MUMBAI: The Mahan coal block in Madhya Pradesh, one of the most controversial of all coal block allocations, has been earmarked for the power sector under the government’s upcoming auctions, which means the Aditya Birla Group won’t be able to bid for the block that it owned jointly with Essar Power Ltd.
The Mahan coal block is listed under ‘power’ in a list issued by the coal ministry on Friday, naming 65 coal blocks that will come up for allocation or auction before the end of the current fiscal year on 31 March, in line with the Supreme Court’s order earlier this year that cancelled most of the coal block allocations since 1993 in a case that challenged the way in which the government gave out natural resources to companies.
Aditya Birla Group’s flagship Hindalco Industries Ltd, the largest copper and the second largest aluminium producer in India, was dependent on the Mahan coal block for its Mahan aluminium smelter with a capacity of 360,000 tonnes. Hindalco, along with its partner Essar Power, had started development work in the region.
“There is a definite tilt towards the power sector as it seems to have been encouraged (from the number of key blocks earmarked for this sector),” said Dhananjay Sinha, head of research–institutional equity at Emkay Global Financial Services Ltd. “Hindalco will have to bid for blocks that come under the general or non-regulated sector where the base price may be high. So Hindalco has been hurt.”
Some of the other blocks where erstwhile owners may not be able to bid are:
Tubed in Jharkhand: Earmarked for the power sector so Hindalco Industries may not be able to bid but its erstwhile joint owner Tata Power Co. Ltd may be able to bid for it.
Talabira 1 in Odisha: Earmarked for power so Hindalco Industries won’t be able to bid.
Ganeshpur in Jharkhand: Earmarked for power so Tata Steel Ltd may not be able to bid.
Radhikapur (East) block in Odissa: Earmarked for power, so Tata Sponge Iron Ltd and its partner Scaw Industries Ltd won’t be able to bid.
Seregarha in Jharkhand: Steel manufacturer ArcelorMittal India won’t be able to bid for this erstwhile block as it has gone to the power sector.
(Source: Mint, December 20, 2014)
BILL TO AMEND ELECTRICITY ACT TABLED IN LOK SABHA
MUMBAI: With an eye to unbundling the power distribution and transmission sector and opening it to competition, the government on Friday tabled the Electricity Amendment Bill, 2014, in the Lok Sabha.
The amendments aim to provide those consuming less than one megawatt a choice of power distribution companies, separate the content and carriage businesses, bring renewable energy into the mainstream and rationalise rates.
The Bill also aims to empower power generators to sell the surplus power generated within a state to entities outside it.
“Opening the sector will ensure the supply of power is in line with market realities,” said an executive at a distribution company.
The proposed amendments to the Act seek to segregate carriage (distribution network) from content (electricity supply business) in the power sector. The government will introduce multiple supply licensees in the content business and continue carriage as a regulated business. The Bill also has a ‘duty to connect, supply to request’ clause for last-mile supply.
With separate businesses, the onus of the development of the network will rest with the carriage provider.
The provisions on ‘tariff policy’ are proposed to be made mandatory for the determination of rates.
The Bill also envisages the timely filing of tariff petitions by utilities, as well as their disposal within a specified period.
The amendments also seek to empower appropriate commissions to initiate suo-motu proceedings to determine the rate in case a utility/generating company doesn’t file its petition on time. It also gives the load despatch centre the power to penalise those not complying with its directions on power supply. To give renewable energy into the mainstream, there are provisions for a national renewable energy policy, in addition to the existing national electricity policy.
To increase procurement, the Bill provides for the setting up of renewable energy generating stations by distribution companies.
(Source: Business Standard, December 20, 2014)
INDIA POWER LINES TO GET $1.2 BILLION GERMAN REVAMP WITH KFW
BERLIN: German state-owned bank KfW Group will spend €1 billion ($1.2 billion) to refurbish India’s electricity network for carrying more renewable energy from sources such as solar and wind.
KfW agreed to loan Power Grid Corp of India Ltd €500 million to build new power lines and signed deals with India’s government for two loans totalling €125 million for grid projects in Rajasthan and Tamil Nadu, it said on Thursday in an emailed statement. The deals are part of a support package of €1 billion, it said.
“Demand for power in India is rising unremittingly,” said Norbert Kloppenburg, a KfW board member. “The expansion of transmission is the task of the moment because of the great potential of renewable energies.”
About as many people in India are without electricity as the population of the US and the number is growing every year. Prime Minister Narendra Modi wants to bring electricity to every home by 2019 by leapfrogging the nation’s ailing power- distribution infrastructure with solar-powered local networks—the same way mobile-phones have enabled people in poor, remote places to bypass landlines.
