NEW DELHI: Notwithstanding the CAG stance favouring the auction route for allocation of natural resources, power companies such as NTPC, Tata Power, Rpower and Jindal Power might get another set of captive coal blocks without having to go through the bidding process.
The new rule on coal block auctions finalised by the coal ministry proposes to carve out a portion of the country’s coal reserves for the power sector that would be offered to companies through state-run corporations. Those companies that have been awarded a power project on the basis of tariff-based competitive bidding would be eligible for this exclusive allocation, official sources said.
Tariff-based bidding has been made mandatory for all power projects awarded after January 2011.
“This is good development and would help companies to offer lowest electricity tariff for consumers,” said an official of a private sector power company asking not to be named as he was not aware of the changes in the regulations.
In a communication to the coal ministry earlier, top officials in the power ministry had stressed on the need to provide captive blocks without auction for all tariff-based projects to keep the competitive process (for power projects allocation) attractive.
As per the rules being finalised in consultation with the state governments, specific areas containing coal blocks would be identified for the power sector. The coal ministry would then fix a reserve price for each coal block and allow state governments and the central power ministry to invite applications from eligible government companies and corporations for the said blocks. The state-owned agencies would then allocate these coal blocks to a company or corporation that have awarded a power project on the basis of competitive bids for tariff.
“The auction process for coal blocks would have ushered in two-stage bidding for the power sector that could prevent discovery of best tariff for power consumers. Under the new mechanism, power companies would know beforehand what kind of resource base they would get with the project and therefore bid aggressively,” said a senior power ministry official requesting anonymity.
Power producers currently participate in tariff-based bidding on the assurance of coal linkage or a captive coal block. Under the bidding route finalised by the government for coal sector, all future coal blocks will be allocated to user industries in the power, cement and steel sectors on the basis of a competitive bidding process. This is expected to increase the cost of fuel for these industries and, in turn, impact final product prices for consumers.
However, analysts feel that discretionary allocation of captive coal blocks to power companies could again become ground for controversy as allegations of favouratism could be levelled against the authorities.
NTPC ANNUAL PROFIT RISES 5 PER CENT
NEW DELHI: Country’s largest power producer NTPC today posted nearly five per cent rise in consolidated net profit at Rs 9,814.66 crore in the year ended March 2012, even as fuel costs surged during the same period.
The state-run company had a consolidated net profit of Rs 9,348.23 crore in the year ended March 2011.
In the last financial year, total income from operations jumped to Rs 65,893.68 crore from Rs 59,505.38 crore in the year-ago period, the company said in a statement.
NTPC’s reported higher annual profit despite its fuel cost, on consolidated basis, soaring about 19 per cent to Rs 43,302.66 crore in the last fiscal. The entity incurred fuel expenses to the tune of Rs 36,414.35 crore in the year ended March 2011.
The board of directors recommended a final dividend of Rs 0.50 per share, taking the total dividend payout to Rs 4 per share for the year 2011-12.
However, the company’s net profit on a standalone basis slumped 6.7 per cent to Rs 2,593.44 crore in the three months ended March. The same stood at Rs 2,781.84 crore in the year-ago period.
In the 2012 March quarter, total income from operations climbed to Rs 16,361.85 crore from Rs 15,597.31 crore in the comparable period.
The standalone figures for March quarter are unaudited.
Meanwhile, NTPC’s standalone net profit rose over one per cent to Rs 9,223.73 crore in the year ended March 2012. In the previous fiscal, the same stood at Rs 9,102.59 crore.
On a standalone basis, total income from operations climbed to Rs 62,053.58 crore in the 2011-12 financial year from Rs 56,903.19 crore in the year-ago period.
NTPC has an installed capacity of 37,514 MW.
NTPC JV COAL POWER PROJECT KICKS UP DEBATE IN LANKA PARLIAMENT
COLOMBO: A 25-year tax holiday granted to a joint venture thermal power generation project betweenIndia’s National Thermal Power Corporation (NTPC) and the state owned power entity Ceylon Electricity Board (CEB) has come in for intense debate in the Sri Lankan parliament.
The 500MW Sampur coal power in the eastern port district of Trincomalee with a project cost of USD 500 million is to get underway this year.
TheIsland’s Parliament yesterday debated a motion on the regulations made by economic development minister Basil Rajapaksa under the Strategic Development Projects Act grant, under which the NTPC would qualify for a 25-year tax concession.
Among other things, the project is also exempted from payment of Value Added Tax (VAT) for five years on the importation of project related goods and the local purchases of project related goods and services.
The exemption would cover payments to contractors and sub-contractors while the import of coal, raw material and spare parts shall be exempted from the VAT payment for a period of 25 years from the date of commencement of commercial operation.
