NEW DELHI: Amid controversies over allegations of irregularities in allocation of coal mines, the Coal Ministry has identified 54 blocks to be allocated to various sectors, including power, steel and cement, through auction route.
Of 54 coal mines, a maximum of 16 have been earmarked for the power sector, 12 for the steel sector, 12 for government firms and seven for the cement sector five for sponge iron and two for surface gasification.
“The coal blocks earmarked for power sector are meant both for tariff-based bidding and central government companies engaged in production of power. The further earmarking would be done in consultation with the Ministry of Power and Central Mine Planning and Design Institute (CMPDIL),” an official document dated May 30 said.
The official document further said the reserves meant for government companies would be allocated for commercial mining. Applications will be invited for allotment of blocks after finalising the detailed terms and conditions.
“Applications for the blocks reserved for integrated steel for government companies shall be separately circulated after finalisation of terms and conditions. The remaining blocks meant for allocation through competitive bidding would be advertised once the bidding documents are ready,” it said.
A few days ago, Team Anna citing portions of a draft CAG report had alleged corruption in coal block allocations. The civil society group had clubbed Prime Minister Manmohan Singh and Finance Minister Pranab Mukherjee with 13 other Cabinet Ministers whom they accused of corruption
The anti-graft group had picked up portions of a draft CAG report to make charges against Singh when Coal Ministry was with him.
Last month, Coal Minister Sriprakash Jaiswal had said the government was ready with the list of coal blocks to be bid and the auction process will begin by June.
GOVERNMENT ISSUES GUIDELINES TO DISCOMS FOR SHORT TERM POWER PURCHASE
NEW DELHI: The government has notified guidelines for short-term power purchase by distribution companies.
The new guidelines will promote competitive procurement of short-term power requirement by the distribution licensees and are also expected to reduce the overall cost of procurement of power leading to significant benefits for consumers, an official statement said.
The guidelines aim at promoting competitive procurement of electricity by distribution companies, reduce power purchase bill and facilitate transparency in procurement processes. The guidelines would not be applicable for power procurement for less than 15 days to allow for contingencies, the statement said.
Power procured under banking mechanism and from power exchanges shall also be excluded from the scope of these guidelines.
BHEL BAGS RS 1143 CRORE NTPC CONTRACT FOR THERMAL POWER PROJECT
NEW DELHI: State-run Bharat Heavy Electricals Ltd (BHEL) said it bagged a Rs 1143 crore contract from NTPC for supply and installation of the main plant package for a thermal power project in Madhya Pradesh.
The contract envisages setting up a 500-mw thermal power generating unit at NTPC’s Vindhyachal super thermal power station.
With the present order, 86 numbers of 500-mw thermal sets have been contracted by BHEL in the country so far, the company said in a statement.
With the commissioning of this unit, the cumulative generating capacity of the power station will be enhanced to 4,760-mw, making itIndia’s largest power generating station.
BHEL’s scope of work in the contract envisages design, engineering, manufacture, supply and erection and commissioning of steam generator and steam turbine generator along with associated auxiliaries and controls.
The equipment for the project will be manufactured at BHEL’s Trichy, Ranipet, Haridwar,Hyderabad,Bangaloreand Bhopal Plants, while the company’s power sector in western region will be responsible for erection and commissioning of the equipment, the statement said.
POWER GRID: TRANSMITTING HIGH-VOLTAGE GROWTH
MUMBAI: There are very few companies in the utility space which have come close to achieving their capacity addition targets for the 11th Five Year Plan (FY08-12). Power Grid Corporation is among the few to have done so. It has incurred Rs 54,000 crore of capital expenditure in the 11th Plan as against the target of Rs 55,000 crore. More important, its achievement gives some confidence to the market about the company’s ambitious target of achieving capex of Rs 100,000 crore in the 12th Plan (FY13-17).
