The NTPC and CoalIndiahave agreed to sign new fuel supply agreements (FSA) on 2009 terms. The only change is the trigger level, which has been scaled down to 80 per cent from 90 per cent, as directed by the Prime Ministers’ Office.
The trigger level is the point up to which Coal India has to meet the supply commitment.
“We already have an FSA with CoalIndia. We will change only one clause – that is the trigger for incentive and penalty,” Mr Arup Roychowdhury, Chairman of NTPC, told Business Line.
When asked whether CoalIndiahad agreed to this condition, Mr Roychowdhury said, “Yes, they have agreed. The Coal Ministry has directed them to sign it. It will happen any time soon.”
When asked whether this means that NTPC is getting preferential treatment, he said NTPC’s case was different from other private developers who are opposing CoalIndia’s new FSA. NTPC has to sign new FSAs for its brownfield projects unlike others who havegreenfieldprojects.
NTPC’s argument is that two different FSAs for the same station will create operational problems. “We already have three units working under the earlier FSAs and there is a fourth unit coming up in the same place for which we have to sign the new FSA. It’s not like this for others,” Mr Roychowdhury explained.
The power producer will sign fuel supply pacts for 4,300 megawatts. Currently, it is sourcing coal based on a memorandum of understanding signed with CoalIndiafor these projects.
The power producers were irked by CoalIndia’s new clauses in the FSA, which has brought down the penalty clause to as low as 0.01 per cent and has the liberty to discontinue supplies at any time.
POINTERS: Contentious issues
1. Penalty clause reduced to 0.01 per cent
2. For three years from the date of signing of FSA, there will be no compensation.
3. For non agreement during review, aggrieved party can terminate the agreement.
4. For non acceptance of change in coal distribution system CIL has right to terminate the agreement.
5. No provision for inter project transfer of coal for efficient operation
6. No provision for re-declaration of grade.
7. Force Majeure events
POWER MINISTRY PANEL TO COMPILE DATA ON IMPORTED EQUIPMENT
NEW DELHI: In a bid to evaluate the performance of overseas power equipment, the Power Ministry is believed to be in the process of collecting information on the performance of Chinese and other imported equipment being used at various power plants according to the sources in the Ministry.
A host of power projects are being run on overseas equipment already and the developers are simultaneously placing big orders, especially with Chinese companies, for upcoming plants.
A panel set up by the ministry is in the process of collecting data on imported equipment, especially fromChina, being used at different power plants across the country.
After collecting the necessary information, the performance of overseas gears would be evaluated, sources said.
According to sources, in recent months, power project developers have started providing requisite data and the evaluation process is expected to be completed in a couple of months. Despite setting up the panel last year, not much headway was made in absence of necessary information.
“The Panel has been set up last year to collate necessary information from the developers, however, the real work on it has been started few months ago, we will soon have enough information to evaluate the performance of the imported gear.” a Power minstry official said.
A significant percentage of power generation plants in the country are running on imported equipment.
Going by the estimates, Indian entities have placed orders for more than 40,000 mw of overseas power equipment and most of them are to come from Chinese firms.
There has been a continuous debate over imposing higher duty on overseas equipment to provide a level playing field to the domestic equipment manufacturers, such as Bharat Heavy Electricals Ltd (BHEL) and L&T against cheaper Chinese imports.
The Government is mulling to slap a duty as high as 19 per cent on the imported gear to discourage imports, though a final decision on the issue is yet to be taken.
MAHARASHTRA CAN EXPORT POWER BY OCTOBER-END
MUMBAI: For power-starvedMaharashtra, it is a big achievement. Barring parts of Marathwada and northMaharashtra, the state has not only become free of load-shedding but by October-end, it will be able to export surplus power following completion of major projects.
“It’s a big achievement. Barring areas where recovery is dismal, we have been able to supply uninterrupted power. We have been providing uninterrupted power for eight to 10 hours even to the agricultural sector,” Ajoy Mehta, managing director, Maharashtra State Electricity Distribution Company Ltd (MSEDCL), told ToI on Monday.
MSEDCL records shows that while there is no load-shedding in areas where losses are below 34%, in areas where losses are more than that, load-shedding ranges from five to seven hours. For recovery, MSEDCL has created six zones: in A, B and C zones, the loss is below 34%; in D zone, it is 34-42%, in E, it is 42-50% and in F, it is above 50%. “We are drafting a new strategy for D, E & F zones to improve performance. If losses in these zones are reduced, the power supply position will improve,” a senior energy department official said.
The official said peak hour demand ranges from 14,500 to 15,500 mw, which is met from 5,500 mw power from state-owned thermal power stations, 1,000 mw from Dabhol, 3,500 from NTPC, 600 from the Uran gas power plant, 1,500 mw from windmills, 1,900 from the Koyna hydroelectric plant and 1,000 from other sources, including the hydel and open markets.