Speaking on the motion, R Sampanthan, the leader of the main Tamil party, Tamil National Alliance (TNA), said the location of the project was a traditional habitat of Tamils.
He said despite pledges the government has failed to resettle the Sampur displaced even after six months.
Vijitha Herath, an opposition JVP legislator accused the government of trying to create an Indian monopoly of the island’s power and petroleum sectors.
Energy minister Champika Ranawaka said the location was not chosen with the intention of displacing the Tamils.
“The tax concessions given to the Indian company are in effect concessions granted to our own people”, he said.
The Minister said electricity cost will be lower from the Sampur thermal power plant.
NTPC NET PROFIT FALLS 6.7% TO R2,593.44 CRORE
NEW DELHI: The country’s largest power producer NTPC posted a nearly 5% rise in consolidated net profit at R9,814.66 crore for the year ended March, even as fuel costs surged during the same period. The company had a consolidated net profit of R9,348.23 crore in the year ended March 2011. In the last financial year, total income from operations jumped to R65,893.68 crore from R59,505.38 crore in the year-ago period, the company said.
NTPC reported a higher annual profit despite its fuel cost, on a consolidated basis, soaring about 19% to R43,302.66 crore in the last fiscal. The board of directors recommended a final dividend of R0.50 per share, taking the total dividend payout to R4 per share for the year 2011-12
The company’s net profit on a standalone basis slumped 6.7% to R2,593.44 crore in the three months ended March. The same stood at R2,781.84 crore in the year-ago period.
ESSAR ENERGY SIGNS POWER PURCHASE AGREEMENT WITH NOIDA POWER CO
NEW DELHI: Ruia-group company Essar Energy today said it has signed a power purchase agreement with Noida Power Company for selling 240-MW electricity from its 600-MW coal-fired plant at Jharkhand.
Essar Energy today announced that it has signed a power purchase agreement (PPA) with Noida Power Company Ltd for 240 MW of contracted capacity from its 600-MW Tori II thermal power station which is under construction in Jharkhand, a company statement said.
The binding PPA has been signed by Noida Power Company with Essar Energy’s subsidiary Essar Power Jharkhand Ltd (EPJL) and has a 25 year duration, the statement said.
The supply of power from the plant would commence from April, 2014, it said.
Under the terms of the PPA, Essar Energy will supply power at a delivered levelised tariff, including transmission costs, of Rs 4.08 per kilowatt hour (approximately 7.6 US cents per kWh).
At its 1,200 MW Tori I project, which is also under construction, Essar Energy has already signed two PPAs of 300 MW and 450 MW, both for 25 years, with the Bihar State Electricity Board.
Essar Energy currently has 2,200 MW of generation capacity operational, with a further 2,310 MW of capacity due to be commissioned this year at the Salaya I, Mahan I and Vadinar P2 projects.
CESC EYEING RENEWABLE ENERGY PROJECTS
KOLKATA: RP-Sanjiv Goenka Group company CESC is looking out for acquiring renewable energy projects which are under implementation, but has got held up for some reason or the other.
This indication was available during a recent interaction with the CESC top-brass. “The company is examining a few renewable energy projects for possible takeover,” they said.
CESC, which is essentially a thermal power company (capacity 1,225 MW), has begun implementing a hydel power project in Arunachal Pradesh for which detailed project report is being readied. It would invest some Rs.100 crore for setting up a 5 MW solar power project inGujarat, it was learnt.
It is targeting a 500 MW renewable energy capacity within five years. “This could be through hydel and wind projects”, the company said. However, the company is not planning to set up solar power projects in the power-starved Sundarbans area.
It may be mentioned that CESC stepped outside West Bengal through its acquisition of the Chandrapura project inMaharashtra, in which it bought a little over 50 per cent stake from Dhariwal Infrastructure Private Ltd. It marked the utility’s entry into the national arena. This was in August 2009.
ABB INDIA NEEDS TO POWER UP REVENUE
Taking the impact of rupee depreciation, ABB India, which is a net importing company with imports accounting for 35% of its material requirement, booked a notional foreign exchange loss of Rs 33 crore in the first quarter of 2012, significantly impacting its net profits for the quarter.
The company’s operating profit dropped close to 4% for the March ’12 quarter compared with the fourth quarter of March ’11. Had it not been for this marked-to-market loss on trade payables, ABB India would have posted an increase of about 28% in its operating profits.
The company’s stock price, which dipped almost 4.5% after the announcement of the results, gradually recovered, but again fell by about 3% to 725.85 at the day’s close on Thursday.