The impact of timely project execution is also visible in its results for the March quarter, which was ahead of Street estimates, as well as the stock’s outperformance in the past year. The company reported strong growth of 40 per cent each in revenues to Rs 3,102 crore and net profit to Rs 1,042 crore, compared to the year-ago quarter. Better-than-expected results, coupled with a higher guidance by the company have also led analysts to revise upwards their FY13 and FY14 estimates for Power Grid.
For the stock, at current levels of Rs 106.35, it is trading at 1.9 times its book value and 12.5 times its earnings, based on FY13 estimates. Valuations look reasonable in the light of strong earnings visibility and improvement in return on equity.
Apart from the existing transmission capacities, the company generates incremental revenue by way of operationalisation (or capitalisation) of new projects. In the March 2012 quarter, the company capitalised projects worth about Rs 7,800 crore, far more than the Rs 2,228 crore spent in the December 2011 quarter, which boosted revenue growth. As new projects go on stream they also generate regulated returns (usually in the range of 14-16 per cent), thereby adding to profits, as well as improvement in return on equity (or shareholders’ funds). This is also a reason that the return on equity jumped almost 100 basis points, to 14.8 per cent in FY12.
Notably, there are more gains awaiting on this front. Analysts are expecting Power Grid’s return on equity to improve to 16.1 per cent in FY13 and further to 17.5 per cent in FY14. This is based on their estimates about commissioning of new projects currently under construction. For instance, about 39 per cent of the company’s total capital employed is in under-construction projects, which will add to revenues and profitability as these projects get operationalised. Additionally, in FY13, the company has plans to incur capex of about Rs 20,000 crore, as against about Rs 17,000 crore in FY12. Both, increase in operational asset base and higher capex are expected to drive growth in the coming years.
In this regard, the increase in capex guidance to Rs 100,000 crore in the 12th Plan adds confidence. Not surprisingly, analysts have upgraded their earnings estimates for the company. Nalin Bhatt, who tracks the company at Motilal Oswal Securities, said in a recent report, “We upgrade our FY13 and FY14 estimated earnings by 10 per cent to factor in higher capitalisation.”
Analysts are also expecting an improvement in the company’s other businesses. “The company is strongly focusing on increasing revenue streams from EPC/consulting and telecom segments. Since these segments have limited incremental investments, it would improve the overall ROE (return on equity) and capitalise the company’s experience and scale,” says Prakash Gaurav Goel, who tracks the company at ICICI Securities, in a recent report.
In this backdrop, analysts expect the company to report an annual growth of 20-22 per cent, each in revenues and profits over the next two years. However, to achieve this and sustain growth in it long run, they also expect to raise fresh equity, which might happen in FY14 or FY15.
SHIV ABHILASH BHARDWAJ TAKES OVER AS NUCLEAR POWER CORPORATION OF INDIA LIMITED CMD
NEW DELHI: Shiv Abhilash Bhardwaj today assumed charge as Chairman-cum-Managing Director of Nuclear Power Corporation of India Limited from Shreyans Kumar Jain who retired after a career spanning over four-decades.
Bhardwaj, who has been Director (Technical) on the NPCIL Board, will be the ‘Acting CMD’ as per the orders of the Department of Atomic Energy, a NPCIL statement said.
A Mechanical Engineering graduate fromDelhiUniversityand M Tech in Design of Mechanical Equipment, from IIT,New Delhi, Bhardwaj obtained training in Nuclear Engineering fromBARCTraining Schooland joined the Power Projects Engineering Division in 1971.
He has been associated with nuclear fuel design and engineering activities, reactor core design, shut down system design, in-core fuel management, reactor physics, reactor components and nuclear safety.
Bhardwaj is a member of the AERB Advisory Committee on Design Codes and Guides and has participated in the preparation of a number of Safety Codes and Guides for the AERB.
Jain, who negotiated withRussiato set up two 1000 MWe reactors in Kudankulam, had taken over as NPCIL CMD on January 3, 2004.