About 90% of India’s renewable energy sources are located in seven states, meaning most of the plants are far from where power is consumed, KfW said. That is the reason updating India’s grid is key, it said. Bloomberg
(Source: Mint, December 20, 2014)
POWER DISCOMS, SEBS OWE RAILWAYS MORE THAN RS 1,038 CRORE
NEW DELHI: The outstanding dues owed by state electricity boards and power discoms to railways is Rs 1,038.66 crore as on October 31, the government said today.
This information was given in a written reply to the Rajya Sabha by Minister of State for Railway Manoj Sinha.
Punjab State Electricity Board owes railways maximum dues of Rs 448.40 crore followed by National Thermal Power Corporation with Rs 163.17 crore dues, Maharashtra State Electricity Board with Rs 123.05 crore and Delhi Vidyut Board with Rs 114.30 crore dues.
Sinha said non-recovery of dues adversely impact the gross traffic receipts and thereby affect generation of surplus for appropriation to Development Fund and Capital Fund, which support plan expenditure of railways.
He further said steps are being taken to expedite realization of outstanding dues like pre-payment of freight has been made compulsory for coal booking for all Power Houses and state electricity boards.
Launching of special drives for clearance of outstanding dues by forming teams of Accounts and Commercial officials from time to time is also done, the Minister added.
(Source: The Economic Times, December 20, 2014)
AVANTHA GROUP’S CG BAGS CONTRACT FROM BELGIUM FIRM
MUMBAI: Avantha Group firm CG today said it has bagged a contract from Belgian firm Northwind to provide operation and maintenance services for a 216 MW wind farm offshore substation in the European country.
“CG has been awarded a contract from Belgian offshore wind farm operator Northwind to provide operation and maintenance services for the 216 MW wind farm offshore substation on Lodewijk bank, 40km off the Belgian coast,” a company release said here.
Financial details of the contract were not disclosed. This order follows a previous contract the company bagged from Northwind for the grid connection study, supply of a 275 MVA main transformer and two reactors of 65 MVA.
The power equipment and electrical appliances maker will provide complete end-to-end services to effectively monitor, maintain and repair the offshore substation and ensure optimal availability and safety for 10 years, the release said.
(Source: The Economic Times, December 20, 2014)
101 CAPTIVE COAL BLOCKS IDENTIFIED FOR ALLOTMENT
NEW DELHI: The government has identified 101 captive coal blocks with 16 billion tonne of reserves for allotment to public sector units and auction to private firms in the first phase, according to a senior government official. Of these, 42 blocks are operational while 32 are likely to commence production in the next six months.
These blocks can together reduce India’s dependence on imported coal in the next one year, the official said. The country imported 130 million tonne of coal in 2013-14.
Sixty five blocks with 8 billion tonne of coal will be auctioned to private power, steel and cement firms while 36 blocks with 8.3 billion tonne of reserves will be allotted to state and central government-run companies.
The official said of the 36 blocks identified for allotment to government companies, 35 with potential have been reserved for the power sector, while one has been earmarked for a state-run steel company. The blocks can fire plants generating at least 60,000 MW of electricity.
Out of 65 coal blocks to be bid out, 28 coal blocks with 4.8 billion tonne of reserves have been designated for the power sector. The blocks can generate about 20,000 MW of power. The rest 30 with reserves of 2.7 billion tonne have been earmarked for non-regulated sectors of steel, cement and captive power. The government on Thursday issued draft bid documents for consultation with stakeholders.
The draft norms bar companies from exiting mining projects and blacklist bidders for a year for withdrawing early from the bidding process.
The government is likely to use reverse auction method to award coal blocks to private power producers.
In reverse auctions, a ceiling price equal to state-run Coal India’s price for that grade of coal will be set and the bidders will have to bid lower than that. Power companies securing coal blocks will have to pay a fixed sum of Rs 100 per tonne of coal extracted.
For steel and cement sectors, the government will set a floor price not less than Rs 150 per tonne based on the formula for determining intrinsic value of each block. The highest bidder will win the blocks. The draft bid documents are open for public consultation till December 22. The government plans to kick off the auction process by December 25 and complete the first phase of the process by March 31, 2015.
(Source: The Economic Times, December 20, 2014)
THERE’S NOTHING COMPETITIVE ABOUT THE COAL E-AUCTION
NEW DELHI: The government’s plan to prevent power rates from going up due to the re-allocation of coal mines could also restrict competition in the auctioning.