A slew of measures that the company has undertaken, including localisation of manufacturing and supplies to improve its operational efficiency, have started to pay off. Its cost of raw materials came down significantly, about 6% since the Q1 of 2011, while its other expenditures for the quarter remained flattish, except for forex loss.
A noticeable increase on the expense side is however, on the employee cost front, which rose about 19% since a year ago. The company has in fact been reporting a YoY double-digit increase in its staff expenditure, consecutively, since the June’ 11 quarter. The management has clarified that this is on account of three businesses that ABB India acquired from ABB Global Businesses and Services last year. Even as the expenses were reined in, a flattish growth in revenues did surprise investors, especially when the company had a robust order backlog of over 9,000 crore since September’ 11.
While ABB’s management has said scheduled deliveries of the projects, especially in the process automation and power systems business, have been a deterrent in booking revenues, the fact that order execution is becoming increasingly challenging for engineering companies is hardly a surprise.
URANIUM SALE TO INDIA AFTER SAFEGUARD TALKS
Ruchira Singh, [email protected]
PERTH: Australian resources and energy minister Martin Ferguson has supported uranium exports to India and highlighted the importance of Asia, both as a source of investment in Australia and as a buyer of Australian minerals.Ferguson, also the tourism minister, has faced criticism for a carbon tax being imposed on companies responsible for emissions as well as a minerals resource rent tax proposed on profits generated from exploitation of non-renewable resources inAustralia.Fergusonspoke about these and other issues in an interview with South Asian journalists on a visit toAustralia. Edited excerpts:
When couldAustraliastart selling uranium toIndia?
To potentially sell the uranium toIndia, subject to the negotiation of bilateral safeguards of uranium inIndia, will now be a question of the two governments resourcing those negotiations. The timeline will be determined by the speed of the negotiations.
How much uranium do you thinkAustraliacould supply toIndia?
Our industry will expand its capacity. The amount of uranium to be sold toIndia,Japan,France, theUK, whatever, will be a commercial issue between Australian mining companies and those who want to buy Australian uranium. That will vary year-to-year or decade-to-decade depending on demand. There is growing demand for uranium fromIndiabecause they are going to increase their nuclear capacity, just like there is a growing demand for Australian uranium potentially inChina. The United Arab Emirates (UAE) is another one. We’ve got bilateral discussions with the UAE about selling Australian uranium. They are building three nuclear…reactors.
What is your rationale behind taxing the mineral sector when it is shooting up costs and prices?
Firstly, the Minerals Resource Rent Tax (MRRT) only applies to coal and iron ore. It does not apply to uranium. And the other change in the taxation regime was the petrol and resources rent tax. Historically an offshore industry, the industry is now developing onshore. So we applied the same tax system on the shore petroleum products because it is a level playing field. We’ve had record commodity prices, far higher than anyone expected. Royalties are paid irrespective of good or bad times in terms of commodity prices.
MRRT aimed at coal and iron ore is a profits-based tax during periods of record commodity prices. Hence, we apply this new tax. Australian community owns resources. We only get one chance to develop resources. Therefore, during times of record profits, the Australian community ought to get a share of those profits. The truth is, a lot of countries are now looking at MRRT as a potential model to apply profits-based taxes to develop their resources sector. I know a number of countries are talking to me about it.
Do you think you might change or tweak these taxes?
We’ve entered into an agreement with the mining industry. This has been legislated. It will come into force from the 1st of July this year. There is no proposal to extend it to other commodities. We’ve had that debate. 90% of profits-based tax is going to come from two commodities —coal and iron ore.
Some of these markets are slowing, steel and iron ore for instance, and the industry is not happy about the taxes. What do you have to say to them?
Demand for Australian commodities or any commodities goes up and down from time-to-time. MRRT is not contributing to changes in market conditions based on supply and demand. Australian tax systems are not influencing the level of growth inChinaorIndia. It’s their own economic activity.
But even though they are slowing, you’ve still got growth of 8% inChina, which is not bad. Indian growth is also pretty good. Demand for coal inIndiafromAustraliais pretty good. There’s a demand for iron ore fromAustralia, too. So we will sell commodities according to demand. MRRT has no impact at all on those international prices.
There are reports about Adani Group and GVK group facing environment clearance issues inAustralia. What are your comments?
InAustralia, we are now rationalizing the face of state and federal environment processes to try and get a one-stop shop to make it easier from a regulatory point of view to get environment approval. That’s a decision of the meeting with the prime minister with state territory premiers and chief ministers about a fortnight ago. I am working with GVK in terms of their environmentals to try and make sure we get them approved as quickly as possible.
One of the issues in that corridor is actually not environmentals, it is actually getting the potential coal companies to cooperate on railway infrastructure. There are three potential coal-producing firms in that corridor. We don’t need three separate railway corridors. We are trying to encourage cooperation, which is commercially smarter for each of those investors focused on the development of their port activities. And I have told those Indian companies it will be smart to cooperate.
