NEW DELHI: Power companies that have not signed the fuel supply pact with CoalIndiacontesting its minimum penalty clause are meeting the Central Electricity Authority tomorrow to find a resolution to the issue.
CEA, the power sector planning body, has convened a meeting of power utilities who have not signed the Fuel Supply Agreement (FSA) with CIL opposing the minimum penalty clause.
According to a government directive last month, in case state-owned CIL fails to supply 80 per cent of the contracted coal with the firms, it will have to pay penalty.
As per the FSA, the rate of compensation or minimum penalty for the “Failed Quantity” is 0.01 per cent and would be applicable after three years, which the power companies say is an inadequate safeguard.
CEA is of the view that CIL has placed an entirely different FSA which is detrimental to the interests of the power sector.
The body communicated its opposition to the Power Ministry, last month. It has also requested the government to re-look some of the other clauses of the FSA.
So far, 13 power companies have signed the fuel supply pact with CoalIndia.
The government directive on the fuel supply pact was issued following a meeting between the power sector honchos and the Prime Minister’s Office.
The model FSA format includes clauses like suspension of supply of coal to power firms if they were found diverting the fuel for any purpose other than the specified end-use plant.
FINANCE BILL RELIEF FOR THERMAL POWER UNITS
MUMBAI: The Finance Bill passed by the Lok Sabha yesterday, to give effect to the Union Budget proposals, has removed the 2014 time bar it had earlier proposed on the duty exemption for thermal coal.
In its earlier Budget proposals, the finance ministry sought to exempt thermal coal (also called steam coal, and used in thermal power generation) from the basic customs duty of five per cent and the concessional countervailing duty of one per cent till March 31, 2014. The exemption with the time bar of 2014 was also extended to natural gas and liquefied natural gas (LNG), uranium concentrate and sintered uranium dioxide in natural and pellet forms.
However, the final Bill removed the time bar for coal; it stays for natural gas, LNG and uranium derivatives. Official sources said the decision to exempt coal indefinitely from import duty was done to perk the infrastructure sector. “Two years is a very small gestation period for setting up power plants or any energy-intensive ventures using steam coal as fuel Therefore, the time period for granting the exemption from basic customs duty and CVD has been extended indefinitely,” they said. Adding that domestic producers of thermal power were already under stress because of high prices of coal.
Coal-fired projects have already been hit by costly imported fuel, which is eroding the margins of power producers. Payment from state electricity boards comes with a lag and is not market-related. There is no clarity yet on cheaper domestic supplies. At this time, full exemption from import duty and for unlimited time is a big relief, said an industry source.
Coal is the fuel used to generate most ofIndia’s electricity, with 78 per cent of domestic production of the fuel being consumed by power projects.Indiahas an installed power generation capacity of 190,593 Mw, of which 55.3 per cent or 105,437 Mw is coal-based.
Key coal exporting countries, such asIndonesiaandAustralia, have changed their pricing in recent months, pushing up global prices substantially. Since this increase cannot be passed on to buyers under the existing power purchase agreements, many projects dependent on such imported coal threaten to become commercially unviable. There is also a shortage in the domestic market. According to the Annual Plan Document 2011-12, the country’s demand for coal is likely to be 696 million tonnes (mt) while the projected domestic production is 554 mt. The gap will have to be met through imports. Government-owned Coal India Ltd, which has a near-monopoly over mining, has projected an overall shortage of 142 mt in FY12, to be met through more expensive imports. Imported coal costs have more than doubled to $120 per tonne since FY09.
CVD is also called an anti-subsidy duty. Besides industry representations, the power ministry had also suggested to the finance ministry for a review of the coal import duty structure, since the additional duty on high global coal prices was adding to the cost.
TARIFF-BASED BIDDING MADE MANDATORY FOR NEW POWER TRANSMISSION SERVICES
NEW DELHI: The Ministry of Power has made it mandatory for new projects to get transmission services through tariff-based competitive bidding. In other words, the company offering the lowest transmission tariff will emerge the winner.