On achieving power surplus status, the official said, the state expects to receive an additional 1,100 mw from NTPC as per an agreement and another 1,500 mw from state-owned power plants at Khaparkheda and Bhusaval. “We are sure that by October-end,Maharashtrawill be power surplus and will be able to export power to neighbouring states,” he said.
MSEDCL found that out of the 1.12 crore consumers across the state, over 35 lakh were defaulters, resulting in a loss of Rs 300-400 crore. “We are drafting a new strategy to tackle defaulters. In certain areas, recovery is zero. We have stopped power supply to these areas, but still they manage to secure power. We have shunted out 350 employees (who could have been aiding them),” he said.
On redistribution of load, the official said it had been proposed to shift major peak hour load to the night. “We have urged leading industrial houses, particularly those who consume a high quantity of power, so that our peak hour demand will reduce. Instead of Rs 7-8 per unit, we have proposed Rs 2.5 per unit.
We have submitted a proposal to the state electricity regulatory commission for approval. If accepted, we will be in a better position to supply more power,” the official said.
RAJASTHAN MODEL FOR POWER DISCOMS’ DEBT RECAST
MUMBAI: Banks are to use the hard bargain they drove to recast debt worth Rs 35,000 crore of Rajasthan state power distribution companies (discoms) as a framework to negotiate terms with financially weak discoms in other states.
Banks have the finance ministry’s blessings to deal with other cases on the basis of the Rajasthan model, said a Central Bank ofIndiaofficial.
Short-term loans due for payment after October 2011 have been restructured for the Rajasthan distribution companies, in the fourth quarter of 2011-12.
The moratorium for principal payment is till October 2013. These loans are to be repaid in three years. Companies will continue to pay monthly interest instalments.
The rise in interest rate under revised terms for loans is not uniform across lenders.
The extent of increase is 100-150 basis points.
Prior to restructuring, the rate was between 11 and 12.5 per cent. After recast, it was 12-13.5 per cent.
The rates were raised to protect the net present value of loans. Banks do not lose out on account of the recast, a bank official said.
A senior official with the Rajasthan state power department said this will ease the pressure on balance sheets.
They will not be required to take loans for repayment.
With improvement in working practices, sale of surplus power and debt recast, the entities expect to break even in three years.
At present, escrow accounts for the Rajasthan discoms are with State Bank ofBikanerand Jaipur – it has an extensive branch network, being a local bank. Now, three lead banks — Central Bank, Bank of Baroda and Punjab National — are working out an escrow account mechanism. This will ensure that cash flows get used for repayments.
The Rajasthan government’s guarantees are in place for revised loans.
As a step to reduce the burden and improve finances, power rates were raised by 25 per cent in 2011 and the discoms have filed a proposal to raise these further, by about 21 per cent, this year.
The power rate subsidies will be paid on an actual basis.
Power distribution losses are to be brought down to 15 per cent in two to three years from 19 per cent now.
They were around 41 per cent five years before.
A CRISIL Infrastructure Advisory study shows aggregate accumulated losses of Indian utilities were estimated at Rs 2,00,000 crore as at the end of March 2012.
About three-fourths of these losses were incurred over the past five years and these were funded mainly by borrowings from banks and financial institutions.
NTPC, FOREST DEPARTMENT TO DEVELOP ECO-TOURISM PROJECT IN MEJA
ALLAHABAD: The stage is set to develop around 250 hectares of areas in Chandpur Khamaria, Itwa-Kala, Mahurikala, Kihuni Kala and Garaia villages of Meja tehsil and start an eco-tourism project. The work on the project would start next month with financial assistance by the National Thermal Power Corporation (NTPC).
The officials of district forest department have finalized the project. There are plans to give the entire area a ‘nature reserve look’. A layout plan has been prepared.
Talking to TOI, district forest officer (DFO) SN Mishra said: “We have decided to develop the area to boost eco-tourism. Black bucks would be given prime space. The forest department has 70 hectares land and about 500 hectares would be taken from gram samaj to develop the area.”
Mishra added big and small water reservoirs for animals would be set up to check the scarcity for black bucks. Various types of grasses would be grown in the area to give it a natural look.
Watchmen and other employees would be posted for maintenance and protection of the area, especially endangered Indian black bucks.
The project would begin with an initial amount of Rs 1.50 crore which would be funded by the NTPC.
“We are in final stages to start the eco-tourism project and provide a conducive environment to protect the endangered Indian black bucks. It would boost tourism in the district,” Mishra added.
Mishra claimed that the population of black bucks has doubled in the past three years. There are over 450 animals roaming in the area at present.
This endangered species had migrated from other areas and had been spotted in this region since the past three year.
Indian black buck (scientific name Antilope cervicapra) is also known by a number of other names like kala hiran, sasin, iralai maan and Krishna Jinka. Found in various parts of Indian subcontinent andNepal, grass forms the staple diet of the black bucks. The animals also eat pods, flowers and fruits as supplements.
“The visual estimation (which is done by sighting and counting the subject) shows that the number of black bucks had increased in the region. Now, the NTPC is assisting the district forest department to establish a conducive environment for these endangered animals to flourish in the open pastures and hilly terrain of the area,” added Mishra.