KUDANKULAM N-PLANT TO SELL POWER AT RS 2.65 A UNIT, SAYS NPCIL CHIEF
CHENNAI: The Kudankulam nuclear power project, which is expected to pump in the first units of electricity into the grid by the end of June, will sell power to the state utilities at around Rs 2.65 a unit, Mr S. K. Jain, Chairman and Managing Director, Nuclear Power Corporation of India Ltd (NPCIL), told Business Line.
The exact rate will be known only after the plant is commissioned and full capacity is reached, he said.
Right now, unloading of the ‘dummy fuel’ is happening.
The process will be over in a couple of days. Soon after, the real fuel will be loaded. The 1,000-MW unit-1 will start generating electricity by the third or fourth week of June, Mr Jain said.
Mr Jain feels that there is no alternative to nuclear power. Coal is polluting, wind is uncertain and “solar will never succeed inIndia” given the dust levels in the country.
(Dust settles on solar panels, affecting generation.)
Nuclear power is also cheap, he said, pointing out that in 2011-12, NPCIL sold 32 billion units of electricity at an average price of Rs 2.44 a unit.
Mr Jain noted that the tariffs are barely affected, either by a rise in fuel prices or factors such as depreciation of the rupee.
The fuel cost constitutes only a fifth of the cost of generation. Besides, fuel for several years is bought in bulk and stored.
“I have ten years worth of fuel for the Kudankulam project,” Mr Jain said, “stored in just one room.”
RENEWABLES’ TRANSMISSION CHALLENGE
Indiahas a large potential for electricity generation from renewables but the current exploitation is minuscule. The main constituent of electricity generation from renewables is wind energy, which contributes about 70% in terms of installed capacity. Other sources are biomass, solar and small hydro (plants with capacity of less than 25mw). For wind power, the resource-rich states are Tamil Nadu, Gujarat,Maharashtra, Karnataka and Rajasthan. For solar power, the entire country has great potential since the daily average solar incident is 4-7 kwh/m2/day. The actual potential inIndiaas far as renewables are concerned, however, is a little debatable since estimates keep varying. For example, in the case of wind energy, though the potential of Tamil Nadu was estimated to be about 5.5gw, about 7gw is already in place, with another 2gw in the pipeline. The Centre for Wind Energy Technology originally estimatedIndia’s potential at 45gw, then revised it to 100gw. There are other independent estimates such as that of the Lawrence Berkeley National Laboratory which pegsIndia’s potential at 800gw at 80 metres mast measurement. In the case of other renewables, the estimates have not been revised for long.
The growth in installed capacity for renewables inIndiaduring the 11th Five Year Plan was quite impressive. About 14,660mw fresh capacity was added, which primarily consisted of wind-based projects. While 10,260mw was from wind, nearly 2,000mw was from biomass, 940mw from solar and the balance from small hydro projects. The total installed capacity of renewables at the end of the 11th Five Year Plan was 24,503mw whereas it was a little more than 1,75,000mw from conventional sources like thermal, large hydro and nuclear. Renewables represent 12% of the total installed capacity, but contribute only 6% of energy generation. The spurt in the growth of the installed capacity of renewables in the 11th Plan can be attributed largely to the regulatory structure that is in place today, which, inter alia, has put into operation the renewable purchase obligation (RPO).
Renewable energy is said to be clean energy, which lends credence toIndia’s stand on carbon emissions at various international fora. Whether renewables are environment-friendly or not is debatable: wind turbines are noisy and destroy bird life; and with solar-based generation plants there are health and safety issues involved in manufacture, installation and disposal. But purely from the point of view of carbon emissions, renewable energy is superior to coal-based energy. Further, renewables have the potential to provideIndiasome respite with respect to fuel shortages, both coal and gas. It is projected that India’s energy requirement at the end of the 12th Five Year Plan would be 1,350 billion units and that the peak demand would be around 1,96,400mw. Given coal and gas shortages, one would need to maximise energy generated from renewables.