This move is aimed at attracting more private investment into the transmission sector, as is the case for road projects.
“The intra-State transmission projects would also be moving to the tariff-based competitive system from January 2013, according to the tariff policy,” according to a statement issued by the Ministry on Tuesday .
Till now, eight inter-State transmission projects worth Rs 14,000 crore have been allotted through competitive bidding, it added.
For implementing the tariff-based regime, against the earlier cost-plus system, the Ministry has put in place a Standard Bidding Document that has been used by some intra-State transmission projects.
A viability gap funding (VGF) model has also been evolved. In this model, the Centre would invest 20 per cent of the capital while a further 20 per cent would be invested by the State Government. The remaining will have to be met by the successful bidder.
“There are some transmission sectors that do not generate much revenue. And, therefore, private companies do not participate. By implementing VGF, more investments can be made through the private-public partnership route,” said a Power Ministry official.
The Ministry has asked all States andUnionTerritoriesto use either the VGF model or the Standard Bidding Document for procurement of intra-State transmission services.
INDIA‘S ENERGY SECURITY UNDER THREAT: FICCI
HYDERABAD:India’s energy security is under grave threat as the various elements of the energy economy are out of gear, industry association FICCI has said.
The apex chamber has demanded a comprehensive power policy that focuses on removing subsidies for hydrocarbons and ensures sustained development of the sector, which is faced with host of challenges impacting its progress.
Increasing fuel burden, inadequate coal supplies, rising under recoveries of oil marketing companies and volatile crude prices have all contributed to the problem, the chamber said.
Mr R. V. Kanoria, President of the Chamber, said, “There is immediate need to rationalise tariffs and address sector concerns. The sector is finding it tough due to lack of coal supplies, inadequate investments and delays in reforms process.”
The country is increasingly dependent on coal and oil imports draining valuable foreign exchange. Therefore, it is necessary to make the sector competitive while ensuring coal supplies to power plants, he said.
Addressing a press conference here along with Mr R. S. Sharma, Chairman of the chamber’s power committee and Dr Rajiv Kumar, its Secretary-General, Mr Kanoria said that the Government needs to look at ending the monopoly of CIL by encouraging private sector players and foreign companies.
The Chamber felt that various constituents of CIL could be broken up and their value unlocked. The huge reserves CIL has could be used to acquire overseas assets. There is also a need to encourage private sector participation in the coal business, he said.
Huge coal supply shortage has meant that over 20,000 MW of thermal power generation capacity was lying idle. This is a major blow for the economy, not only because these plants are not generating power, but also because the investments made into them was a waste, Mr Kumar said.
The supply of quality power is key to the progress ofIndia’s economy. Inadequate power leads to a cascading impact on the entire economy, including the manufacturing sector. “In fact, my plant at Vizag (Kanoria Chemicals) is closed for about 10 days,” Mr Kanoria said.
Mr Sharma said the Government could consider removing subsidies on hydrocarbons to make the sector competitive and also help improve the country’s economy.
TAMIL NADU TO SHELL OUT RS 4,000 CRORE SUBSIDY TO ELECTRICITY UTILITY
CHENNAI: The Tamil Nadu Government will shell out Rs 4,024.96 crore as subsidy compensation to the State power utility in 2012-13.
According to an official press release, the subsidy compensation to the Tamil Nadu Generation & Distribution Corporation Ltd, the power utility, is to off set the losses it suffers for charging consumers a lower tariff than that fixed by the electricity regulator.
The Electricity Act 2003 makes it mandatory for State Governments to pay the subsidy in advance.
In 2011-12, the subsidy compensation was pegged at Rs 2,071.41 crore.
The compensation is fixed by the Tamil Nadu Electricity Regulatory Commission which also fixes the power tariff, said the release from the Commission.
Major segments of the domestic consumers get subsidised power.