The project includes expanding the grassland, which would serve as a perfect grazing field for black bucks. Ponds and water reservoirs would be established. Salt licks (bricks containing salt) would also be placed all over the area to take care of the salt deficiency in this tender animal.
BARH POWER PLANT’S 1ST UNIT TO BE READY BY JUNE 2013
PATNA: The NTPC authorities have assured chief minister Nitish Kumar that the Barh thermal power plant’s first unit of 660MW will become operational from June 2013.
The CM, who visited the plant on Monday, held a meeting with NTPC officials, who made a presentation before him. They told him that the second unit of the same capacity will be made functional in 2014. Kumar asked them to accelerate the work.
Earlier, the CM planted saplings on the plant’s campus and said environmental work should also be done simultaneously with the construction work. The CISF personnel presented a guard of honour to the CM who was accompanied by energy minister Bijendra Prasad Yadav, Barh MLA Gyanendra Singh Gyanu, road construction secretary Pratyaya Amrit and CM’s secretary Chanchal Kumar. They were welcomed by the Barh plant’s general manager K S Garhbiyal and NTPC official U P Pani.
Earlier, the CM visited ancient Punyark Surya Mandir at Pandarak and prayed there for the state’s progress, prosperity and peace.
NTPC’S BANGLADESH PLAN HITS SUNDERBANS HURDLE
KOLKATA: Maharatna major NTPC’s maiden overseas venture atKhulnainBangladeshhas now run into an environment hurdle due to its proximity to the world’s largest mangrove forest Sunderbans.
Environmentalists inBangladeshhave already moved court asking the project to be scrapped as it comes within 14 kilometres of Sunderbans. The 1320MW (2X660MW) project is a 50/50 joint venture between NTPC and Bangladesh Power Development Board and both the parties have signed a memorandum of understanding recently.
“Some environmentalists have approached the court as it comes within 14 kilo metres near Sunderbans. We have given the site clearance for the project. But the environment impact assessment report that the firm has submitted is not satisfying. So we have asked them for a detailed report. We want to know how the firms will mitigate the possible environment hazards,” said Tarun Kanti Shikder, director, Department of Environment inBangladesh,Khulnadivision. The project was pegged at about $1.5 billion.
According to environmentalists, the plant Bagerhat district’s Rampal area inKhulnadivision, comes less than 10 kilo metres closer to the declared preserved zone. When asked about the development, a top NTPC official said, “It is a bilateral deal. We hope that the issues will be solved and the project will go through the environmental issues. Since MoU has been signed in February, our next step is to have a power purchase agreement in place and it would be ready with in two to three months.” Entire power generated by the project will be supplied to BPDB, to meet growing requirements ofBangladesh, as per the MoU.
Meanwhile, environmentalists inIndiaare also getting ready to approach the court. “We have already sent a letter to the Centre, Prime Minister of Bangladesh and chief conservator of forest in that country. If things don’t work out, all the environmental organisations in the region will get together and may approach the court too. It may affect the entire flaura and fauna of Sunderbans, spread acrossIndiaandBangladesh,” said Biswajit Roy Chowdhury, secretary, Nature Environment and Wildlife Society.
TheBangladeshcourt has asked the country’s government to explain, “why it should not be directed not to set up the plant” inKhulnaregion. “If both the government’s are keen, then we may have to give clearance for this bilateral project. Everything depends on the EIA report,” Shikder said.
NTPC’s another overseas project inSri Lankais also not yet taken off.
However, sources confirmed that theChittagongproject is already on track.
WE WANT TO BRING CAPTIVE USERS INTO MAINSTREAM POWER BUSINESS: PTC CHIEF
NEW DELHI: PTC India, having succeeded in almost every front of the power market, is now targeting ‘Group Captives’ — a concept that allows large industries to come together and set up power plants.
In conversation with Business Line, Mr T. N. Thakur, Chairman and Managing Director, PTC India, shares his views on the company’s future projects, including renewables, as well as the industry.
PTC is now targeting ‘Group Captives’ in a big way. It is encouraging large industries to generate power 24×7 under the group captive concept to meet their own requirements as well as generate to sell.
(The concepts require the consumers to hold together 26 per cent equity in the project and consume 51 per cent of the power generated).
Fuel and coal linkages in the domestic market are fast becoming critical.
Thus, PTC intends to arrange for fuel linkages on a long-term basis with suitable tie-ups with overseas mining agencies for power projects being set up in the coastal regions ofIndiabased on imported coal and enhance our endeavour to promote power tolling as a vital area of activity.
The company recognises the fact that fossil fuel-based generation is under pressure due to climatic changes. Thus, we are making efforts to bring into our fold more renewable and energy-efficient projects.
This area of business we see as becoming very significant in the next few years.
Under current conditions, PTC will endeavour to maintain its leadership position in the short-term trading market, expand operations on the power exchange front, andaggressively pursue competitive bidding and avail itself of opportunities in cross-border projects.