The draft approach paper for e-auction has nothing for power companies that fall in the case-II category, closing the doors even on the new players.
Power industry executives said the new rules give out the sentiment that investment of the existing players is being safeguard.
“Why should a new player come when they are creating a mess of the whole re-allocation system? With the government not offering to provide any assistance, players with no power-purchase agreement will stand to lose,” said a senior industry executive.
The case-II bidders in the power sector own up the responsibility of setting up the power project with the Centre or the state governments acting just as a facilitator.
“Around five projects with a cumulative capacity of 9,000 mw in Uttar Pradesh, Haryana and Punjab fall in the bracket of case-II bidding. Stakes of companies such as Sterlite, L&T, Lanco and Jaypee stand contested with the government keeping them out of the auction,” said A K Khurana, director general, Association of Power Producers.
In case-I type projects, clearances, land and other infrastructure is provided by the government.
The government plans to have two different modes of e-auction for the cancelled coal blocks. For the regulated sector, where the end use is generation of power, there will be reverse auction.
Whereas for captive power generation, the steel and the cement sectors, there would be forward bidding model.
“The government wants to stop gaming in the bidding but is being preferential to the projects which have fuel arrangement, power-purchase agreement and infrastructure. But this is what would lead to manipulation of bids,” said a power sector executive.
The industry experts said in all likelihood, the cancelled mines are going back to their prior owners. In the detailed tender document which the potential bidders would have to submit, asks for precise details on end-usage of coal, amount of coal needed for same, distance of end-use plant to the mine and the completion status of the same. This could translate into power, steel & cement projects which had attached captive mines getting it back, after payment of penalty.
The captive power producers (CPP), which have been kept in the bracket of forward bidding, are against this move of the government.
“In the meeting with the stakeholders on 16 December, captive power producers addressed their concern that they are already buying coal form Coal India at 35 per cent higher rates. Keeping forward bidding model for us would escalate our power cost. Crisis looms over the sectors having captive power production,” said a CPP executive.
In the reverse auction mode bidder who will quote the lowest would get the mine for generation and sale of power. Whereas, in the forward bidding model the bidder quoting the highest price would get the mine for end use.
(Source: Business Standard, December 20, 2014)
COAL CONTRADICTION – THE ONUS IS ON THE RAJYA SABHA TO IRON OUT THE COAL BILL’S INFIRMITIES
The Coal Mines (Special Provisions) Bill, 2014, has been passed by the Lok Sabha and will next be discussed in the Rajya Sabha. This bill replaces an ordinance issued in October. The Supreme Court had cancelled the allocation of 204 coal blocks, out of a total of 218 allocated since 1993, on the grounds that the allocation process of the screening committees was arbitrary and illegal. Further, the court said that the cancellation of the 42 coal blocks that were operational or near-operational would be effective from March 31, 2015.
This bill has the following main features. In Schedule I, all the 204 cancelled blocks are listed. Of these 204 blocks, the 42 operational ones are mentioned in Schedule II and a further 32 in Schedule III. The bill restricts the allocation of Schedule II and Schedule III blocks to government or private companies that are engaged in any of the specified end-uses: power generation, coal washing as well as iron, steel and cement production. Other blocks may be allocated to a government or private company for consumption, sale or any other purpose specified in the mining lease. The above allocations can be made only through auction by competitive bidding. The bill also allows the government to allot a coal mine without bidding to a government company or to an electricity generator that has been awarded a power project on the basis of competitive bids for tariffs. Given that this bidding mechanism may lead to a change of ownership, the bill provides for a process to transfer the assets and compensate the existing owner.
Given the shortage of coal in the country, one can argue that there is an urgent need to take action to ensure that the 42 coal blocks do not stop production and that other coal blocks can begin production. The first question is whether this objective needs legislative action or can it be executed under current laws. The Coal Mines (Nationalisation) Act, 1973, permits a mining lease to be granted only to the Central government or its undertakings (or subleases to be granted by them), or to private companies that have any of the four specified end-uses: power generation, coal washing, iron and steel production or cement production. The Mines and Minerals (Development and Regulation) Act, 1957, was amended in 2010, mandating allocation to such private companies to be made only through auction by competitive bidding.
Given these provisions, existing laws permit re-allocation of the cancelled blocks to private companies engaged in the four specified end-uses through competitive bidding. The main reason for the cancellation of allotments by the court was that the allocation process was illegal and arbitrary. If the reallocation were to be done through competitive auctions, there would be no violation of any existing law. That said, one would still need a process for the transfer of assets.