The subsidy ranges from Re 1 a unit to Rs 1.60. Hut dwellers and agriculturists are supplied free power.
Nearly half the subsidy, about Rs 1,971.71 crore is subsidy compensation for free power supply for agriculture; about 44 per cent, Rs 1,767.72 crore is to off set the losses due to selling cheap power to domestic users; and the balance 7 per cent, Rs 285 crore, for subsidised power to hut dwellers, weavers and places of worship.
NHPC FLOUTED RULES IN SUBANSIRI PROJECT: RTI ACTIVIST
KOLKATA/GUWAHATI: Accusing the NHPC of flouting norms in the formulation and implementation of the Subansiri Hydro Electric Project, RTI activist J N Khataniar said this could lead to “serious ecological and seismic problems inAssam, Arunachal Pradesh and neighbouring areas.”
Releasing details secured by means of RTI from the NHPC, the Brahmaputra Board and the Ministry for Environment andForest, Khataniar told reporters here on Tuesday that the state sector power giant gave “misleading advertisements” in newspapers and media regarding the project.
“In newspapers advertisements, NHPC claimed to have secured statutory and regulatory clearances for the project from ten bodies, including the MoEF, the Ministry of Power, the Brahmaputra Board, Central Water Commission (CWC), Central Electricity Authority (CEA) and so on before beginning construction.
“However, when I filed an RTI seeking information in this regard from the Brahmaputra Board, I was given a reply that no such clearance has been given,” he said.
The Brahmaputra Board, in its reply, said: “…It is to state that there is no information regarding requisite statutory and regulatory clearance of the Subansiri Lower Hydro Electric Project issued by Brahmaputra Board to NHPC prior to the starting of the construction works of the project.”
The activist, who is also an engineer, conducted on-site inspections at the site in Assam-Arunachal border said, “around Rs 7,000 crore has been spent there since 2003-04, despite violation of clearance rules.”
The Subansiri project is an under construction gravity dam on the Subansiri river on the border ofAssamand Arunachal Pradesh.
Khataniar also filed an RTI with NHPC regarding the issue of clearances. The power major, in reply, submitted clearance letter from only four bodies — CEA, MoEF, Ministry of Power and theAssamgovernment.
“The Brahmaputra Board has clearly stated that no clearance was given by it. And NHPC also failed to give any information regarding clearances it claimed to have secured from five other bodies/ministries,” Khataniar said.
“The CEA had in 2003 made it clear that its clearance is granted only on the condition that NHPC will secure statutory clearance from Brahmaputra Board and the CWC. As such, it is a clear violation of the special clause enshrined in CEA’s clearance,” he added.
As per the clearance from the MoEF, it was stipulated that the ministry’s regional office at Shillong would monitor implementation of environmental safeguards at the project area.
“In reply to an RTI filed with MoEF, I was informed that monitoring was conducted from April 2004 to March 2009…Why monitoring of the project was not continued by the MoEF’s Shillong office for last three years could not be explained which is another serious violation of the conditions of environment clearance,” Khataniar said.As per the clearance given by the Assam government, the state chief engineer of the state water resources department was to be included in the project monitoring committee.
“In reply to another RTI application, the government informed that the concerned official has never been invited for such work by the NHPC,” he said.
He further added: “The area, situated in trans-Himalayan region, is active seismologically and is earthquake prone zone. Such flouting of norms may have serious repercussions of the entire North East.”
BHEL-ISG CLINCHES RS 312 CRORE ORDER FROM NTPC
BANGALORE: Industrial Systems Group (ISG), a city-based unit of BHEL, has bagged an order worth Rs 312 crore from state-run NTPC for coal handling plant package for the Meja Thermal Power Project.
The order includes mechanical, civil, structural and electrics and all related auxiliary facilities, a press statement said.
BHEL-ISG specialises in system integration of bulk material handling like coal and ash handling systems for thermal power plants, raw material handling for industry, the statement said.