The short-term power market has grown at a fast pace. New products have come into the market and pricing has shifted from cost-based to market-based.
Private players have also started seeing value in the sector and are playing a vital role in generation and trading of electricity.
Today, the share of bilateral trading hovers around 5-6 per cent of total generation in the country, while that of the exchange is around 2 per cent. As Unscheduled Interchange (UI) gets reduced, we can reach the figure of 10 per cent in a short time.
The power trading business today is highly competitive. There are more than 40 inter-State trading licensees — most of them are private entities such Reliance, Tata, GMR, Adani, Lanco and others.
PTC, a Government of India initiative and leading market player, is a public limited company listed on both the exchanges. Among the central public sector undertakings, NTPC Vidyut Vyapar Nigam Ltd is the only major trading licensee.
On the buyers’ side, barring a few private distribution licensees such asDelhiand Orissa discoms, much of the trading business takes place with distribution utilities which are mostly State-owned.
It is essential that regulatory commissions or policymakers operate in a framework that empowers trading licensees to take business decisions commensurate with risks and rewards. But such a framework should not leave scope for uncertainties which may affect returns on investment or have a negative impact on the confidence of investors in the sector.
Regulatory interventions should only be in case of market abuse; market forces should otherwise be given a free hand.
Price caps and margin caps prescribed by regulators are not very encouraging and distort price signals based on interplay of demand and supply.
While it is important to safeguard the interests of customers, it is equally important to motivate investors to infuse funds into the sector.
BHEL BAGS CONTRACT FOR SOLAPUR POWER PROJECT
NEW DELHI: State-owned BHEL on Monday said it has bagged a contract for supplying equipment at Solapur Super Thermal Power Project inMaharashtra.
“BHEL has won a contract for supply and installation of Electrostatic Precipitator (ESP) package for 2×660 MW (1,320 MW) Solapur Supercritical Thermal Power Project,” the company said in a statement. BHEL’s scope of work in the contract involves design, engineering, manufacture, supply, and erection and commissioning of the complete ESP package.
The ESP shall be manufactured at BHEL’s Ranipet plant, while the High Voltage Rectifier Transformers will be supplied by the company’sJhansiplant. BHEL’s Power Sector – Western Region will be responsible for erection and commissioning of the ESP, the statement said.
Meanwhile, last week the company won an order worth Rs 380 crore from Rajasthan Rajya Vidyut Utpadan Nigam Ltd (RRVUNL) for setting up a 160 MW gas-based plant in Rajasthan. The Rs 380 crore contract is the expansion project (Stage IV) of Ramgarh power plant in Jaisalmer district of Rajasthan. BHEL’s scope of work envisages design, engineering, manufacture, supply, erection and commissioning of the Main Plant and providing equipment for the Gas-based power project.
AP TRANSCO WARNS OF PENALTIES FOR DELAY IN PROJECT EXECUTION
HYDERABAD: AP Transco on Monday warned of penalties for delay in implementation of transmission projects.
The corporation has directed all construction agencies and contractors of transmission lines and substations to complete the ongoing projects within schedule. It emphasised the need to expediting the works in view of expected monsoon in the first week of June.
Reviewing the progress of construction works of Extra High Tension (EHT) substations, Mr Hiralal Samariya, Chairman and Managing Director of AP Transco, stressed the need to complete the projects as per the terms without any deviations.
He warned action will be initiated against the defaulting contractors for not execution of works according to the agreement by levying heavy penalties.
The corporation is making huge investments in strengthening the transmission and distribution network in the State. A committee will be constituted for resolving the problems faced by the officials and contractors in timely execution of transmission projects, he said.
Since the power demand is increasing by about 10 per cent per annum, he said that the transmission system and generation capacity would be increased to meet the requirements of the consumers.
The Joint Managing Director of AP Transco, Mr P. Ramesh, has been entrusted the task of coordinating with all district collectors to resolve the various issues cropping up during the execution of transmission projects.
These include land acquisition and right of way problems. A nodal officer will be nominated for co-ordinating with the Andhra Pradesh Electricity Regulatory Commission for securing approvals for new transmission projects.
L&T CONSTRUCTION BAGS RS 744 CRORE CONTRACTS IN FIRST QUARTER
NEW DELHI: Engineering major L&T Construction today said it has bagged contracts worth Rs 744 crore during the first quarter of current financial year (2012-13) so far.
L&T Construction has bagged new orders valued Rs 744 crore during the first quarter of 2012-2013, a statement said, adding that they include orders for power transmission and distribution.
The Power Transmission & Distribution secured new orders worth Rs 479 crore from key customers which include orders for electrical, instrumentation and automation works from National Mineral Development Corporation (NMDC), Jindal Power Limited and NTPC.
An order has been secured from Power Grid Corp for the construction of overhead transmission lines from Barh in Bihar toGorakhpurin Uttar Pradesh.