Indianeeds a lot of coal. Are you in talks with the government or has the government approached you?
I speak to Indian ministers on a regular basis.
The Indian industry finds it hard to pay the prices that Australian coal suppliers demand. Is there anything that could help them in terms of deals and discounts?
The prices are based on international supply and demand. We can’t get involved on those matters. Australian coal is on offer. You pay the appropriate market price. There are no subsidies.
Has the Indian government asked you for any kind of a deal?
No. Even if they asked, I would not do anything because I do not get involved on commercial matters. It is inappropriate. We operate on a market-based system and there is no role for government for commercial negotiations.
With the new taxes you are imposing, prices are set to get higher…
No. It is a profits-based tax. Prices won’t get higher because Australian coal is sold on the basis of international price. A profits-based tax is aimed at the government getting a greater share of profits of companies that invest inAustralia. It will not impact prices. International price is a question of international operations of supply and demand.
It still hurts the profit margins and producers tend to pass it on.
If they try and pass it on, there will be a supplier out ofIndonesia, for example, who will supply it at a cheaper price. Or even potentially out of theUS.
What will be the impact of the carbon tax from 1 July? Will minerals be costlier around the world?
The carbon tax will have no impact whatsoever on the investment flows into the resources and minerals sector inAustralia. The carbon tax was announced last year, but investments have been coming in at a steady pace. There is absolutely no reason why the cost of coal, LNG (liquefied natural gas), iron ore or gas would go up after the carbon tax comes into force.
Ruchira Singh was inPerthas a guest of the Australian government.
IFC TO BUY STAKE IN SUNEDISON
CHENNAI: International Finance Corp. (IFC), the private sector investment arm of World Bank group, has agreed to buy 15% each in two units of SunEdison Llc, a global provider of solar energy services, for $55 million (around Rs.290 crore).
The investment will be made in Singapore-based SunEdison Energy Holdings Pvt. Ltd and the Netherlands-based SunEdison Energy Holdings BV, which will go into growth and development of solar power projects in south Asia, South-East Asia and sub-SaharanAfrica.
SunEdison develops, finances, installs and operates solar power plants. IFC will initially invest $14.5 million and the remaining $40.5 million will be made available after certain conditions are met to support the growth, development and construction of the company’s solar power projects.
The remaining amount will be released over a period of two years, Pashupathy Gopalan, managing director, southAsiaand sub-Saharan operations at SunEdison said. Gopalan declined to disclose the conditions that need to be met for future funding requirements. The investment reflects the economic growth and focus on energy security in southAsiaand sub-Saharan nations, which are assessing and supporting alternative energy courses, said Gopalan.
“We are doing this to enable pioneering projects under new regulatory support schemes and increasing economies of scale in downstream installations,” said Anita George, director for infrastructure inAsiaat IFC.
The investment in SunEdison is the largest by IFC compared with similar investments in solar energy companies, including Azure Power, Applied Solar Technologies, SunBorne Energy and Mahindra Solar One.
C-WET STARTS NEW WIND ASSESSMENT PROJECT
NEW DELHI: Centre for Wind Energy Technology (C-Wet), an autonomous R&D institution under the renewable energy ministry, has launched another phase of its wind assessment project. This phase of the project will measure the potential of wind energy at a height of 100 meters in 75 locations and at 120 meters height in 4 locations.
“The technology of megawatt class wind turbine has been changing all over the world. Anticipating taller towers with larger diameter rotors in the Indian market, we have now extended our assessment at greater heights in different areas to harness the potential of wind energy with the latest technology inIndia,” said Dr S Gomathinayagam, executive director, C-Wet.
This phase will also look for land availability through Geographical Information System along with a ‘land-use land-cover’ map, indicating the type of land cover which provides easy access to the wind power producers. It will also mark suitable land areas that are available for wind farming, using geographical instruments and applications like ‘Google maps’.
Currently, the project operates in 7 states — Andhra Pradesh, Tamil Nadu, Maharashtra,Gujarat, Rajasthan and Madhya Pradesh, while there’s a separate project for Odisha.
This project would calculate the potential of only on-shore wind sites. For offshore, however, there is one project in Tamil Nadu near Rameshwaram, measuring the wind energy potential at 100-meter height.
The Centre believes that this will attract a lot of new engineering, procurement & construction players and independent power producers in the wind energy sector. “This project will give direction to the industry and guide investors, policy makers and the government. Wind turbine manufacturers and power producers will have prior knowledge about the land, indicative wind at heights, hence helping them to choose a suitable technology,” said Gomathinayagam.