BHEL-ISG has over 30 years of experience in providing total solutions for large and complex projects in steel, mining, water management, oil and gas industries and coal and ash handling plants of power plants, the statement said.
MAKE OR BREAK SITUATION IN THE POWER SECTOR
MUMBAI: Over the past five years, prices of goods and services have risen across the board, but this is not reflected in power rates. Cost of power grew five per cent per annum in the five years to FY10, says CRISIL, while household expenditure rose 10.6 per cent. Per capital income during this period grew 13.4 per cent.
The lack of pricing power in the face of sharp inflation in prices of fuel (coal and gas) had created a crisis-like situation for power producers. Therefore, rate rises by state electricity boards (SEBs) came as a relief for power utilities and related sectors. Domestic coal prices had increased six per cent and imported coal prices had moved 12 per cent per annum. The average price of gas, used to fire power plants, grew nine per cent. As a result, annual losses of utilities before subsidies had ballooned to 33 per cent a year. Accumulated losses were estimated at nearly Rs 2,00,000 crore at the end of FY12. According to CRISIL, with rate growth lagging fuel prices, finances of utilities have worsened.
Given the adverse financial dynamics of the sector, rate rises announced by most SEBs may sound good but are not sufficient to diffuse the ticking time bomb. Not only power producers, but also distribution companies, power financiers and banks are at stake. According to analysts at Sharekhan, though rate rises are inadequate in some states, it does ease the pain of debt-laden SEBs and sets the ball rolling for the sector to come out of the mess. Analysts believe distribution companies need to raise rates at a CAGR of 11-58 per cent over FY13 and FY14 to stay viable. According to Avendus Securities, if there are no reforms, losses of distribution companies, as a percentage of nominal gross domestic product, may reach 1.2 per cent by March 2014, as seen between FY99 and FY02.
It’s this make or break situation that makes analysts believe the government will push for key reforms to avert a disaster. Power analysts feel there are two things the government needs to ensure. First, regular cost-linked growth in rates is imperative for the sector to be financially viable. Second, given that coal production has been stagnant for the past four years, boosting domestic coal production is crucial. The hurdles to captive coal mining too, seem to be easing, given the severe shortage of coal and capacities, likely to come up in the next few years. However, extraction may start only after two years.
Given the possibility of various blockages being eased in the sector, an uptick in rates and increase in supply of lower-cost coal, analysts believe the earnings outlook seems to have improved. Avendus believes consensus forecast for FY13 and FY14 earnings growth of power companies exceed that of the Nifty.
USE OF SURPLUS COAL: RELIANCE POWER NEEDS TO WAIT FOR NEW POLICY
NEW DELHI: Reliance Power will have to wait for a new coal surplus policy before it can use the surplus coal from its Tilaiya Ultra Mega Power Project. The Coal Ministry has been asked to formulate a policy for use of surplus or incremental coal available for ultra mega power projects (UMPPs).
A person familiar with the development told Business Line, “The Empowered Group of Ministers (EGoM) in its meeting on April 27 decided to ask the Coal Ministry to formulate a policy keeping in view the opinion given by the Attorney General for the use of surplus or incremental coal.”
A committee of Secretaries will be asked to give its recommendation, followed by inter-ministerial discussions. The Cabinet Committee on Economic Affairs (CCEA) is expected to take a call after that. “One thing that is clear is the new policy will be implemented prospectively,” he added.
According to a senior Government official, this means that the new policy will not affect the permission already given for use of Reliance’s Sasan UMPP incremental coal for the Chitrangi Project of Reliance Power.
However, the application of Reliance Power to use surplus coal from blocks allocated to the Tilaiya (in Jharkhand) UMPP will be processed under the new policy on surplus coal.
It may be recalled that the EGoM had, in the same meeting, agreed to continue with the earlier decision of allowing Reliance Power to use surplus coal from Sasan UMPP for the Chitrangi project. The EGoM had, in its meeting on August 14, 2008, decided to recommend to the Coal Ministry to allow use of incremental coal for other projects.