In the Water & Solar Business, L&T Construction has secured orders worth Rs 265 crore from various customers for the construction of a Solar thermal plant at Rajasthan and also an EPC contract for the construction of a pumping station and allied works atBotadBranchCanalfrom Paliyad to Goma inBhavnagardistrict,Gujarat.
EXPECT BHUTAN’S WINTER TIME IMPORT OF POWER FROM INDIA TO INCREASE TILL 2016
SILIGURI: Hydropower majorBhutan’s winter time import of power fromIndiais expected to increase significantly till 2016. Water resources rich Himalayan countryBhutanitself needs power from outside to meet its domestic demand during lean winter season due to shortage of water flow.
The total import of power byBhutanfromIndiabetween October 2011 to March 2012 has been calculated as worth Nu 30 Million (Eqv. INR 30 lakh), much higher than the previous year. This upward trend is likely to continue till 2016, the expected year for mega Phunatshangchu project (1200MW) to start producing – informed officials from Druk Green Power Corporation, that takes care of Bhutan’s Hydropower initiatives.
As estimated,Bhutan’s present wintertime import need is 160MU of power that is expected to grow by 25% annually. It is convenient forBhutanto get it fromIndiawith well set transmission facility in-between.
Interestingly,Bhutanneeds to import power despite the fact that its generation of 6275 MU, as of End Oct 2011, is much higher than average domestic demand of 1500 MU.
But, according to MD of DGCP Mr. C. Rinzin, with most hydropower plants ofBhutanbeing on ‘run of the river’ schemes, generation is entirely water flow dependent. So, generation touches bottom level during dry winter season. Naturally the country then needs to import power from outside. On the other side, domestic demand is also growing up fast tightening the scenario.
“The domestic demand growth is mainly because of growth of power type of industries. Government needs to relook into its policy of allowing new power hungry industries insideBhutan,” said a senior Bhutan Chamber of Commerce and Industries member.
With estimated potential of 30,000MW,Bhutan’s installed capacity is around 1500MW. With heavy export of hydropower,Bhutanearns 45% of its revenue and 20% of its GDP out of hydropower. The country is at present on a mission to achieve 10,000 MW installed capacity by 2020 in co-operation with the Government of India.
ABB BAGS RS 175 CRORE NTPC ORDER
NEW DELHI: ABB Ltd on Monday said it has won Rs 175 crore order from NTPC Ltd to build two substations inMaharashtra. The substations will facilitate transmission of electricity from new power generation plants being constructed in the region.
The substations will include seventeen 400 kilovolt (kV) bays and fourteen 132 kV bays in Solapur and twelve 400kV bays and eight 132kV bays in Mauda. Scope of the contract comprises design, engineering, supply, installation, commissioning and associated civil works for the substations. The project is scheduled for completion in 2016.
Substations are key installations in the power grid that transform voltage levels and facilitate safe and efficient transmission and distribution of electricity.
The substations will be equipped with latest automation system to facilitate open communication between numerous control and protection devices within the substation and beyond, company local division manager and head of power systems division in India N Venu said.
ABB earlier bagged contracts from NTPC for construction of substations at Mauda -I, Gandhar and Nabinagar.
REACTOR PRESSURE VESSEL OPENED IN KUDANKULAM NUCLEAR POWER PLANT
CHENNAI: The Kudankulam Nuclear Power Plant today achieved an important milestone when the Reactor Pressure Vessel was unsealed paving the way for removal of dummy fuel and inspection of the vessel, moving closer to filling real fuel in the reactor.
“…An important milestone of unsealing of Reactor Pressure Vessel is achieved today. During early hours, the equipment known as “Multiple Stud Tensioner” was lowered on the top of the sealed reactor pressure vessel to loosen all the studs which are used for sealing the vessel,” a KNPP release said.
This would facilitate removal of dummy fuel assemblies from the reactor pressure vessel. Subsequently reactor pressure vessel inspection would be taken up, KNPP Senior Manager (HR) K Anbumani said in the release.
The Atomic Energy Regulatory Board had on May 10 permitted KNPP to open the Reactor Pressure Vessel Top Head, Dummy Fuel Assembly removal and the vessel inspection, one step short of filling enriched uranium.
The release said the process of commissioning activities were in progress on round-the-clock basis.
It also said R.S.Sundar has taken charge as KNPP Site Director from M.Kasinath Balaji, who has been shifted as the first Executive Director Operations-Light Water Reactors, Nuclear Power Corporation of India Limited, Mumbai.
NPCIL last week said the 1000 MW first unit of the controversy-hit KNPP in Tirunelveli District was expected to start commercial operations in August this year.
Commissioning work of the reactor at the Indo-Russian project, which had remained stalled following protests by anti-nuclear activists citing safety concerns, resumed in full swing after the Tamil Nadu Government gave its green signal in March last.
DAMODAR VALLEY TO REPLICATE GUJARAT’S CANAL-TOP SOLAR PLANT
NEW DELHI: In a rare compliment from a UPA Minister for the BJP government in Gujarat, New and Renewable Energy Minister Farooq Abdullah on Monday said the solar power plant atop a water canal in the state has shown the nation the way and it will be replicated by Damodar Valley Corporation.