SUZLON GROUP BAGS 39-MW ORDER IN POLAND
MUMBAI: Suzlon Group-subsidiary REpower Systems today bagged an order to supply 19 wind turbines, each having a power of 2.05 MW, from RWE Innogy for its Nowy Staw wind farm project inPoland.
The wind farm project, spread across 15 sq km and scheduled to be commissioned in early 2013, has a potential to generate enough power to meet the needs of more than 50,000 homes every year, Suzlon said in a statement.
“With Nowy Staw, we are expanding our wind portfolio inPolandby almost 40 MW. This will bring us a step closer to our goal of adding 50 MW of wind capacity inPolandevery year until 2015. Our Polish wind pipeline is well filled. All in all, Innogy plans to have around 300 MW in operation inPolandby 2015,” RWE Innogy Chief Executive Fritz Vahrenholt said.
This is REpower’s largest project inPoland, the company said.
“With Nowy Staw we are implementing our largest project inPolandso far. The site in the north of the country with its average wind velocities is optimally suited to accommodate the REpower MM92 turbines. Till date, we have installed more than 2,000 plants of the MM series all over the world,” REpower Chief Executive Andreas Nauen said.
DENMARK‘S TILT TOWARDS RENEWABLES
Prosumers? If you are inDenmark, or have been there lately, you wouldn’t need a cryptologist to crack the word for you. As the country marches towards its goal of getting half of its electricity from wind power by 2020, inevitably every household is an electricity storage unit — a taker and giver of electricity, a producer and a consumer of power. Or, a prosumer.
Denmarkis, for sure, a small, windy country and can meet lofty goals with fewer challenges than others. Nevertheless, what the country is doing in terms of use of renewable energy shows the way. Simply put, it plans a massive wind power thrust and intends to solve the grid problems using the market and consumers as the key instruments of maintaining grid stability.
Consumers will buy power when the generation is surplus, and therefore, cheap, and store it in various forms — batteries in electric cars, ‘heat pumps’ that convert electricity into heat and store it, compressed air and fuel cells that produce hydrogen from electricity. In addition to these, large centrally operated electric heat pumps that convert electric energy into heat energy (for conversion back into electric energy when needed) also aid grid stability.
The backbone of all this is of course the smart grid that can seamlessly ‘flex up’ or ‘flex down’ generation across multiple stations and the consumption. Imagine, you just plug the cable into your car and go to bed; the recharging happens only when the electricity costs are low, which will be naturally when the windmills are busy. People at Energinet, the State-owned utility that manages the entire grid from its headquarters at Erritso, describe the future electric cars that would be plying on Danish roads as ‘ one giant storage battery’.
When the generation is down, the stored energy is used and any surplus put back into the grid, which can make its way into markets as far asSpain.
Over the next eight years,Denmarkwill put up 3,300 MW of wind capacity, 1,000 MW of which will be in the deep seas and another 500 MW near shore. With energy conservation measures, the gross energy consumption will come down 12 per cent over the 2006 levels.
Carbon dioxide levels will come down 40 per cent over the 1990 levels. By 2030, coal is to be completely phased out. By 2050,Denmarkwants to kiss goodbye to fossil fuels and be 100 per cent powered by renewable energy. Gradually, the natural gas fromNorth Seawill be replaced by bio gas.
While the concept of using a combination of the market as a grid-stabilising agent with the use of smart grid is nothing new in theory,Denmarkhas shown the guts to put it into practice and, therefore, will be a precedent-setter. All this is being done without pinching the pockets of the consumers too sharply.
It is estimated that the incremental taxes that a family would have to pay in 2020 would be €175, or Rs 12,250, a year — a small price for clean environment and energy security. A smart prosumer may even make more money than the extra taxes he pays.
BIOMASS POWER PRODUCERS SEEK GOVT SUPPORT
HYDERABAD: The Indian Biomass Power Association has requested the Union Power Ministry to help resolve some of the problems faced by them to make projects financially viable.
The association representatives met the Deputy Chairman of Planning Commission, Dr Montek Singh Ahluwalia, and Mr P. Umashankar, Union Power Secretary, earlier this week, to express their concerns in running biomass projects.
Most developers are facing difficulties due to the different regulatory environment is States. Mr P. Krishnakumar, President of the Association and Mr D. Radhakrishna, Secretary-General, in a statement, mentioned how biomass project developers are facing tough times due to various State agencies adopting different tariff structures. This is making them unviable in most States.
The officials were informed that while there is potential for about 18,000 mw, only 1050 mw has been commissioned thus far, and most of the plants are struggling to run them optimally.
In fact, some of them are on the verge of closure. The banks are refusing to lend due to delays in securing payments from distribution companies of some States. The biomass sector has a direct bearing on people dependent on the sector, they mentioned.