However, if the intent is to permit private companies to operate in this sector without end-use restrictions then existing laws would need to be amended. This bill enables such change. However, when other sectors such as telecom and insurance were opened up to private-sector participation, independent regulatory bodies (such as the Telecom Regulatory Authority of India and the Insurance Regulatory and Development Authority) were created to ensure orderly development of the sector and to discourage oligopolistic behaviour. This bill does not create such a regulator.
There are some ambiguities in the bill that may need to be resolved to avoid potential litigation. For example, the bill allows power-generating companies that have bid on the basis of tariffs to be allotted coal mines but it does not restrict them from selling the coal. The bill also makes amendments to the Coal Mines (Nationalisation) Act and the Mines and Minerals (Development and Regulation) Act in order to permit private-sector participation in coal mining, without end-use restrictions. However, it does not delete the existing section of the Coal Mines (Nationalisation) Act that expressly prohibits such participation. Thus, this act will now have two sections that contradict each other.
The coal sector has socio-economic implications on several dimensions. Over half the power generated in India is coal based, and given our power shortage and rising energy needs for both industrial and domestic use, increasing coal production is important. India imports billions of dollars of coal every year, adding substantially to the current account deficit. The coal sector employs about four lakh persons.
Coal mining can be land intensive and the development of mines can lead to the displacement of people. Coal mining and usage also affect the environment and have adverse implications for climate change. Therefore, it is important that any change in the policy on coal mining and usage be undertaken after careful consideration. The onus is now on the Rajya Sabha to consider all its implications before passing the bill.
The writer is co-founder and president, PRS Legislative Research, Delhi
(Source: The Indian Express, December 20, 20140
COAL INDIA ASKS POWER FIRMS TO CONTACT IT FOR COAL IMPORT FOR FY’16
NEW DELHI: Coal India has asked power firms to contact its supplying companies in case they need to import coal through them for the coming fiscal. “In order to make necessary arrangements for supply of imported coal, interested and eligible power utilities are requested to approach the supplying coal companies immediately with whom they have signed for further course of action,” Coal India (CIL) said in a notice.
The PSU further said it offers to supply imported coal for the year 2015-16, under the provisions of fuel supply agreement (FSA) entered with the power utilities in the post 2009 FSA model. Coal and Power Minister Piyush Goyal had earlier said that CIL has received an order to import around 5 lakh tonnes of coal for the current fiscal.
CIL had earlier said that the first shipment of 1.79 lakh tonnes of imported coal has landed at Mundra port and would be supplied to the power companies. In terms of the Presidential Directives issued in 2012 and last year, CIL board had earlier decided that under fuel supply pacts for new power plants commissioned after 2009, out of the minimum assured quantity, that is, 80 per cent of Annual Contracted quantity, 15 per cent shall be supplied from imported coal.
It was decided that such imported coal supply was to be made through a PSU importing agency under a back to back supply agreement with the power plants opting to take imported supply from CIL. Accordingly, CIL engaged MMTC through a competitive bidding for arranging such imported coal.
(Source: The Financial Express, December 20, 2014)
DOWNER BAGS $2-BILLION ADANI MINE DEAL IN AUSTRALIA
HYDERABAD: Billionaire Gautam Adani’s Adani Group has awarded contracts worth over $2 billion to Australian engineering group Downer EDI Ltd for constructing mines as well as for mining services at the Carmichael Coal Mine in Central Queensland.
Downer EDI said it had received two Letters of Award from Adani Mining Pty Ltd.
Grant Fenn, the Chief Executive Officer of Downer, said the Adani mining services contract would be one of the largest of its type signed in Australia in recent years.
“We’re very much looking forward to working with Adani at the Carmichael Coal Mine, which is expected to become the largest thermal coal mine in Australia,” he said.
Under the five-year mining services contract, with two additional one-year options, Downer will be responsible for statutory management and mine operations, drilling and blasting and load and haul of waste and coal.
According to the company website, Downer will be responsible for the engineering, procurement and construction of on-site infrastructure and preparatory civil works.
The capital for the major fleet for the mining services contract will be provided by Adani.
Adani Australia Country Head and CEO Jeyakumar Janakaraj said the Carmichael mine will deliver vital export opportunities for Queensland and also provide employment to 10,000.
“This partnership with Downer reflects the clear confidence that tier I firms have in Adani’s projects and we welcome the chance to work with such a respected, proven partner on this critically important task,” Janakaraj said.
(Source: Business Line, December 20, 2014)