“Gujarathas shown the way” with the commissioning of the world’s first 1 MW canal-top solar power plant in Mehsana district, he said during Question Hour in Rajya Sabha. TheGujaratproject virtually eliminates the requirement to acquire vast tract of land and limits evaporation of water from the 750 meter long canal.
Abdullah said DVC has over 2000 km of canal network on which it wants to mount solar panels that can generated up to 1,000 MW electricity.
“States likeGujaratand Rajasthan have done commendable work in solar power,” he said adding his ministry is eager to help states irrespective of which party was in power. His statement drew loud thumping of desks from Opposition benches with Ravi Shankar Prasad (BJP) congratulating the minister for speaking frankly about the contribution made by states. “We want to help state governments. We don’t discriminate ….Hum sab Hindustani hai…Hindustan bachega to hum bachenge (We all are Indians, ifIndiasurvives, then only we will survive),” he said, adding, “We want to strengthen the nation.”
Abdullah also lauded Rajasthan Chief Minister Ashok Gehlot for the vast network of renewable energy sources including solar and wind power set up in the state.
He said over 979 MW of solar power capacity has been set up in the country, of which 654.8 MW is in Gujarat, 197.5 MW in Rajasthan and 20 MW inMaharashtra. The tariff has come down from Rs 18 per unit to about Rs 7 a unit, he said adding it will further come down when the second phase of projects come up.
PRIVATE FIRMS GOT UNDUE BENEFITS OF RS 1.8L CRORE IN ‘COALGATE’: CAG
NEW DELHI: The Comptroller and Auditor General’s final report on allocation of coal blocks between 2004 and 2009 without auction is expected to peg the value of “undue benefits” that the government extended to private entities alone at more than Rs 1.8 lakh crore, sources have indicated.
The last draft of the report, first reported by TOI on March 22, had said the government extended undue benefits of Rs 10.67 lakh crore by giving away 155 mines to 100 commercial entities, including public sector bodies, without bidding since 2004.
The government auditor has brought down the value of undue benefits by taking out public sector and state government entities from the final report and focusing only on private ventures. This was done at the coal ministry’s behest, which argued during the ‘exit conference’ that public sector entities are audited separately.
But even at the reduced level, the value of undue benefit to coal block allottees is higher than the outer limit of the Rs 1.76 lakh crore-loss estimated by CAG in the 2G spectrum allocation case.
Besides, removal of public sector and state entities from the final report would mean the entire undue benefit of over Rs 1.8 lakh crore has accrued to private entities alone. The final report can still cause discomfort to the government .
CAG’s coal report in House today?
Sources said the Comptroller and Auditor General’s (CAG) final report on allocation of coal blocks has been lying with the government since May 11 and may be tabled in Parliament on Tuesday, the last day of the Budget session.
After TOI reported the final draft, the Prime Minister’s Office had made light of the figure and selectively quoted from a letter to the PM written by CAG Vinod Rai to say it was “not even pre-final”.
Even Rai was targeted by some economists and ministers. But on March 27, he hit back by saying CAG auditors had a global standing and did not make “fundamental errors”.
“We are incapable of making fundamental errors as being discussed in media. Our report will make clear all doubts on fallacies being talked about… They (CAG auditors) are the best in the world. Both developing and developed countries send their auditors to train with us at our academies… the report (on allocation of coal blocks) will make clear how sound our processes are,” Rai had said at the concluding session of a seminar on Public Accountability and Role of CAG.
The government auditor had calculated the undue benefit at the price of the lowest grade of coal. It first estimated the cost of production for each block by taking into account the actual cost of production in a similar CoalIndiamine for the same year. Then the difference between CIL’s sale price and cost of production was multiplied by 90% of the reserves in each block. The figure thus obtained was the windfall gain for that block.
The reasoning behind taking 90% of the total reserves rather than the entire lot, according to CAG, is that “detailed exploration establishes reserves at a confidence level of 90%”.
The final draft report said the coal ministry had in 2004 said that chances of any allottee not being able to recover this much from the reserves “would be, if at all, very remote”.
COAL BLOCKS AUCTION: CRISIL LOWEST BIDDER
NEW DELHI: Global firm Crisil has emerged as the lowest financial bidder for the Coal Ministry’s contract to prepare the methodology for determining the reserve price for coal block auctions.
“Crisil emerged as the L1 bidder (the bidder which quoted the lowest price) when the financial bids were opened. The consultancy work would be allocated to Crisil only after examining its documents,” a source in the know said.
Crisil provides ratings, research, and risk and policy advisory services.
Of the six bidders in all, Crisil, SBI Caps and PwC had been shortlisted by the Ministry after the technical bids, sources said. Deloitte was also among the early bidders.
In February, CoalIndiasubsidiary — Central Mine Planning & Design Institute (CMPDI) — on behalf of the Coal Ministry, had invited an expression of interest for providing consultancy services.