Following the representations, the association stated that the Deputy Chairman has assured that he would look into their concerns and see how the situation could be improved.
The association is seeking the inclusion of biomass projects under priority sector lending or interest subsidy.
CABINET REFERS COAL REGULATORY BILL TO GOM
NEW DELHI: The Cabinet today referred the draft Bill for setting up a regulatory authority for the coal sector to a ministerial panel.
“Coal matter has been referred to GoM,” a Minister said emerging out of the Cabinet meeting today.
The Minister however, did not provide details as to why the matter was referred to the Group of Ministers (GoM).
Sources in the Coal Ministry said that a consensus could not be reached on some of the provisions in the Bill as some of the Ministers felt it needed modifications.
Also, “general opinion was that why so many executive functions have been given to the regulator,” sources said.
Besides ensuring transparency in allocation of coal blocks, the proposed bill seeks to provide level-playing field to all stakeholders and promote investment in the sector.
As per the draft Bill, its functions also included granting authorisation to any person for undertaking mining, monitoring and enforcing closure of mines and determining price of raw and washed coal.
Sources said a separate GoM would be set up for this. Earlier, the draft bill got delayed as it had to be sent back to the Law Ministry. The amendments included changes in age and expanding qualification of the legal member of the proposed regulator.
The regulator, as provided in the draft, will attempt to expedite resolution of disputes relating to pricing of coal and put in place benchmarks for performance of companies in the sector.
Recently, a draft report of the Comptroller and Auditor General (CAG) had pointed out that the government lost Rs 10.67 lakh crore on account of allotment of coal blocks to 100 private and public sector companies during 2004 to 2009.
GOVERNMENT ASKS COAL INDIA TO SUPPLY COAL TO ALL POWER PROJECTS
NEW DELHI: The government has ordered Coal India Ltd (CIL) to supply Coal to all power plants getting commissioned within this fiscal even if they have not signed legally binding fuel supply agreements (FSA) with the PSU miner.
The coal ministry directive will benefit existing power plants of companies like NTPC, CLP India and Reliance Power that began operations before March this year besides units that will be commissioned this fiscal. Power companies have hailed the move.
However, quantity of coal to be supplied will be decided by CIL in consultation with the Central Electricity Authority (CEA).
A senior coal ministry official said CIL can supply coal to all power projects this fiscal if it achieves production targets and liquidates about 70 million tonne of stock lying at the mines. CIL targets production of 474 million tonne coal this fiscal against 436 million tonne previous year.
Power sector experts say plants are financially viable if they operate above 50% capacity.
“Ministry of Coal has issued a directive to coal companies to supply coal to power plants commissioned till March 31, 2012 as well as those to be commissioned during 2012-13 through memorandum of understanding (MoU) route as FSAs are getting delayed,” an official statement said. Unlike FSAs, which are legally-binding pacts, MoUs are short-term contracts for coal supply.
“Coal to these power plants will be supplied for the quantities to be decided in consultation with the CEA till the FSAs for these plants are signed. “With this directive, the commissioned plants would be able to generate power without facing disruption of coal supply,” an official statement said.
Power companies had alleged that CIL last month discontinued fuel supply to plants that began operations after December 2011. CIL move followed a presidential decree that asked CIL to sign time fuel supply agreements (FSAs) with plants commissioned before December 2011.
Association of Power Producers director general Ashok Khurana said, “We welcome coal ministry’s intervention to ensure that coal supply to plants that are commissionedis not disrupted. We hope these MoUs would soon get converted to FSAs in modified form.”
COAL FIRMS TO SUPPLY FUEL TO POWER PLANTS VIA MOU ROUTE
NEW DELHI: The government has directed coal companies to supply fuel to power plants that have been commissioned this year through the MoU route till issues related to fuel supply pacts are resolved.
The latest directive would benefit as much as 8,800 MW of electricity generation capacity that has come up in the first three months of 2012, sources said.
“The Ministry of Coal has issued a directive to coal companies to supply coal to power plants commissioned till March 31, 2012 as well as those to be commissioned during 2012-13 through the MOU route as the FSAs are getting delayed,” the Power Ministry said in a release today.
“With this directive, the commissioned plants would be able to generate power without facing disruption of coal supply,” it added.
An MoU is not a legally binding document and now, that route would be used till the issues regarding Fuel Supply Agreement (FSA) are resolved.
The Association of Power Producers (APP) Director General Ashok Khurana said the latest directive is a welcome move. APP, a grouping of 24 leading power producers, had also taken up the issue with the Power and Coal Ministries as well as the Prime Minister’s Office.
