managing Director & Vice President, Schneider Electric Infrastructure Limited

6 p6

p10

In Depth: Power sector in 2016: Achievements and outlook p12 In Depth: Government upbeat on growth in transmission for 24x7 power supplies

p17

Statistics

p20

Coal

News Briefs p22 In Depth: Union Budget 2017-18: Sops crucial to energise power and coal sector p25 In Depth: CEAâ&#x20AC;&#x2122;s draft national electricity plan spells trouble for thermal power industry p28 Statistics

Topics Covered

Power transmission

Clean technology

Power generation

Technical challenges in thermal

Electrical equipment

Commercial coal mining

p33

January 2017 www.InfralinePlus.com

Oil and Gas

Renewable

News Briefs p44

News Briefs p55

In Conversation: Darshan Hiranandani, MD & CEO, H-Energy Private Limited p47

Expert Speak: Richard Slater, Director, Research, Development & Learning, IPE Global Group p60

In Depth: Strategic Petroleum Reserves: Insights and recommendations p49

Expert Speak: V P Mahendru, Chairman & Managing Director, EON Electric Ltd p63

Statistics p53

In Depth: India needs effective financing mechanisms to achieve 175 GW target by 2022 p65 Statistics p68

Topics Covered

LNG terminal

Manufacturing

Pipeline development

Banking and finance

Petroleum reserves

Smart city

Expert Speak/Interview

Prakash Chandraker

Darshan Hiranandani

MD & Vice President, Schneider Electric Infrastructure Limited

MD & CEO H-Energy Private Limited

Off Beat

Liquidity crunch impacts cement industry

Richard Slater

V P Mahendru

Director, Research, Development & Learning, IPE Global Group

Chairman & Managing Director EON Electric Ltd

Reports & Studies

People in News

January 2017 www.InfralinePlus.com

NewsBriefs | Power Panel examines direct benefit transfer of subsidy for power consumers

After cooking gas, consumers may now get direct subsidy on electricity. An expert panel comprising senior officials from states and industry is studying the matter and will present its report to the power ministry in January. The expert committee, set up by

the ministry to suggest ways to increase electricity demand and consumption, is examining subsidising the target consumers in a manner similar to what has been done in the case of LPG cylinders for plugging leakages and bringing down the subsidy burden. The Niti Aayog and industry experts have been advocating the scheme to lower subsidy, prevent its misuse and strengthening power distribution utilities. The committee comprises principal energy secretaries of states like Madhya Pradesh, Gujarat, Uttar Pradesh and energy secretaries of Tamil Nadu and Bihar, besides top officials of the Central Electricity Regulatory Commission and the Central Electricity Authority.

Parliamentary panel junks claims on power sector achievements

Punching holes in the Centre’s claims that it has overachieved the capacity addition target in the power sector for the 12th Plan period by adding around 88,928.2MW as against the target of 88,537MW till October 31, 2016, a high level Parliamentary panel has noted that the overall target is being achieved due to ‘overachievement’ of targets assigned to the private sector for the entire Plan period. In its report, the Parliamentary Standing Committee on Energy has noted that the share of capacity addition assigned to the state-owned entities was a meagre 26,182MW, out of which it was to able to achieve only 14,692MW, a poor 56 per cent till March 31, 2016.The panel has made its observations on the basis to the capacity addi-

tion figures provided to it by the power ministry for the period till March 31, 2016. The ministry in its year ending review for 2016 has claimed that during the 12th Plan period, the capacity addition of about 88,928.2MW was achieved against the actual target of 88,537MW from conventional sources, till October 31, 2016.

National India’s per capita electricity consumption touches 1010 kWh

In an indication of growing appetite for electricity in India, the country’s per capita electricity consumption has reached 1010 kilowatt-hour (kWh) in 2014-15, compared with 957 kWh in 2013-14 and 914.41 kWh in 2012-13, according to the Central Electricity Authority (CEA), India’s apex power sector planning body. But experts are far from enthused from the increasing consumption figure. Per capita electricity consumption crossing 1,000 units a year is certainly a milestone, but without much significance. One-fourth of the households in the country still have no access to electricity, with some states in East and North East having less than even 30% households with (electricity) access. Most significant milestone that the nation must achieve is 100% households having 24×7 quality supply of electricity. India’s per capita power consumption is among the lowest in the world. Around 280 million people in the country do not have access to electricity. In comparison, China has a per capita consumption of 4,000kWh, with developed nations averaging around 15,000kWh per capita.

In a first, Power Trading Corporation ties up with Indore’s SEZ With industrial consumers bearing the brunt of high power costs in the form of cross-subsidy imposed by the staterun power discoms even in the special economic zones (SEZs), Power Trading Corporation (PTC) India has joined hands with a multi-product SEZ in Indore for distribution of 80 MW power in a first-ofits-kind arrangement. The company has availed the ‘deemed licensee’ status of the SEZ, which allows it to replace state with any other agency as the designated discom. The discoms in nearly all states charge the industrial consumers over twice as much per unit of electricity as the domestic ones to finance subsidies

to the agriculture sector and the less privileged domestic consumers. This, however, reduces the competitive ability of the manufacturing unit with tariff as high as R10/unit in some of the industrialised states. Assuming R8/unit as the power cost for such an industry, even a reduction of R1/unit in the energy bill could bring down the input cost by over 10%. PTC India, which has a base of nearly 500 bulk consumers, will execute the distribution business through its subsidiary PTC Retail. Going ahead, the company could also look at roping in the defence establishment.

January 2017 www.InfralinePlus.com

NewsBriefs | Power Tilaiya UMPP: Panel seeks fresh comments from Ministry of Power, others

The inter-ministerial panel formed to look into the issues pertaining to Tilaiya UMPP — relinquished by Reliance Power — has failed to make any headway in the matter relating to the bank guarantee and has sought fresh comments from the power ministry and PFC. The Coal Ministry had earlier issued a show-cause notice to Reliance Power, seeking

reasons for delays in developing coal mines allocated for Tilaiya UMPP. The panel was of the view that the comments received from the Ministry of Power and the Jharkhand government did not reveal anything specific so as to facilitate decision making on the issue of release/deduction of bank guarantee (BG). The power ministry had clarified that with regard to development of coal blocks earmarked for UMPPs, it was no way involved and the actual responsibility for the mines development was of the procurers of this project. The ministry further informed the panel that the procurers had accepted the termination of power purchase agreement (PPA), however, refused to accept the delay in development of coal block on their part.

India to give Nepal additional 240 MW electricity India has agreed to export to Nepal additional 240 megawatts of electricity -- 80 MW immediately from January and 160 MW from February -- in a bid to lessen the power woes of the Himalayan nation. An agreement was signed to this effect in New Delhi recently between Nepal Electricity Authority (NEA) and NTPC Vidyut Vyapar Nigam (NVVN), a wholly-owned subsidiary of India’s state-owned power major NTPC. The NEA is Nepal’s state-owned electricity company. The import will be made through Dhalkebar-Mujjafpur Cross Border Transmission line which was inaugurated in February 2016. The fresh agreement on power purchase from India would to some

extent address the problem of blackouts in the country, the NEA said. Nepal is reeling under a huge power crisis. The country suffered power cuts up to 15 hours everyday until last year -- mostly in winter season.

National Need for better management of grants-in-aid for power sector

Comptroller & Auditor General of India (C&AG) has highlighted that grants-inaid given by the Central Government to its Power Sector has increased to Rs. 12388 crore during the last two financial years amounting to 27 Office of Ministry of Power`s (MoP)`s total revenue expenditure. The grants have flowed primarily under Deen Dayal Urja Jyoti Yojana (DDUJY) for electrifying village households, on augmenting the Integrated Power Distribution System (IPDS) for strengthening the distribution network, as well as to the Power Safety Development Fund (PSDF) for disbursements towards promoting efficiency and safety in grid operations. Major portion (97 %) of the grant-in-aid funds of MoP were intended for creation of assets. C&AG have however pointed out that there were lacunae in fund management by the recipient agencies.

Government asks Power Grid Corp to consider selling stakes in projects Power Grid Corporation of India Ltd., a state-run electricity transmission company, should sell stakes in its projects to unlock capital for future expansion, according to the power ministry. The company should cut its balance sheet size to half by selling stakes in projects, power minister Piyush Goyal said recently. It should consider an infrastructure investment trust, or InvIT model to monetize assets, he said. Selling stakes in projects will help the company free-up capital and raise more debt for future projects at competitive rates, Power Secretary Pradeep Kumar Pujari said. “We want to avoid a situation where raising debt in the future becomes difficult,” Pujari said. An asset-sale

plan has been on the government’s agenda. Finance Minister Arun Jaitley asked staterun companies to sell assets to unlock value and make investments in new projects in his budget speech in February. Goyal’s advise that Power Grid should reduce its balance

sheet size by half is an endorsement of that plan. Power Grid, which owns and operates more than 85 percent of India’s inter-state power transmission capacity, plans to invest 1 trillion rupees ($6.8 billion) in the next four years to build new projects, it said in November. It had fixed assets worth 1.58 trillion rupees as of Sept. 30, including plant machinery, transmission projects, telecom equipment, buildings and land. The company’s debt-equity ratio was 71:29 as of Sept. 30, compared with a 70:30 ratio recommended by power regulator Central Electricity Regulatory Commission, which determines transmission charges based on capital and operating costs.

January 2017 www.InfralinePlus.com

NewsBriefs | Power Tamil Nadu sees strong demand for power in November

Power demand in Tamil Nadu had grown by over 30 per cent in November 2016 from the corresponding period last year, according to data compiled by the Central Electricity Authority (CEA). The data revealed that Tamil Nadu’s power requirement was 8,183 million units (MUs) in November 2016 as against the 8,180 MUs available. In November 2016,

Tamil Nadu had a “peak demand” of 13,888 MW, which the State managed to meet. In the comparable period in 2015, the State’s power requirement was 6,273 million units and availability was 6,270 million units. In November 2015, “peak demand” was 12,154 MW, which was met, according to the CEA data. According to Elara Capital, a lower base has helped the southern States register strong growth in November 2016. “Demand in Andhra Pradesh and Karnataka was up 28 per cent each in November 2016 (vis-a-vis a contraction of 4 per cent and 2 per cent respectively in November 2015). Likewise, Tamil Nadu’s demand was up 30 per cent (as against a contraction of 6 per cent in the base year),” it added.

No power tariff revision in Delhi for first time in 5 years

For the first time since 2011, power tariffs won’t be revised in Delhi. The tussle between AAP government and LG’s office over the appointment of Krishna Saini as Delhi Electricity Regulatory Commission chief has meant that tariffs will remain unchanged. It is learnt that discoms might file an appeal with the appellate tribunal, stating that the failure to revise the tariff was a violation of its guidelines and Delhi consumers could face stiff increases in the future to correct this anomaly. Tata Power Delhi recently filed a petition, seeking power purchase adjustment charges equivalent to a 2-3% hike in fuel bills for July-September 2016. BYPL

and BRPL are yet to send their petitions. DERC is mandated to give discoms PPAC, according to the orders of the Appellate Tribunal of Electricity. However, it’s unclear how long it will take to process the petition.

States Rajasthan and Punjab miss UDAY scheme targets; Bihar improves

Discoms of Rajasthan and Punjab have missed their loss-reduction targets under Ujwal Discom Assurance Yojana (UDAY) by wide margins, recent data reveals. On the other hand, Haryana and Bihar have managed to reduce their discoms’ cost-revenue gap or losses more than committed by them under the tripartite UDAY MoU. Also, all five states — with the most debt-burdened discoms — were running behind schedule as on September 30, 2016, in curbing the aggregate technical and commercial (AT&T) losses or pilferage and theft of electricity (see table). A glance at the performance of the five key states that signed on for UDAY reveals a mixed picture. A total of 18 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 last year and the states have committed to reduce their AT&C losses to 15% and eliminate the cost-revenue gap by the end of FY19.

Haryana discom reports Rs 201 crore profit in first half of 2016 One of the two state-owned power distribution companies in Haryana, Dakshin Haryana Bijli Vitaran Nigam Ltd, has become the first power utility to turn around under rescue scheme Ujjwal Discom Assurance Yojna (UDAY), rolled out in November 2015, raising hopes that fortunes of the entire electricity value chain including of coal mining and power generation will benefit from better electricity demand in coming days. An analysis of the financial health of the utility said the company has reported “remarkable achievement of turnaround” from a loss of Rs479 crore in 2015-16 to a profit of Rs201.35 crore in the first

half of 2016-17. Turnaround of distressed state power distribution firms is crucial

for the health of other segments of the electricity value chain which depends on power offtake. Better power demand from distribution firms will help generation companies, especially thermal power plants, to step up their capacity utilisation which is currently at about 60%. Coal demand, too has been sluggish in the past as loss making distribution firms were not able to cater to the actual energy demand. The power ministry analysis said that the Haryana utility still has to improve upon its performance in meeting the target of lowering losses on account of billing inefficiency and power theft.

January 2017 www.InfralinePlus.com

NewsBriefs | Power PM Nawaz inaugurates 340MW Chashma-III nuclear power plant

Prime Minister Nawaz Sharif recently inaugurated the power production from 340 MegaWatt Chashma-III nuclear power plant ‘C-III’ near Mianwali, in Khyber Pakhtunkhwa province. Radio Pakistan has reported Sharif and other dignitaries offered prayers for the

successful operation of the nuclear power project which is a joint collaboration between the Pakistan Atomic Energy Commission (PAEC) and China National Nuclear Corporation. It was executed by the Pakistan Atomic Energy Commission under the guidelines of the International Atomic Energy Agency. The ChashmaIII nuclear power plant was preceded by the Chashma-I and Chashma-II power projects. Another unit of the same capacity, Chashma-IV, is expected to be completed in 2017. Additionally, the Karachi nuclear power projects K-II and K-III will add a total of 8,800MW electricity to the national grid by 2030 as a mid-term target for the PAEC.

Toshiba flags hit of ‘billions of dollars’ on U.S. nuclear acquisition Toshiba Corp said it may have to book several billion dollars in charges related to a U.S. nuclear power plant construction company acquisition, sending its stock tumbling 12 percent and rekindling concerns about its accounting acumen. The Japanese group said cost overruns at U.S. power projects handled by the CB&I Stone & Webster Inc business it acquired last December from Chicago Bridge & Iron Company NV (CB&I) would be much greater than initially expected, potentially requiring a huge writedown. Toshiba’s announcement came as its Westinghouse Electric Company subsidiary is engaged in a legal and accounting row with CB&I, which has argued in court that it expected a

International Nebras acquires 35.5% stake in Indonesian power firm

Nebras Power has completed the acquisition of a 35.5 percent stake in Indonesian utility firm PT Paiton Energy through its wholly owned subsidiary Nebras Power Netherland BV. The acquisition was completed on December 22. PT Paiton Energy owns a 2,045 megawatt (MW) thermal power plant in East Java, which is the first and largest Independent Power Producer (IPP) in Indonesia, representing 4 percent of the county’s total installed generation capacity. Paiton Energy sells the entire capacity and output of its power plant under two long term power purchase agreements with PT Perusahaan Listrik Negara (Persero)’s (PLN), the Indonesian state-owned vertically integrated electricity utility.

relatively small payment from Westinghouse of only $161 million when the deal closed on the understanding that the latter was taking on a challenged business.

The remaining 64.5 percent equity stake in PT Paiton Energy is held by wellknown international and local utilities and power development companies.

IFC provides $165 million financing package to help meet Bangladesh energy needs International Finance Corporation (IFC), a member of the World Bank Group, will provide $165 million in debt financing to Sembcorp Utilities, a wholly-owned subsidiary of the Singapore-based Sembcorp Industries, to significantly expand power generation capacity in Bangladesh. The financing will be provided through a combination of a $103-million loan from IFC’s own account and an additional $62 million mobilized through partners. The financing will help Sembcorp set up a greenfield 414 MW dual-fuel combinedcycle power plant at Sirajganj in Bangladesh. The total project cost is estimated at around $412 million. In addition to IFC’s financing,

the U.K. government’s development-finance institution, CDC Group, and the Singaporebased infrastructure project-financing firm, Clifford Capital, will each contribute $103 million in debt. A portion of Clifford Capital’s tranche will benefit from risk cover from MIGA, a member of the World

Bank Group. MIGA will also provide a risk guarantee to Sembcorp to cover its equity investment of $103 million in the project. Tang Kin Fei, Group President and CEO of Sembcorp Industries said, “The project reflects Sembcorp’s strong capabilities as a developer, owner, and operator of energy and water assets. With IFC, Clifford Capital, and CDC, we have strengthened our commitment towards supporting Bangladesh’s vision for continued growth and development. Sembcorp’s Sirajganj power plant will allow us to provide costeffective and reliable energy solutions to the country over a period of 22.5 years upon its completion.”

January 2017 www.InfralinePlus.com

ExpertSpeak

IoT technology can help utilities in boosting T&D efficiency With India having one of the lowest per capita electricity consumption, losses during transmission and distribution of power is criminal. The country needs to save each and every bit of power for it to achieve the goal of 24x7 power supply. In this regard, Prakash Chandraker, Managing Director & Vice President, Schneider Electric Infrastructure Limited, feels that Internet of Things (IoT) can be a game changer for the country in stemming its high T&D losses.

Even as India battles demand and supply mismatches in power, transmission and distribution (T&D) losses continue to be the highest globally. While some estimates put T&D losses at around 20%, others peg this as high as 27%. Either figure is too high, particularly when the Centre has ambitious power production targets and plans to ensure power for all by 2019. Most losses are either due to inadequate infrastructure and technical inefficiency that triggers higher losses or result from theft. The latter occurs when power is pilfered directly from power lines or by bribing officials during meter readings, while others tamper meters to minimize billing.

Lessons from the EU Whatever the cause, it is possible to curb such power losses via Smart Grids and the use of IoT (Internet of Things) technology. That such solutions are workable can be gauged from the European Union, where yearly T&D losses only average 6%, yet represent an annual wastage of 7 billion Euros. EU power distributors are therefore mandated by new regulations to enhance efficiency across networks, while integrating alternate energy generation and electric vehicles into their grids. If IoT technology and Smart Grids can offer solutions to address 6% T&D

losses in the EU, the impact can well be imagined if these are deployed to combat India’s 20%-plus T&D losses. Indeed, with smart technology, it’s possible to plan, measure and boost T&D efficiency. This can be Prakash Chandraker, Managing Director & Vice President, Schneider Electric Infrastructure Limited done by installing Utilities equipment and cannot rely Distribution Management System software that upon outdated optimizes network configuration, monitors and communicates technology in the relieves overburdened network segments and helps minimize across the disSmart Grid era losses and load unbalance in high tribution path. It and medium voltage substation is then important transformers and feeders. Besides, this to use the right helps power utilities reach an optimal strategies via the IoT and voltage profile and enhance voltage associated smart technologies to achieve quality. the goal of minimal power losses. In issue two, distributed energy Consider active strategies to control resources – distributed generators energy losses. Active energy efficiency (renewable or backup), controllable denotes reduction in energy conloads used for demand response and sumption via measurement, monienergy storage (electrical or thermal) – toring and controlled usage. Dynamic can produce rising and falling voltage network reconfiguration and voltage simultaneously in different parts of the optimization are prime examples. grid. Additionally, mandatory moniBy deploying these strategies, power toring of this voltage in older substautilities can solve some of their tions can be costly and complex. problems. Examples of three issues and In strategy two, power utilities their relevant strategies will help better can tweak the voltage control understand how this can be done. infrastructure. To procure accurate, In issue one, technical losses in MV real-time voltage data, cost effective, (medium voltage) networks account self-powered, communicating IoT for around 3% of distributed energy, voltage sensors at the MV/LV denoting a major loss. In strategy one, substation level or along lines can by the use of algorithms, an Advanced

January 2017 www.InfralinePlus.com

be installed by the utilities. ‘Virtual’ sensors can also be used to estimate MV output based on easily accessible data. Also, power utilities can install actuators with smart transformers along MV lines to hike or lower the voltage. Issue three relates to estimates that indicate 90% of non-technical losses take place in LV (low voltage) networks. Assessing improvements would mean identifying and monitoring the losses. Given the high number of points, however, this is expensive. In strategy three, the utilities can use Smart meters, which could work as additional sensors in tracking network energy performance data. Comparing the pattern of measured energy on an LV feeder to the patterns of energies delivered by smart meters pinpoints the exact location of losses as well as helps in faster detection

The following best practices could be deployed in creating a migration plan that can help power utilities build a more efficient network: 1. Within three months, identify the areas where waste occurs. 2. Within a year, install sensors and applications that could accurately estimate efficiency losses. 3. Within two years, undertake a pilot project to demonstrate feasibility, quantify the gains and estimate deployment costs. 4. Within a decade, plan as well as undertake a staged rollout of the full range of Smart Grid technologies. and location of the LV network outages for improved reliability.

Smart Grid Roadmap Nonetheless, using IoT and connected technology strategies won’t be easy without understanding how to do so, step by step. Essentially, there are four

Given the high number of points, however, this is expensive. In strategy three, the utilities can use Smart meters, which could work as additional sensors in tracking network energy performance data. Comparing the pattern of measured energy on an LV feeder to the patterns of energies delivered by smart meters pinpoints the exact location of losses as well as helps in faster detection and location of the LV network outages for improved reliability

major steps to distribution network efficiency. The first point to remember is that utilities cannot rely upon outdated technology in the Smart Grid era. With the IoT and allied technologies already a global reality, utilities can upgrade their present infrastructure to overcome numerous modern distribution network challenges. It is important that power utilities in India undertake the above measures to drive higher operational efficiencies. While these steps may inflate short-term capital costs, the long-term advantages – such as lower operating expenses, reduced energy wastage as well as a more integrated and flexible network – are well worth the early investments. The views in the article of the author are personal For suggestions email at feedback@infraline.com

January 2017 www.InfralinePlus.com

InDepth

Year End Review 2016: Positive Outlook for Power Sector

►► Capacity addition continues to exceed target, Private Sector takes lead ►► Government Schemes & Policies provide much needed momentum By Kalyan Verma & Shubhendra Singh Analysts - Power & Coal, Infraline Energy

The regulatory and policy initiatives of the Government have begun to show results and the country continues to exceed capacity addition targets in FY 2016-17. Encouraged by private sector participation, India has achieved a total installed generation capacity of 308834.28 MW as on November 30, 2016. Coal based capacity continues to dominate the country’s energy mix with 60.81% of the total installed capacity followed by Renewable Energy Sources whose share has

grown from 10.63% in March’2011 to 14.87% in November’2016. Infact, the Renewables segment has, for the first time, surpassed the hydro power segment in terms of total installed capacity and this goes on to show the shifting focus of the policymakers to non-conventional energy sources.

Capacity addition continues to exceed target, Private Sector takes the lead During the 12th Plan period (2012-17), a capacity addition of about 90463.22 MW

against the target of 88537 MW has been achieved from conventional sources as on 30th November, 2016 and about 21,128 MW against the target of 30000 MW from renewable sources have been achieved till 30th September, 2016. In FY 2016-17, a generation capacity of 5463.5 MW has been added in the period Apr’16-Nov’16 against a target of 3655 MW in the corresponding period. The Private Sector, having received a boost with Government initiatives to reduce power supply uncertainities, in the form of transparent

January 2017 www.InfralinePlus.com

process for allocation/auction of coal & RLNG E-auctions for stranded gas based power plants, contributed with the majority of the Projects Commissioned amounting to 3768 MW (68.97%) in FY 2016-17 (Upto Nov’16).