The matter regarding use of surplus coal is also pending in court. Tata Power has taken issue against Reliance Power’s Sasan project. The matter is pending in the Supreme Court.
The Government is looking to set up 16 UMPPs in the country. Each of the projects is given fuel linkages, which means captive supply of coal. Of 16, three (Sasan in Madhya Pradesh, Krishnapatnam in Andhra Pradesh and Tilaiya in Jharkhand) has been awarded to Reliance Power and one (Mundra inGujarat) to Tata Power.
RISE IN POWER TARIFF LIFTS CESC PROFIT IN Q4
KOLKATA: CESC Ltd today reported over 137 per cent rise in net profit to Rs 266 crore in the January-March quarter when compared with the same period previous year.
The higher profit came on the back of higher tariff awarded by the regulator during the last quarter. Profit after tax for 2011-12 increased by close to 16 per cent to Rs 565 crore.
In March, the West Bengal State Electricity Regulatory Commission (WBSERC) allowed the RP-Sanjiv Goenka Group flagship, to enhance electricity tariff in Kolkata by 69 paise unit (over 13 per cent) to Rs 5.88 a unit for 2011-12. The arrears estimated to be Rs 550 crore (on an annualised basis) will be collected over next two years.
Announcing the results the CESC Vice-Chairman, Mr Sanjiv Goenka, on Tuesday said that the board of directors decided to set up a 3 X 660 MW supercritical thermal power plant at Balagarh inWest Bengal, subject to fuel availability. The State Government has reportedly taken the responsibility of ensuring availability of coal to the proposed Rs 10,000 crore project.
“The State Government is proactively pursuing with the Union Government for coal,” Mr Goenka said.
According to him, the company has nearly 1,000 acres of “free hold” land in possession at Balagarh in Burdwan district.
In early 1990s, a CESC subsidiary was granted “fast track approval” to set up a thermal power station at Balagarh which could not be implemented. Sources told Business Line that ensuring fuel supply to the project is easier said than done. While ensuring supply (linkage) through CoalIndiaappears elusive at this juncture, the West Bengal Government recommended the Centre for allotment of captive coal block to the CESC project through the State dispensation route.
However, considering the long list of States pitching to exercise the option, it may not be easy for the Coal Ministry to yield to the demand ofWest Bengal.
Considering a mere 1.7 per cent annual growth in consumption of electricity in CESC licensee area coupled with expected commissioning of 600 MW greenfield capacity at Haldia in mid-2014; Balagarh project has little bearing on power availability scenario of Kolkata in the next couple of years.
JSPL ACQUIRES 9.25 PER CENT STAKE IN AUSTRALIA’S APOLLO MINERALS
NEW DELHI: Jindal Steel and Power Ltd (JSPL) has acquired a 9.25 per cent stake inAustralia’s Apollo Minerals for AUD 1 million (about Rs 5.30 crore).
“JSPL is making a significant investment in Apollo. This initial investment, facilitated by Bligh Capital Pty Ltd, will provide JSPL with 9.25 per cent of the total issued shares in Apollo,” the Australian company said in a statement.
It added that the deal will be completed this week and is not to subject to regulatory approvals from any Australian or state government agency.
Before this acquisition, the Naveen Jindal-led firm’s presence inAustraliawas limited to the coal sector with six exploration permits inQueenslandand 27.27 per cent stake in Rockland Richfield.
The Australian firm is an iron ore and minerals explorer and developer, having Commonwealth Hill project inSouth Australiaand Mount Oscar Project in the Pilbara region ofWestern Australia.
“Since we gained access to the Commonwealth Hill Iron project in October 2011, Apollo has added value to the project through exploration and is now adding more value by attracting an investor of the size and quality of JSPL,” Apollo’s Chief Operating Officer Dominic Tisdell said in the statement.