“This (directive) will ensure that fuel supply will not be disrupted for power projects that came up between January 1, 2012 and March 31, 2012,” Khurana told PTI.
Concerned over the delay in signing of FSAs, the Power Ministry had taken up the issue of ensuring fuel supply to power plants with the Coal Ministry.
“In this regard, the Ministry of Coal was requested to issue a directive to coal companies to ensure supply of coal to power units which have been commissioned or are likely to be commissioned this year,” the release said.
As per the release, the quantity of coal to be supplied to these power plants would be decided in consultation with the Central Electricity Authority (CEA) till FSAs for these projects are signed.
Most of the power companies have expressed concerns on certain clauses, such as those related to penalty, in the revised FSA mooted by Coal India Ltd.
CEA, the power sector planning body, on Wednesday held discussion with major power producers to gather their views on the FSA.
LET COAL INDIA E-AUCTION SURPLUS COAL OF CAPTIVE MINES
NEW DELHI: In the backdrop of controversial diversion of coal by some private companies from their captive mines, the coal ministry has proposed that surplus stocks be given to CIL for sale through e-auction.
“Any surplus coal produced/generated (from the captive mines)…. shall be transferred to nearest Coal India (CIL) subsidiary….(and) shall be disposed by e-auction by the CIL,” says an official document of the Coal Ministry.
Under e-auction, coal is sold at spot market price. Around 10 per cent of the total coal produced by CIL, which accounts for over 80 per cent of the domestic coal production, is sold through e-auction.
The document also suggested penal action, including coal block cancellation, against companies, which have been alloted captive blocks, are found selling coal.
“Any attempt to sell coal alongwith middlings and rejects shall amount to breach of law as well as the breach of terms and conditions of allocation/mining lease/FSA…and the company attempting to do so shall invite penal action, including cancellation of allocation and/or termination of mining lease/FSA,” the document said.
A couple of days ago, Coal Minister Sriprakash Jaiswal had stated that a policy on usage of incremental coal be finalised in a month’s time.
The Empowered Group of Minsters (EGoM), headed by Finance Minister Pranab Mukherjee, last month had asked the Coal Ministry to formulate a policy on the use of surplus coal, a source added.
After seeking comments from various ministries, the draft policy on usage of surplus coal would come up for deliberation in the meeting of Committee of Secretaries (CoS).
“Consequently, CoS will submit its report to EGoM, following that it (the draft policy) would go to Cabinet for approval,” another source said.
FSAs OR NOT, COAL MINISTRY WANTS UNINTERRUPTED SUPPLY FOR POWER COMPANIES
NEW DELHI: In what may come as a relief for power project developers, the coal ministry has directed state-owned coal companies to ensure uninterrupted fuel supply to plants commissioned till March 31, 2012, as well as those to be commissioned during fiscal 2012-13 even if they fail to sign fuel supply agreements (FSAs). The coal supply to these power projects would be maintained by coal companies under the MoU route till the time fuel user and supplier companies are ready to sign the FSAs.
The move is expected to benefit about 18,000 MW of power projects of a host of companies, including NTPC, Balco, Adani, GMR and DVC, that have recently been commissioned or are in advanced stage of commissioning.
There was uncertainty over the supply of coal to these projects as Coal India (CIL) had decided to offer fuel to plants only through the FSA route as directed by the committee of secretaries (CoS). As per the directions ofCoS, CIL is currently in the process of signing FSAs for projects commissioned till December 31, 2011. FSAs for other projects are expected to come up for consideration only later but power companies fear that this delay could make their project remain idle even after commissioning.
The coal ministry directive has come after the power ministry expressed concern over the delays in signing of the FSAs. As per the decision, the coal to these power plants will be supplied for the quantities to be decided in consultation with the Central Electricity Authority till the time the FSAs for these plants are signed.
THERE WILL BE A SHORTAGE ONCE NEW FUEL SUPPLY AGREEMENTS ARE SIGNED: S NARSING RAO
KOLKATA: Coal India Limited (CIL) has been in the news after a presidential decree that forced it to sign fuel supply agreements (FSAs) with power plants. The new chairman and managing director of the company, S Narsing Rao, shares his views on controversies surrounding FSAs and the possible imports that the company may have to resort to. In an exclusive interview with Shine Jacob, Rao explains CIL’s strategies on coal imports and plans to tackle production constraints. Edited excerpts:
Power companies have raised concerns about the new fuel supply agreement (FSA), especially the insignificant penalty clause of 0.01 per cent. Would you consider revisiting the clause?
As far as we are concerned, there are no issues with FSAs. Our subsidiaries have made offers to power companies and they have to respond. Till now, we have signed 13 out of 48 FSAs. Power plants that have not signed power purchase agreements (PPAs) are not eligible to sign FSAs, so some of the units that have not signed are not even eligible.