Government Schemes & Policies provided much needed momentum Amendments in National Tariff Policy: Union Government approved the amendments in the Tariff Policy in January, 2016 aimed at promoting the 4 Es – Electricity for All, Efficiency, Environment and Ease of doing business to attract investments and ensure financial viability. The amendments in the National Tariff Policy will help in harnessing the potential of hydro power generation, increasing the share of renewables and provide incentive to the developers in utilizing their unrequisitioned power capacity. Village Electrification: Prime Minister Shri Narendra Modi’s ambitious

programme to achieve 100% village electrification by 1st May 2018 has witnessed rapid progress in the current year with only 7018 villages remaining to be electrified (As on 27th December,2016). During the year 2016-17, a total of 3976 villages have been electrified so far and these figures only reinforce the fact that Government is serious in its efforts to bring electricity to the last village in the country. UDAY (Ujwal Discom Assurance Yojana): In November 2015, Government of India approved a reform package Ujwal Discom Assurance Yojana (UDAY) with the primary aim

of financial and operational turnaround of Power Distribution Companies. The scheme was introduced after the total accumulated debt of the Discoms touched INR 4.5 Lakh Crore by September, 2015. So far 17 States (Jharkhand, Chhattisgarh, Rajasthan, Uttar Pradesh, Gujarat, Bihar, Punjab, Jammu & Kashmir, Haryana, Uttarakhand, Goa, Karnataka, Andhra Pradesh, Manipur, Madhya Pradesh, Maharashtra, Himachal Pradesh) and one UT of Puducherry have signed the MOU for the UDAY Scheme to improve their operational and financial performance. The recently launched portal www. uday.gov.in depicts the improvements

The Private Sector, having received a boost with Government initiatives to reduce power supply uncertainties, in the form of transparent process for allocation/ auction of coal & RLNG E-auctions for stranded gas based power plants, contributed with the majority of the Projects Commissioned amounting to 3768 MW (68.97%) in FY 2016-17

Impact of the Amendments in National Tariff Policy Benefit consumers by providing 24X7 power for all and also through reduction in cost of power through efficiency measures

Spur renewable power growth towards a greener environment and protect India’s energy security

Aid the objectives of Swachh Bharat Mission as well as Namami Gange Mission through conversion of waste to energy

Improve ease of doing business to ensure financial viability of the sector and attract investments

Promote transparency, consistency and predictability in regulatory approaches across jurisdictions

Facilitate competition, efficiency in operations , improvement in quality of supply of electricity & enhance Energy Security

January 2017 www.InfralinePlus.com

InDepth Various Schemes & Policies launched in 2016 with the aim of providing 24*7 Power for All

24*7 Power for All Initiative

Ujwal Discom Assurance Yojana (UDAY) to revive the distribution sector

Amendments in National Tariff Policy to increase focus on renewable energy, short term power market & affordable power for all

in the performance of the Discoms post UDAY. The performance of States is uneven with DHBVN Discom in Haryana registering profit for the first time ever since its inception in 1999. DHBVN Discom has reported a remarkable turnaround from a loss of INR 479 Crore in 2015-16 to a profit of INR 201.35 Crore in the first half of 2016-17. Most of the other States have shown improvements in their losses but have missed their loss reduction targets. UDAY bonds worth INR 183084.29 Crore have been issued so far by the various State Governments and the Discoms. While Rajasthan Discoms have issued bonds to the tune of INR 12368 Crore, Uttar Pradesh Discoms have issued 10714 Crore of UDAY bonds. 24*7 Power for All Initiative: Under the Government’s vision of providing “24*7 Power for All”, an assessment of the energy demand of the respective States is made along with the adequacy of the power availability from various generating stations, inter-state transmission system, intra-state transmission system and the distribution system to provide “24*7 Power for All”. 34 out of 36 States/UTs have already signed

The recently launched portal www.uday.gov.in depicts the improvements in the performance of the Discoms post UDAY. The performance of States is uneven with DHBVN Discom in Haryana registering profit for the first time ever since its inception in 1999. DHBVN Discom has reported a remarkable turnaround from a loss of INR 479 Crore in 2015-16 to a profit of INR 201.35 Crore in the first half of 2016-17 the “24*7 Power for All” document and only two States Tamil Nadu and Uttar Pradesh are yet to give their concurrence in this regard. Energy Efficiency Schemes: A number of energy efficiency schemes have

been launched by the Government like Standards & Labelling Programme of the Bureau of Energy Efficiency, Perform Achieve and Trade (PAT) Scheme, Energy Conservation Building Codes (ECBC), Unnat Jyoti by Affordable LEDs for All (UJALA) & Street Lighting National Programme (SLNP) and scheme for promotion of Energy Efficient Fans and Agriculture pump sets. So far around 19.05 Crore LEDs have been distributed under the UJALA Scheme as on 2nd Jan 2017. Draft National Electricity Plan: The draft National Electricity Plan released by CEA has projected the capacity addition forecasts upto 2027. In this draft policy document, it is stated that no new coal based power plants are needed to be set up in the country atleast upto 2027. 50 GW of coal based projects are Under-Construction which are likely to yield benefits in 2017-22 and would meet the country’s demand upto 2027 with 100 GW of targeted capacity addition from Solar and Wind. However, the draft report is silent on the future of the proposed coal based power plants in the country. Modest Tariff Hike by SERCs in FY 2016-17: The average tariff hike, based on the orders of the State Electricity Regulatory Commissions (SERCs) has been moderate for FY 2016-17. While the states of Delhi, Bihar, Punjab, Haryana, Odisha & Uttar Pradesh have witnessed no tariff hikes in the current fiscal while Chhattisgarh has implemented the maximum tariff hike so far (Hike of 12% for domestic consumers and (12 – 16)% for High Tension consumers). While Gujarat Electricity Regulatory Commission (GERC) has reduced power tariffs by 10 paise per unit for all residential consumers and 14 paise of HT consumers, the tariff for consumers of all categories in Haryana has been reduced by 37 paise per unit. Andhra Pradesh and

January 2017 www.InfralinePlus.com

Arunachal Pradesh have not effected tariff hike for domestic consumers and Maharashtra Electricity Regulatory Commission (MERC) has allowed MahaVitaran a moderate hike of 1% to 1.3% for residential consumers. Karnataka and Rajasthan have increased their tariffs by an average of 9% and 9.6% across various consumer categories. Compensatory Tariff Granted: Central Electricity Regulatory Authority (CERC) has ruled in favour of Tata Power & Adani Power in case of Compensatory Tariff dispute for granting compensation due to increase in imported fuel costs to their UMPP Projects won through Competitive Bidding. The case was being fought by Tata Power and Adani Power with state utilities of Gujarat, Rajasthan, Maharashtra, Punjab and Haryana. Tata Power and Adani Power are suffering huge losses due to change in imported coal prices and regulations in the Indonesian coal market and they requested compensation under â&#x20AC;&#x153;Change in Lawâ&#x20AC;? clause of the signed PPAs. Foreign Direct Investment: 100% FDI has been allowed under the automatic route for Power Generation Projects (Except Atomic Energy Projects), Transmission, Distribution and Trading, as per the notification issued by Department of Industrial Policy & Promotion (DIPP) in June,2016. FDI upto 49% has been allowed in Power Exchanges, registered under the Central Electricity Regulatory Commission (Power Market) Regulations, 2010, under the automatic route, subject to certain conditions, as laid down in the policy. During the Year 2015-16 (April-2015 to March-2016), Power Sector attracted FDI of INR 5662 Crore while the Sector has attracted FDI of INR 3744 Crore so far during the period April-2016 to September-2016.

January 2017 www.InfralinePlus.com

InDepth Launch of Online Portals/Mobile Applications: Grameen Vidyutikaran (GARV) app to help people track the progress of Village Electrification under Deen Dayal Upadhyaya Gram Jyoti Yojana (DDUGJY)

GARV – II App which hosts the data of about 6 lakh villages and that has been mapped for tracking the progress on household electrification in each of these villages Vidyut Pravah App to provide real time information on electricity availability and its price Unnat Jyoti by Affordable LEDs for All (UJALA) app to keep track of LED distribution status under DELP Scheme

E-Tarang app for real time monitoring the status of Transmission Lines and Substations in the country E-Trans app for better discovery of price in respect of Inter-State Transmission Systems awarded under Tariff Based Competitive Bidding (TBCB) Route DEEP (Discovery of Efficient Electricity Price) e-Bidding portal is a common platform for power procurement through E-Bidding with facility for e-reverse auction process Mobile app for Star Labelled Appliances is a mobile app launched by BEE for Standards and Labeling Programme (S&L) for consumers with provisions to receive real-time feedback from consumers and other stakeholders

URJA (Urban Jyoti Abhiyaan) Mobile App provides information on urban power distribution sector related to consumer complaints, AT&C losses, power outages, release of new service connection and number of consumers making e-payments

Reduced Peak Power Deficit: The various initiatives of the Government to improve the power supply position in the country have already started showing results in the form of an all time low power deficit of 0.7% and peak power deficit of 1.6% in FY 2016-17 (As on Nov’16). However, more needs to be done in the form of Demand Side Management initiatives and efficiency improvement measures by the Discoms to reduce the AT&C Losses, to better manage the issues of energy deficit. Launch of Online Portals/Mobile Applications: To improve the transparency and accountability in the functioning of the various Government Departments, a number of Online Portals and Mobile Applications were launched during this year.

Positive outlook for Power Sector The series of initiatives taken by the Government have helped revive the

much needed investors confidence in the sector resulting in increased FDI Flows and domestic investments. The entire sector has received the much needed momentum, leading to record commissioning of projects more than the target set for the last fiscal and the current fiscal. Increased Coal Production by CIL along with Government’s measures of providing coal to the stranded projects in the form of E-auctions have brought transparency in the system and there has been a significant improvement in the critical coal stock level of the power plants compared to the year before with only 2 power plants with critical coal stock (coal stock less than 7 days) as on 26th December, 2016. The RLNG E-Auction Scheme and initiatives to import cheap RLNG from Australia are all positive developments on the generation front. India will not need any new power plant for the next three years as the focus now shifts in improving the efficiencies on

Distribution side and resolving issues of transmission congestion. The recent initiatives of the Government to sign nuclear agreements with a number of countries which include Sri Lanka, Australia, France, UK & Japan, resolution of the deadlock in the Indo-US civil nuclear agreement and agreement by Canada to supply 3,000 metric tonnes of uranium under a $ 254 million five-year deal to power Indian atomic reactors is an indicator of the future outlook of the Indian power sector which would bank heavily on nuclear energy to meet the infrastructural needs of a fast, developing economy. However, coal based power plants would continue to lead in meeting the country’s base load energy requirements in the next decade along with substantial increase in the share of Renewable Energy Sources.

For suggestions email at feedback@infraline.com

January 2017 www.InfralinePlus.com

InDepth Government upbeat on growth in transmission for 24x7 power supplies

►► 28,114 ckm of transmission lines commissioned during 2016, growth of 27.21% over previous fiscal ►► CERC’s committee wants transmission planning to be aligned to meet customer aspirations By Team InfralinePlus

A robust transmission infrastructure in the era of smart technologies is the backbone for the operation of a competitive electricity market. The integration of the planned Renewable Energy (RE) generation capacity with the national grid requires expansion and modernization of the intra- and interstate distribution as well as transmission grid. Development of the transmission system must match with the generating capacity on one side and growing demand on the other with flexibility for generators to switch from one drawing entity (DISCOM or Con-

sumer) to another and vice versa for the drawing entity to switch from one generator to another. With open access in transmission, the role of transmission has changed from an infrastructure provider to an enabler in the operation of a competitive power market. While there has been a marked increase in the growth of the central sector transmission system and transformation capacity during the previous (11th) and the current (12th) five-year plans, transmission congestion in some parts of the grid as evident in the last few years, underlines the need for

emphasis on the development of adequate transmission system, especially at the intra-state level and its coordinated planning and development with the inter-state transmission system. A committee formed by Central Electricity Regulatory Commission (CERC) has recently come out with a report (September 2016 report) to Review Transmission Planning, Connectivity, Long Term Access, Medium Term Open Access and other related issues. The Committee has advised that the transmission planning be aligned to meet customer aspirations as opposed to

January 2017 www.InfralinePlus.com

InDepth

the existing system where transmission is associated with long-term power purchase agreements (PPAs). As per the report, “transmission planning can be done on the basis of projected load of the states and anticipated generation scenario based on economic principles of merit order operation.” “System studies be carried out for various generation and load scenarios during peak and off-peak hours, considering renewable capacity addition and scheduling of various generating stations that don’t have any PPAs”, as per the report. Further, the committee has emphasised the need for the creation of a central repository of generators in the Central Electricity Authority of India (CEA), where any generation project developer proposing to set up a new generation plant must register itself. The committee feels that this will not only provide vital data for the transmission planning process but will alleviate problems due to uncoordinated generation additions. Consequent to various steps taken by the Government of expediting forest clearances and intensive monitoring of critical transmission lines, 28,114 circuit kilometers (ckm) of transmission lines have been commissioned during the period April-March 2016 against 22,101 ckm commissioned during the same period previous year, thus having a growth of 27.21%. This is 118.56% of the annual target of 23,712 ckm fixed for 2015-16. Of total, 14238 ckm of transmission lines have been commissioned by Central sector and 2402 ckm by State sector, while 2402 ckm by JV/Private sector.

Future projects Ministry of Power (MoP) has expedited work on the long-term ‘20-year Perspective Plan (2016-2036)’ for power transmission. Concepts such as General Network Access (GNA) have been discussed and talked about comprehensively in the MoP’s document. State governments of Tamil Nadu, Karna-

Growth in Transmission Line Network (in cKm) 2015-16, 28,114 2013-14, 16,748

2011-12, 20434 2012-13, 17107 2010-11, 15,161

2010-11

2011-12

2012-13

2013-14

2014-15, 22,101

2014-15

2015-16

[CATEGORY NAME], [VALUE]

2016-17 (PROJECTED)

in circuit kilometers (in cKm) Source: Ministry of Power (MoP)

Transmission projects worth more than INR 50,000 Crore are expected to go under the hammer during the current fiscal (2016-17). Last fiscal year (in 2015-16), transmission projects worth over INR 1 Lakh Crore were bid out of which the Central Transmission Utility, Power Grid won projects worth INR 56,000 Crore and the rest were won by the private sector entities taka, Rajasthan, Madhya Pradesh and Haryana would offer power transmission projects through the bidding route, which forms the part of their ‘24x7 Power for All’ plans. Transmission projects worth more than INR 50,000 Crore are expected to go under the hammer during the current fiscal (2016-17). Last fiscal year (in 2015-16), transmission projects worth over INR 1 Lakh Crore were bid out of which the Central Transmission Utility, PowerGrid won projects worth INR 56,000 Crore

and the rest were won by the private sector entities.

Grid expansion for the sake of renewables India is running the world’s largest renewable energy expansion programme with a target to increase overall renewable capacity by more than 5 times from 38 GW in 2016 to 175 GW in 2022.Integration of large amount of fluctuating RE in the grid is a serious technical challenge for grid managers to ensure smooth operations

Likely scenario of transmission projects expected to bid (under tariff-based competitive bidding route) Upcoming projects at RfQ stage (from August end)

INR 2,900 Crore

Tariff-based competitive bidding (TBCB) at RfP stage

INR 6,735 Crore

Upcoming projects under TBCB

INR 14,697 Crore

Recently approved projects (PowerGrid, private sector)

INR 3,044 Crore

Source: Ministry of Power (MoP), news articles

January 2017 www.InfralinePlus.com

of the Indian grid – the fifth largest in the world. General Network Access (GNA) could be a framework for providing stability in the uncertain situation prevalent today since generation has been delicensed in the Electricity Act 2003 giving rise to an unwanted situation due to the inability of any central agency in planning transmission capacity addition resulting in stranded generation and transmission assets. GNA will put the onus on generators and DISCOMs to apply for GNA and pay a periodic fee for the same. Since the grid will be a plug and play grid it will be able to absorb the infirm with the firm power, demand and supply curves effortlessly. This will happen due to the advantages of the varying demand patterns across the region due to weather and other reasons whereby surplus power cannot only be absorbed within the country but also be exported to the Central, South and South Eastern region. As per the CERC Committee report, “GNA based development of transmission system, on the other hand, is not linked to PPAs. Development of transmission system under GNA would be based on (a) anticipated generation and demand scenario (b) Withdrawal GNA representing the quantum of power each STU/Bulk Consumer anticipates to draw from the ISTS (c) Injection GNA and (d) the long term PPAs already in place.” “This would address the problems being faced presently on account of generators not seeking LTA or seeking LTA for a quantum much less than Installed Capacity and would also get requisite participation of and contribution from the Withdrawal DICs, who are in best position to project their drawal requirements, as part of the transmission planning process.” As per the committee, “GNA based transmission planning, probability of inadequacy of ISTS is expected to

reduce substantially in next 4 to 5 years after the transmission system commensurate with GNA based planning is in place. Needless to mention that proper assessment of Withdrawal GNA would go a long way in setting up ISTS of requisite capacity.” The current CERC regulations require generators to identify the target region and a long-term consumer with duly executed power purchase agreement before using the grid through long term access: • The generator needs to identify the target region where it intends to sell the power before securing long term access to the grid, • The generator also needs to execute a long-term Power Purchase Agreement (PPA) to transmit power by using the long-term access.

GNA could be the framework for providing long term access and usage of the national grid, which will replace the CERC regulations of long-term Connectivity (2009) and long-term Open Access (2004) and allow plug and play flexibility to the generators and consumers. The issue of green corridors and their interconnections with the main grid, the backing down of thermal power in favour of renewable to access limited transmission grids are all under consideration and the government along with the Ministries seem to be upbeat and optimistic in coming out with sustainable solutions. For suggestions email at feedback@infraline.com

January 2017 www.InfralinePlus.com

StatisticsPower State-Wise Issuance of UDAY Bonds (As on Dec’2016) (All Figures in INR Crores) State

Discom Liabilities (to be restructured) as on 30-09-2015

RAJASTHAN

UTTAR PRADESH

CHHATISGARH

JHARKHAND

S.No.

Total Bonds issued by State till date

Total Bonds issued by Discom till date

Total bond issued under UDAY till date

80530

58157

12368

70525

53935

39133.29

10714

49847

1740

870

6718

6136

PUNJAB

20838

15629

BIHAR

3109

2332

JAMMU & KASHMIR

3538

HARYANA

34602

25951

ANDHRA PRADESH

11008

8256

MADHYA PRADESH

4539

MAHARASHTRA

6613

227170

160002.29

23082

183084.29

TOTAL

Month-wise Electricity Generation for FY 2016-17 (till Oct’16) (Unit - MU)

Sector/Fuel

Apr-16

May-16

Jun-16

Jul-16

Aug-16

Sep-16

Oct-16

Central sector

35861.47

38055.35

37846.87

38419.62

38788.71

37196.85

34887.89

Thermal

28977.44

29311.67

28215.18

26872.82

26531.38

27522.2

27284.99

Coal

25466.19

25897.77

25049.11

23605.1

23172.47

24016.74

23828.22

Gas

1687.31

1772.6

1586.42

1591.72

1634.26

1717.03

1725.44

Other

1823.94

1641.3

1579.65

1676

1724.65

1788.43

1731.33

Hydro

3598.72

5795.07

6764.82

8288.64

8707.53

6579.08

4448.04

Nuclear

3285.31

2948.61

2866.87

3258.16

3549.8

3095.57

3154.86

State sector

31525.34

30163.02

28238.36

25362.87

25725.07

28000.74

32134.45

Thermal

27802.44

26655.07

24656.62

20705.42

18952.46

22243.79

26874.19

Coal

26170.22

25081.13

23201.96

19276.36

17613.55

20841.83

25205.83

Gas

1270.34

1258.56

1131.74

1099.21

1134.72

1186.11

1436.02

Other

361.88

315.38

322.92

329.85

204.19

215.85

232.34

Hydro

3722.9

3507.95

3581.74

4657.45

6772.61

5756.95

5260.26

Nuclear

Private sector

31817.43

31421.33

30677.9

29810.9

29694.65

31918.7

31864.77

Thermal

31326.08

30001.92

28728.57

27674.19

27507.18

30170.25

30885.58

Coal

29078.71

27769.25

26445.71

25474.12

25060.6

27729.41

28973.19

Gas

1215.53

1290.43

1351.52

1336.99

1670.74

1680.74

1070.16

Other

1031.84

942.24

931.34

863.08

775.84

760.1

842.23

Hydro

491.35

1419.41

1949.33

2136.71

2187.47

1748.45

979.19

Nuclear

Total conventional generation (MU)

99204.24

99639.7

96763.13

93593.39

94208.43

97116.29

98887.11

All India as reported by CEA

99204.24

99639.7

96763.13

93593.39

94208.43

97116.29

98887.11

January 2017 www.InfralinePlus.com

Plant Availability Factor of NTPC Thermal Power Plants : FY17 (Till Nov’16) Sl. No. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37

Power Plants ANTA Gas Power Plant AURAIYA Gas Power Plant DADRI Gas Power Plant DADRI Thermal Power Station DADRI-II Thermal power Station RIHAND Super Thermal Power Station RIHAND-II Super Thermal Power Station RIHAND-III Super Thermal Power Station SINGRAULI Super Thermal Power Station UNCHAHAR-I Thermal Power Station UNCHAHAR-II Thermal Power Station UNCHAHAR-III Thermal Power Station JHAJJAR (Indira Gandhi STPP) Korba Super Thermal Power Station Vindhyachal Super Thermal Power Station-I Vindhyachal Super Thermal Power Station-II Vindhyachal Super Thermal Power Station-III Kawas Gas Power Station Gandhar Gas Power Station Singrauli Super Thermal Power Station-II Korba Super Thermal Power Station-III NTPC-SAIL Power Company Ltd (Bhilai) Sipat Super Thermal Power Plant Stage-I Ratnagiri Gas and Power Private Ltd (Dabhol) Vindhyachal Super Thermal Power Station-IV Mauda Super Thermal Power Station Farakka Super Thermal Power Plant Stage-I&II Farakka Super Thermal Power Plant Stage-III Kahalgaon Super Thermal Power Station Stage-I Kahalgaon Super Thermal Power Station Stage-II Talcher Super Thermal Power Station Stage-I Barh Super Thermal Power Station Stage-II Ramagundam Super Thermal Power Station Stage - I & II Ramagundam Super Thermal Power Station Stage - III Talcher Super Thermal Power Station Stage-II Simhadri Stage-II Vallur - NTECL Vallur STPS (1500MW)

Region

FY17 (in %) Apr-16

May-16

Jun-16

Jul-16

Aug-16

Sep-16

Oct-16

Nov-16

66.17 97.73 96.54 105.66 55.56

95.22 95.71 93.65 104.74 103.38

92.27 96.82 95.17 104.74 103.24

97.68 97.68 96.95 104.74 103.39

93.6 97.72 91.74 104.39 103.23

96.95 96.24 96.95 105.1 101.74

94.9 96.47 96.66 106.04 104.92

98.23 96.47 94.45 105.47 100

Cumulative FY17 91.88 96.85 95.26 105.11 96.93

79.62

66.55

48.15

78.54

90.33

96.88

98.15

98.24

82.06

99.7

101.21

99.05

100.71

90.25

96.9

92.98

101.7

97.81

94.57

100.96

85.21

100.76

95.13

97.29

51.8

101.71

90.93

51.2

84.65

98.52

100.15

86.83

85.18

89.53

96.35

86.55

79.13

91.7

91.42

91.36

96.4

70.97

61.62

91.45

84.26

56.98

92.6

104.64

104.5

104.51

104.58

104.76

105.37

97.24

104.47

104.66

104.76

105.37

104.74

66.16

81.58

100.07

97.55

97.91

100.13

95.37

97.43

92.03

96.54

90.88

96.63

76.87

97.16

96.15

93.79

93.62

92.7

78.58

82.26

96.34

97.4

93.85

91.63

91.81

99.11

91.37

95.48

94.23

93.13

57.27

49.39

76.9

93.95

99.81

82.52

101.32

100.95

97.35

98.58

98.15

78.1

67.5

101.71

92.96

74.65 97.01

93.48 96.19

98.9 96.18

100.29 98.79

100.04 97.91

98.84 98.72

100.54 74.58

101.66 93.78

96.05 94.15

100.53

95.81

100.3

99.19

61.01

100.29

100.41

97.33

94.36

99.77

99.23

99.99

100.13

98.94

100.86

82.04

85.11

95.76

84.45

93.09

91.95

94.99

95.3

94.25

94.37

94.35

92.84

94.11

98.91

95.75

70.19

100.22

96.81

75.81

94.19

90.75

0.25

0.04

1.35

3.33

7.44

5.62

5.59

2.95

95.38

100.97

100.94

95.28

96.47

96.56

95.5

97.91

97.38

99.67

95.41

99.79

85.54

85.61

100.08

98.39

89.21

94.21

34.84

75.28

97.28

93.38

95.97

91.34

93.48

84.72

83.29

97.81

99.78

99.7

97.72

96.95

99.86

100.01

97.02

98.61

89.68

98.64

98.13

97.84

91.22

75.75

96.83

92.79

92.61

97.72

97.68

98.24

72.34

99.39

93.84

98.42

94.66

94.04

96.32

97.77

92.15

97.91

95.65

94.36

87.53

91.72

94.18

50.85

82.5

80.9

90.18

83.21

44.94

87.61

76.22

74.55

99.45

99.51

83.22

78.63

82.06

100.47

98.2

97.77

92.41

102.19

102.16

102.23

100.41

97.34

101.44

60.81

21.84

86.05

96.98

95.87

93.4

97.81

71.66

77.85

81.62

87.15

99.47

100.26

100.21

100.26

100.99

101.32

100.51

68.64

65.23

56.45

58.12

87.77

93.32

69.46

79.8

72.35

January 2017 www.InfralinePlus.com

NewsBriefs | Coal

State discoms may soon swap coal via online auction

Coal price boom evades Coal India

Global coal mining companies have seen one of the very good year in terms of realisations as prices have gone up sharply in 2016, but that is not the case for India’s largest and state-owned Coal India as its realisations have actually fallen and outlook

for immediate two-quarters is certainly not looking good due to comparatively weaker demand. In 2016 thermal coal prices were up 95% so far. Coal India had raised its prices in May this year. However, the company’s average price realisation per tonne of coal declined thereby upsetting the benefits of the price hike. In case power demand remains muted in the coming fiscal quarters, the average realisation from coal sales may remain weak for the rest of the year too. Coal prices were increased from last May but looking at demand further increase looks difficult despite the sharp upturn in coal prices globally.

NTPC to invest Rs 2,648 crore in developing three coal blocks in Odisha

State-run NTPC has lined up investments worth Rs 2648 crore for developing three coal blocks in Odisha. The Maharatna public sector undertaking (PSU) plans to invest Rs 684 crore in the Dulanga coal block, which is linked to its Dariplalli super thermal power project that has the capacity to generate 1,600 Mw of power. The power project, which is supposed to come up in Sundargarh district, will attract an investment of Rs 12,532 crore from NTPC. “The first unit of the Darlipalli plant, which has the capacity to generate 800 Mw of power, is expected to be set up by February in 2018. Commercial operations would take off from August”, said Arvind Kumar, regional executive director (East-II), NTPC Ltd. NTPC has already invested Rs

National

4,000 crore on the Darlipalli project. Fifty per cent of the power generated at this plant will by supplied to the state to meet its energy demands. Apart from the Dulanga coal block, NTPC was also allocated the Mandakini-B coal block last year to help fuel its first 4, 000-Mw power plant in Telangana.