The Central Mine Planning & Design Institute had been assigned the task of hiring a consultant for the methodology of fixing the reserve price of blocks and finalising the bid document, and assist in the bidding process.
A Coal Ministry official had earlier said that the Ministry would put 54 blocks on auction in the first tranche, once the methodology is fixed.
NO-GO GHOST STILL HAUNTS COAL INDIA
NEW DELHI: More than eight months after the government scrapped the controversial ‘no-go’ policy, which had banned mining in some areas, state-owned Coal India Ltd (CIL) is still struggling to operate its new projects located in the so-called no-go areas in the absence of a formal go-ahead from the environment ministry.
The delay is set to stem the miner’s efforts to meet new supply obligations, further aggravating the ongoing coal crisis in the country.
“Since September last year, only two of our new mining projects have received clearance and, that too, outside of the no-go list. Overall, 179 proposals are still awaiting green clearances,” CIL Chairman S Narsing Rao told Business Standard. This includes 132 proposals awaiting the first stage clearance and 47 waiting for the second stage nod from the ministry. Around 40 of CIL’s new projects are stuck in the no-go zones.
The ministry, under the then environment minister Jairam Ramesh, had announced the no-go classification in mid-2010, banning mining in major coal bearing areas. The move blocked the development of 203 coal blocks with reserves of a whopping 660 million tonnes (mt)–enough to fire a power generation capacity of 130,000 Mw. Apart from CIL’s projects, blocks allotted to two dozen companies, including NTPC, Hindalco Industries, Essar Power and Adani Power, were also falling under the no-go zones. A twelve-member ministerial panel, headed by Finance Minister Pranab Mukherjee, had in September last year decided to do away with the classification.
While the no-go system has been done away with, the environment ministry is now working on a new concept which will demarcate some mining areas as “inviolate areas”, where mining will be prohibited, owing to their high quality of forest cover.
A senior official from the environment ministry rejected CIL’s claim that delay in green clearances were hurting production. “The company is raising a hue and cry to put the blame for reduced output on others. CIL has not developed even 10 per cent of the land in some forest areas approved by us for the company,” he said. He also added that as the policy on “inviolate areas” is still under works, it cannot be a reason for delayed clearances as claimed by CIL.
Despite the lack of approvals for new projects, CIL reported a two per cent growth in its 2011-12 output. The world’s largest coal producer ramped up production in February and March to make up for a dip in output in the early part of the year.
This year, however, the pressure to meet supply obligations has increased manifold as the government forced the company to sign pacts with power producers at a higher commitment level of 85 per cent of demand.
Rao, however, is optimistic about meeting the challenge. The company is bracing itself to meet this year’s higher production target of 464 mt, in addition to the 70 mt supply commitment for new power projects. “Our capital expenditure is set to double from Rs 4,000 crore last financial year to Rs 8,000 crore this fiscal. This is apart from the Rs 6,000 crore to be invested in acquisitions of assets overseas,” he said.
A majority of the new investment this year would be channelized in buying heavy earth moving machinery for two subsidiaries — South Eastern Coalfields Ltd (SECL) and Northern Coalfields Ltd (NCL). The rest of the investment would go in land acquisition in new mines and improving railway sidings for speedier evacuation.
Rao also said his team had started applying for green clearances with the environment ministry afresh. The coal ministry had last January instructed state governments to submit revised proposals for projects stuck in the no-go areas, taking note of a formal end to the classification.
The government had scrapped the no-go plicy after the new environment minister Jayanthi Natarajan had agreed that the classification should not be for the basis for clearance or rejection of coal blocks.
The decision was based on a recommendation by a committee under Planning Commission member B K Chaturvedi, which said the no-go classification had no legal basis.
TCI SETS A 6-MONTH DEADLINE FOR GOVT TO ACT ON CHARGES AGAINST COAL INDIA
MUMBAI: After lying low for a few weeks, The Children’s Investment Fund (TCI) has fired a fresh salvo at the Indian government, effectively setting a six-month deadline to act upon the allegations put forth by the foreign institutional investor in the matter of Coal India (CIL).
In its latest letter, TCI — which holds a little over 1% in Coal India — has asked the Indian authorities to come forward for ‘formal negotiations’ for an ‘amicable settlement’ of the issues that have been raised by the former on numerous occasions. Meanwhile, reports suggest that the coal ministry officials are not keen on meeting with representatives of TCI who had sought a meeting on May 29.
Further, TCI has categorically said that the letter is a notice under the agreement signed betweenIndiaandCyprusin 2002 for mutual promotion and protection of investments and further action will be taken if the government fails to act within six months.
“For the avoidance of doubt, this letter is written notification of TCI Cyprus’ claim under Article 9 of the (India-Cyprus) Treaty,” says the three-page letter written on May 16.
“We, therefore, request that the government of theRepublicofIndiaenter into formal negotiations with TCI on behalf of TCI Cyprus seeking amicable settlement of these claims under the Treaty… Failing such settlements within six months, we reserve our rights to initiate arbitration in accordance with Article 9 of the Treaty,” it adds.