The falling tariff rates of electricity generated from solar projects have also caused a lot of excitement. In the latest bids for the Jawaharlal Nehru National Solar Mission, the market-determined tariff was about R8 per unit as compared to about R10.39-12.46 per unit (depending upon module) announced by the Central Electricity Regulatory Commission in March 2012. Though financial institutions are apprehensive that such low tariffs are non-viable, there is no doubt that tariffs are falling and falling fast, because of lower capital cost. From R15 crore per mw about three years ago, it has fallen to R10 crore per mw today.
Though one has been canvassing for the growth of renewables inIndia, their growth is dependent on other factors that are not being highlighted enough. Unless these issues are addressed, renewable energy growth in the years to come will remain a dream. The first issue is of evacuation of renewable power, which needs special attention. Most of the renewable power projects get grid connectivity at relatively lower voltage levels, i.e. at 132 KV or below. This means that state transmission utilities will need to build these lines but many of these utilities are not financially healthy enough to undertake huge investments.
For example, Tamil Nadu has the largest wind-based capacity inIndia, touching almost 7,000mw. This accounts for almost 40% of the total installed capacity in the state. So it would require an investment of almost R4,000 crore to evacuate power from its wind-based projects. Tamil Nadu can neither absorb the full potential of its wind-based generation nor export this to neighbouring states due to a poor transmission network. In any case, the neighbouring states would not like to absorb power in excess of their RPO. Besides, long-term planning becomes difficult as forecasting is always a problem and the wind season only lasts from June to September. Induction of heavy wind power shoots up the frequency beyond the Indian Electricity Grid Code limit of 50.2 Hz and, at times, cheaper power options are left unutilised to keep the grid stable.
As it is, the renewable energy potential is located in remote areas. For example, wind potential lies along the coastal lines, small hydro power in the remote hilly areas of Himachal, J&K and Arunachal. Further, transmission projects for renewables need to be planned greatly in advance. While transmission lines may take 4-5 years to plan and construct, a renewable energy project may get constructed much earlier.
The second factor, which acts as a dampener for renewable energy’s proliferation, is its low capacity factor. This kind of intermittent power affects grid stability adversely, which requires balancing through spinning reserves. This can only be provided by pumped storage hydro plants or open cycle gas-based plants, since they have to start producing electricity instantly wherever there is shortage in generation from wind-based capacity. As we all know, the share of hydro power inIndiais going down steadily and, therefore, how much support the hydro stations can provide to renewables in the future is yet to be seen. In any case, the existing hydro stations provide no comfort to states like Tamil Nadu, since you cannot immediately supply power to the southern region due to transmission constraints. Tamil Nadu has to set up its own spinning reserves. No comfort can be drawn from gas-based stations either since gas is in short supply and gas plants are operating as base load plants, not in a position to provide incremental power if required. It is reported that though there is 13,000mw of gas-based capacity under construction, only 1,000mw will get gas allocation during the 12th Plan.
The National Action Plan for Climate Change targets 12% capacity from renewables by the end of the 12th Plan. This would translate into adding about 6,000mw of incremental capacity each year, which can’t be successfully implemented until a strong transmission network is created in sync with the generation plants from the renewable sector. EntireIndiawill have to be brought under a single grid to reap the potential that lies in the southern states. Basically, investments in the transmission sector must multiply. This is especially relevant in a scenario where hydro or gas-based plants cannot be set up quickly.
The author is senior advisor, Planning Commission of India
AFTER GO, NO-GO CLASSIFICATION, INVIOLATE AREA HAUNTS INDUSTRY
NEW DELHI: After a long hiatus, the ministry of environment and forests (MoEF) is back in action, taking strong measures to protect its stance on various issues pertaining to environment and forest clearances.