State-run power plants will soon be able to swap coal supplies with projects of private companies through tariffbased online competitive bidding. The government will launch a portal to enable the swap, aiming for optimum utilisation by private as well as public power companies. It will enable states to procure cheaper electricity by swapping coal to efficient power projects or by saving logistics cost. The portal, christened Coal Mitra, will initially allow transfer of domestic coal between state and central PSUs but will soon be extended to include private power plants. For coal swap, state generation firms will have to consult power distribution companies and ensure cost of power does not rise above existing tariffs after the transfer. State generation companies will float short term power supply bids and companies that agree to offer power at the lowest rate through reverse e-auction will be selected for coal swap.

SECL records 83.77 MT coal production during April-Nov The South Eastern Coalfields Ltd (SECL) has recorded coal production of 83.77 millions tonnes (MT) against a target of 90.37 (MT) between April to November 2016. The company has also commenced the process for setting up the 5.0 MTPA Baroud Coal Washery in Raigarh district of the State. The Washery will be set up on Build-OperateMaintain (BOM) basis. It may be recalled that SECL will provide the capital funding for setting up of the Washery and also other infrastructural facilities like land, water, power etc. Notably, the Central government has also decided to transport coal above G10 level only after being washed from

October 1, 2017. The decision is taken to tackle the quality issue of the coal produced. In order to meet the rising demand, Coal India Ltd has been setting up 15 new washeries with a total capacity of 112.6 million tonnes per annum. Out of these washeries, six are Coking Coal washeries with total capacity of 18.6 million tonnes per annum and nine Non-Coking washeries of 94.0 million tonnes per annum. Apart from these, 3 washeries of 11.6 million tonnes per annum are under construction. SECL is targeting total coal production of 250 million tonnes (MT) from its underground and open cast mines by 2019-20.

January 2017 www.InfralinePlus.com

NewsBriefs | Coal Thermal power plants’ capacity utilisation to drop to 48 percent by 2022

All coal-based thermal power plants need to brace for a drastic fall in capacity utilisation to as low as 48% by 2022, as additional nonthermal electricity generation capacities come on stream, the Central Electricity Authority has warned. At that level of

utilisation, they may lose the ability to run at a technically viable level and might find it extremely difficult to service debts turning into non-preforming assets for lenders. The CEA, in its Draft National Electricity Plan, has predicted that by 2022 many plants may get partial or no schedule of generation at all meaning that many of these thermal power plants may have to be kept idle for lack of demand. According to the CEA, the expected installed capacity from different fuel types at the end of 2021-22 in base case works out to 523 gigawatts, including 50 GW of coal-based capacity currently under construction.

India’s coal demand to see biggest growth globally India’s coal demand will see the biggest growth over next five years even as it slows down globally on lower consumption in China and the US while renewable energy sources gain ground, the International Energy Agency said. India will see an annual average growth rate of 5 percent by 2021 even as demand peaks in the world’s top consumer, China, the Paris-based body said in a report. India’s coal output rose 5.1 percent last year, it said. “Growth in global coal demand will stall over the next five years as the appetite for the fuel wanes and other energy sources gain ground,” according to IEA’s latest coal forecast. But much of Asia will remain hooked on coal which, while polluting, is also affordable and widely available, IEA said.

The share of coal in the power generation mix will drop to 36 percent by 2021, from 41 percent in 2014, IEA said in the latest Medium-Term Coal Market Report, driven by lower demand from China and the United States, along with fast growth of renewables and strong focus on energy efficiency.

National NTPC and Nalco form joint venture to set up 2,400 Mw coal-based plant

Power major NTPC and aluminium manufacturer Nalco will float a 50:50 joint venture to set up a 2400 MW (3X 800 MW ) coal based power project at Gajmara, Dhenkanal in Odisha. Power from the plant would meet increased power requirements at Nalco’s Angul facility. It will also supply power to the aluminium manufacturer’s greenfield project at Kamakhyanagar in Odisha’s Dhenkanal. Coal from the mines allocated to Nalco shall be linked to the Joint Venture project at Gajmara. “The two leading central public sector companies are synergizing their respective domain expertise to fuel economic growth of India in general and state of Odisha, joint venture agreement, power purchase agreement shall be fast tracked and be in place by the end of the current financial year,” a NTPC said. The Joint Venture between NTPC and NALCO has potential to create value for both the companies’ which have public equity.

NTPC to phase out 11,000 Mw old power plants in five years: Piyush Goyal Country’s largest power generator NTPC Ltd will replace its old power plants having a total capacity of 11,000 Megawatt, power, coal, renewable energy and mines minister Piyush Goyal said recently. He said the company would phase out power plants older than 25 years and added that the whole process would require around Rs 50,000 crore and would take around five years. “It is very concerning that this country has very old power plants running which leads to very high carbon dioxide emission. The government wants to not only bring in new pollution control technology but also

wants to phase out old power plants to bring down pollution levels,” Goyal said. “NTPC has already given the in-principle clearance to replace around 11,000 MW of its old, inefficient thermal power plants,” he said. Further, the Minister informed that the Power Ministry is in talks with the Environment Ministry for clearances, which should not be a problem as it is a huge step in increasing energy efficiency and reducing carbon emissions. He also urged the State Governments to work in Mission-mode to modernize their existing thermal power plants with new super critical technology.

January 2017 www.InfralinePlus.com

NewsBriefs | Coal Obama sets rule to protect streams near coal mines

The Obama administration has set final rules designed to reduce the environmental impact of coal mining on the nation’s streams, a long-anticipated move that met quick resistance from Republicans who vowed to overturn it under President-elect

Donald Trump. The Interior Department said the new rule will protect 6,000 miles of streams and 52,000 acres of forests, preventing debris from coal mining from being dumped into nearby waters. The rule would maintain a buffer zone that blocks coal mining within 100 feet of streams, but would impose stricter guidelines for exceptions to the 100-foot rule. Interior officials said the rule would cause only modest job losses in coal country, but Republicans and some coal-state Democrats denounced it as a job-killer being imposed during President Barack Obama’s final days in office.

China set to dominate the global coal market in 2017

In its medium-term coal market report for 2016, IEA reports that global coal demand growth has stalled after more than a decade of 4 percent annual growth, with demand in 2016 to be below 2013 levels. Consumption decreased for the first time in 2015 as declines in the U.S. and China were not offset by growth elsewhere. China saw coal use decline in all major consuming sectors; electricity, steel, and cement. Coal generation dropped due to sluggish 0.5 percent electricity demand growth and the country’s diversification policy, which led to growth in hydro, nuclear, wind, solar, and natural gas power generation growth. Coal use in the U.S. plummeted due to low natural gas prices and coal plant retirements pushed by the Mercury

Air Toxics Standards (MATS). Overall U.S. coal consumption dropped 15 percent, the largest annual decline ever. Even as coal declines in Europe and America, the shift to the East is accelerating. Coal is the preferred option to increase power generation in growing economics that face electricity shortages.

International S. Korea to close 10 aged coal power plants by 2025

South Korea plans to replace environmental facilities at 43 other coal plants in the nation in the initiative expected to cost a total of 11.6 trillion won (US$9.67 billion) by 2030, according to the Ministry of Trade, Industry and Energy. The ministry has signed an accord with five local power plant operators on the project. It plans to spend 203.2 billion won on the shutting of the old plants.”It marks the first time that coal power plants in South Korea will be shut down,” the ministry said. “It represents a resolve to establish the low-carbon and environment-friendly electricity source.”Among other programs, 9.7 trillion won will be injected into modifying environment-related facilities at the 43 plants. It will help reduce the amount of pollutants from coal plants from 174,000 tons last year to 48,000 tons in 2030, added the ministry.

Australia wants AIIB to invest in coal power Australia is reportedly lobbying hard for the China-led Asian Infrastructure Investment Bank (AIIB) to invest in coal power projects in Asian countries. The newly-established development bank is currently drafting its energy strategy and the prospect that coal could be excluded from its priorities has alarmed both the Australian government and the country’s powerful coal lobbies. Australia accounts for around one-third of all coal trade in the world, with most of its coal exports going to China, Japan, South Korea and other countries in the region.“The [Australian] government wants the AIIB

energy strategy to acknowledge that fossil fuels will play a significant role in energy generation in the region for decades to come,” Kate Williams, spokeswoman for Australia’s Treasury Department, said.

China launched the AIIB as “clean, lean and green” lender to finance infrastructure projects across Asia and the bank started operations in January with 57 member countries and US$100 billion in committed capital. The AIIB launched the first round of consultations in October for its energy strategy, which will be approved by the bank’s board in their annual meeting next June. The bank’s first draft guidelines on the energy strategy published in October said Asia needs US$8,740 billion of energy investment by 2025 to implement already announced policies.

January 2017 www.InfralinePlus.com

InDepth Union Budget 2017-18: Sops crucial to energise power and coal sector

►►An opportunity to put in place levers to strengthen the demand situation in the economy ►► MoF may look to extend 10-year tax holiday to companies that start generation by March, 2020

By Team InfralinePlus

The recent surge in India’s solar capacity addition offers a ray of hope for domestic producers and foreign investors. However, investors’ confidence in the power industry has been tested severely over the past few years due to the drastic erosion in the creditworthiness of the sector, triggered mainly by fuel shortages earlier which rendered several projects commercially unviable and more recently due to the weakening financial health of state power distribution companies (DISCOMs)

which has left a significant capacity being declared as stranded. The central government wants to fulfill the promises of ‘Make in India’, and to provide uninterrupted power supply to each Indian household by 2022 — all these aspects may face an issue — requiring massive surge in power requirement and consumption. In line with the above vision, the government, in the 2015 and 2016 Union Budgets had announced certain policy measures which would address this issue. It has

been proposed to setup 5 new Ultra Mega Power Projects (UMPP), each of 4000 MW, in the plug-and-play mode and has been clarified that all clearances would be in place before the project is awarded by an auction process. The transparent auction process has also been adopted for coal, where it is envisaged that the coal bearing states will be getting additional funds for creation of long awaited community assets and welfare of people. Also, the ministry of new renewable energy has revised its

January 2017 www.InfralinePlus.com

InDepth Power Sector I. Power generation/distribution (i) Tax incentives / sops such as extension of tax holiday to power projects till the end of March 2017 and re-introduction of generation based incentives (GBIs) to wind power generators in the form of 80% accelerated depreciation (AD) has brought some respite to the project developers in the last couple of years. However, since April 2016, AD has been reduced by 40% which will significantly impact the wind power developers in the longer run. Moreover, GBIs will cease post March 2017 which will further affect the creditworthiness of the renewable energy projects. The Ministry of Finance (MoF) may look to extend the 10-year tax holiday to companies that start power generation by March 31, 2020. Industry players have called for the extension of the sunset tax clause for power companies to include plants that provide power till March 2020 as opposed to 2017 earlier. (ii) Clean technology projects / super critical technology may be exempted from all taxes for a period of 10 years from the date of commercialization extending all benefits for commercialization. Projects that implement clean technologies should be given benefits in taxes. Manufacturers who have already adopted internationally recognized clean technologies should be incentivized and encouraged by exemption from levy of any clean energy cess. (iii) Naphtha import should be given concession in duty on import as this would help in reviving the gas/naphtha based power plants. (iv)Fly ash is the waste product of Power generation. Fly ash bricks are now possible and they save having to dump the fly ash while conserving the environment by replacing Coal baked bricks. It is counterproductive to charge Central Value Added Tax (CENVAT) on sale of fly-ash bricks. They should be fully exempted. 26

II. Financing Recently, financing of projects has become very difficult considering most of the public-sector banks have reached sectoral lending limit for the power sector mainly due to thermal and gas based power plants being stuck and not being able to service the debt availed by such projects. To give push to development of projects generating renewable energy, the Reserve Bank of India has recently added renewable energy sector within the priority sector lending, for a loan up to INR 15 crore per project. However, the limit of INR 15 crore per borrower - and INR 10 lakh per household - would restrict the flow to smaller solar projects and rooftop plants. This should be addressed in the upcoming budget. III. Other initiatives (i)Two new proposed legislationsâ&#x20AC;&#x201D;the Public Contracts (Resolution of Disputes) Bill and the Regulatory Reform Bill must see the light of the day after being put up for discussion post Union Budget 2015-16.This may be positive step to help resolve long-standing power tariff disputes with high potential to revive impacted projects. (ii) It is strongly recommended that Minimum Alternate Tax (MAT) should be reduced from the current level of 18.5%. This will go a long way in incentivizing investments in the power sector. (iii) All other state taxations, including Electricity Duty (ED) on consumption or production of power, and should be subsumed into the proposed Goods and Services Tax (GST). This will ensure a uniformity in the taxation on consumption of power and will ultimately reduce the power prices which will be beneficial to all consumers. (iv) Power equipment imports for setting up captive power projected should be exempted from customs duties, state governments have imposed cess, electricity duty and various other taxes which add to the cost of power.

Recently, financing of projects has become very difficult considering most of the public-sector banks have reached sectoral lending limit for the power sector mainly due to thermal and gas based power plants being stuck and not being able to service the debt availed by such projects. To give push to development of projects generating renewable energy, the RBI has recently added renewable energy sector within the priority sector lending, for a loan up to INR 15 crore per project

January 2017 www.InfralinePlus.com

Past initiatives/announcements for power sector (Union Budget FY 2015-16 & FY 2016-17) • To reduce dependence on imported coal, a Public Private Partnership (PPP) policy framework would be devised with Coal India Limited to increase coal production. • Extension of tax sops to all power projects which begin generation, distribution or transmission of power by 31st March 2017. • Adequate quantity of coal will be provided to power plants which are already commissioned or would be commissioned by March 2015. An exercise to rationalize coal linkages to optimize transport of coal and reduce cost of power was underway. • Rs 500 crores to be provided for Ultra Mega Solar Power Projects in Rajasthan, Gujarat, Tamil Nadu, Andhra Pradesh and Ladakh. • Low-interest–bearing funds to be provided from National Clean Energy Fund (NCEF) to Indian Renewable Energy Development Agency Ltd (IREDA) for on-lending to viable renewable energy projects. • Government re-introduced generation-based incentives (for wind power projects) in the form of 80% accelerated depreciation (AD) to boost capacity addition in the sector; cutting of custom duty by 5 per cent on capital goods import. (FY 2014-15). However, in the Union Budget 2016-17 it was announced for the reduction in AD from 80% to 40%. • Government proposed to set up 5 new Ultra Mega Power Projects, each of 4000 MWs in the plug-and-play mode. (All clearances and linkages will be in place before the project is awarded by a transparent auction system. Government hoped it will help unlock investments to the extent of INR 1 Lakh Crore). However, with the recent enthusiasm shown by investors in the area of renewables, the proposal has been scrapped. • Increase in Clean Energy Cess from Rs 200 to Rs 400 per metric tonne of coal, etc. to “finance clean environment initiatives”.

Coal Sector I. The Railway Budget for 2015-16 proposed raising freight rates for 12 commodities that include a 6.3 per cent increase for coal. Electricity tariffs were expected to rise with increased freight rates, as a direct consequence of increase in transportation cost for power producers. Likely impact of freight rate hike would be on the landed cost of coal. The Ministry of Finance (MoF) must reduce the railway freight rates for transportation of coal. This will reduce the burden on power producers and will result in lowering of power prices for consumers. II. Introduction of PPP in coal mining sector to bring in best practices and technology for coal mining. Domestic coal prices may be linked to one or a basket of international coal indices with adjustment to heat value and ash content to ensure prices are commensurate with the quality of coal. III. Clean Energy Cess: The increase of Clean Energy Cess to INR 400 per MT is a major burden which will further weaken the competitiveness of the Indian industry. This should be suitably reduced/or CENVAT credit must be given to negate the effect of increase in coal prices and ultimately the landed cost of power. IV. Import duty of coking coal had been increased to 2.5% in the Union Budget 2014-15. Negligible quantity of coking coal is available domestically, and thus the need is met mainly from imports for the steel sector. It is therefore recommended that the duty on coking coal be exempted as was the case prior to the Union Budget 2014-15.

target of renewable energy capacity to 175 GW till 2022, comprising of solar (100 GW), wind (60 GW), biomass (10 GW) and small hydro power (5 GW). However, with the recent enthusiasm shown by investors in the area of renewables, the proposal has been scrapped considering the muted interest shown by developers/investors. The upcoming Union Budget (2017-18) provides an opportunity to put in place levers to strengthen the demand situation in the economy. This is important to impart momentum to the capex cycle and put GDP back on high growth track. Power is the critical infrastructure on which the socio-economic development of any country depends. So a clear and stable tax regime is bare minimum requirement of the investors/developers engaged in development of power plants. The same will be expected in the Union Budget 2017-18. For suggestions email at feedback@infraline.com

January 2017 www.InfralinePlus.com

InDepth CEA’s draft national electricity plan spells trouble for thermal power industry

►►No immediate requirement for fresh capacity addition from coal based source up to 2027 ►► Low asset utilization in future will make it difficult for power producers to service debt By Team InfralinePlus

While India’s massive capacity addition in renewables strengthens country’s position against climate change and its commitment to the United Nations Framework Convention on Climate Change (UNFCCC), it also raises concerns for thermal power producers, especially in the wake of National Electricity Plan (NEP) drafted by the Central Electricity Authority (CEA). Given the massive capacity addition plans in the renewable sector, CEA estimates there is no requirement

for new coal plants in 2022-27. Based on demand projections, CEA estimates new coal-based capacity requirement of 44,085 MW in 2022-27. Since 50,025MW of coal power projects are already in different stages of construction and likely to yield benefits in 2017-22, CEA does not foresee any immediate requirement for fresh capacity addition from coal-based source up to 2027. As per the draft, “Considering capacity addition from Gas – 4,340 MW, Hydro 15,330 MW,

Nuclear - 2800 and RES – 1,15,326 MW as committed capacity during 2017-22 and likely capacity addition of 101,645 MW from conventional sources during 12th plan and projected demand for the year 2021-22, the study result reveals that no coal based capacity addition is required during the years 2017-22. However, a total capacity of 50,025 MW coal based power projects are currently under different stages of construction and are likely to yield benefits during the

January 2017 www.InfralinePlus.com

period 2017-22. Thereby, the total capacity addition during 2017-22 is likely to be 1,87,821 MW.” CEA’s draft NEP highlights the demand side projections, and presents a perspective on electricity supply sources till 2027 while also projecting a subdued demand for power with a 20.7 per cent lower peak demand in 2026–27. A key highlight of this plan is the draft covers the review of the 12thPlan, plan for 2017-18 in detail and perspective Plan for 2022-27. The projected peak demand at the end of 2021-22 is 235 GW, which is about 17% lower than the projection made in the 18th Electric Power Survey (EPS) report, the CEA has written in the draft plan.

Current Scenario

The total installed capacity is 308.8 GW (approx.) as on November 30, 2016 while, the peak demand is 153 GW. Power generation units in India are running below capacity as state electricity distribution companies (DISCOMs) shy away from buying more power. According to data published by the CEA, India’s thermal power plant load factor (PLF), slipped to 52.03% in August this year, its lowest in over a decade and has been consistently hovering below 60%. There has been an increase in private sector capacities without Power

Purchase Agreements (PPAs) in the last three years. If PPA signing does not commence soon, by the end of FY 16-17, nearly 15% of private sector capacities (20-25 GW) without PPAs will be exposed to the vagaries of the short-term electricity market. The central government’s push for renewable energy capacity addition (proposed 175 GW by 2022) and the states’ obligation to include solar

CEA’s draft NEP highlights the demand side projections, and presents a perspective on electricity supply sources till 2027 while also projecting a subdued demand for power with a 20.7 per cent lower peak demand in 2026–27. A key highlight of this plan is the draft covers the review of the 12thPlan, plan for 2017-18 in detail and perspective Plan for 2022-27

in their total energy mix is driving long-term contracts to solar. It is noteworthy that all long-term contracts spanning more than 25 years, were all signed by solar power companies in 2015-16 and up to the second quarter of the current fiscal year (FY 2016-17). Coal-powered thermal power plants account for 70% of total electricity generated in the country and represents 61% of the installed power capacity. Till the thermal generating capacity utilisation improves to 80-85%, PLF levels (to the existing 58% PLF level) and the existing untied capacities are contracted, it’s unlikely that there will be any private sector interest in the coal-based thermal generation sector. This can be gauged from a particular extract from the draft plan, “To accommodate high quantum of RES into the grid, thermal plants are likely to run at low PLF in future. Many plants may get partial/nil schedule of generation. The market mechanism through regulatory intervention needs to be evolved so that the owners of thermal plants are able to recoup the investment and at the same time, customers are not unnecessarily burdened with high tariff.” At that level of utilisation, thermal power producers may lose the ability to run at a technically viable level and might find it extremely difficult to service debts turning into non-preforming assets (NPAs) for lenders. Apart from IPPs, CEA projections spell trouble for equipment suppliers in the capital goods sector, especially in the industry-boiler, turbine generator and related segments. As there are large solar & wind power capacity additions envisaged to come on track in several states in 2016; however, the lack of assurance on the evacuation infrastructure and the grid availability can affect the credit profile of the upcoming projects. Technical and commercial challenges are emerging for the DISCOMs because of changes in the energy mix. Efforts to address these challenges are

January 2017 www.InfralinePlus.com

InDepth

Likely Future Scenarios (As per Draft National Electricity Plan 2016) High Hydro (15,330 MW) RES Target of 175 GW

Demand CAGR (6.34%, 7.34% and 8.34%)

Low Hydro (11,788 MW) High Hydro (15,330 MW)

RES Target of 150 GW

Low Hydro (11,788 MW) High Hydro (15,330 MW)

RES Target of 125 GW

Low Hydro (11,788 MW)

Figure 1: CEAâ&#x20AC;&#x2122;s projections based on sensitivity analysis (High Hydro Scenario) PLF % vs RES Capacity Addition High Hydro Scenario (15330 MW) PLF % of coal based power plants

Deviation settlement in situations where infirm power is scheduled in 15-minute time blocks as firm power in reference to the CERC order of February 2014 will lead to the imposition of heavy penalties on DISCOMs for under, over drawls of power. Example MSEDCL has an 18,000 MW system; it is allowed a deviation of 150 MW under and over drawl and potentially faces a penalty as high as INR 16.92/unit

62.3

57.5

60.0 52.8

125

55.1

57.4 50.4

150

52.6

47.9

175

RES Capacity Addition (GW) CAGR of 6.34% (up to 2021-22) Source: Central Electricity Authority (CEA)

CAGR of 7.34% (up to 2021-22)

CAGR of 8.34% (up to 2021-22)

trailing behind what would be required to mainstream the envisaged pace of capacity addition. Moreover, deviation settlement in situations where infirm power is scheduled in 15-minute time blocks as firm power in reference to the CERC order of February 2014 will lead to the imposition of heavy penalties on DISCOMs for under, over drawls of power (e.g. MSEDCL has an 18,000 MW system; it is allowed a deviation of 150 MW under and over drawl and potentially faces a penalty as high as INR 16.92/unit). The person/consumer buying the power which caused deviation will have to pay penalty charges on deviating from schedule and preferential tariff. The person/consumer procuring solar/wind power as per the provision of power purchase agreement (PPA) with the state DISCOM or a private player shall pay the UI Charges (Unscheduled Interchange) as per the Deviation Settlement Mechanism (DSM) on deviating from the actual schedule in addition to the preferential tariff on that quantum of power procured from the distribution licensee. As per the Draft National Electricity Plan, 2016, it can be seen that, under constant demand and hydro condition, the PLF of coal-based is almost negatively linearly co-related with RES capacity. Detailed studies have shown that as RES generation

January 2017 www.InfralinePlus.com

Figure 2: CEAâ&#x20AC;&#x2122;s projections based on sensitivity analysis (Low Hydro Scenario)

PLF % of coal based power plants

PLF % vs RES Capacity Addition Low Hydro Scenario (11788 MW)

62.0

58.1

60.8 55.8

53.5

125

58.2 51.1

150

53.3

48.6

175

RES Capacity Addition (GW) CAGR of 6.34% (up to 2021-22)

CAGR of 7.34% (up to 2021-22)

CAGR of 8.34% (up to 2021-22)

Source: Central Electricity Authority (CEA)

Under a constant demand and hydro condition, the PLF of coal based stations is almost negatively linearly co-related with RES capacity. Detailed studies have shown that, as the RES generation increases there is equivalent quantum decrease in thermal generation. This shows that any increase in RES generation is mostly replacing the thermal generation. Therefore, with the increased infusion of RES generation into the grid, the PLF of the coal based plants decreases

CEAâ&#x20AC;&#x2122;s projections based on sensitivity analysis i) Scenario with CAGR 6.34% These scenarios have been studied based on the Energy Requirement (BU) and Peak Demand (MW) estimated by Sub Committee on Demand projection. The CAGR of Electrical Energy requirement from the year 2015-16 to 2021-22 is coming out to be 6.34%. It may be seen that no coal based capacity addition is required in all the scenarios during the years 2017-22 to meet the energy demand. However, the PLF % of coal based power stations will increase with lower achievement in Hydro and/or RES capacity addition. ii) Scenario with CAGR 7.34% These scenarios have been studied based on the Electrical Energy Requirement (BU) and Peak Demand (MW) estimated by considering a CAGR of 7.34% in Electrical Energy requirement instead of 6.34% worked out in the Base case. It may be seen that coal based capacity addition in the range of 7020 MW to 12040 MW is required in various scenarios. The PLF % of coal based power station will increase with lower achievement in Hydro or RES capacity addition targets. iii) Scenario with CAGR 8.34% These scenarios have been studied based on the Energy Requirement (BU) and Peak Demand (MW) estimated by considering a CAGR of 8.34% in Electrical Energy requirement instead of 6.34% estimated in Base case. It may be seen that coal based capacity addition in the range of 21,370 MW to 27,600 MW is required in various scenarios. The PLF % of coal based power station will vary with lower achievement in Hydro or RES capacity addition. iv) Relationship between RES generation and PLF (%) of coal based thermal plants It is seen that, under a constant demand and hydro condition, the PLF of coal based stations is almost negatively linearly co-related with RES capacity. Detailed studies have shown that, as the RES generation increases there is equivalent quantum decrease in thermal generation. This shows that any increase in RES generation is mostly replacing the thermal generation. Therefore, with the increased infusion of RES generation into the grid, the PLF of the coal based plants decreases. Source: Central Electricity Authority (CEA)

January 2017 www.InfralinePlus.com

InDepth

increases there is equivalent quantum decrease in thermal generation. This shows that any increase in RES generation is mostly replacing the thermal generation. Therefore, with the increased infusion of RES generation into the grid, the PLF of the coal-based plant decreases.