The letter has once again alleged that while the board of CoalIndiafailed in its fiduciary duties, the government is forcing the board to abuse minority shareholders with illegal price controls. “TheRepublicofIndia’s recent conduct with respect to CIL has seriously impaired the business activities and operations of CIL and has contravened the Treaty,” says the letter.
TCI has alleged that it was wrong on part of the government to direct CIL to sell coal under Fuel Supply Agreements (FSA) at a discount of up to 70% compared to the international prices. Further, TCI has raised a red flag over the government decision of directing CIL to enter into additional FSAs with power companies wherein CIL will have to unconditionally guarantee supplies or face severe financial penalties.
“TCI Cyprus fully reserves all of its rights against India, including the right to claim compensation for the harm caused to its investments by these violations, both under the Treaty and any other applicable instrument,” says TCI.
The foreign investor has already written many letters to the board of directors of CIL and the secretary of the ministry of coal, alleging that while the board failed in its fiduciary duties, the government is forcing the board to abuse minority shareholders with illegal price controls.
On Monday, shares of CoalIndiagained 2.41% or R7.30 to end the day at R310.45.
CORPORATE DISCLOSURE NO COVER FOR WRONGDOING
The Children Investment Fund UK that holds about 2 per cent stake in Coal India Ltd has been exercised over its investments going sour, thanks to the government’s meddling in the company. This is especially with regard to CIL’s fuel supply commitments to thermal power companies.
It has gone to the extent of contemplating going to court over the issue of burdensome covenants thrust upon CoalIndia. The market regulator, SEBI, has gone on record saying that shareholders’ hyperactivism has no place in company law and administration. Its refrain, of a piece with the stand taken by dubious company promoters, is that, as long as disclosures are made shareholders have no business to assert themselves, much less play an intrusive role. Take it or leave it, is the message emanating from SEBI. Vote with your feet if you want to, is the subtext of this message.
In the Anglo-Saxon model of company governance, non-promoter shareholders have indeed been condemned to playing a fringe and passive role. Many a corporate mogul, including some inIndia, have had the gumption to thumb their noses at them and ask them to collect their rewards from the market. They have been told in unmistakable terms that they simply did not have the power to rock the boat, and demand economic rewards from the company, if it was for some reason unwilling to give them.
In the event, while a lender can enforce his security either with or without the help of the court, non-promoter shareholders, no matter how much they have forked out to the company, have been at the tender mercies of the dominant shareholders. The only exception is when a foreign collaborator, despite his lesser stakes vis-à-vis the Indian promoter, asserts himself through a shareholders’ agreement, or otherwise. The state of the art technology brought by him is the tool that prevailed over the Indian promoters.
But the advent of mutual funds brought about a seminal change in the nose-in-the-air attitude of the promoters. There have been instances, both in theUSand inIndia, of mutual funds nursing their investments assiduously, keeping the wayward promoters on leash. What emboldened them to look the company managements in their eyes was not sizeable equity stakes, but research capabilities and deep pockets. They did not resign themselves to a passive role even where all that needed to be disclosed was disclosed.
It is wrong to believe that disclosure absolves one of all the guilt. To be sure, in theUS, plea bargaining, a facet of mea culpa, is used as a bargaining chip to lessen penalties and punishments, when one is caught with hands in the till. But that does not mean one can get away with murder by making a clean breast of one’s crime. Many inIndiabelieve that a company need not fear anything as long as it has disclosed everything as per the applicable norms, including the accounting standards.
This smug belief has engendered a view that one need not be unduly worried about the subtle niceties of scrupulously avoiding conflict of interest, so long as the company through its financial statements faithfully discloses all the instances of its directors and other managerial personnel doing business with the company. The truth, however, is a director interested in a contract is barred from the board meeting in which the matter is going to be disclosed.
He cannot speak and vote on the issue in which he is interested. This solemn edict of the law is followed more in the breach, on the facile ground that the company has in any case made all the disclosures under the accounting standard on related party transactions.
It is thus wrong to silence the voice of the Children’s Investment Fund on the ground that when it made the investments in CoalIndiait ought to have read the offer documents — that as a government company, shareholders are exposed to the danger of the company’s policies being subjugated to the thinking of the government of the day.
Indian courts have often rescued minority shareholders from the depredations of the rapacious majority. But in all these cases the companies involved were in the private sector. CoalIndiawould be a test case to find out what the courts think about oppression of small shareholders where the dominant shareholder is the government.
Meanwhile, there could be a bit of masochism involved in voting with one’s feet or selling out. TheUSinvestors in Satyam computer’s ADRs did vote with their feet but their system allowed them to recoup the ensuing losses through a class suit from the company.
Till we put in place a similar system in our country, it would be idle to expect one to sell out if only to teach the company a lesson. In any case a large scale exodus is not something a company can be proud of. In fact, it could be counter-productive in the long run.
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