NEW DELHI: Power Ministry is likely to order power generation firms to delay the annual maintenance work at their thermal plants as delayed monsoon is likely to compound electricity deficit by impacting hydro-power production.
“Usually this is the time (July-August) when thermal power plants go for maintenance … But in such conditions we have to postpone that… It can be postponed by 2-3 months,” Power Minister Sushilkumar Shinde said in an interview.
He added, “So far there is not much impact on electricity generation, but yes delayed monsoon is a cause of worry, so we have to take care of the country by providing them electricity through thermal power.”
However, the ministry is yet to officially communicate it to the generation companies.
According to the Indian Meteorological Department (IMD), rainfall was deficient by 25 per cent as on July 8, with 22 out of 36 regions experiencing below-normal rainfalls.
The Central Water Commission reported that water levels in the 84 reservoirs used for “storage” are below normal.
As per latest Central Electricity Authority data (July 17), the reservoir level of Bhakra Nangal Dam, one of country’s largest dams, stood at 473 metres as against its full capacity of 513 metres.
Similar is the plight of about 30 dams in the country. The reservoir level of Tehri dam in Uttarkhand was 761 metres as against its full capacity of 830 metres, the data said.
The reservoir level of Sardar Sarovar dam inGujaratwas 114 metres compared to its full level of 139 metres and that of Nagarjun Sagar dam in Andhra Pradesh was 155 metres, as compared to its full reservoir level of 180 metres.
State-run hydro power generation company NHPC, which currently generates over 5,000 MW of electricity plans to commission 1,200 MW of capacity during the current financial year, including spill-over from the last fiscal.
Over 21,000 MW capacity of the company is under various stages of implementation, according to its website.
The company plans to double its existing capacity by 2017. Out of the 10 projects, three are coming up in Himachal Pradesh, four in Jammu & Kashmir, one in Arunachal Pradesh and two inWest Bengal.
The Power Ministry has set a target of adding 88,000 MW in the next five years, from all sources of energy.
CERC DEFERS DECISION ON TATA POWER PLEA
NEW DELHI: The Central Electricity Regulatory Commission (CERC) on Wednesday deferred a decision on Tata Power’s petition seeking permission to hike tariff for the Mundra ultra mega power project to reflect the change in the Indonesian coal price following the recent change in that country’s mining law.
The project developer was asked by the commission to go back and take recourse to the dispute resolution provisions of the power purchase agreement (PPA) before seeking relief from the CERC. “The petitioner (Tata Power) has been asked to take action under the dispute resolution provisions of the PPA,” Rajiv Bansal, secretary, CERC, told FE. The regulator decided on this course after a dispute arose over whether Tata Power had complied with the PPA provisions.
While the developer insisted that it did comply with the formality, power buyers like Punjab andGujaratdisputed Tata Power’s submission. The CERC heard Adani Power’s petition separately on the issue of maintainability. The developer has sought regulatory permission to revise tariff for its Mundra project.
The respondents,Gujaratand Haryana, have been asked to reply to the petition within three weeks.
Adani will get one week to file its rejoinder to the respondents’ replies.
Indonesiais most suitably located to export coal toIndia. That is the reason several Indian power companies have acquired coal assets or tied up long-term coal supplies fromIndonesia. But the Indonesian government’s recent
move to change its mining law to bring coal price in line with the international market has sent fuel cost calculations of several power project developers haywire.
About 15,000-mw capacity based on Indonesian coal is facing the prospect of default on coal supply commitment due to developers’ inability to pass on increase in fuel cost to discoms.
BAILOUT SCHEMES FAIL TO PUSH STATES ON POWER REFORMS
NEW DELHI: THE government’s promise of another reform-linked mega-bailout for power distribution companies comes even though there is little evidence that such largesse prompts states to mend their ways and restructure the sector.
In July 2008, the Centre had launched the Restructured-Accelerated Power Development and Reform Programme (R-APDRP) scheme to help states finance projects and reduce theft and other “commercial losses” that undermined the viability of the sector.
The plan was to provide loans of R52,000 crore with the promise of converting them into grants as and when projects were completed. Four years later, just R8,500 crore of R-APDRP funds have been disbursed, as states have failed to ensure that the electricity boards and discoms operate on a commercial basis with freedom to revise tariffs when needed.
Even Power Finance Corporation (PFC), the nodal agency implementing the scheme, conceded that it has so far done “only basic work” of compiling baseline data relating to aggregate technical and commercial (AT&C) losses. These investments will start showing results only from 2013-14, a PFC official told FE on condition of anonymity.
Earlier this week, on the sidelines of a conference of state power ministers organised by the Planning Commission here, the Union power secretary had said the government was considering a fresh debt recast package for power discoms whose combined debt has reached an unmanageable R2 lakh crore. Analysts see the roots of the crisis in the failure of state governments to undertake necessary reforms so that power distribution becomes a viable business.
The Union power ministry has already prepared a debt-restructuring plan, which would force banks and financial institutions with significant exposure to the power sector to take haircuts.