Likely impact analysis

Even though power generation has increased, lack of power purchase power agreements (PPAs) continues to keep plant load factor at its lowest. Low asset utilization in future as depicted (graphs) will make it difficult for power producers to service debt. Lack of power demand from industries is already causing ready capacities not being able to find long term buyers and sell at abysmally low prices at the power exchange. With the increasing adoption of renewable power (particularly solar) and

growing preference for competitively bid merchant contracts mean the thermal power industry can no longer have the luxury of stable long-term PPAs. International Energy Agency (IEA) provides a generic characterization of the differences between flexible and inflexible plants. Flexible coal plants offer ramping rates of 4-8%/ minute, 2-5-hour start up times, and minimum output limits of 20-40% (of maximum), compared to inflexible plants with ramping rates of less than 4%/minute, 5-7 hour start-up times and minimum output limits of 40-60%. 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. Flexible nuclear plants offer minimum output limits of 30-60%, compared to 100% for

The financial position of state power distribution companies (DISCOMs) is being cited as a key impediment to demand growth. Over-investment in transmission is desirable for a country like India because the sources of energy lie either in the central/eastern coal belt or hydro resources in north while demand centers are in the planes of north, west and south

inflexible plants. In France, existing nuclear plants can ramp down to 30%, with ramp rates of up to 1%/minute. In terms of flexibility, hydro plant, Pump Storage Plant, Open Cycle gas turbine, Gas Engines etc. are very suitable. Coal plants are classified as constant output or baseload plants and are rarely turned down or off frequently. Essentially, they are considered as inflexible. These plants experience reduced efficiency, more maintenance, lower equipment lifetime and reduced cost etc. if subjected to cycling or frequent ramp up and ramp down. However, existing coal based plant can be redesigned/retrofitted to enable quick start-ups and ramping. The financial position of state power distribution companies (DISCOMs) is being cited as a key impediment to demand growth. Over-investment in transmission is desirable for a country like India because the sources of energy lie either in the central/eastern coal belt or hydro resources in north while demand centers are in the planes of north, west and south. Stranded power capacities of 22-28 GW (industry estimates) may have to wait for 2-3 years for securing PPAs. During the present period, both government and industry are relying on UDAY scheme for the demand to pick up and kick-start the growth in the sector. As per CEA’s draft, “In view of a large capacity addition programme from renewable energy Sources, hydro and gas based power stations are required to play vital role by providing balancing power to cater to the variability and uncertainty associated with RES. Therefore, suitable measures to ensure timely completion of capacity addition from hydro and adequate supply of natural gas to stranded gas based power plants may be taken.” In view of all of this, thermal power industry will have to brace for a transitional shift in future. For suggestions email at feedback@infraline.com

January 2017 www.InfralinePlus.com

StatisticsCoal Port-wise Coal Imports in India (Quantity in Metric Tonnes) S.No.

Ports

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16

Paradip Vizag Goa/Marmagoa Dhamra Gangavaram Kolkata / Haldia Krishnapatnam Mundra New Mangalore Kandla Ennore Magdalla Karaikal Jaigarh Tuticorin/VOC Chennai

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

Mundra Krishnapatnam Dahej Ennore Tuticorin/VOC Vizag Paradip Gangavaram Kandla Navlakhi Kakinada Dhamra Magdalla Bedi Mumbai New Mangalore Goa/Marmagoa Adani Hazira Pipavav Kolkata/Haldia Karaikal Jaigarh Bhavnagar Okha Porbandar Muldwarka Jafrabad Jakhau Cochin Sikka Chennai

* November 2016 is provisional data

Imports (FY 2014-15)

Imports (FY 2015-16)

Coking Coal 8,992,360 5,887,886 5,839,993 5,560,774 5,318,145 4,998,623 1,289,343 1,044,334 812,391 431,878 398,202 383,983 118,833 82,100 49,100 1,628 Non-Coking Coal 38,914,325 25,360,804 13,207,450 11,586,516 9,965,779 9,931,812 9,631,993 9,447,943 8,804,707 7,359,030 6,045,996 5,768,643 5,484,802 4,995,030 4,565,464 3,859,485 2,613,456 2,472,140 1,969,786 1,897,477 1,232,716 1,174,264 1,047,030 646,030 570,030 337,630 271,030 244,030 48,034 44,330 247

Imports (FY 201617) - till Novâ&#x20AC;&#x2122;16*

7,233,877 4,611,482 6,163,132 4,844,386 5,506,715 4,949,814 4,510,943 1,056,048 121,659 358,952 347,039 978,695 533,575 30,000 0 1,288

5,082,526 2,564,240 3,231,410 5,529,345 2,822,790 3,661,000 2,430,997 735,561 0 289,513 199,871 817,846 577,913 44,870 0 838

14,667,996 21,938,131 11,232,142 10,758,859 12,001,649 7,666,590 7,321,302 8,560,804 11,654,689 6,119,175 2,822,054 7,597,423 5,225,930 4,561,545 3,432,878 5,053,589 4,896,621 2,657,841 1,501,845 2,552,225 2,199,504 1,902,981 967,807 612,491 570,596 682,916 354,413 291,090 113,850 64,197 843

9,282,917 13,377,124 7,011,810 5,618,440 6,858,887 3,684,668 4,560,248 4,680,422 7,464,428 1,730,493 1,439,989 2,572,347 3,492,976 1,842,571 1,717,014 3,215,832 2,786,262 2,329,865 811,097 2,274,487 2,655,854 1,000,987 626,444 441,277 327,974 266,995 328,790 275,923 63,000 66,508 843

January 2017 www.InfralinePlus.com

StatisticsCoal Indonesian Coal Prices - HBA - FY 2016-17 (till Decâ&#x20AC;&#x2122;16) Month

HBA 6322 kcal/kg (USD/ton)

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

Prima Coal

Pinang Coal

Indominco IM East

Melawan Coal

Envirocoal

Jorong J-1

Ecocoal

7000

6700

6150

5700

5400

5000

4400

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

Mine Wise Production from Captive Coal Blocks for the period April 2015 to November 2016

Coal Production (Provisional) in Million Tonnes

Name of the coal mine

Avg. Grade

Final Bid Price / Reserve Price

2015-2016

2016-2017 (till November-2016)

Revenue Generated from monthly production of coal on account of Final Bid Price / Reserve Price from April-15 to November-2016 (Rs. in crores)

Sarisatolli

G11

470

1.877

0.895

124.13

Talabira-I

G13

478

0.56

0.151

21.07

Gare Palma IV/4

3001

0.069

0.723

205.66

Gare Palma IV/5

3502

0.582

167.03

Chotia

3025

0.12

0.18

90.75

Belgaon

G10

1785

0.165

0.062

40.45

Amelia (North)

712

2.8

2.657

309.97

S. No.

Sial Ghogri

1402

0.005

0.44

Parsa East & Kanta Basan

G11

100

6.21

4.974

104.84

11.801

10.229

1064.34

Total

January 2017 www.InfralinePlus.com

CoverStory

Energy market set for a bull run in 2017

►►Power and coal faces slowdown in 2016, industry bullish on demand revival ►►Momentum in Renewable Energy, especially solar, expected to continue in 2017 By Infraline Bureau

After touching new lows in January, world energy prices have partially recovered lost ground and now look set for a bull run. While hardening prices would help energy-exporting countries to balance their budgets, which have been under stress since June 2014 crash in the global energy market, big energyimporting countries like India could face serious macroeconomic challenges. The Narendra Modi government has been a major beneficiary of low energy prices, which it used to hike excise duty by nine times and fill its coffers. But if the current uptrend in energy market continues, the NDA government’s macroeconomic management

skills could be put to the test sooner rather than later. If dollar continues to strengthen against rupee, India could face the double whammy of surging crude price and an unfavourable exchange rate, though such a scenario is a bit unlikely. 2016 was a roller coaster year for the world energy market. Crude oil prices hit a 14-year low in January and then bounced back to nearly double in December. Pledge of production cuts by Opec and non-Opec cartels brought stability to the crude market which has been in the grip of volatility due to supply glut. As year 2016 progressed, coal market also hardened,

with Indonesian coal reaching 25-month high of $69.70 per tonne in October, after hitting its lowest point in January since 2009. Global LNG prices have also stabilised after crashing in 2014. After plunging to $6.08 per mmbtu in April-July 2016 quarter, LNG prices have climbed up to $7.15 mmbtu (Japan reference price), as per data compiled by the World Bank. Back home, renewable energy especially sector found favour with investors, with tariff falling to a new low of Rs 3 a unit, much lower than for many new coal-fired power plants. Rising international coal prices, coupled with weak electricity demand,

January 2017 www.InfralinePlus.com

CoverStory

led generators to defer import orders. Given the weak demand for coal, the government has also scrapped Coal India’s 1 billion tonne production target by 2020. Because of sluggish growth in electricity demand, the government has not envisaged any new capacity addition plan in coal-fired generation while four ultra mega power projects envisaged in Odisha, Chhattisgarh, Maharashtra and Tamil Nadu have been scrapped. Investment activity in the power sector is unlikely to pick up unless manufacturing gets demand boost. Demonetisation is likely to delay manufacturing revival by a couple of quarters, feel analysts. However, the silver lining is that the Goods and Services Tax (GST) is now proposed to be rolled out from April 2017. Experts feel that the manufacturing sector will revive in 2017-18, which would entail increase in demand for electricity and coal. “The demand of coal is going to be steady in the coming year,” said Dilip Kumar Jena, manager, PwC. Meanwhile, robust fuel demand threatens to push up India’s crude oil import dependence as domestic output continues to stagnate. The government overhauled policy to attract enhanced into oil and gas exploration. The government has also invited bids for the development of 69 small and marginal fields under the new

policy. Investors’ response to the auction would be seen as a referendum on the new policy. After a pick-up in the last fiscal, award of contracts for highways showed signs of slowing in the first half of the current fiscal. National Highways Authority of India not only awarded fewer projects but the total length of projects was also 16 per cent shorter compared to the same period last year.

In 2016, the government took several policy steps to attract investment into exploration and boost oil and gas production, including a shift to revenue-sharing dispensation from the production sharing regime, policy for extension of PSC period and marginal field policy. Based on the experience of Nelp implementation, the government has announced Hydrocarbon Exploration Licensing Policy (HELP) to give a boost to oil and gas production.

Oil and gas sees some action

The Modi government has targeted to bring down country’s crude import dependence by at least 10 per cent by 2022 but this sounds more like a slogan than serious commitment. Crude oil production during April-November was 3.6 per cent lower compared to the same period last year. On the other hand, petroleum consumption grew by 9.4 per cent during the same period, which means crude import dependence, which has already crossed 80 per cent of the country’s requirement, would further rise in 2016-17. Drop in natural gas output was even sharper at 3.7 per cent lower during April-November period. The LNG import during the same period was 23.2 per cent higher compared to the corresponding period of the previous year. In 2016, the government took several policy steps to attract investment into exploration and boost oil and gas production, including a shift to revenue-sharing dispensation from the production sharing regime, policy for extension of PSC period and marginal field policy. Based on the experience of New Exploration Licensing Policy (Nelp) implementation, the government has announced Hydrocarbon Exploration Licensing Policy (HELP) to give a boost to oil and gas production. The government also unveiled uniform licensing for both conventional and non-conventional resources, a move that would facilitate extraction of coal bed methane, shale and shale gas. The government also introduced new gas pricing formula that would provide marketing and pricing freedom for new production from difficult fields like those in deepwater, ultra deepwater and high pressure-high temperature areas. This pricing, which is subject to a cap based on the price of alternative fuels, is expected to improve the viability of capital-intensive offshore projects. The government also introduced a concessional royalty regime for

January 2017 www.InfralinePlus.com

deepwater and ultra-deepwater areas — no royalty for the first seven years, and thereafter the rate will be 5 per cent and 2 per cent, respectively. Royalty rates for shallow water areas have been reduced from 10 per cent to 7.5 per cent. The government has also unveiled a vision document to ensure speedier exploitation of hydrocarbon resources in the North-East region. However, refiners and retailers are having a good time as consumers splurge on cheaper fuel. Three oil PSUs – IOC, BPCL and HPCL – are planning a mega refinery, with annual processing capacity of 60 million tonne, on the west coast to benefit from the projected explosion in the country’s fuel demand. The implementation cost for the proposed refinery is estimated at Rs 2 lakh crore. State-owned refiners have already committed a huge investment to reconfigure specifications of their refineries to produce greener fuels compliant with euro-VI norms. Because of high crude oil imports, India’s current account has been its traditional vulnerability. A sudden increase in current account deficit could trigger capital flight and send rupee into a free fall. “The most significant development in energy sector in 2017 would be how the crude prices move when the Opec and select non-Opec members actually implement the production cut as decided a month ago. India has been having a lucky run in last 30 months due to low oil prices, if there is sudden jump in prices, the stress would be felt by the world’s fourth largest consumer of oil, that imports 80 per cent of its requirement” warned Debasish Mishra, Partner at Deloitte Touche Tohmatsu India LLP. The government can cushion fuel consumers by rolling back excise duty hikes on petrol and diesel if international crude oil prices remain below $65 a barrel. If this mark is breached, the government will have to bring back some kind of subsidy-sharing mechanism to cushion consumers or let market forces decide fuel price. If the

The petroleum and natural gas sector attracted FDI worth $ 6.67 billion between April 2000 and March 2016. Investments in India’s oil and gas sector will likely touch $ 37.28-44.73 billion over the next few years, which will help raise the share of gas in the country’s primary energy mix to 15 per cent by 2030, says BP Group government chooses the latter option, it could risk political backlash. So the government would be cautious while passing on increase in global crude oil prices to consumers. According to data released by the Department of Industrial Policy and Promotion, the petroleum and natural gas sector attracted FDI worth $ 6.67 billion between April 2000 and March 2016. Investments in India’s oil and gas sector will likely touch $ 37.28-44.73 billion over the next few years, which will help raise the share of gas in the country’s primary energy mix to 15 per cent by 2030, says BP Group.

The gloomy outlook on country’s natural gas production in coming years augurs well for LNG imports. India is the fourth-largest LNG importer after Japan, South Korea and China, and accounts for 5.8 per cent of the total global trade. Domestic LNG demand is expected to grow at a compounded annual growth rate (CAGR) of 16.89 per cent to 306.54 MMSCMD by 2021 from 64 MMSCMD in 2015, say analysts. That would call for a commensurate increase in gas pipeline network capacity an LNG infrastructure. The government’s ambitious plan to more than double the share of natural gas in India’s energy mix -- from 6.5 per cent in 2015 to 15 per cent over the medium term -- would necessitate investments of at least Rs 65,000 crore (nearly $10 billion) just to augment infrastructure for gas import and for laying pipelines. Gas pipeline infrastructure in the country stood at 15,808 km in December 2015.

A year marked by acquisitions

Russian oil major Rosneft acquired 98 per cent stake in Essar Oil and related infrastructure such as captive port and power units at an enterprise valuation of Rs 86,100 crore, including debt. This is the largest foreign direct investment into India which would wipe off half of the Essar group’s debt.

January 2017 www.InfralinePlus.com

CoverStory

In 2016, ONGC Videsh completed acquisition of 15 per equity in Vankor Field located in East Siberia of the Russian Federation from Rosneft Oil Company and subsequently acquired additional 11 per cent interest. Vankor is Russia’s second largest field by production and accounts for 4 per cent of Russian production. The average daily production from the field is around 415,500 barrels per day of crude oil (bopd) since acquisition and ONGC Videsh’s share of daily oil production from Vankor (considering both the acquisitions) will be about 108,030 bopd. ONGC Videsh and Petroleos De Venezuela SA (PDVSA) signed definitive agreements for facilitating redevelopment of the San Cristobal joint venture project in Venezuela in November. The redevelopment plan aims to increase the current level of production of about 18,000 bbl/day to 27,000 bbl/day by use of water flooding techniques. The agreement also provides for mechanism to liquidate ONGC Videsh’s outstanding dividends from the project and obtain long term finance for the capital investment for implementing the redevelopment plan.

Market for clean fuel, digital technology set to increase

In its quest for clean fuel, India is expected to witness investments to the tune of Rs 15,000 crore in the biofuel industry in the next few years. This comes at a time when the government is expecting biofuel business in the country to touch Rs 50,000 crore by 2022. As per estimates, public-sector undertakings are set to invest Rs 4,000 crore to produce blended fuels and another Rs 5,000 crore to set up nine plants that will produce second-generation ethanol produced from sources other than molasses, like biomass. Apart from this, Numaligarh Refinery would invest Rs 950 crore to set up 300,000 tonnes bio fuel plant.

Among private-sector players, Praj Industries is planning to invest Rs 3,000 crore for multiple refinery projects, CVC Bio-refinery is setting up two projects in Gujarat and Punjab for Rs 1,000 crore, and Munzer Biofuel will invest another Rs 300 crore for a biodiesel plant in Mumbai. In the area of digital technology, despite the downturn, oil and gas companies plan to invest the same amount or more in digital technologies—including cloud-enabled mobility, Big Datapowered analytics and the Internet of Things (IoT), says Accenture Consulting. According to Accenture, as upstream oil and gas companies scrutinise every dollar invested, they’re spending smarter today on digital technologies, seeking to drive value and reduce costs amid low oil and gas prices.

Outlook for 2017

Following the OPEC agreement on supply cut, it is widely believed that crude oil prices are expected to see an upswing in 2017. However, Goldman Sachs thinks otherwise. According to the firm, the OPEC deal to cut oil production may provide a short-term support for prices, but chances are it won’t change the supply outlook much. Goldman said that it was sticking with its forecasts for WTI at $53 a barrel in 2017. The investment bank had cut its year-end forecast this week from $50 a

barrel. “If this proposed cut is strictly enforced and supports prices, we would expect it to prove self-defeating medium term with a large drilling response around the world,” Goldman’s analysts said. Back home, ONGC has recently signed agreements with Schlumberger and Halliburton Offshore Services for enhancing production from its matured fields of Geleki in Assam and Kalol in Gujarat, respectively. Schlumberger will provide its technical expertise with investments for service charge payable to them on per barrel of oil and per SCM of natural gas of incremental production of oil and gas respectively. Halliburton too will provide similar support to ONGC. Analysts say this model by be adopted by other upstream players too in coming days. If oil prices keep surging in the international market, the government might unveil new incentives to attract investment and expedite exploration, say analysts. The government might also push oil PSUs to expedite acquisitions of oil and gas assets abroad if international energy surges beyond its comfort. Investment in gas and LNG infrastructure will continue uninterrupted given the low share of gas in India’s primary energy mix and bleak prospect of growth in domestic production. Foreign investors are likely to increase their wager on retailing sector

January 2017 www.InfralinePlus.com

which has seen withdrawal of subsidies and introduction of a level playing field in recent years.

Coal losing favour?

Weak demand for electricity impacted capacity utilisation of coal-fired power plants in 2016. The plant load factor (PLF) of coal-based power plants varied between 54 and 67 per cent and the average PLF was lower compared to 2015. Domestic coal production grew by an anaemic rate of 1.6 per cent during April-November. Power plants based on imported coal postponed their fuel supply orders due to the double whammy of weak electricity demand and higher fuel prices. The coal ministry maintained its focus on increasing coal production as part of its strategy to rationalise dependence on imports. Through this policy, the ministry hopes to bring down coal import by over 15 million tonne in the current fiscal. Several new web portals like Coal Allocation Monitoring System (CAMS) and Coal Mitra Web Portal were launched by the ministry to promote ease of business and to bring transparency in distribution of coal to the small and medium-sized enterprises. As a first step towards commercial mining, the government offered 16 coal mines for allocation to state public sector undertakings for sale of coal or commercial mining. Of these, 8 coal

mines were earmarked for state PSUs of host states while the remaining was reserved for PSUs in other states. Subsequently, five coal mines were successfully allocated to PSUs’ of coal bearing-states and two to PSUs in other states. Allotment agreements have also been executed with the allocatees for seven of these coal blocks. In addition, allotment agreements were also signed for five coal mines under the provisions of the Coal Mines (Special Provisions) Act 2015 -- 3 for power and 2 for nonregulated sector -- during the period January-November 2016. But allotment

agreement has yet to be signed for Amelia coal mine, which is allotted for end use to a generator. In an innovative move, the government has allowed public and private power producers to swap their coal supplies with a view to reducing the cost of electricity by ensuring more efficient fuel usage. The government is likely to extend the facility to other coal-consuming industries sooner or later.

Quest for clean coal technology continues

As the world’s third largest coal producer, the development of modern coal technology is critical if the Indian government is to provide enough affordable electricity to address the needs of more than 300 million people that do not currently have access to this basic human need. Placing high efficiency, low emissions coal (HELE) technology at the heart of India’s energy policy will ensure significant CO2 and non-CO2 emission reductions, while generating the critical, stable electricity supply the country needs to meet its ambitions for the future. During Prime Minister Narendra Modi’s recent visit to Japan, India and Japan agreed to strengthen bilateral energy cooperation, especially in clean coal technologies. Both the countries underlined the importance of promoting further cooperation in such areas as clean coal technologies and popularisation of eco-friendly vehicles including hybrid vehicles, electric vehicles, etc. The preparatory work for the energy cooperation between the two sides was laid by Union power minister Piyush Goyal’s visit to Japan at the beginning of the year.

Outlook for 2017

Demand for coal is expected to pick up in 2017 on the back of revival in electricity generation which has been sluggish due to weak demand from the manufacturing sector. However, due to absence of a medium-term plan

January 2017 www.InfralinePlus.com

CoverStory

for capacity addition in generation, there will not be much pressure on domestic coal producers to step up output. However, as international coal prices are on upswing, generators using domestic coal will be at an advantage. Coal India has planned Rs 57,000 crore investment by 2020 to expand its mining capacity. However, the PSU may go slow as the government has scrapped the 1 billion tonne output target for the company. Further, coal-based power generation in the country faces an uncertain future in the back of the recent draft National Electricity Plan (NEP) released by CEA which projects no fresh coal-based capacity addition from 2022 to 2027. This has set the cat among the pigeons as the country is still heavily reliant on coal to meet its electricity needs and any attempt to tinker with the energy basket at this stage can have drastic implications not only for the energy sector but also for the entire economy. Clearly, this will have to be addressed by the industry in 2017.