We are getting some feedback from clients like NTPC. Some have requested for modifications in the clauses. But the clauses were approved by the board. On our part, we can assure that we will do our best to stick to our offers.
You have joined Coal India Limited (CIL) at a crucial time, can you outline your priorities?
To step up production, of course. Dispatch and environmental issues need to be sorted out. We also have to work more closely with the Railways.
We need to liquidate our coal stock of about 71 million tonnes (MT) but infrastructure is a major issue. We have to see how we can step up evacuation of coal from the current level of 6 MT. Our targeted production this fiscal is 464 MT, while the dispatch target is 470 MT, which includes some of our coal stock. To do this, we need a bit of micro planning in logistics, contractors and rake availability.
If new FSAs are signed, you’d need to increase production by 70 MT. Do you think this is achievable with the production target that you have set?
Our assessment is that the requirement would be close to 100 MT. We are expecting to supply about 35 MT to the power sector from our production. So there will be a shortage. There’s a question mark over how we are going to meet that. Import is one possible option.
Last year, CIL failed to find takers among power producers for long-term coal off-take agreements. Do you have a separate strategy in place this time around?
The earlier offer was for long-term deals over a 10-year period. These kinds of long-term deals can be advantageous or disadvantageous depending on many international factors — including prices, freight rates and foreign exchange. Given the volatile factors, prospective consumers may have been unwilling to make a commitment.
I don’t think we may look at that kind of a long-term arrangement now. If we are going to supplement coal supplies to the power sector, it would be on a year-on-year basis — not even on a medium-term basis.
Even if you import, what if power companies want coal supplies delivered at the plants?
As I said, a year-on-year deal can be an option for imports. Whether we do it ourselves or bank on some central public sector undertaking (PSU) that already has expertise in the sector is something we will have to look into. Since a PSU dealing with coal imports will already know the business, it can have a back-to-back arrangement with power companies and we can facilitate it. At this stage, this is a possible idea, but we can look into it only if clients are willing.
If at all we go into that arrangement, we would adopt a hands-free approach. At present, FSAs are yet to be signed. After signing FSAs, imports will come into the picture and we will then be able to assess the shortfall. The question on the views of power companies regarding this proposal will only arise once FSAs are signed.
Is a price increase under consideration at this point in time? Will there be a rollback of the gross calorific value (GCV) system?
We will look into the issue of price rise only after coming out with the financial results. The nine-month impact of the National Coal Wage Agreement (NCWA) IX will have to be factored in. I can’t say when it will happen but prices have to be adjusted from time to time.
The government has notified the GCV system, so I don’t think there will be a rollback. There should be no difference between GCV and useful heat value (UHV) systems, it is only a notification. There may be some issues related to the grading and quality but GCV per se cannot be an objectionable thing.
Last year, CIL failed to meet the production target even after revising it a few times. What are your constraints and how do you plan to increase production?
We are optimistic about our targets. We will clear critical stumbling blocks like rehabilitation and resettlement (R&R) hiccups and departmental works will also have to be improved. I don’t think we can do much more than this in the remaining 10 months. But in the long run, we will invest more on infrastructure facilities. Our capital investment for the next five years is around Rs 32,000 crore.
We will invest more on railway lines and will speed up the three rail projects in the pipeline in Jharkhand, Chhattisgarh and Odisha, which will see a total investment of about Rs 2,000 crore. These projects include the Tori-Shivapur-Hazaribagh line in Jharkhand that is about a 100 km, Mand-Raigad in Chhattisgarh and another 100-120 km railway line between Bhupdevapur and Manoharpur in Talcher, Odisha. If these three projects are implemented, we will be able to evacuate 50 MT through each of these projects.
Do you think environmental concerns are going to become a constraint? How are you going to tackle it?
We are taking more proactive steps and will get in touch with all stakeholders like the environment ministry, state governments, district administration and the locals so that it doesn’t become a major stumbling block. All I can say is we are hopeful of getting the clearances for pending projects. About 70 projects need to be cleared that have a capacity of about 196 MT. Some of these have evacuation problems. So, even if the clearances are in place we may or may not be able to take it forward.
CIL was unsuccessful in overseas acquisitions. Even theMozambiqueproject is yet to take off. What are the primary issues?
We are not a private company so we can’t take big decisions quickly. They have to go through a process. The government-to-government route is much easier. But that, too, has its own set of problems. For example, working in a foreign territory where there is no expertise, you have to get technology from outside.
On acquisitions, we have to look at properties that can be completely owned by CoalIndia. And for that, we should look at some African and Southeast Asian countries, rather the developed world.
MENU 