It has decided to introduce a new categorisation declaring a portion of mineral bearing areas as ‘inviolate’ for undertaking any mining activity. This will make the reprieve to firms from the suspension of the go-no-go norm temporary. The ministry has finalised the modalities to launch the new categorisation that is once again expected to impact a series of existing and forthcoming projects of the power, steel and cement sectors.
“We have defined the parameters for the inviolate areas based on the protected area status, crop diversity, biodiversity richness and the number of species there. We have developed the criteria for the inviolate areas as the group of ministers (GoM) on coal had asked us to,” said a senior ministry official.
Though the official refused to give further details, sources said that the new categorisation would impact existing projects as several coal block allocations have been made in areas where mining would be barred under new categorisation.
Based on a joint exercise by environment and the coal ministry in early 2010, the former decided to put 48% of the area under study (primarily in central and eastern India) out of bounds for mining or no-go areas. This categorisation attracted strong opposition from the industry which felt that the move would destroy their projects that use coal as input.
“The new categorisation of inviolate areas may be as stringent but it would offer reprieve to the industry in the form of a policy on giving alternate coal blocks. This means that even if a company loses its allocation under the new norms, it could be offered alternate coal block”,” said an official in the Planning Commission.
In yet another show of its ability to take bold steps, the ministry has also rejected a proposal from the finance ministry to break the single forest advisory committee (FAC), that gives inputs to the ministry to accord forest clearance to industrial projects, into two or three committees so that the clearance process could be hastened. It has also rejected a proposal from the power ministry with regards to delegation of powers to regional offices for according forestry clearance for the sector.
In fact, the finance ministry’s recommendation of setting up several FACs has not gone well with the environment ministry with the latter being in the process of rejecting this idea. According to the MoEF, there is no need for more FACs as the single advisory body has no pending cases on forest clearances- a feat it has achieved for the first time.
“We will tell the finance ministry that more FACs are not required because no project is pending with the committee. applications are pending at the level of the divisional forest officer (DFO). In fact, state governments don’t even submit proper applications. What states do is not our responsibility but it is marked in our performance of delaying clearance”,” the official added saying that more than 500 clearances are pending at the state level or with the project proponents for non submission of essential information.
METHANE TO BE EXTRACTED FROM COAL INDIA MINES
KOLKATA: The Union Ministry of Petroleum and Natural Gas (MoPNG) has decided to allow extraction of mine methane from CoalIndiamines.
The Ministry was engaged in a turf battle with the Coal Ministry on the issue for more than a year now.
The proposal was mooted by the coal major in early 2011 for safe mining, and ensure gainful use of the greenhouse gas which was otherwise released in the atmosphere leading to environmental impact.
According to sources, the draft Cabinet note prepared by the Ministry in this regard comes with a rider. CIL should take prior approval from MoPNG for initiating any such project. In line with the CBM policy, the mine methane extraction agency is also required to pay production-linked-payments (PLP) to the Union Government.
Though it welcomed the move to open up the sector, the Coal Ministry has reportedly raised its objections on MoPNG proposal for granting approval to such project on a case-to-case basis.
According to sources, methane gas is proposed to be extracted from existing CIL leasehold area and is outside the ambit of the CBM policy. Accordingly, the Coal Ministry was pushing for an umbrella policy and the regulatory guidelines, if any, for the extraction of gas.
However, the draft proposal if implemented would add to the red tape.
“Mine methane extraction projects are small in nature. Considering the vast mining operations of CIL, the proposed policy would only ensure Petroleum Ministry’s control over the company on every de-gasification bid,” a source said.
In April last year, CoalIndiadecided to invite private participation for extraction of methane from five extremely gassy and “unsafe” underground mines in Jharkhand. The project was estimated to help unlock nearly 100 million tonne of medium grade coking coal and 25 billion cubic metre of methane.
The tender attracted interest of a large number of private players fromIndiaand abroad, but could not be awarded due to objections raised by the MoPNG.
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