Power sector faces slowdown

During the 12th Plan period (2012-17), a capacity addition of about 90463.22 MW against the target of 88537 MW has been achieved from conventional sources as on November, 2016 and about 21,128 MW against the target of 30000

MW from renewable sources have been achieved till September, 2016. However, during April-November 2016, electricity generation grew by just 4.9. Capacity addition in generation also slowed to 5,463 MW during AprilNovember compared to 8,346 MW registering 35 per cent decline. The Union power ministry has also given in-principle clearance to replace 11,000 MW thermal power plants, older than 25 years, with energy efficient super critical plants in about five years, with an investment of around Rs 50,000 crore. However, Crisil says it expects healthy power demand growth over the next 5 years (2016-17 to 2020-21). Industrial demand is expected to grow at a moderate pace in line with GDP growth and gradual pick-up in economic activity. However, residential demand is expected to witness stronger growth on account of high latent demand and rapid

Crisil says it expects healthy power demand growth over the next 5 years (2016-17 to 202021). Industrial demand is expected to grow at a moderate pace in line with GDP growth and gradual pick-up in economic activity

urbanization coupled with impetus from Government for rural electrification, the rating agency added. But capacity addition in transmission network continued at a brisk pace. As much as 42,005 MVA of transformation capacity was added during April-November, compared to 33,181 MVA in the same period last year. Meanwhile, the Union power ministry has maintained its focus on ensuring uninterrupted power supply to all by 2019. To this end, specific plans are under implementation in 34 states and Union territories. Only UP and Tamil Nadu are yet to sign agreements with the Centre. During the 12th Plan period (2012-17), nearly 88,928 MW of conventional power generation was added till October end against the 12th Plan (2012-17) target of 88,537 MW. A total of 3000 MW of inefficient thermal generating capacity was also retired during the current year till October end. Due to large generation capacity addition, electricity energy shortage in the country has reduced to 0.7 per cent during April-October, 2016 from 8.7 per cent during the year 2012-13. Adequate supply of the domestic coal to power plants has been ensured. Nearly 1,00,468 ckm-long transmission line was laid down till October end against the target of 1,07,440 ckm for the 12th Plan. Transformation capacity of 2,88,458 MVA was also added during the period against the target of 2,82,750 MVA. The government has launched a scheme by providing support from Power System Development Fund (PSDF) for operationalisation of stranded gas-based generation. The outlay for the support from PSDF has been fixed at Rs 4,000 crore for the current fiscal. It was Rs 3,500 crore in 2015-16. Deen Dayal Upadhyaya Gram Jyoti Yojana (DDUGJY) projects with total cost of Rs 42392 crore for 29 states and Union territories have been sanctioned. The Ujjwal Discom Assurance Yojana (UDAY) seems to have found

January 2017 www.InfralinePlus.com

favour with the states, with as many as 17 states including Jharkhand, Chhattisgarh, Rajasthan, Uttar Pradesh and Union Territory of Puducherry joining the loan repricing scheme introduced by the Union power ministry in 2015. The Centre has now extended the deadline till March end to help other states avail the scheme. Bonds to the tune of Rs 1.82 lakh crore has been issued by states which have joined UDAY so far. A multi-level monitoring mechanism has been put in place to ensure a close monitoring of performance of the states participating in UDAY. The Union cabinet approved the new electricity tariff policy, which would encourage harnessing of hydro as well as renewable energy resources. Promotion of renewable general obligation, compulsory electricity procurement by discoms from wasteto-energy plants, exemption from competitive bidding for hydel projects till 2022 are key features of the policy. The Centre also took initiatives like separate e-auction for power sector and revision of guidelines for short-term procurement of electricity by discoms through competitive bidding route.

Little technology play

Kanoria Group Company, IPCL, and Germany’s Uniper will build a new technology that will allow coal-fired power plants to start generation at a short notice, which would in turn help in better integration of renewable power into grid. In what would be a new technological jump in the power transmission sector, state-owned Power Grid plans to use drones to monitor project development in critical areas. The PSU has already received approval to deploy drones from a committee that includes representatives from the ministries of defence, home affairs, and power, and allied departments. Japan will sell civil nuclear power equipment and technology to India, as per the agreement by the two sides

during the recent visit of Prime Minister Narendra Modi to that country. This is the first time Japan agreed to such a deal with a country that is not a member of the Nuclear Non-Proliferation Treaty.

Outlook for 2017

Demand for electricity is set to pick up in 2017 and in subsequent years as states move towards implementing “Power for all”. Besides, Centre’s flagship programmes like Make in India, Digital India and growing rural electrification are also expected to add to electricity demand. India needs a cumulative $2.8 trillion investment in energy supply by 2040, threequarters of which goes to the power sector, and a further $0.8 trillion to improve energy efficiency, according to International Energy Agency. Given the government’s resolve to speed up development of transmission network and debt structuring of state discoms under UDAY, the sector outlook for 2017 remains positive. “Power sector will look forward to improved demand and better liquidity in 2017 on the back of reforms initiated in 2016”, said Salil Garg, Expert, India Ratings and Research Private Ltd.

Renewable steals the limelight

Renewable energy sector, especially solar remained the darling of investors

in 2016 and it is likely to get attention in 2017 as well given the urgency to fight climate change despite election of Donald Trump as next US president. The government has targeted to have 1.75 lakh MW renewable power by 2022. Against that, over 46,000 MW capacity was added till the end of October, the fourth largest in the world. Solar tariff fell to an all-time low of Rs 3 per unit in an auction for rooftop solar power conducted by Solar Energy Corporation of India (SECI). The offer was made by Amplus Energy Solutions. But 2016 also saw US-based solar developer Sun Edison file for bankruptcy. India has targeted to have 1 lakh mw solar power by 2022. Against that, it has added 8,727 MW capacity as at the end of October. India has targeted to add 16,725 MW renewable power capacity in current fiscal including 12,000 MW solar, 4,000 wind, 500 mw biomass and 225 mw based on small hydro projects. The capacity addition plan will be scaled up to 20,450 MW in 2017-18 and 22,150 in 2018-19. The government has taken various measures to encourage capacity addition in renewable power, including setting up of exclusive solar parks; development of power transmission network through Green Energy Corridor project; identification of large government complexes/ buildings for rooftop projects; provision of roof top solar and 10 percent

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CoverStory

renewable energy as mandatory under Mission Statement and Guidelines for development of smart cities. The government has also introduced amendments in building bye-laws for mandatory provision of roof top solar for new construction or higher Floor Area Ratio; granted infrastructure status for solar projects to help issue tax free bonds and secure long-term funding. As a step towards fulfilment of the Government of Indiaâ&#x20AC;&#x2122;s target for installation of 40 GW rooftop solar power plants by the year 2022, SECI recently floated a tender of 1,000 MW capacity for development of gridconnected rooftop solar capacity for central government ministries and departments. This would be the largest rooftop tender to be launched by SECI, and is expected to give a big boost to the hugely potent rooftop solar power generation segment. Union power minister Piyush Goyal and US Ambassador to India Richard recently launched US-India clean energy finance (USICEF) initiative which would support project preparation activities for distributed solar projects in order to unlock OPIC financing and mobilize public and private capital to expand access to distributed clean energy solutions that will benefit disadvantaged communities in India and contribute to Indiaâ&#x20AC;&#x2122;s ambitious renewable energy and energy access goals. USICEF builds on the success of other project preparation facilities to support renewable energy in emerging markets. Through this initiative, project developers pursuing mini-grid, distributed rooftop and offgrid solar projects, as well as smallerscale grid connected solar projects would be benefited.

Wind

Nearly 1502 MW wind power capacity has been added till October end against the target of 4,000 MW for 2016-17. The cumulative capacity has reached 28,279 MW, making India the fourth

largest player in the world after China, US and Germany. The government has approved a scheme for building 1,000 MW Inter State Transmission System (ISTS) connected wind power projects. The scheme provides for formulation of guidelines by MNRE for implementation of the programme. ICRA said that the scheme for award of 1000 MW wind-based projects would facilitate the consumption of wind based generation by distribution utilities in states with limited wind energy resources, which would in turn would enable discoms in such states to honour their non-solar RPO requirement

As more and more renewables get integrated into the grid, Energy Storage will play an important role in helping with grid management and smoothing out the peak curve created by Renewable Energy. It is expected that Energy Storage will be a multi GW market in the years to come. However, as of now, the renewable energy sector is still awaiting a breakthrough in energy storage technology to some extent. Although the option of renewable energy certificate (REC) is already available for such utilities to meet the RPO norm, ICRA that the REC route is not exercised by the distribution utilities in many cases. While the scheme would also encourage the addition of fresh capacity in the sector, the extent of fresh capacity addition could be lower than the 1,000 MW approved under the scheme, the rating agency added. The MNRE has issued draft guidelines for devel-

opment of onshore wind power projects with provisions for hybridisation and repowering. The draft envisages clear timelines for completion of project after grant of land use permission to prevent squatting of land.

Energy storage holds key

As more and more renewables get integrated into the grid, Energy Storage will play an important role in helping with grid management and smoothing out the peak curve created by Renewable Energy. It is expected that Energy Storage will be a multi GW market in the years to come. However, as of now, the renewable energy sector is still awaiting a breakthrough in energy storage technology. Unless that happens, the sector will have to contend with intermittency, which limits its role in meeting electricity requirement without interruption. Apart from energy storage, another technology which came to limelight in 2016 is the Digital Wind Farm of GE. The company has unveiled its latest innovation in the Industrial Internet era, The Digital Wind Farm, which it says is making its turbines smarter and more connected than ever before. According to GE, the Digital Wind Farm pairs its newest turbines with a digital infrastructure, allowing customers to connect, monitor, predict and optimize unit and site performance. This technology has a lot of potential for a country like India.

Outlook for 2017

Determined to meet emission commitments made under the Paris climate agreement, the Modi government is focusing on reducing reliance on fossil-fuel generated electricity. That is the reason it is aggressively pursuing capacity addition in renewable sector. What is aiding the governmentâ&#x20AC;&#x2122;s plan is the falling price of solar equipment, which is progressively reducing tariff. On the back of strong government push, aggressive solar bidding, falling prices

January 2017 www.InfralinePlus.com

of equipment and positive investor sentiment, the sector is expected to continue the growth momentum in 2017.

Infrastructure push required

The infrastructure sector continues to reel under demonetisation announced by Prime Minister Narendra Modi on November 8. The real estate sector has been hit hard due to exodus of workforce deployed at project sites. There is a fear that some project could miss their schedules committed to homebuyers. The cash driven real estate also apprehends drastic fall in prices, which would help buyers no doubt. However, the sector might benefit if banks lower interest rates. The road and highways sector also fared worse in 2016-17 compared to the previous year despite increase in infra spending and provision of fiscal sops by the government. As per available data, the National Highways Authority of India (NHAI) awarded fewer contracts in the first six months of the current financial year, compared to the same period last year. Not only was the number of projects less this year, the total length (km) of these projects was also down 16 per cent. The shortfall is because the government was not ready with the detailed project reports (DPR). Besides, land was to be made available on priority. Projects awarded by the NHAI in 2015-16 spanned about 16,600 km. The pace of road construction also improved by 40 per cent to 6 km per day in fiscal 2016 from an average 4.3 km per day in fiscal 2015. Thirty-six highway contracts, totaling a length of 2,549 km, had been awarded during April-September 2016. However, in the first half of 2016-17, 29 projects of 2,130 km, estimated at Rs.26,000 crore were awarded. Half of the total contracts awarded this year were on hybrid annuity model, where the government would bear 40 per cent of the total highway cost. As many as 11 projects were awarded on engineering, pro-

curement and construction basis. Transport minister Nitin Gadkari has announced the government’s target of Rs 25 lakh crore ($ 376.53 billion) investment in infrastructure over a period of three years, which will include Rs 8 lakh crore ($ 120.49 billion) for developing 27 industrial clusters and an additional Rs 5 lakh crore ($ 75.30 billion) for road, railway and port connectivity projects. Gadkari recently announced Rs 2 lakh crore worth of highway projects in the poll-bound states of Punjab and Uttar Pradesh. However, only three projects in Punjab

The road and highways sector also fared worse in 2016-17 compared to the previous year despite increase in infra spending and provision of fiscal sops by the government. As per available data, the National Highways Authority of India (NHAI) awarded fewer contracts in the first six months of the current financial year, compared to the same period last year have made it to the list of 29 contracts awarded since April, while UP bagged only one project. The total cost of these projects is Rs 3,330 crore. The Centre is planning to boost regional connectivity by setting up 50 new airports over the next three years, out of which at least 10 would be operational next year. The government also plans to invest over Rs 7,000 crore (US$ 1.04 billion) in FY2016-17 to develop its network in the north-eastern region for better connectivity. The Reserve Bank has allowed companies in the infrastructure sector to

raise external commercial Borrowings with a minimum maturity of five years and with an individual limit of $ 750 million for borrowing under the automatic route. The shipping ministry’s Sagarmala Programme is now moving from the conceptualization and planning to the implementation stage. The National Perspective Plan (NPP), for the comprehensive development of India’s coastline and maritime sector, has been released. As part of Sagarmala, more than 400 projects, at an estimated infrastructure investment of more than Rs. 7 lakh crore, have been identified across the areas of port modernisation and new port development, port connectivity enhancement, port-linked industrialisation and coastal community development. These projects will be implemented by relevant central ministries, state governments, ports and other agencies primarily through the private or PPP mode.

Outlook for 2017

The infrastructure sector remains a key priority area for government spending. The challenge for the government is to ensure cheaper funding for the sector. International investors are ready to put big in India’s infrastructure projects. However, they remain hesitant given the dismal failure of the government in the past to abide by contracts in the face of judicial activism and public protests. After coming into power in May 2014, the Modi government has tweaked contractual terms to unclog stalled public-private partnership (PPP) projects in the road sector. It has also launched Rs 40,000 crore National Infrastructure and Investment Fund to ensure cheaper funding for road and highway projects. The government will be well-advised to sweeten terms of model contract to win back confidence of investors spooked by Indian state’s failures to maintain contractual sanctity. For suggestions email at feedback@infraline.com

January 2017 www.InfralinePlus.com

NewsBriefs | Oil & Gas India’s fuel consumption jumps over 12 per cent on demonetization

India’s fuel demand growth continued its upward trajectory for the third straight month in November 2016 fuelled largely by demonetisation that allowed the use of banned Rs 500 and Rs 1,000 notes for payment of auto and cooking fuels. The consumption of petrol,

diesel, kerosene and cooking gas rose 12 per cent during the month as compared to a 6 per cent growth in the same month last fiscal (Nov 2015). According to data published by Petroleum Planning & Analysis Cell (PPAC), overall fuel consumption rose 9.4 percent for the first eight months of the current fiscal as compared to 9.5 per cent growth in the corresponding period last fiscal. Motor spirit (Petrol) consumption recorded a growth of 14.2 percent in November 2016 and on cumulative basis registered y-o-y growth of 11.7 percent. PPAC attributed the high growth to consumer preference for petrol-driven vehicles, continued high sale of two-wheelers and the policy on scrapping old diesel vehicles.

Essar Oil posts record Rs 2,162 crore net profit for FY16

Essar Oil earned a record net profit of Rs 2,162 crore in the 2015-16 fiscal on back of robust refining margins. Essar earned a highest-ever USD 10.81 on turning every barrel of crude oil into fuel during the fiscal as compared to a current price gross refining margin of USD 8.37 a barrel in the previous year. Essar Oil got delisted from stock exchanges last year and is therefore, not obliged by regulations to report quarterly numbers and this is the first time it is giving financial earnings for 2015-16. “In FY201516, the company achieved its highest ever EBIDTA of Rs 7,773 crore, which was 35 oer cebt higher than the previous year. The Profit after Tax was also at a new high of

Rs 2,162 crore -- a rise of 42 per cent from FY2014-15,” a company statement said. The total throughput of the refinery stood at 19.1 million tonnes in 2015-16, compared to 20.49 million tonnes in the previous year. The lower throughput during the year was on account of the planned shutdown of 28 days, undertaken during the September-October period, it said.

National Bhatinda Refinery eyes Rs 5,000 crore for expansion

The Guru Gobind Singh refinery at Bhatinda in Punjab will increase its refining capacity to 18 million metric tonnes per annum (mmtpa) and set up a petrochemical complex, people aware of the development said. The unit, also known as Bhatinda Refinery, is run by HPCLMittal Energy Ltd (HMEL), a joint venture between Hindustan Petroleum Corp. Ltd and Mittal Energy Investments Pvt. Ltd, Singapore. HPCL and Mittal Energy Investments hold 49% stake each in the venture, with financial investors owning the rest. “Expansion plan for the refinery is in the process and we would be setting up a petrochemical complex as part of the refinery expansion. We are working on the plan and would be shortly finalising details,” said an official. It is learnt that the company would be funding expansion through a combination of equity and debt syndication by banks to the tune of Rs5,000-6,000 crore. HMEL is currently expanding the capacity of the refinery from 9 mmtpa to 11.5 mmtpa, raising refinery throughput by about 25%.

ONGC to pay $1.2 billion for GSPC assets in KG Basin Oil and Natural Gas Corp (ONGC) will pay $1.2 billion for Gujarat State Petroleum Corp’s (GSPC) entire 80% stake in the Deen Dayal West field and six other finds in the KG Basin in a deal that would help the Gujarat firm de-leverage. ONGC will acquire the participating interest of GSPC, a company of the Gujarat government, along with the operatorship in the Deen Dayal West field for $995.26 million, the company said. Jubilant and Geo Global Resources have 10% each in the field. ONGC would also pay GSPC $200 million towards future consideration for six discoveries other than Deen Dayal West Field, which

will be adjusted against the valuation of these discoveries after the approval of their field development plans. “The acquisition of participating interest and operatorship rights in the block fits well with the strategy of ONGC to enhance natural gas production from domestic fields on a faster pace ... with a goal to reduce import dependency of

hydrocarbons by 10% by year 2021-22. The trial gas production from Deen Dayal West Field has already begun,” the company said. It said the acquisition would act as a pivot to develop other fields in the region using the infrastructure already built by GSPC. GSPC had announced the gas discovery in the Deen Dayal West field with much fanfare when Narendra Modi was Gujarat’s chief minister. Subsequently, the company faced unexpected technical hurdles resulting in a rise in development expenditure, debt and delay in execution. GSPC has spent $3 billion to develop the field but hasn’t been able to start commercial production.

January 2017 www.InfralinePlus.com

NewsBriefs | Oil & Gas CCEA nod likely for farming out 67percent of oil blocks in January

The Cabinet Committee on Economic Affairs (CCEA) is likely to award around 31 oil and gas blocks to various bidders out of 46 contract areas (or 67 per cent) which were put on offer. A final nod for awarding the contract areas to the selected bidders in discovered small and marginal field

(DSF) auction will happen only by the third week of January. Earlier, the Dharmendra Pradhan-led ministry had indicated that the fields were likely to be allotted to the parties concerned by the end of December. The Directorate General of Hydrocarbons (DGH), an arm of the petroleum and natural gas ministry, which was conducting the bidding, has already forwarded the list of selected bidders to the ministry of petroleum. The ministry is likely to move the Cabinet for its final clearance by the third week of January. Forty-two companies took part in the current round of auction for the small and marginal fields, of which 37 were private companies.

Dilip Shanghvi’s Sun Oil buys out Niko Resources stake in Hazira field Billionaire Dilip Shanghvi’s Sun Oil and Natural Gas has bought a 33.3% stake in the Hazira oil and gas field from Canada’s Niko Resources Ltd and is in talks to buy the rest from Gujarat State Petroleum Corp. Ltd (GSPC).The deal value, however, could not be ascertained. Niko has operated the field for 22 years. Sun Oil and Natural Gas is a unit of Shanghvi’s Sun Petrochemicals Pvt. Ltd while GSPC is 87% owned by the Gujarat government. The Hazira field is part of 16 hydrocarbon assets in Gujarat’s Cambay basin where GSPC holds stakes. Currently, the Hazira field produces 1,300-1,400 barrels of oil per day (bopd) and 7-9 million standard cubic feet of gas per day. Niko is

also a 10% partner in Reliance Industries Ltd’s (RIL) and BP Plc’s D6 block in the Krishna-Godavari (KG) basin. It has been facing financial headwinds owing to which on 9 November it said it would sell its stake.

National

RIL commissions 1st phase of paraxylene plant at Jamnagar

Reliance Industries announced the commissioning of the first phase of its Paraxylene (PX) plant at Jamnagar, Gujarat. The plant with capacity of 2.2 million tons per annum is built with state-of-the-art crystallisation technology from BP which is highly energy efficient and environment friendly. “With the commissioning of this plant, RIL’s PX capacity will more than double from 2.0 million tons to 4.2 million tons per annum,” a company statement said. On commissioning of entire PX capacity, Reliance will be the world’s second largest PX producer with 9 per cent of global PX capacity and 11 per cent share of global production. The new PX capacity will add value to the output from refineries and improve the profitability of the Jamnagar complex. PX is the building block for the entire polyester chain. The new capacity will complete the integration within Reliance’s polyester value chain, leading to improved margins and also strengthen its position in polyester industry globally.

Railways to run passenger trains on LNG, cut diesel costs by 20percent Brace for a pollution-free train ride soon. Indian Railways has decided to move towards using Liquefied Natural Gas, commonly called LNG, to run its passenger trains, converting all its exiting locomotives into dual-fuel based. The driving power cars, which so far have been using diesel as its fuel, would now be retro-fitted to use LNG as well, for the first time, sources said. The aim is to cut down on diesel consumption by 20%.To achieve this, the locomotives have to be overhauled with enhanced safety features as LNG is a hazardous inflammable fuel. The development comes at a time when

petroleum prices are now on an uptrend with most oil marketing companies raising retail prices of diesel by as much as Rs

1.80 a litre. In contrast, use of LNG would mean significant savings for the Railways as the country has recently renegotiated a long-term deal with Petronet LNG Ltd in December reworking a 25-year contract with Qatar’s RasGas Co, resulting in prices dropping by almost half. Indian Railways has firmed up the plan under which it would convert existing and new driving power cars of diesel-run trains, called DEMUs into dual-fuel system. Initially, all Cummins 1400 HP engines would be taken up for conversion, which are either new or freshly-overhauled engines done after 18,000 hours of run.

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NewsBriefs | Oil & Gas Asia set for biggest refining capacity jump in three years

Asia will post its biggest net refining capacity addition in three years in 2017, further boosting demand for crude in the world’s biggest and fastest growing oil consuming region. New and expanded refineries from China to India will offset closures in Japan, adding a net 450,000 barrels per day (bpd) of crude processing capacity in 2017, the

highest since 2014, energy consultancy Wood Mackenzie said. The increase amounts to about an additional 1.5 percent of refining capacity on top of Asia’s total installed capacity of nearly 29 million bpd, Thomson Reuters Eikon data shows.”Heavy crude demand in particular is expected to rise in 2017 as more Asian facilities undergo upgrading and new ... refineries come online,” said Sushant Gupta, WoodMac’s Asia research director for refining. The rise in capacity will tighten Asia’s crude market as it coincides with planned output cuts by oil producers like the Organization of Petroleum Exporting Countries (OPEC) and Russia in a bid to end oversupply and prop up prices.

Indonesia plans shake-up of upstream oil and gas contracts

Indonesia plans to change future production sharing contracts in its upstream oil and gas sector so that contractors shoulder the cost of exploration and production, rather than be reimbursed by the government. Energy Minister Ignasius Jonan said that the government plans to issue a new regulation in January so that such costs would be reflected by a more flexible split in revenue from production. Such a system, instead of the existing cost-recovery system, would be fairer and more efficient, and likely to increase proven reserves, he said. Big global resource firms such as Chevron, Exxon Mobil and Total operate in Indonesia, but the country has

struggled to attract fresh investment and to develop new fields. Indonesia’s chamber of commerce said it was waiting for more clarity on the plans and the Indonesian Petroleum Association said it was still in discussions with the government.

International Europe could absorb 40 bcm more gas per year if price right

Europe’s power industry could absorb around 40 billion cubic metres (bcm) of additional natural gas annually in coming years if gas prices fell against those of coal to lift generation margins, a study by German energy advisory Team Consult said. “Our core question was what is the potential of coal-to-power generation that could be replaced with gas,” said Jens Voeller, head of the gas business unit of the Berlin-based company. “We are aware that 40 bcm is a maximum level,” he added. Northwest European gas traders are trying to gauge such potential in a region where underemployed liquefied natural gas (LNG) terminals expect to receive a wave of global supply, especially from the United States and Australia. Team Consult looked at the utilisation and economics of gas-fired power plants in six European countries, namely Britain, Germany, Italy, the Netherlands, Belgium and Spain, over the past six to eight years.

Ghana gets fresh $517m World Bank loan for oil & gas The World Bank Group said two of its units would provide another $517 million to Ghana in debt and guarantees to support the $7.7 billion Sankofa oil and gas project developed by Italy’s ENI SpA and upstream trader Vitol Ghana. The financing adds to a $700 million World Bank guarantee package announced in July and brings the institution’s total financing to around $1.217 billion for the offshore project, whose gas component is set to open in 2018. The bank’s commercial lending arm, the International Finance Corporation (IFC), has committed a loan of $235 million to Vitol Ghana

and is arranging another $65 million in debt. Guarantees by the Multilateral Investment Guarantee Agency, another bank institution, will support Vitol

Ghana’s commercial borrowing needs for the project and will be issued for up to 15 years. The new pledges bring the World Bank Group’s financing share of the Sankofa project to about 16 percent. “Sankofa is expected to generate $2.3 billion in revenues for Ghana’s government per year and provide a stable, long-term source of domestic gas that will solve Ghana’s chronic gas supply constraints,” an IFC statement said. ENI holds a 44.4 percent stake in Sankofa, Vitol holds 35.6 percent and Ghana National Petroleum Corporation holds a combined carried and participating interest of 20 percent.