“Central assistance should be linked to specific action by states so that states that fail to meet targets can be deprived of benefits. But that is not the case with the R-APDRP which has certain implementation gaps,” said former Union power secretary RV Shahi.
“Both carrots and sticks should be used to push states on power reform path,” he added.
R-APDRP has achieved some progress, but there is room for much more, said Seshan Balakrishnan, director, infrastructure advisory services, E&Y.
“The technical definition of the scheme should be relaxed and all areas peripheral to R-APDRP towns (scheme coverage is 1,400 towns), part of contiguous urban habitation, etc, ought to be covered under the scheme. In essence, except for agricultural needs, all power consumption should be covered under the scheme irrespective of municipal limits as currently defined,” Balakrishnan said.
Balakrishnan added that though R-APDRP is comprehensive, addressing preliminary issues consumed a lot of time, leading to staggered disbursement of funds and impeding capital expenditure. Source say PFC has reduced fund estimates for the scheme by around R17,500 crore.
The PFC official, however, added that the scheme has indeed helped reduce AT&C losses in several states. Andhra Pradesh and Karnataka have each reduced its AT&C losses by 1-10% and 2-13%, respectively, in 22 towns by implementing the scheme,Gujaratby 1-10% in 35 towns and Madhya Pradesh 3-11% in 16 towns.
GURGAON FACES LONG CUTS AS STATE BATTLES COAL SHORTAGE
CHANDIGARH/GURGAON: The power situation in Gurgaon is likely to worsen in the coming days as Haryana’s power utilities are finding it difficult to source sufficient electricity. Sources said the government, too, has not been able to arrange coal for power plants, so power cuts will continue till at least the first week of August.
State-wide supply on Thursday afternoon was 1,100 lakh units (LU) against a demand of 1,300 LU. However, after factoring in 30% line losses, the availability was a little over 800 LU. The power loss of 300 LU is more than Gurgaon circle’s requirement of 180-200 LU per day.
Officials said the overall shortage of around 500 LU resulted in major power cuts in Gurgaon on Thursday. Haryana power minister Ajay Singh expressed helplessness in ensuring smooth power supply. “We are helpless. We don’t have special plans for Gurgaon as we have to see the state as a whole.”
After a short cool spell due to rain, Gurgaon is again witnessing long power cuts as the supply has plummeted in the region. The discom DHBVN said supply on
Wednesday was 130 LU whereas the demand was 160 LU.
In Lakshman Vihar, power was disrupted four times during the day. “The situation had improved after rain but now the cuts are back,” said Laksh Chaudhari, a resident. Residents of Sector 4 said there were repeated cuts on Wednesday night. “I called up the complaint centre and was told that a power cable had developed a snag in Basai village,” said Amit Arora, general secretary of the Sector 4 RWA.
Similarly, the residents of Sector 22 complained of voltage fluctuation throughout the day. “The power cuts are making our lives miserable and the voltage fluctuation is ruining our electrical appliances,” said Bhim Singh, a resident of Sector 22.
The residents were furious because DHBVN hiked fuel surcharge adjustment (FSA) with effect from July 1. They claimed that the power bill of every household in the region had shot up as a result. “FSA is being slapped by the DHBVN to pay for the extra power purchased for the region. But we don’t know where this additional power is going since the power situation has not changed much,” said Shankar Nath, a resident of Sector 15.
RAISE TARIFF ISSUE WITH STATE UTILITIES: CERC TO TATA POWER
AHMEDABAD | NEW DELHI: The power regulator has directed Tata Power to begin fresh talks with state utilities for revising tariff for its Mundra ultra mega power project (UMPP), where it connected the second 800-mw with the grid on Thursday.
Pramod Deo, chairman of the Central Electricity Regulatory Commission, told ET that Tata Power has been asked to initiate a consultation process with states to modify power purchase agreements (PPAs). “Under the PPA, there is a consultation process. We have asked them (Tata) to begin consultations with states and come back to us within 30 days,” Deo said.
The company is seeking higher tariff on the grounds that Indonesian coal has become costly. On Thursday, Tata power said it had connected the second unit of the Mundra plant with the grid, raising the firm’s total capacity to more than 6,000 mw.
In a statement on the occasion of building the second unit of the UMPP, Tata Power managing director Anil Sardana said, “It is also wished that the company would receive a viable framework in response to its petition at CERC.”
Tata Power wants state utilities of Gujarat, Maharashtra,Punjab, Haryana and Rajasthan to agree to pay more for power from the Rs 17,000-crore UMPP, but its customers are resisting the move. It had earlier approached the power ministry and state distribution companies.
“We have already conveyed our concerns to Tata Power during our joint monitoring committee meet early this year. We want Tata Power to challenge the Indonesian government’s move to charge more for coal exports before seeking tariff hike from us,” said a top official of one of the beneficiary state utilities.
POWER SITUATION LIKELY TO IMPROVE WITH ADDITIONAL SUPPLY FROM GAIL
HYDERABAD: The Andhra Pradesh Chief Minister, Mr N. Kiran Kumar Reddy, today assured CII that the power supply situation will improve with additional gas supply from GAIL.