As per the deal, JSPL’s Australian subsidiary Jindal Steel and Power Australia Pty Ltd will acquire 25 million shares of Apollo at AUD 0.04 each. For this, a share subscription agreement was signed last week by both the firms.
Apollo has kept a target of exploring 500 million tonnes of magnetite bearing iron atMountOscarproject, while it expects to make announcement on Commonwealth Hill reserves soon.
According to Apollo, JSPL’s investment is part of an AUD 3.6 million fund raising programme of the company, for which it has received firm commitments.
Industry sources said that JSPL may increase its stake in Apollo to 20 per cent in near future and can also go for buying entire iron ore from Australian firm’s Commonwealth Hill mine, whose reserves’ size is expected to be announced soon.
JSPL officials could not be reached for comments on the deal.
Stating that “Apollo is not up for sale”, a spokesperson of the Australian firm said in an e-mailed statement that “the shareholder subscription agreement between JSPL and Apollo does not limit the stake that JSPL can own in Apollo Minerals.”
The spokesperson further said that “at this stage, the investment by JSPL in Apollo represents a strategic investment and partnership only.”
Shares of the JSPL closed today at Rs 484.70 apiece on the BSE, down 3.29 per cent from the previous close.
KUDANKULAM VILLAGERS RETURN THEIR VOTERS’ IDs
MADURAI: A large number of villagers in and around Kudankulam on Tuesday submitted their voter identity cards to members of the People’s Movement Against Nuclear Energy (PMANE) to be surrendered to the revenue officials later, opposing the Kudankulam Nuclear Power Project (KKNPP).
The move by the villagers comes in the wake of chief minister J Jayalalithaa announcing inNew Delhithat the first reactor of the multi-crore nuclear plant would attain criticality in 10 days. The villagers from Idinthakarai, Thomaiyarpuram, Perumanal, Kuduthalai, Kudankulam, Vairavikinaru, Kuthankuli, Kuttapuli and Avaidaiyalpuram submitted their voter ID cards to PMANE functionaries at the protest site in Idinthakarai and also signed an undertaking opposing the nuclear plant.
The anti-nuclear plant protesters also conducted the signature campaign in several villagers around Kudankulam. “We will be utilising the signatures collected to prove our mandate against KKNPP in the courts,” said PMANE coordinator S P Udayakumar. By Tuesday evening, more than 2000 persons had surrendered their voter ID cards even as 325 persons are observing a fast.
PMANE has also launched a campaign titled “RespectIndia”, on the need to respect the rights of individuals and communities. “Just as the freedom fighters asked the colonial rulers to ‘Quit India,’ we, the People’s Movement Against Nuclear Energy fighters, request the corrupt and communal ruling class inIndiato ‘RespectIndia,’ respect the Indian citizens’ lives, rights and entitlements,” Udayakumar urged.
SUZLON BAGS GMDC’S 50MW WIND POWER PROJECT
MUMBAI/AHMEDABAD: The Suzlon group no Monday signed contract with state-owned Gujarat Mineral Development Corporation (GMDC) Ltd for setting up 50 Mw wind power project inJamnagar.
With this power project the total installed wind power capacity of GMDC would increase to 150.50 Mw.
As part of the project, 24 units of 2.1 MW wind turbines would be installed inJamnagardistrict of the state with investment of Rs. 305.32 crore. The Power division of GMDC has installed Wind turbine generator of a total 100.5 Mw capacity at different locations like Malliya, Jodiya, Gorsar, Bada and Varvala. Out of this a major portion, over 60 Mw, has been set up by Suzlon.
“Suzlon is pleased to once again partner with GMDC in driving forward their commitment to sustainable energy, and through this contribute to the development ofGujarat’s low carbon economy. The state ofGujaratis blessed with immense wind potential and we are proud of our contribution in harnessing this potential,” Chairman – Suzlon Group, Tulsi Tanti said.
The Suzlon Group has its presence across the globe with over 19,000 Mw of wind energy capacity installed in 28 countries.
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