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InConversation Attractiveness for LNG spot contracts has increased Darshan Hiranandani, MD & CEO, H-Energy Private Limited, talks to InfralinePlus about the LNG scenario in India, companyâ&#x20AC;&#x2122;s growth plans and challenges in the natural gas industry. Please share your outlook on the LNG industry in India. India is one of the largest importers of natural gas after Japan, Korea and China. The increasing requirement of natural gas for new power generation projects, fertilizer plants and other industrial users has resulted into rapid growth in LNG demand over last few years. Currently, India has four LNG re-gasification terminals with a total capacity of appox. 30 MMTPA and proposed projects are likely to augment this capacity to approx. 50-60 MMTPA. Regasified LNG (RLNG) contributes to 45% (around 55 MMSCMD) of the total natural gas consumption in India which is 140-145 MMSCMD.Considering that the rising energy needs,steady decline of indigenous productionand discovery of domestic fields not keeping pace with the rate of decline of existing fields, the contribution of RLNG is expected to soar further. Today there are 250 million households in India. Only about 3.3 million are connected to gas which is barely 1.5%. This figure is expected to grow and become much stronger leading to more demand for natural gas consumption. What is the progress on the LNG project being executed by H-Energy on the west coast? We are setting up a LNG receiving

facilityat Jaigarh Port in Ratnagiri district of Maharashtra.The project will be implemented in 2 phases. Phaseâ&#x20AC;&#x201C;1 will consist of a jetty based FSRU [Floating Storage Regasification Unit] of approx. 4 MMTPA capacity and will be hooked up through a 60 km tie-in pipeline from Jaigarh to Dabhol. The project is strategically located at Jaigarh near Dabhol where two major trunk natural gas pipelines viz. DahejUran-Dabhol-Panvel (DUDPL) and Dabhol-Bangalore (DBPL) are interconnected. With this existing pipeline infrastructure, RLNG from Jaigarh LNG Terminal can be supplied to western, northern and southern markets giving the terminal access to existing gas markets. The first phase of the project is expected to be operational by Q2/2018. Phase-II will consist of construction of land based LNG regasification terminal with a capacity of 8 MMTPA.The subconcession agreement and port services agreement have been signed with JSW Jaigarh Port Limited. Jaigarh Port is an operating allweather and deep-water port with night navigation facilities. The port has an existing breakwater and sufficient draft which provides adequate tranquil conditions for berthing LNG carriers. The LNG terminal project has also received all major clearances, including approval

Darshan Hiranandani, MD & CEO, H-Energy Private Limited

from Maharashtra Maritime Board (MMB). Presently the company is in the process of finalizing the charter party contract for the FSRU and will initiate jetty construction work shortly to ensure timely completion of the project. The detailed route survey and regulatory permissions for the 60km tie-in line are in place and the laying of the pipeline will begin shortly. What is the update on the Jaigarh-Mangalore Natural Gas Pipeline? We have received authorization from Petroleum and Natural Gas Regulatory Board (PNGRB) to lay, build, operate or expand 637 km natural gas pipeline from Jaigarh to Mangalore. The pipeline will connect to the demand centers in the coastal towns and cities of Ratnagiri, Sindhudurg, Goa, Karwar, Udupi and Mangalore. It is expected that regasified LNG flowing through this pipeline will act as a key source of clean energy for industries, homes and vehicles in these coastal

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InConversation towns and cities which have been deprived of natural gas infrastructure so far. After receiving the authorization for this pipeline in June 2016, we have started detailed route survey work and are in the process of obtaining regulatory clearance required for the laying the pipeline.

The company also has plans to execute an FSRU on the East Coast. Please elaborate. We have plans to set up a Floating Storage and Regasification Unit (FSRU) at offshore Digha region, West Bengal. The FSRU will have regasification capacity of 3-4 MMTPA and is expected to be commissioned by Q4-2019. The offshore FSRU will deliver regasified LNG to onshore receiving facility (ORF) at Contai in West Bengal through a 115 km subsea pipeline.From the ORF the regasified LNG will be supplied to the customers through the 715 km ContaiDattapulia-Jajpur-Dhamra pipeline. The pipeline on its northern leg will serve regions of Haldiaand Kolkata in West Bengal and will also supply gas to customers in Western Bangladesh. On its southern leg, the pipeline will connect Dhamra, Pradeep and Bhubaneshwar in Odisha. H-Energy consortium was awarded this project through a tender by Kolkata Port Trust (KoPT) in August 2015 and will be the first offshore FSRU project in India. The project will enable customers in Eastern India to have access to regasified natural gas allowing them the opportunity to switch over from existing liquid fuels towards a cleaner fuel option. Please share your current investments and future plans. H-Energy is currently developing LNG re-gasification terminals and cross-country pipelines on the east and west coast of India.

This infrastructure project entails investment up to USD 2.0 billion. Being involved in sourcing of LNG and marketing of RLNG, H-Energy will pioneer a regime of contractual offers to customers that will strike a balance between commercial viability and flexible provisions for both buyer and seller which is still an alien concept to the existing industry. We also plan to enter into city gas distribution business for development of local gas pipeline network ensuring its presence in the midstream and downstream industries. What are the challenges in the Indian gas market today? Price volatility in the recent past has made customers sceptical towards long term contracts.Gas pricing issues remain a concern. The uncertainty in price is one of the major challenges in seeking long term contracts from customers. The attractiveness for spot-contracts has increased. When short-term contracts predominate, it deters investment

flows to infrastructure projects. That is what we are experiencing currently in the Indian market. Offtake planning for short term contracts is easier as demand in the near future can be more accurately forecasted than for a period of ten to fifteen years. The next three to five years are going to be quite crucial in determining how the markets are going to behave during the next decade. Demand from city gas is expected to grow faster as compared to industrial segment.Going ahead, operating on a demand pull rather than inventory push will help industry to grow. Customers will enjoy the freedom to opt for contractual arrangements that suits their requirement rather than being compelled to accept the terms of the seller. Industry will eventually make progress if business entities will collaborate rather than compete. Going ahead shared synergy is likely to be the norm of this industry.

For suggestions email at feedback@infraline.com

January 2017 www.InfralinePlus.com

InDepth

Strategic Petroleum Reserves: Insights and Recommendations

►►Crude from SPR can also be used to manipulate fuel prices ►► Bangladesh, Sri Lanka and Nepal can be involved to have a stake in SPR By Mohd. Arif, Analyst (Oil & Gas), Infraline Energy

Energy is rudimentary for the quality of life. All across the globe we are very much dependent on the uninterrupted supply of energy for our basic and advanced necessities. Any disruption in energy can prove to be lethal in the development of a nation as almost all the sectors are dependent on it. The major sources of energy include crude oil, natural gas, coal, nuclear energy, and renewables. The crude oil consumption is highest in the energy mix.

In 2014, crude oil and natural gas had a collective share of 57%. Countries like U.S., China etc. are having strategic storages of crude oil so that the same can be used in the case of any disruptions of supply from external sources, whereas on the other side Indian strategic petroleum reserves are in nascent stage. Since the price of crude oil is low these days, it is high time to make the most out of this situation by importing crude oil and storing it.

The strategic petroleum reserve (SPR) is an emergency storage of crude oil or refined products like gasoline, diesel etc. so that it can be used in an emergency situations like supply disruption from the main source, war etc. In today’s world, where energy is a necessity for everybody and crude oil’s share in the energy mix is about 33%, therefore, it is imperative for countries to safeguard their supply of crude oil. Apart from this, crude from

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InDepth

SPR can also be used to manipulate fuel prices. For example, if there is a sudden surge in the global benchmark price of crude oil for a shorter period then the effect can be negated by utilizing crude from SPR. Apart from this, stored crude can also be sold in international market so as to gain profits. Moreover, the most important factor is its use in the time of oil shocks or in the case of oil disruption, like we have witnessed in the past. India is having strategic storage facilities for crude oil and LPG. ISPRL (Indian Strategic Petroleum Reserves Limited) is the government agency which manages the

construction of strategic storage of crude oil in majorly three locations at present: Visakhapatnam (Vizag), Mangalore and Padur. These crude oil storages are in underground rock caverns and their location is such that they can be easily accessible to the refineries. The cost estimates of strategic crude oil reserves facilities in Visakhapatnam, Mangalore and Padur are Rs. 1178.35 crore, Rs 1227 crore, 1693 crore respectively. An additional capital of 265.79 crore will be provided by Hindustan Petroleum Corporation Limited (HPCL) for the added 0.3 MMT capacity at Visakhapatnam.

Stored crude can also be sold in international market so as to gain profits. Moreover, the most important factor is its use in the time of oil shocks or in the case of oil disruption, like we have witnessed in the past

Low crude oil prices

Learnings from the U.S. and China

• Geopolitics There is a tension going on between India and Pakistan over several issues like terrorism and Kashmir, in case of war, there will be a disruption in the supply of crude oil from overseas, as war will affect the transportation of crude oil. • Inclusion of foreign and domestic players With the establishment of SPR along with favorable policies, India can attract foreign players that can invest in India and this will consequently help in energy security and in the generation of employment. • Learning from the U.S. and China The U.S. has released its crude oil from SPR in the past in order to manipulate the prices of crude oil and China has included domestic and foreign players as a result of which its SPR are growing at a fast pace.

Parameters for the development of SPR

OPEC policies

• Low price of crude oil As there is a drop in global oil prices due to the supply glut because of cold war between U.S and Saudi Arabia. India can leverage from this by importing crude oil and filling up the SPR.

Geopolitics

Inclusion of foreign and domestic players

• OPEC policies OPEC member’s collective policies can make an impact in the energy scenario. Thus, to minimize the dependency of these countries, India should concentrate on the establishment of more SPR and utilizing existing SPR. The OPEC crude oil price is determined by the OPEC basket, which is a weighted average of crude oil produced by the OPEC countries. The price fluctuations can be easily seen in the graph. 2015 has witnessed an average price of $49.49 per barrel, which was the lowest since 2004 price of $36.05 per

January 2017 www.InfralinePlus.com

Crude Oil: Price history 2016*

3 9 .6 9

2015

4 9 .4 9

2014

9 6 .2 9

2013

1 0 5 .8 7 1 0 9 .4 5

2012

1 0 7 .4 6

2011 7 7 .3 8

2010 6 0 .8 6

2009 2008

9 4 .1

2007

6 9 .0 4

2006

2005

2004

the domestic market, the result will be the decrease in prices of refined products like gasoline and diesel. Although in the long run the price will bounce back, as they did in the case of the U.S., when they released the crude oil in the market for the same reason.

5 0 .5 9 3 6 .0 5

Source: Statista

International companies like Aramco, ADNOC, KNPC etc. have shown interest in storing and refining in India only, so as to reduce the transportation cost. Thus, an agreement can be done between the government and these foreign players to have a stake in SPR. barrel. The graph is shown in order to highlight the significance of appropriate timing to purchase crude in bulk so as to fill up SPR.

the world’s total energy will increase in the coming future. In order to secure the future of energy, India will have to maintain SPRs.

Need for Strategic Petroleum Reserve

• To earn profits: Although SPR is solely for strategic purposes, but it can be sold in small quantity in the market when the prices of crude oil are high so as to gain substantial profits. And it can be filled when the prices of crude oil are low.

• To bridge the supply demand gap in the case of emergencies: There will be a huge supply demand gap if the supply is stopped from the source. Strategic reserves will help in bridging this gap. • To increase the energy security: India is the fourth largest consumer of energy and its share in

• To manipulate domestic prices: Although this can be for short term only, but if the prices of refined products are high in the market because of high crude oil prices, then government can release crude oil in

• To increase foreign participation: International companies like Aramco, ADNOC, KNPC etc. have shown interest in storing and refining in India only, so as to reduce the transportation cost. Thus, an agreement can be done between the government and these foreign players to have a stake in SPR and they can store their products, but in the case of emergencies, India will have a right to use the stored oil. Foreign participation will also bring the money to India, and will help in reducing the import bill.

Major geo-political issues • Saudi Arabia and Iran The rivalry between Saudi Arabia and Iran is one of the main reasons of conflict in the Middle East. Saudi Arabia executed Iran’s leading Shia cleric Sheikh Nimr al-Nimr. However, the dispute between Saudi Arabia and Iran is historical. This animosity between the two nations can cause war. In the case of war, the nations that are dependent on the Saudi Arabian oil and Iranian oil will get affected. India’s main supply comes from Middle East, and Saudi Arabia is the largest supplier of crude oil to India. • Israel – Palestine conflicts Israel and Palestine conflict is one of the major conflicts in this era, and some countries are siding with Israel whereas some countries are siding with Palestine over the West Bank and Gaza strip land. A war

January 2017 www.InfralinePlus.com

InDepth

might result in the supply disruption of crude oil worldwide. • India- Pakistan conflict India and Pakistan have locked horns before also over the matter of Kashmir. In the case of war, crude oil supply from exporting countries might get affected as vessels filled with oil can become easy target for enemies. • Syrian civil war Syrian civil war is the protest against the President Bashar alAssad’s regime; many countries have intervened like U.S., Russia etc. Many civilians have died so far and many are migrating towards Europe. This is resulting in crude oil production loss as Syria is a significant oil producing country in Eastern Mediterranean Region. 52

Recommendations • Develop and implement a robust SPR policy A proper SPR policy needs to be developed or implemented and at the same time it is also required to be communicated, so that various potential stakeholders get aware about the favorable SPR policy and

they can show their interest in this business. • Fast track legal formalities For establishing SPR and to attract foreign players, it is necessary that legal aspects like paper work should be dealt with the speedy pace. This is essential because these aspects take too much time for approval in current scenario and due to which projects get delayed a lot. • Extracting data All the data should be extracted from all the countries that are having the SPR and are having ample experience in dealing with SPR like U.S, China etc. So that detailed study can be conducted and so that we can avoid the mistakes which they have made in the past, and we can learn from their experience. • Location identification All the potential locations for the establishment of SPR should be identified in order to clear the future course of action. • Involvement of neighboring countries Neighboring countries like Bangladesh, Sri Lanka and Nepal can

be involved to have a stake in SPR, this will help economically and speedy establishment of SPR. • Type of SPR with least maintenance cost should be identified and established There can be different types of SPR, each having different constructing and maintenance cost, the type of SPR having least maintenance cost should be established as crude filled in SPR will stay there for indefinite period of time.

Suggested SPR policy At present, 5 MMT of strategic storage of crude oil is already under construction. The main salient features of the suggested SPR policy are as under: • No custom duty on imports of equipment related to the construction of SPR should be levied • Proposal of one time lump sum investment of USD XX million by foreign players and share of X% in the stored crude, which they can further market the same at market determined prices • Corporate income tax should be payable as per the Income Tax Act, 1961 • Fiscal stability provision should be introduced in the contract • Pre-determined location according to phases should be planned and imposed • Bidding rounds should be conducted for getting the stakes in Strategic Petroleum Reserves • SPR should ideally be refilled when crude oil prices would be in the range of $X per bbl. to $Y per bbl • At the time of very high or uncontrollable oil prices in international market, the crude oil present in our SPR’s should be exploited in order to maintain internal stability • Foreign countries stake in the SPR should be up to X%. For suggestions email at feedback@infraline.com

January 2017 www.InfralinePlus.com

StatisticsOil & Gas Monthly Crude Oil Processed by Refineries (November, 2016) OIL COMPANIESÂ

APR

MAY

JUN

JULY

AUG

SEPT

OCT

NOV

TOTAL

IOCL-KOYALI, GUJARAT

1215

1240

1233

1273

1229

1084

1134

1185

7275

IOCL-MATHURA, UTTAR PRADESH

797

814

797

755

701

749

804

714

4613

IOCL-PANIPAT, HARYANA

1316

1386

1357

1400

1048

1234

1302

1294

7741

IOCL-HALDIA, WEST BENGAL

692

713

682

659

630

665

679

544

4042

IOCL-BARAUNI,BIHAR

559

577

547

576

571

513

481

523

3343

IOCL-GUWAHATI,ASSAM

436

Indian Oil Corporation Ltd.(IOCL)

IOCL-DIGBOI,ASSAM

251

IOCL-BONGAIGAON,ASSAM

212

215

200

215

202

193

212

213

1236

IOCL-PARADIP,ODISHA

394

538

257

697

465

445

807

554

2797

5313

5602

5183

5686

4953

4996

5543

5146

31733

IOCL TOTAL

Hindustan Petroleum Corporation Ltd.(HPCL) HPCL-MUMBAI,MAHARASHTRA

714

725

623

689

737

631

720

715

4119

HPCL-VISAKH,ANDHRA PRADESH

804

815

798

731

517

734

804

819

4398

HMEL-GGSR, BATHINDA, PUNJAB

920

945

878

909

934

915

816

754

5501

2438

2485

2299

2329

2188

2279

2340

2288

14018

HPCL-TOTAL

Bharat Petroleum Corporation Ltd (BPCL)

BPCL-MUMBAI, MAHARASHTRA

1146

1169

1163

1210

1212

1167

1245

1221

7068

BPCL-KOCHI, KERALA

895

933

897

923

938

924

975

1012

5509

NRL-NUMALIGARH, ASSAM

217

238

233

237

239

197

263

1244

BORL-BINA

534

617

532

502

588

501

610

171

3273

2791

2957

2825

2872

2977

2673

3027

2667

17094

CPCL-MANALI, TAMILNADU

821

807

878

951

957

885

939

833

5298

CPCL-NARIMANAM,TAMILNADU

275

877

856

911

1000

1003

927

985

872

5574

BPCL-TOTAL Chennai Petroleum Corporation Ltd (CPCL)

CPCL-TOTAL

Oil & Natural Gas Corporation Ltd.(ONGC) ONGC-TATIPAKA,ANDHRA PRADESH

MRPL-MANGALORE,KARNATAKA

1166

1232

1274

1332

1376

1302

1369

1400

7683

ONGC TOTAL

1173

1239

1282

1339

1382

1310

1376

1407

7724

2732

2856

2727

2814

2779

2658

2757

2655

16566

Reliance Industries Ltd. (RIL) RIL,JAMNAGAR,GUJARAT RIL-(SEZ), JAMNAGAR,GUJARAT

3115

2183

3215

3425

3224

3124

3224

3162

18284

RIL TOTAL

5846

5039

5942

6239

6003

5782

5980

5817

34850

ESSAR OIL LTD.,VADINAR,GUJARAT

1719

1779

1720

1760

1781

1751

1777

1727

10510

20157

19955

20162

21224

20287

19718

21028

19923

121504

GRAND TOTAL

January 2017 www.InfralinePlus.com

StatisticsOil & Gas Production of Petroleum products by refineries and fractionators (‘000 MT) PRODUCTS

APR

MAY

JUN

JULY

AUG

SEP

OCT

Nov

TOTAL

LPG

841

870

906

954

893

836

965

944

7209

NAPHTHA

1361

1364

1529

1738

1788

1761

1821

1650

13012

MS-III

815

887

867

799

791

838

890

6686

MS-IV

762

804

734

831

816

781

1033

860

6620

MS Others

1392

1525

1436

1438

1218

1223

1366

1152

10750 9039

ATF

1159

1057

1170

1114

1162

1066

1191

1129

SKO

507

583

586

616

513

547

464

386

4211

HSD-III

2805

3004

2932

2893

2564

2443

2715

2723

22079

HSD-IV

2448

2501

2421

2719

2531

2365

2900

2758

20644

HSD Others

2784

2602

3303

3426

3406

3066

3109

3018

24714 337

LDO

LUBES

702

1037

1131

925

1038

930

921

992

1034

8008

LSHS

186 3264

BITUMEN

590

578

475

268

227

251

414

461

RPC/Petcoke

979

962

1065

1104

1065

1071

1119

1134

8499

Others

1936

2069

1705

1624

1978

1890

1646

1356

14426

TOTAL,

19548

20090

20201

20707

20050

19165

20746

19656

160386

19295

19796

19924

20406

19747

18883

20445

19365

158083

OF WHICH : REFINERIES

FRACTIONATORS

253

294

277

301

303

282

301

291

2303

19548

20090

20201

20707

20050

19165

20746

19656

160386

Consumption of Petroleum Products (As on November, 2016) (In ‘000 MT) PRODUCT

16-Apr

16-May

16-Jun

16-Jul

16-Aug

16-Sep

16-Oct

16-Nov

LPG

1590

1599

1613

1708

1840

1874

1860

1882

SKO

516

530

533

502

497

501

380

387

2106

2129

2142

2216

2339

2374

2240

2269

(A) Sensitive Products

Sub total (B) Major Decontrolled Products MS

1996

2083

1845

1918

2204

1815

2106

2026

HSD

6767

6957

6384

5807

6134

5217

6673

6749

Naphtha

1107

1084

1129

1200

1156

1050

1106

1082

ATF

557

571

553

559

555

554

587

583

LDO

Lubricants & Greases

273

291

333

301

246

302

286

294

FO & LSHS

656

608

633

596

582

591

588

572

Bitumen

680

684

510

227

211

317

444

534

Sub total

12070

12314

11424

10523

11128

9883

11832

11882

(C ) Other Minor Decontrolled Products Petroleum coke

1570

1898

2327

2166

2749

1880

1837

1910

Others

509

530

566

608

571

561

578

579

Sub total

2079

2428

2893

2774

3320

2441

2515

2489

All Products total

16234

16848

15658

14922

15805

14792

16551

16639

January 2017 www.InfralinePlus.com

NewsBriefs | Renewable

International

India to invest $1.8 billion on lines to transmit solar power

India will invest Rs127 billion on lines to transmit power from solar parks to enable Prime Minister Narendra Modi’s goal of boosting clean energy capacity to 175 gigawatts by 2022. The dedicated transmission lines, part of the so-called green corridor

project, will transmit 20 gigawatts of power capacity from 34 solar parks across 21 states, the government said in a series of reports commissioned by minister for power, coal and mines Piyush Goyal. The reports were written by Power Grid Corp. of India Ltd to develop plans to integrate renewable energy on the national grid. The greenenergy corridor is part of the country’s plans to boost transmission capacity to enable a seamless flow of electricity from clean electricity producing states to consuming states that face power shortages. New lines will also help manage intermittency challenges of renewable energy, especially as clean sources increase their share of power generation to almost 50% in some states.

SECI floats tender for grid-linked 1GW rooftop solar As part of efforts to achieve the Centre’s target of 40 GW rooftop solar by 2022, Solar Energy Corp (SECI) has floated a tender of 1000 MW power for development of grid-connected rooftop solar capacity by utilising buildings of central ministries/ departments.“This would be the largest rooftop tender to be launched by SECI and is expected to give a big boost to the hugely potent rooftop solar power generation segment,” the New & Renewable Energy Ministry said. According to the ministry, the 1000 MW tender, one of the largest globally, is a move to rapidly escalate rooftop solar capacity in the country, and comes in quick succession to SECI’s earlier tender of 500

MW capacity, targeting buildings in the residential/institutional and social sectors. SECI is the leading PSU in the rooftop solar segment and has already commissioned over 54 MW capacity of rooftop solar projects under multiple government schemes.

National

Energy Efficiency Services net profit at Rs 35.59 crore for 2015-16

State-run Energy Efficiency Services Ltd (EESL) has registered a net profit of Rs 35.59 crore for 2015-16. “Net profit of the company in 2015-16 is Rs 35.59 crore, an increase of Rs 26.53 crore over the previous year,” a statement said. During the financial year 2015-16, the company registered an increase of Rs 646.31 crore in revenue from operations, which went up to Rs 708.84 crore from Rs 62.53 crore, it said. EESL declared Rs 10.68 crore towards dividend for 2015-16 in comparison to Rs 2.72 crore in the previous year.”The net worth of the company as on March 31, 2016 has increased from Rs 110.33 crore to Rs 208.03 crore,” it added. EESL, a joint venture company of NTPC Limited, Power Finance Corporation Limited, Power Grid Corporation of India Limited, Rural Electrification Corporation Limited under Ministry of Power, concluded its 7th Annual General Meeting on December 24, 2016. EESL Chairman K K Sharma said the company is growing at an exceptional pace and poised for a big leap in the coming years.

India will be among the largest installations of renewable energy by 2022: Piyush Goyal Asserting that the present generation has the duty to leave behind a better place to live in for the next generation, Minister of State for Power, Coal, New and Renewable Energy and Mines Piyush Goyal said by 2022, India will be one of the largest installations of renewable energy in world. Goyal also said Prime Minister Narendra Modi is committed towards ramping up renewable energy.”This government is committed and has created an actionable agenda so that by 2022 India would probably be one of the world’s fasted growing renewable energy in the country, one of the largest installations of

renewable energy in the world if not the largest. India will have about 2, 25,000 MW of renewable energy by 2022, which is

the world’s largest installation.”Under its plan, Goyal said, the government is also committed to set up solar plant of one lakh megawatt to meet its security needs. “So far in the two and half years, we have expanded the solar install capacity by 200 percent, i.e. 9,000 MW and by end of December 2017 I expect it to be 20,000 MW,” he added. Goyla further said India is also considering to expand its hydro power capacity which currently stands at 25 MW.”Similarly in wind we are aggressively taking it to 20,000 MW, apart from expanding the scope of nuclear and small hydro projects,” he said.

January 2017 www.InfralinePlus.com

NewsBriefs | Renewable Azure Power wins 50 MW Solar Power Project under SECI Auction

Azure Power, a leading solar power producer in India, announced that it has won a 50 MW solar power project under the National Solar Mission (NSM) Phase II Batch III, which was recently put up for auction by Solar Energy Corporation of India (SECI). Azure Power secured 50 MW

of the total 100 MW capacity auctioned and will supply power to SECI for 25 years. The project will be built in the Ananthapuramu Solar Park, which is being developed by the Solar Park Implementation Agency (SPIA), Andhra Pradesh Solar Power Corporation Limited (APSPCL). The tariff on the project will be Rs 4.43 per kWh (US$0.067) with an additional support of Rs 12.7 million per MW (US$ 0.19 million) from the Government of India in terms of Viability Gap Funding (VGF). This makes the levelized tariff of this project significantly higher than the levelized tariff of the lowest bid, including VGF, under SECI auctions in NSM Phase II Batch III.

Railways plan 1,200 Mw of solar, wind energy

projects, the share of which has increased over the years. Most of these projects receive a generation-based incentive of 50 paise per unit. “As the generation-based incentive will expire, the government is discussing a new incentive for procurers of wind power.

In an effort to get at least a tenth of its energy need from renewable sources, the ministry of railways plans to set up at least a 1,000 Mw solar power plant and about 200 Mw of wind power plants by 2020. And, solar energy panels on train coach roofs. In a year, Indian Railways consumes 18.25 billion kilowatt hours (kwh) of electricity, 1.8 per cent of the country’s total. Its annual diesel need is 2.78 billion litres. In a recent presentation, it said 1,000 Mw of solar units were envisaged to be set up by developers on railway or private land and rooftops of rail buildings, at their own cost; the ministry of new and renewable energy would give a subsidy or viability gap funding for five years. So far, 14 Mw of solar and 36.5 Mw of wind energy have been set up, and 218 railway stations have solar rooftop installations. Of the 1,000 Mw of solar units planned, half are planned as rooftop installations through developers and the rest as landbased systems.

India has been holding solar auctions for the past three years, this is the first one for wind energy and the response to it will be

keenly watched. Three previous attempts to hold auctions for wind energy -one by the Karnataka government, followed by two such by the Rajasthan government -failed as wind developer associations raised several legal issues. This time, however, the issues have been ironed out. SECI notice to auction 1000 MW of wind power was issued on October 28. Solar auctions have seen tariffs fall by over 60% to Rs 4 per kwH and it is hoped that wind auctions will similarly reduce wind tariffs as well. Until now, wind tariffs were set by each state’s electricity regulatory commission, and currently vary between Rs 3.50 and Rs 5 per kwH.

Viability gap funding likely for wind power The Union Budget is likely to introduce viability gap funding and an incentive scheme for power distribution companies procuring wind power. If announced, these will be major reliefs for the wind power sector, which could lose key incentives by the end of this financial year. The previous Union Budget had capped accelerated depreciation at 40 per cent from April 2017. It was 80 per cent earlier. Also, the generation-based incentive of 50 paise per unit will cease from March 31, 2017. Of the 28,279.40 megawatts (Mw) of wind power in the country, around 70 per cent is built on accelerated depreciation. Eighty per cent of a project’s cost is paid back if commissioned before September 30. The rest of the capacity has been set up by independent power

National

Wind power reverse auction deferred India’s first reverse auction for wind power has been postponed by three weeks. The last date for submission of bids has been extended to January 8 in the New Year from December 15, while the opening of bids, earlier scheduled for December 16, will take place on January 9. “There was a pre-bid meeting on November 29 at which developers sought many clarifications,” said Ashvini Kumar, Managing Director, Solar Energy Corporation of India, the arm of the Ministry of New and Renewable Energy which is conducting the auction. “These took a little time to sort out, so the bidding period was extended.” Although

January 2017 www.InfralinePlus.com

NewsBriefs | Renewable

International States

Odisha to set up rooftop solar panels in 15 towns

In its bid to harness the green energy potential, Odisha plans to set up solar panels on rooftops of government buildings in 15 key towns. “Odisha is betting big on non-conventional sources of energy. The state government has approved a proposal for taking

up rooftop installations on the government buildings in 15 key towns,” said an official. The towns identified are Rourkela, Burla, Sambalpur, Hirakud, Balasore , Bhadrak, Baripada, Berhampur, Chakradharpur, Koraput, Sunabeda, Nabarangpur, Khurda and Puri. The Green Energy Development Company Ltd (Gedcol), the nodal agency for implementation of renewable energy projects, will implement 10 megawatts (Mw) rooftop projects at a cost of around Rs 80 crore by 2017-18. Recently, the Odisha government has signed implementation agreement with Azure Power Mercury Pvt Ltd for developing the country’s first grid-connected Mw scale rooftop project on the net metering basis.

Rajasthan exempts electricity duty for solar rooftop units to encourage renewable In what would further encourage investments in renewable energy projects, the state government has exempted electricity duty of 40 paise per unit for rooftop solar and captive units. The decision is expected to help Rajasthan reach closer to 2300 MW rooftop solar capacity by 2022, a target given to it by the Centre. The duty cut is expected to have a positive impact on the new capacity lined up. Recently, Rajasthan Renewable Energy Corporation (RREC) issued rate contract order for 25 MW rooftop plants and empaneled companies to design, supply and install these projects. People interested to put up rooftop plants can reach these vendors who are also required to guarantee 5 years of maintenance. “These

projects enjoy a subsidy of 30% provided by the government. Capacity of these plants varies from 1 kWh to 500 kWh. The 2300 MW target given to Rajasthan by the Centre for solar rooftop is steep, but we have all the necessary policies in place to achieve that,” said B K Doshi, managing director, RREC.

J&K harnessing less than 1percent of 111 GW available solar potential

Due to non-seriousness of the State Government and lack of proper support from the Union Ministry of New and Renewable Energy, Jammu and Kashmir is harnessing less than 1% of the available solar power potential and given the prevailing situation nobody knows whether the State would ever be able to make use of this gift of nature to tide over the energy crisis. The National Institute of Solar Energy has assessed the solar power potential of Jammu and Kashmir at 111 Gigawatts with the mention that if all out efforts are made to tap this huge potential this border State would surpass all other States in the country as far as generation of solar power is concerned. However, all the concerned agencies of Jammu and Kashmir have been able to tap less than one percent of the solar potential because of non-serious approach from all the quarters within the State as well as lack of proper support from the Union Ministry of New and Renewable Energy.

Gujarat slips to third position in solar power generation After losing its top rank to Rajasthan last year, Gujarat has now slipped further to end at third position in commissioned solar power capacity. Rapid capacity addition by Tamil Nadu helped the state to topple both Rajasthan and Gujarat from their respective top ranks. According to the Union ministry of new and renewable energy (MNRE), Tamil Nadu has topped the list with solar power capacity of 1,555.41 MW as on October 31, 2016, while Rajasthan stands at second position, with 1,301.16 MW and Gujarat third with 1,138.19 MW. “The capacity addition in Gujarat has slowed down because the state already

has surplus power and it has also been able to meet its renewable purchase obligation (RPO) target,” said Pranav Mehta,

co-chairman, Global Solar Council. “On the other hand, Tamil Nadu has aggressively installed solar capacity to promote green energy and meet its RPO target,” Mehta said. RPO mandates states to purchase specified amounts of power from solar plants. The RPO for Gujarat is 1.75% of total power demand in state. Tamil Nadu has jumped to top from the fourth position in January 2016 when its capacity at 418.94 MW. The Adani group commissioned a 648 MW solar power plant, said to be the world’s largest at a single location, at Ramanathapuram district of Tamil Nadu in September this year.

January 2017 www.InfralinePlus.com

NewsBriefs | Renewable ADB provides USD 150 million to Sri Lanka for green power development

The implementation of Green Power Development and Energy Efficiency Improvement Investment Program will support the Government’s objective of enhancing clean power generation, system efficiency and reliability. The total investment cost of this program is USD 440 million of which USD 300 million will be provided by ADB under Multi - tranche Financing

Facility (MFF). This program consists of two tranches. Accordingly, the Government of Sri Lanka signed two loan agreements worth of USD 150 million with ADB on 20th November 2014 to finance the first tranche of the program. The total investment cost of the tranche 2 is USD 260 million and ADB will provide USD 150 loan directly to Ceylon Electricity Board (CEB) under a treasury guarantee. Tranche 2 of this program consists of the following three major components; (i) Transmission infrastructure enhancement; (ii) Efficiency improvement of medium-voltage network and (iii) demand-side management improvement for energy efficiency through development of a smart grid and metering pilot subproject.

China to cut solar, wind power prices as project costs fall

China is reducing the amount of money it pays to newly completed solar and wind power generators for their electricity, in order to reflect declines in construction costs, the country’s price regulator and economic planner said. The nation will cut tariffs paid to solar farms by as much as 19 percent in 2017 from this year’s levels and by as much as 15 percent for wind mills in 2018 from current prices. The changes will help reduce subsidies paid to new photovoltaic and wind power projects by about 6 billion yuan ($863 million) annually. The move comes as average solar panel prices have tumbled about 30 percent this year, according to data from Bloomberg New Energy Finance, resulting in a lowering of the bids that solar

developers offer to build projects. Prices of wind turbines also fell in 2016, according to London-based BNEF. China will also encourage local authorities to continue making use of auctions to select renewable energy developers, in order to further lower power prices, according to the NDRC.

International Nigeria to become the hub of renewable energy in West Africa

Notwithstanding the hiccups currently being experienced in the power sector of the economy, stakeholders in the sector have resolved to make Nigeria the power generation hub in West Africa with the vast opportunities available in the nation’s renewable energy resources. This has come with calls by the stakeholders on the need for the Federal Government to take urgent step in ensuring the development of cost-effective renewable energy options in view of huge threat to climate by fossil fuels. Most stakeholders argued that pursuit of renewable energy provision is most appropriate at this point in the life of the nation, considering numerous advantages attached to that source of power supply. A German firm, LTI Re Energy recently signed an agreement with a Nigerian firm, NIGUS International, to construct a 500 megawatts solar energy plants in the North East zone, beginning with Adamawa State.

Chevron to sell geothermal assets in Indonesia and Philippines Philippine conglomerate Ayala Corporation (AC), through its wholly owned subsidiary AC Energy, has signed an agreement to acquire the geothermal assets of Chevron in Indonesia and the Philippines. AC Energy, as part of separate Indonesian and Philippine consortia, has signed shares sale and purchase agreements with Chevron Global Energy, Union Oil Company of California and their relevant affiliates to acquire Chevron’s geothermal operations. In Indonesia, Chevron operates the Darajat and Salak geothermal fields which have a combined capacity of 235MW equivalent of steam and 402MW of electricity. The company also

has 40% interest in the Philippine Geothermal Production Company, which operates the Tiwi and Mak-Ban geothermal field in Southern Luzon and supplies steam to

power plants with a combined capacity of around 700MW. Chevron Upstream executive vice-president Jay Johnson said: “These assets deliver reliable energy to support the needs of Asia-Pacific’s growing economies. “This sale is aligned with our strategy to maximize the value of our global upstream businesses through effective portfolio management.” The assets being considered for sale were valued at $3bn. The Indonesia consortium, named Star Energy Geothermal (Salak-Darajat), comprises AC Energy with 19.8% stake, Star Energy Group, Star Energy Geothermal, and Electricity Generating Public Company.

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January 2017 www.InfralinePlus.com

ExpertSpeak Need a single central body for energy policy that encourages right balance of fuel mix India is striving towards more sustainable and resilient cities which can adapt to rapid change, manage shocks and natural disasters and respond to negative environmental impacts through the provision of energy efficient infrastructure and resources. However, with the climate change agreement in place, India also needs to move towards a clean economy. In this regard, Richard Slater, Director, Research, Development & Learning, IPE Global Group, examines the current growth and development scenario and suggests ways in which India can achieve its goals of sustainable development.

India is striving towards more sustainable and resilient cities which can adapt to rapid change, manage shocks and natural disasters and respond to negative environmental impacts through the provision of energy efficient infrastructure and resources. However, with the climate change agreement in place, India also needs to move towards a clean economy. In this regard, Richard Slater, Director, Research, Development & Learning, IPE Global Group, examines the current growth and development scenario and suggests ways in which India can achieve its goals of sustainable development. India is currently standing at the threshold of a major transformation. On the one hand, the government is focusing on urban development through initiatives such as Smart Cities and urban growth, and on the other hand, it has taken several steps to encourage the transition to a low-carbon economy. India has already taken this into account and clearly defined its goals in its Intended Nationally Determined Contributions (INDCs) which says that there can indeed be a reconciliation between economic development and the state of the environment, as opposed to the rapid development of many countries in the past that came at the cost of the environment.

A country such as India that is extraordinarily rich in bio-diversity, with species of rare flora and fauna is threatened today, by Richard Slater, Director, Research, Development over-exploitation & Learning, IPE Global Group India of resources and needs to climate change. affordable housing for weaker secbalance growth Thus, it is tion, ending open defecation and with sustainability imperative manual scavenging, modern and in human, social, that India scientific municipal solid waste economic and enviis able to and water management across the ronmental terms balance growth country. with sustainWhile these initiatives are ability in human, moving in the right direction, cities social, economic and continue to experience increased traffic environmental terms. congestion, air pollution, rising greenhouse gas emissions, and poor public health. Poor city planning is a major Where are our cities today? contributor to this combination of India is striving towards more sustainproblems. Lack of reliant infrastructure able and resilient cities which can adapt and poor services have also resulted in to rapid change, manage shocks and a rise in communicable diseases such natural disasters, and respond to negaas Chikungunya and Dengue which tive environmental impacts through the have severely affected public health provision of energy efficient infrain many cities across India. At least structure and resources. In the last two 10,851 chikungunya cases have been years, the government has also launched reported in Delhi alone in 2016 whilst several projects in the urban sector cities such as Pune registered 2,523 such as Pradhan Mantri Awas Yojana chikungunya cases in October alone. Housing for All (Urban), Atal Mission Air pollution is another major for Rejuvenation and Urban Transforhealth hazard. Delhi Pollution mation (AMRUT), Smart City Mission, Control Committee data shows that Swachh Bharat, etc. These schemes aim the concentration of PM2.5 (parto improve water supply and sanitation, ticles less than or 2.5 micrometers pedestrian, non-motorised and public in diameter) peaked at an alarming transport facilities, slum rehabilitation,

January 2017 www.InfralinePlus.com

883 micrograms per cubic metre post Diwali this year, which is more than 14 times the safe standard of 60 micrograms per cubic metre! Smaller cities such as Kanpur, Raipur, Agra, Patna, Varanasi, etc. are also showing alarming increases in air pollution. Rapid urbanization also poses the problem of greater demand in the near future. The Government of India’s “Power for All” scheme proposes continuous and uninterrupted power to all households and industries by March 2019 with a 132% rise in energy consumption by 2035. The substantial increase in energy demand will translate into higher demand for electricity and increased environmental challenges. As the Paris agreement on climate change takes effect, India has an obligation to hold global warming to not more than 2 degree Celsius above preindustrial levels. Thus, there is increasing need for co-operation and collaboration within cities to build resilience. The importance of a cleaner fuel at this juncture cannot be stressed enough.

Resilient energy for smart cities India’s economy is currently heavily dependent on coal – almost 70% of India’s power plants are coal-based. As part of the Paris Agreement, non-fossil fuels would account for 40 per cent of India’s total energy generation capacity by 2030. However, the share of renewable energy stood at 14.14% as of September 2016, which is not anywhere close to the target that India has set out for itself. Power generation from renewable energy has not been able to meet peak power demand. One of the major constraints of renewable energy is the reliability of power supply. For example, solar or wind power is heavily dependent on weather conditions, hence represents an intermittent and unpredictable supply that is unlikely to be able to meet the demand during peaking hours. Another disadvantage of current

Rapid urbanization also poses the problem of greater demand in the near future. The Government of India’s “Power for All” scheme proposes continuous and uninterrupted power to all households and industries by March 2019 with a 132% rise in energy consumption by 2035. The substantial increase in energy demand will translate into higher demand for electricity and increased environmental challenges. renewable energy is that it is difficult to generate power at scale. The answer here is not to pick one source of energy over another. Instead, it is vital to recognize the role that different fuels can play at different stages. Since targets of renewables are quite stretched, the next alternative would be to switch from high carbon emitting fossil fuels to lower ones. For instance, natural gas can absorb infirm renewable energy and consequently, provide support during peaking hours. This would not just ensure the more efficient use of energy from all sources but would help to overcome the shortfalls in renewable generation. Data on GHG emissions and primary energy consumption by fuel type shows that natural gas results in 60% lesser emission for CO2e for the

same level of energy consumption as compared to coal. Moreover, it is quite versatile and can be used in process industries and transport. In early 2016, vehicles running on compressed natural gas (CNG) were exempted from the odd-even rule in Delhi. The Supreme Court also ordered the Delhi government to pull 30,000 cabs off the roads as they run on diesel or petrol rather than CNG. All this reiterates the fact that gas is not just cheap but also safer and cleaner, making it a viable source of energy. ‘Climate Proofing’ infrastructure is another necessary step to ensure the supply of energy in times of floods, higher temperatures and higher levels of precipitation. Solar energy use should also be encouraged for all establishments with floor area of more than 300 sqm.

January 2017 www.InfralinePlus.com

ExpertSpeak

Cities Mission aim for better waste management systems and therefore, it is important that these schemes operate in sync with each other.

Increased private sector participation

Both the renewable sector and the gas industry in India have witnessed reasonable growth in terms of demand over the last few years. However, this growth has been uneven with the renewable sector growing by 13.7% while natural gas has shrunk and fallen below the previous yearâ&#x20AC;&#x2122;s consumption. In contrast, coal has grown by 4.8% while oil has grown by an astounding 8.1% Green building standards need to be adopted mandatorily to help reduce total energy demand in cities and building applications should demonstrate the use of climate friendly designs and materials.

Need for integration Both the renewable sector and the gas industry in India have witnessed reasonable growth in terms of demand over the last few years. However, this growth has been uneven with the renewable sector growing by 13.7% while natural gas has shrunk and fallen below the previous yearâ&#x20AC;&#x2122;s consumption. In contrast, coal has grown by 4.8% while oil has grown by an astounding 8.1%. One major roadblock in India is the lack of a single central body that is responsible for

energy policy and regulatory affairs which results in inconsistencies for sub-sectors, i.e. coal, oil, electricity and gas. This highlights the need for a single central body for energy policy that encourages the right balance of fuel mix by incentivizing the overall fiscal and policy frameworks. It is imperative that the central government and state government are in consensus and are willing to create some potential synergies and opportunities that are mutually beneficial. There are several central and state government schemes across sectors but ultimately, there is a need to integrateall these initiatives in a way that they lead to a more holistic pattern of development. For instance, both Swachh Bharat Abhiyan and Smart

Going forward, there is an urgent requirement to attract private players to boost investment and promote PPP projects. Since many investors are cautious of delays and uncertainties, there is a need for government to devise an effective system for the allocation of power projects and a clear methodology for incentivizes investments. Energy Efficient practices should also be incentivized in construction, manufacturing and transportation. At a fundamental level, there is a need to review obsolete approaches to financing public bodies with tools and support systems that can enhance the ability of cities to plan and implement projects and deliver results. For instance, a system integrator can help map and develop models for meeting the supply and demand for urban infrastructure and services. Such integration can serve as engine of economic growth by providing solutions for high quality infrastructure in the future. India will continue to witness the growth and development of its small, medium and large cities into the future cities and the process of revitalising existing cities must be carried out without interrupting ongoing activities. To meet these challenges in a sustainable manner, the government will need to reassess how it produces and consumes energy and, together with its stakeholders, work towards a lower-carbon future. It is imperative that such solutions are at the core of Indiaâ&#x20AC;&#x2122;s growth and development strategy. The views in the article of the author are personal. For suggestions email at feedback@infraline.com

January 2017 www.InfralinePlus.com

ExpertSpeak Government needs to incentivize domestic LED manufacturers to boost R&D Indian still has a long way to go in manufacturing of LED lights given the stiff competition faced from the Chinese. Presently, in the back of strong inventives, Chinese products are often superior and cheaper compared to India. Add to that minimal R&D facility, the LED manufacturers in India are grappling to compete with their Chinese counterparts. In this article, V P Mahendru, Chairman, Managing Director, EON Electric Ltd, offers a series of suggestions to address this challenge. The global reverberations of ‘Make in India’ were felt when the Chinese decided to launch their ‘Made in China’ campaign, which showed they were not taking the prospective threat of faster industrial growth in India lightly, despite being a global manufacturing hub for the past two decades. Along with its high-decibel campaign, China announced a raft of tax concessions to counter Prime Minister Narendra Modi’s ‘Make in India’ pitch. Given China’s manufacturing headstart, India can only hope to steal a march over the more nimble dragon by surpassing the incentives and benefits offered by its northern neighbour to manufacture indigenously. The case of LED lights can serve as a classic example in this regard. While Indian manufacturers have taken steps to manufacture LED Lights in India and also promote its exports, they have been pushed on the back foot by Chinese LED makers, who receive immense incentives and support from their Government.

Incentivize innovation Accordingly, the Government needs to incentivize domestic LED manufacturers to boost R&D efforts in India. This is imperative if Indian companies are to overcome the stiff challenge from cheap Chinese LED makers. Presently, due to minimal R&D work in India,

Chinese products are often superior and cheaper compared to those made in this country. More importantly, the authorities need to take measures against the cheap lighting products V P Mahendru, Chairman, Managing Director, sold in the grey marEON Electric Ltd kets across India. ‘Made It is impossible mind and aversion to even good in India’ label for domestic quality similar products in India. has not gained manufacturOnce consumers are made total confidence of ers to comaware about the drawbacks the Indian consumers of such cheap / sub-standard pete against and sometimes the low prices products, there will be more acquires negative of these prodappreciation for ‘Made in brand image ucts. Although India’ products, even if these these are mostly of cost somewhat more than cheap sub-standard quality, imports. It is also important to ensure they are eagerly lapped up by Indian that all products made in India are consumers who are extremely price as attractive and have an excellent sensitive and sometimes overlook qualfinish like the high-value items ity and performance standards. manufactured overseas. Lack of looks While promoting its ‘Make in India’ and proper finish are some of the campaign, the Government should drawbacks that bedevil some Indiapublicise the fact that its products are made goods. Consequently, over the of better quality, compared to many decades, the ‘Made in India’ label of those made in China, which are of has not gained total confidence of the ‘use and throw’ variety. With most the Indian consumers and sometimes Chinese items being cheaper, there is acquires negative brand image. no assurance about how long they will last. Moreover, the moment such cheap Quality quotient and green products develop a problem, most labelling cannot be repaired and simply have Yet, this drawback should not deter Into be thrown away. That is how such dian manufacturers unduly. Recall how Chinese products have gained global half a century ago Japan’s manufacturnotoriety as the ‘use-and-throw’ variety ers faced similar image problems about and yet such issues build in consumers their products being sub-standard. But

January 2017 www.InfralinePlus.com

ExpertSpeak

the Japanese worked hard on improving their quality quotient and the results are there for the world to see. Today, most products made in Japan are considered among the best worldwide. Names such as Sony and Toyota are still synonymous with great quality products, notwithstanding the problems of acceptance they may have faced in the past and now face issues of higher cost of manufacturing. Additionally, the ‘Make in India’ programme should focus on products made through sustainable processes that leave a low carbon trail and cause minimal damage to the environment. The publicity campaigns for such products should highlight the fact that these have been made via sustainable processes with low / adverse environmental impact. Green labelling of these products will boost their brand value and encourage environmentallyconscious customers to support such products in the interests of global sustainability. The importance of green labelling and quality benchmarks cannot be

underestimated in today’s world. Companies ignoring these issues do so

The Government needs to incentivize domestic LED manufacturers to boost R&D efforts in India. This is imperative if Indian companies are to overcome the stiff challenge from cheap Chinese LED makers. Presently, due to minimal R&D work in India, Chinese products are often superior and cheaper compared to those made in this country. More importantly, the authorities need to take measures against the cheap lighting products sold in the grey markets across India.

at their own peril. Automotive companies across the globe have paid a heavy price for defective products that have led to massive recalls. Besides the logistics nightmare and tremendous monetary loss due to product recalls, the company’s brand image suffers damage too, which may take years, if not decades, to repair. Finally, whether it is LEDs or the manufacture of other products in India, ease of doing business in the country is still not a ground reality. Manufacturers need to negotiate a maze of approvals before they can begin manufacturing. It’s time the Government simplified the myriad sanctions required through singlewindow clearance system. If this single reform is undertaken, it would be another big boost to the ‘Make in India’ campaign. China’s status as a global manufacturing hub would then be truly under threat.

The views in the article of the author are personal. For suggestions email at feedback@infraline.com

January 2017 www.InfralinePlus.com

InDepth India needs effective financing mechanisms to achieve 175 GW target by 2022

►► By 2020 annual solar power capacity additions and investments could surpass those in coal ►► Debt has emerged as a major constraint both in terms of availability and cost of financing By Team InfralinePlus

Indian government is running one of the most ambitious renewable energy (RE) programmes in the world with commitment at the United Nations Framework on Climate Change Convention (UNFCCC) to install 175 GW of installed generation capacity from renewable energy sources (100 GW – Solar, Wind – 60 GW, 10 GW – Biomass, 5 GW – Small Hydro) by 2022. Since the advent of such programme, there has been a queue of domestic and international firms willing to invest in India’s burgeoning RE sector. Several steps have been taken by the government to ensure that this

vigorous move to greening India attains momentum. Some of these include the enactment of the National Off Shore Wind Energy Policy paving the way for offshore wind energy development, establishment of the PACE setter fund with US with a collective contribution of USD 4 million to fund innovative clean energy projects through seed capital, inclusion of renewable energy in priority sector lending by RBI, increasing coal cess for incentivizing RE projects, etc. This is in conjunction with other policy interventions such as the enforcement of Renewable Purchase Obligations (RPOs) and the

setting up of Green Energy Corridor projects, etc. 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 visiblefrom numerous opportunities of fundraising, and Mergers & Acquisitions (M&A) activity. Tata Power’s acquisition of Welspun Renewables

January 2017 www.InfralinePlus.com

InDepth

Energy in September underlines the opportunities of M&A in the RE sector as of presently. The most remarkable feature about renewable energy investments in 2016 has been the predominance of the developing and emerging economies in the area. A report from Climate Policy Initiative (CPI) shows that in order to meet the target of 175 GW of renewable energy by 2022, the renewable energy sector in India will require $189 billion in additional private investment, a significant amount. The potential amount of investment in the renewable energy sector in India is $411 billion, which is more than double the amount of investment required. It is noteworthy that India’s Intended Nationally Determined Contributions (INDC) document (ratified and signed on October 02, 2016) lays out a 2030 target to achieve about 40% cumulative electric installed capacity from RE sources, with the help of technology transfer and low cost international finance. In the Indian context, equity financing does not appear to be a concern as compared to debt financing, at least in the short to medium term. However, debt has emerged as a major constraint both in terms of availability and cost of financing. Barriers to debt emerge from contexts specific to RE as well as from larger concerns related to

the country’s infrastructure financing problems, underdeveloped debt markets and other macroeconomic constraints. According to CPI report, “In order to meet the renewable energy targets by 2022, the amount of debt financing required is $132 billion, and the amount of equity financing required is $57 billion. In order to estimate the debt and equity financing requirement, we used a debt to equity ratio of 70:30.” Conventionally, financing in India follows a structure of 70:30 wherein

A report from CPI shows that in order to meet the target of 175 GW of renewable energy by 2022, the renewable energy sector in India will require $189 billion in additional private investment. The potential amount of investment in the sector in India is $411 billion, which is more than double the amount of investment required

70% of the overall funds is sourced through debt component and 30% from equity. Among the commercial financing institutions, banks, both public and private sector, followed by NBFCs have emerged as the leaders in infrastructure financing. In the case of clean energy sector, which is classified as infrastructure, the dependency on commercial banks, NBFC and ECBs is higher. Higher lending rates in the economy pushes up the cost of debt for the clean energy sector. While higher interest rates affect all business activity, the clean energy sector is even more sensitive especially considering capital intensity. Counterparty risks arising due to the financial troubles of state electricity distribution companies (DISCOMs) is a critical bottleneck for lending to the energy sector in general. For instance, almost 85% of DISCOMs in India have a credit rating of B+ or less (CRISIL/ ICRA reports). In the case of RE power development, this translates to a situation where despite being payment security risks associated with individual states discourages commercial bankers from lending to the sector.

Challenges facing renewable growth The sector, while very attractive for investment, faces a handful of issues including land availability, aggressive tariffs, challenges around evacuation of power, inexperienced promoters entering the sector, a lack of established and professional O&M (operations and maintenance) players. Solar resource and other cost parameters differ from location to location and project to project. Considering a continuous drop in module prices, developers are taking aggressive positions in their project cost estimates to bid aggressive tariffs which have been witnessed in recent past. The actual scenario may or may not follow such aggressive considerations. But it also faces financing challenges as investors become more cautious amid a fall in solar energy

January 2017 www.InfralinePlus.com

Figure 1: Potential investment required to achieve 175 GW RE capacity by 2022

Source: Climate Policy Initiative (CPI) November 2016 Report

tariffs. The main reason for aggressive bidding in recent set of auctions was because the projects were bid under the government-provided solar parks, which meant the developers get readyto-use infrastructure, such as land and transmission facilities, leading to low project risk and lower costs. Foreign firms, looking to make big bang announcements in India, see this as an attractive bet compared to state-level

auctions, which would require them to acquire land and build infrastructure support. While the top-tier developers will continue to attract debt financing, it is expected that projects with tariffs below INR 5/unit levels will face difficulties in debt financing as the lenders are becoming increasingly risk averse, particularly in the current environment when there is so much scrutiny around

Figure 2: Possible Scenarios of Installed Generation Capacity in 2022 and 2030 By 2030, an additional 320 GW of RE will be required 40% RE in the overall 800 GW power scenario

Addition of 15.7% RE generation (compounded growth per annum) is required

Source: Navroz K. Dubash, Climate Policy Initiative (CPI)

NPAs (non-performing assets) and quality of bank loan books. Hence, there is a fear that some of the developers looking at investing in India may be put off by the Indian market due to the unviable tariffs and returns. Besides financials, technical issues pose a big threat to India’s capacity addition plan in the clean energy sector. Integration of such large quantum of infirm power from RE projects which have been accorded ‘must-run’ status would lead to backing down of cheaper thermal power. This may lead to increasing cost of scheduled power and possible losses for thermal power producers on account of unscheduled, hence unsold power. Since fixed charges for the thermal power would still have to be paid by DISCOMs, it would lead to still more financial pressure on them. Backing down long term thermal firm must run power for accommodating infirm power is unsustainable, both technically and financially, and will be a big challenge for system operators to deal with, besides attracting penalties for under supply in existing long term power purchase contracts. To sum up, there is clearly a need for effective RE financing mechanisms over and above market creating regulation & policy mechanisms to stimulate debt availability from the commercial and private sector. Given India’s higher savings rate as well as generally favourable capital inflows, lack of funds is not a major barrier. Rather the barriers rise from the absence of financial infrastructure such as a deep bond market and fixed interest debt instruments which can channelize long-term and low-cost funds towards infrastructure financing in general. Simultaneously, there is also a need to improve the risk/ return profile on renewable energy projects such that they can be competitive in attracting long-term and cheaper finance, both domestically as well as internationally. For suggestions email at feedback@infraline.com

January 2017 www.InfralinePlus.com

StatisticsRenewableEnergy 1. Cumulative Renewable Energy capacity addition achievement as on 30.11.2016 Program/ Scheme wise Physical Progress in 2016-17 (& during the month of November, 2016) FY- 2016-17 Sector

Target

Cumulative Achievements

Achievement (April November, 2016)

(as on 30.11.2016)

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

4000

1641.95

28419.4

Solar Power

12000

2112.02

8874.87

Small Hydro Power

250

50.92

4324.85

BioPower (Biomass & Gasification and Bagasse Cogeneration)

400

101

4932.33

Waste to Power

7.5

114.08

16660

3913.39

46665.53

Total

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

2.24

161.12

Biomass(non-bagasse) Cogeneration

651.91

Biomass Gasifiers

18.34

-Rural

-Industrial

4.3

168.54

Aero-Generators/Hybrid systems

0.38

2.97

SPV Systems Water mills/micro hydel

100

74.97

382.01

1 MW + 500 Water Mills

0.10 MW + 100 Water Mills

18.81

187

81.99

1403.7

0.286

49.384

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

2. Details of CFA under VGF, Defense, Rooftop, Canal Bank & Canal top, CPSU and Solar parks schemes (up to 31.10.2016) Sl. No. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18

State Andhra Pradesh Chhattisgarh Delhi Gujarat Haryana Jharkhand Karnataka Kerala Madhya Pradesh Maharashtra Odisha Punjab Rajasthan Tamil Nadu Telangana Uttar Pradesh Uttarakhand West Bengal Total

Funds released by SECI 2016-17 12,717.31 22.9 169.57 1,759.58 114.99 22.79 8,501.46 321.13 11,820.37 344.28 2.54 300 14,829.34 600.58 375 192.9 638.25 514.62 53,247.61

January 2017 www.InfralinePlus.com

3. State-Wise No. of Projects, Cumulative Capacity and Subsidy Released for Grid Connected and Decentralized Projects installed under Waste to Energy Program during last 3 years (2013-14, 2014-15 & 2015-16) and in the current year 2016-17 (as on 30.11.2016) SI. No. 1 2 3 4 5 6 7 8 9 10 11 12 13

Name of State U.P. Punjab Maharashtra Rajasthan Uttarakhand Tamil Nadu Gujarat A P. M.P. Karnataka West Bengal Himachal Pradesh Kerala Total

No. of Projects 4 4 5 1 1 1 1 8 1 3 2 1 1 33

Installed Capacity, in MW 8.03 5.17 5.26 0.7 0.5 1.68 1.17 14.83 0.37 5.24 1.17 1 0.23 45.34

Subsidy Released, in Crore 6.62 2.78 5.51 1.4 0.3 0.83 2.32 6.59 0.18 3.82 0.58 0.5 0.11 31.54

4. State/UT-wise details of solar power projects/systems installed (as on 30.11.2016) Sr. No.

State/UT

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 TOTAL

Andaman & Nicobar Andhra Pradesh Arunachal Pradesh Assam Bihar Chandigarh Chhattisgarh Dadra & Nagar Haveli Daman & Diu Delhi Goa Gujarat Haryana Himachal Pradesh Jammu & Kashmir Jharkhand Karnataka Kerala Lakshadweep Madhya Pradesh Maharashtra Manipur Meghalaya Mizoram Nagaland Odisha Puducherry Punjab Rajasthan Sikkim Tamil Nadu Telangana Tripura Uttar Pradesh Uttarakhand West Bengal Solar rooftops in Railways, Government Departments, Public Sector Undertakings etc. 8970.03

Solar power projects/ systems installed (Megawatt) (as on 30-11-16) 5.4 979.65 0.27 11.18 95.91 16.2 135.19 0.6 4 38.41 0.05 1158.5 53.27 0.33 1 17.51 327.53 15.86 0.75 840.35 421.75 0.01 0.01 0.1 0.5 68.08 0.03 568.04 1317.64 0.01 1590.97 973.41 5.02 239.26 45.1 23.07 15.07

January 2017 www.InfralinePlus.com

OffBeat

Liquidity crunch impacts cement industry Cement industry facing higher input costs and sluggish demand Sector is hopeful that infrastructure projects will offset weakness in realty sector

by Team InfralinePlus

With demonetisation hitting construction sector hard, the cement industry has suffered serious collateral damage and its revival is likely to be delayed at least by a year. Cement demand plunged by nearly half in November. Spooked investors hammered down shares of cement companies. Ambuja Cement’s share price, which was at Rs 244.65 on November 8, had slipped to Rs 198.35 on December 26. ACC’s stock price fell by 15 per cent to Rs 1,284.10 during the same period. JK Cement’s share plunged by 30 per cent. UltraTech Cement lost 22 per cent in market valuation during the same period.

Cement sector valuations were pricing in a strong recovery before demonetisation was announced on November 8. However, the prospects of recovery have been hit hard by demonetisation. That is why cement stocks are under pressure, said analysts. Betting big on UPA government’s infrastructure spending plan, the cement industry aggressively added capacity in the past decade. However, the economic slowdown that began in 2011-12, coupled with high interest rates and inflexibility in contractual terms for public private partnership projects, hurt infra spending. As a consequence, banks were

left with unprecedented level of bad loans and halted lending to infrastructure projects. The industry finally saw green shoots of recovery in the January-March 2016 quarter. The Modi government’s infrastructure spending plans further boosted hope for cement demand revival.

Higher input costs and sluggish demand But the demonetisation has now dashed the hope. On the contrary, the cement industry is facing the double whammy of higher input costs and sluggish demand. That means there is hardly any room for the industry to cut price

January 2017 www.InfralinePlus.com

to boost demand. Following note ban, construction sites saw mass exodus of workers as developers were unable to pay them due to cash crunch. Developers had to provide free meals and arrange part-payment to stop workers from abandoning project sites. Cement demand dropped 45-50 per cent in November with the sharp decline in trade segment purchase post-demonetisation of high value currency. Cement industry produces about 23 million tonnes a month. Demand for cement fell across regions with the central region covering Uttar Pradesh and Madhya Pradesh managing minimum disruptions. Infrastructure and construction activities across the country came to abrupt halt following withdrawal of Rs 500 and Rs 1,000 currency notes from circulation. The fall in cement demand has come when the industry was expecting revival of infrastructure activities post-monsoon. Rating agency ICRA said that while cement prices have been affected in the southern and western markets, volume growth has been adversely impacted in all regions in November following demonetisation. In the southern market, the prices have shown a decline of Rs 30/bag in October and November together, with the current prices hovering around Rs 300/bag. On an average, in the southern market, the cement prices during 8M FY2017 stood at around Rs 305/bag, lower by Rs 20/ bag when compared to 8M FY2016. A similar decline in prices post demonetisation was witnessed in the western markets wherein the price, after having recovered by Rs 15/bag in October to Rs 265/bag, slipped to Rs 240/bag in November, the rating agency said. As per a recent survey by JM Financial, cement volumes are down across markets. The northern and western regions witnessed fall in sales. Some southern regions have seen decline in the first week of December. The eastern region saw a 70 per cent demand decline in November but

demand recovered to 70 per cent of the usual level in the subsequent period. “Cement demand may see subdued 3 per cent growth in Q4FY17 and upturn is expected only in FY20 as compared to FY19 earlier,” Deutsche Bank Markets Research said in an update.

Infrastructure push may spur demand The cement sector is hopeful that infrastructure projects will offset weakness in realty sector. With the government’s balance sheet likely to be in a

Cement demand dropped 45-50 per cent in November with the sharp decline in trade segment purchase post-demonetisation of high value currency. Cement industry produces about 23 million tonnes a month. Demand for cement fell across regions with the central region covering Uttar Pradesh and Madhya Pradesh managing minimum disruptions much better fiscal position, the industry expect a sharp pick-up in infra demand, considering the government’s continued focus on public spending. Currently, road and railway sector spending is primarily driven by central government agencies. State government finances, on the other hand, may come under some pressure, as a good 5-10 per cent of their revenue receipts come from the property sector. To that extent, their spend on rural roads, urban development projects such as metro and mono-rail, affordable housing, irrigation, etc, could be adversely affected. States’ financial

squeeze might be mitigated if the central government passes on a higher proportion of its improved finances to the states, analysts said. Before demonetisation, the cement industry expected 55-65 per cent demand from housing, 17-20 per cent from infra and 25 per cent from institutions and commercial realty. Experts said in urban housing, the already subdued levels over the last 3-4 years could get prolonged but might not necessarily get worse. Cement companies are also not in a position to cut prices to boost demand given that 30 per cent of manufacturers are not breaking even on a cash cost basis, said industry sources. After the recent hike in fuel cost, this figure is estimated to have risen to 43 per cent. Experts point out that cement demand could be hurt, given that 70 per cent of cement is consumed by housing. Demonetisation could cause demand destruction in organised real estate as well as individual and rural house construction, which would then get transmitted to cement demand in due course. Analysts reckon that cement producers could cut back production and take some price impact, which would further dent their profitability which is already depressed due to increase in costs of inputs like coal and petcoke. Cement producers said contractors are finding it difficult to make cash payments for buying key raw materials such as sand, bricks and stones besides meeting labour salary. Transactions between companies and their dealers are undoubtedly through the banking system but from there on the payments by retailers and customers vary according to their business relationship. Going ahead, the slowdown of construction activity in the unorganised realty segment that uses unaccounted funds to buy land parcels and get various approvals will impact sales in select regions. December cement sales may also be hit as the actual impact of demonetisation plays out on near-term

January 2017 www.InfralinePlus.com

OffBeat

demand. While most manufacturers pushed supplies to the dealers last month, the delay in actual consumption will impact this month sales volume of cement companies. Demand scenario may pickup from January with the liquidity improving. Because of aggressive capacity addition, the domestic cement manufacturing capacity is expected to go beyond 400 million tonne by the end of this fiscal. India is already world’s second largest producer of cement after China. After a long spell of demand slump, the cement industry was expecting a revival in 2016-17. The industry had expected demand growth to bounce back to 6-8 per cent this year, up from 3 per cent in 2015-16. These forecasts are grounded on expectations of improved demand from infrastructure and housing projects backed by the government. 72

Pay commission disbursements would happen and trigger housing growth. Besides, roads, hydel projects, metro projects, and low income housing projects in the infrastructure segment had started doing since the last quarter of 2015-16. In April, Harish Badami, CEO and managing director of ACC, had told shareholders at the company’s annual general meeting that demand growth was projected to touch 6 per cent in calendar year 2016 compared to 2 per cent in 2015. Badami’s optimism apparently stemmed from major spends planned by the government on infrastructure, connectivity, housing and sanitation. Encouraged by revival in infra spending, NS Sekhsaria, chairman, Ambuja Cements Ltd, had projected compounded annual growth rate of 6-7 per cent over next five years, as per a

After a long spell of demand slump, the cement industry was expecting a revival in 2016-17. The industry had expected demand growth to bounce back to 6-8 per cent this year, up from 3 per cent in 2015-16. These forecasts are grounded on expectations of improved demand from infrastructure and housing projects backed by the government Growth in installed cement production capacity Financial year FY13

Installed capacity (mt) 248.2

FY14 FY15 Fy16 FY17

255.8 270.3 282.8 407 (Projection

Source: industry

World’s top cement consumers in 2016 Country China

Consumption (mt) 2,511

India US Brazil Russia

280 93 78 73

Source: International Cement Review

letter written by him to shareholders. The last and first quarter of a financial year are typically considered the best quarters for the cement sector due to increased construction activity seen before the onset of monsoons. HDFC Securities has said in its latest report that the expected recovery in the cement sector may take another year. It has also cautioned against a longer slump in the unorganised real estate market, due to the aftermath of demonetisation, a sector which drives a large proportion of cement sales. The report says that until October, cement demand had grown by 5.1 per cent year-on-year. Strong monsoons had also raised the expectation of a demand revival in Maharashtra, Telangana and Karnataka. However, HDFC Securities says that things have “taken a turn for the worse” post demonetisation. Demand declined by 25-30 per cent in North Central India and by 15-30 per cent in West and South India. Cement demand is unlikely to recover for another year due to demonetisation and increase in prices of diesel and pet coke that has put cost pressure on most cement makers. Luckily, the Union budget 2017-18 is round the corner and would provide an opportunity for the government to announce new sops to attract investment into the infrastructure sector. The real estate sector has been used to cash transactions for too long. Now that the government wants to wean it away from cash, it should provide additional sops to mitigate the adverse impact of its cashless drive on the industry. Incoming US president Donald Trump’s promise to step up infra spending has sent US stock markets soaring. The Modi government too can focus on boosting domestic demand through stepped-up infra spending as the global economy stutters. That would help generate new jobs. For suggestions email at feedback@infraline.com

January 2017 www.InfralinePlus.com

Reports & Studies Big chunk of private coal-based power plants under operational stress: FICCI

A major portion of the installed capacity of 71 GW of private coal-based independent

power plants is under operational stress mainly due to absence of fuel supply agreement and power purchase pact, industry body FICCI said. “46 GW out of installed capacity of 71 GW of coalbased IPP plants are in operational stress attributable largely to absent FSA and PPA, but also to financial and regulatory issues,” the industry body said. FICCI said it conducted a unitwise analysis to examine the business environment in which the commissioned plants are being operationalised and the

new capacities in pipeline are to be mainstreamed. Constraints of power purchase agreements (PPA) as well as fuel supply agreements (FSA) are majorly restricting these plants from approaching the power market and finding buyers, the study showed. Taking together the commissioned and pipeline projects of private developers as on August 2016, aggregate coal-based capacities without FSA and PPA are seen to be in the range of 26–28 GW and 41–43 GW respectively.

Mining sector can add $70 bn to India’s GDP in next 15 yrs: CII A vibrant mining sector has the capacity to spur growth and add up to USD 70 billion to the country’s economy as well as generate 60-70 lakh jobs, a report by industry body CII said. The report -- Mining Opportunities - Realising Potential -- also stresses on dealing with clearances which it says “still remain an impediment for a smooth transition from auction stage to implementation stage”. A vibrant mining sector has the potential to propel economic growth not just through its contribution to GDP but also through its forward and backward linkages, the report said. “In high growth scenario, mining sector can add close to USD 70 billion to GDP from now to 2030. Mining

could play a crucial role in employment generation for India moving many from poverty to empowerment. In an accelerated growth scenario, mining can generate an additional 6-8 million jobs,” it added. Over last two years, the government has

taken some important steps for removing stagnation in the sector. A major step is the enactment of Mines and Minerals (Development and Regulation) Act, 2015, which has made the process of allocation of mines transparent by introducing auctions. The tenure of the mineral concessions has also been increased from the existing 30 years to 50 years, the report said. Presently, the process of obtaining approvals and clearances still remains long drawn and varies from state to state. This requires to be made simpler and expeditious so that the time required for operationalisation of the mineral concession can be drastically reduced,” it added.

Net-metering battles in the US hold crucial lessons for India Evolution of net metering policy in USA holds vital lessons for the fledgling rooftop solar market in India, which is still very small but growing rapidly. Many Indian utilities are already resisting net-metering connections for commercial and industrial customers, solar energy research agency Bridge to India said. Rapid growth in the US rooftop solar market and the number of net-metering connections has opened a battle-front between utilities on one hand and solar developers and consumers on the other hand. Utilities are arguing against the rationale of giving customers full retail credit for their excess energy and vigorously challenging the current net-metering framework in many states including Arizona, Nevada, Maine, Florida, and Alabama. Future net-metering policy in these ‘battle ground states’ is now being

decided by public hearings, ballots, regulatory intervention and court rulings. The current Indian net-metering regulations are too simplistic and they need to be overhauled urgently for sustainable growth of rooftop solar in India, Bridge to India said in a report. “If a state like Tamil Nadu realistically installs around 700 megawatt of commercial

and industrial rooftop solar by 2020 based on BRIDGE TO INDIA’s overall market projection, the state utilities will lose 0.8% of their power sales by volume but 1.4% by revenues, equivalent to Rs 9.7 billion (USD 140 million) annually,” the report said. The reason for disproportionate loss of revenues is that commercial and industrial customers pay the highest tariffs to subsidize residential and agricultural customers. Some states including Tamil Nadu and Maharashtra are already resisting net-metering connections for commercial and industrial customers. Other states are also likely to take that view. “The current Indian net-metering regulations are too simplistic. There is usually no grandfathering protection for customers and no satisfactory financial compensation for the utilities.

January 2017 www.InfralinePlus.com

People in News

Shyamal Mukherjee elected new chairman of PwC India

Dr. P.V. Ramesh, IAS takes over as CMD of REC

MM Mani to be new power minister of Kerala

Shyamal Mukherjee has been elected as the chairman of PwC India, replacing two-time chairman Deepak Kapoor. Mukherjee, who joined PwC in 1984 and became a partner in 1993, will lead the network of Indian accounting firms, and the consultancy major. Kapoor steadied PwC India’s country business after the audit firm was severely hit by the Satyam Computer Services scam. PwC were the auditors for Satyam. During his tenure the India business recorded the fastest pace among PwC network countries for three years in a row. Commenting on his appointment, Shyamal Mukherjee noted that his focus will be on seamless client delivery, “being a great employer in the country and pioneering use of technology to drive innovation and efficiency.” Mukherjee is a member of the India leadership team and part of PwC’s Global Strategy team. Prior to his current role as PwC India’s brand & strategy leader, Mukherjee was the joint leader of the firm’s tax & regulatory practice.

Dr. P.V. Ramesh, an IAS officer of the 1985 batch of Andhra Pradesh Cadre has taken over as Chairman and Managing Director of Rural Electrification Corporation Limited (REC) on 5th January, 2017. Prior to joining REC, Dr. Ramesh was the Special Chief Secretary, Environment, Forest, Science & Technology and Development Commissioner in the Government of Andhra Pradesh. He is a trained Doctor from the Christian Medical College & Hospital, Vellore. He has, during his service tenure of over 31 years, held important positions of Principal Finance Secretary, Principal Secretary Department of Health and Family Welfare and Commissioner of Industries in the Government of Andhra Pradesh. He has served in the United Nations Organization for nearly 13 years and worked in several countries across Asia Pacific and Africa, Europe and UNOPS Head Quarters in New York.

In the first reshuffle since it came to power in May, the LDF government in Kerala inducted senior party leader and MLA MM Mani from Idukki district as the electricity minister. Mani, a first time legislator and CPM state Secretariat member, is a veteran labor leader from the high range Idukki district and had functioned as the party’s district secretary for many years. As per the decision taken at the CPM State Committee meeting, Kadakampally Surendran who now holds the electricity portfolio will be given the Co-operation and Tourism portfolios. He will also continue to handle the Devaswam portfolio. A C Moideen, who has been handling the Co-operation and Tourism portfolios, will be given the Industries portfolio. The Industries portfolio fell vacant after EP Jayarajan stepped down on nepotism charges in October. Moideen has also been given Sports and Youth Affairs.

Sameer Sawhney Infra CEO

appointed

Srei

Sameer Sawhney has been appointed as the Chief Executive Officer (CEO) of Srei Infrastructure Finance Ltd. Prior to this appointment, he was the regional CEO and Managing Director (South East Asia and India) ANZ Bank, driving the business, customer and country strategies across the bank’s key markets. Commenting on the appointment, Hemant Kanoria, Chairman and Managing Director of Srei Infra, said, “Sameer’s appointment as CEO adds to our strength and will bring dynamism in our business.” Srei Infrastructure Finance is one of India’s largest private sector integrated infrastructure institutions, constantly and consistently delivering innovative solution in the infrastructure sector.

NTPC Ramagundam’s new ED takes charge Dilip Kumar Dubey, Executive Director-NETRA at NTPC EOC, Noida, has taken charge as Executive Director of NTPC-Ramagundam. A mechanical engineer from Awadesh Pratap Singh University and also an MBA (finance) graduate from FMS-Delhi, Mr. Dubey joined the NTPC on September 21, 1981 as ET. He has rich and varied experience in different areas of the power plant. He had held several important positions in a career spanning over three-and-a-half decades in NTPC. Mr. Dubey is widely known as a boiler expert and involved in the activities of Advance Ultra Super Critical units of NTPC. He has been actively involved in climate change negotiations of the United Nations Framework Convention on Climate Change (UNFCCC). The existing ED of Ramagundam, Prasant Kumar Mohapatra, was transferred as regional ED of WR-headquarters-II Raipur.

Jindal Steel & Power announces change in CFO

Jindal Steel & Power announced that K. Rajagopal, has resigned from the position of Chief Financial Officer and he will relinquish his Office from the close of business hours on 21 November 2016. Further, Rajesh Bhatia has been appointed to the position of Chief Financial Officer of the Company with effect from 22 November 2016 to fill the vacancy caused by resignation of K. Rajagopal.

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