While GAIL has assured that it will supply regasified liquefied natural gas to support 500 MW of power generation, the State has asked GAIL to support with gas supply of about 5 million standard cubic meters per day. This is enough to generate additional 1,000 MW of additional power, he said.
The demand supply gap has widened with the energy demand going up by about 15 per cent, he said.
Responding to Mr Ramesh Kymal, Chairman, Renewable Energy Council, CII, on the need to encourage non-conventional energy projects, particularly wind power generation farms, the Chief Minister said the changes suggested by them were being looked into and a favourable policy will be announced soon. Mr Kymal, who is the Chairman and Managing Director of Gamesa, an equipment supplier for wind energy projects, said Andhra Pradesh has potential to add 2,000 MW of wind power projects every year provided a workable tariff is offered to developers. “In fact, we can set up 2,000 MW by December itself, if we are offered a tariff of Rs 4.50/unit,” he said.
The Chief Minister said that State’s land policy has been finalised and is likely to be cleared in the next Cabinet meeting.
The Chief Minister said nearly Rs 60,000-crore worth investments in gas projects is not being utilised due to lack of gas supply. Therefore, the Centre should ensure such huge resources are not wasted.
JINDAL POWER MAY PICK STAKE IN GAYATRI JOINT VENTURE
BANGALORE/HYDERABAD: Hyderabad-based infrastructure firm Gayatri Projects is in talks with Jindal Power, the unlisted arm of Jindal Steel and Power Ltd ( JSPL), for a possible stake sale in a power project jointly developed by NCC and Gayatri. The deal is valued around over Rs 1,400 crore.
A person having direct knowledge of the transaction said: “The company is talking to domestic independent power producers (IPPs) with deep pockets, coal blocks and understanding in both coal-supply constraints and power sale through purchase agreements with state-owned power utilities.” The company has been in talks with over five strategic investors, including Tata Power and Jindal Steel and Power, for a possible stake sale. While sources at both NCC and Gayatri confirmed the same, Jindal Steel and Power refused to comment on the deal.
Both the partners, NCC and Gayatri, together have been looking to sell up to 49% in the joint venture (NCC Power Projects) that is setting up 1,320-mw coal-fired power project near Krishnapatnam inNelloredistrict of Andhra Pradesh. NCC currently holds 55% in the power project while the balance 45% is held by Gayatri Projects. “We have appointed merchant bankers who are now on the job of negotiating with prospective strategic investors. We had earlier planned to rope in private equity funds but it didn’t materialise,” says T Sandeep Reddy, managing director of Gayatri Projects.
However, he refused to share the names of the prospective buyers. Following the divestment of 49% in favour of strategic partner, NCC will hold 26.01% and Gayatri 24.99% in the power company. The two companies has so far invested Rs 700 crore in the project.
“The advantage with the Krishnapatnam project isthat we have already brought in 35% of equity upfront and declared financial closure. Till I draw proportionate amount of debt, further equity is not required.
To draw the debt, we will have another 12-18 months and I can find a strategic partner meanwhile” said YD Murthy, NCC’s executive V-P (finance). The project is expected to be completed by March 2015. “We are not interested in selling out completely. Both the partners, NCC and Gayatri, together will hold a minimum majority of 51% in the power company,” Reddy told ET. NCC Power had already achieved financial closure on the power project and has begun the civil works. It has tied up with CoalIndiafor 70% of the fuel and it has identified coal mines inIndonesiato source the balance.
“The biggest problem with the project is it is linkage-based. The buyers are hard bargaining and NCC and Gayatri are looking at reasonably attractive pricing given the substantial progress in the power project,” said another person familiar with the deal.
CIC ENERGY CONFIRMS SALE TALKS WITH JINDAL STEEL & POWER
MUMBAI: CIC Energy, a Canada-listed company with coal assets inBotswana, on Wednesday evening said it is in advanced negotiations with Jindal Steel & Power for a possible acquisition of CIC at an indicative price of 2 Canadian dollars (Rs 109.4) per share.
The Economic Times, on July 18, had detailed a possible takeover of CIC by Jindal Steel at an approximate valuation of more than Rs 1,000 crore, to further the Indian steel manufacturer’s plans to own captive coal mines.
Jindal Steel’s offer price of C$2 a share is at a 42% premium to CIC’s Wednesday closing price of C$1.41. Shares of CIC jumped as much as 18% on the Toronto Stock exchange on Wednesday.
“In response to reports regarding discussions between CIC Energy and Jindal Steel & Power, CIC Energy confirmed that it is currently in advanced negotiations with Jindal Steel & Power (Mauritius), a wholly-owned subsidiary of Jindal Steel and Power, regarding the possible acquisition of the company ,” said the CIC statement.
“While negotiations are ongoing, a binding agreement has not yet been signed. Therefore, there can be no assurance that any transaction will result from these discussions , or as to the timing, structure or terms of any transaction,” the statement added.
Jindal Steel, the Naveen Jindalcontrolled steel and utility major has been scouting for mines overseas to shore up its coal reserves to fuel its future power projects. It has readied a war chest of Rs 3,500 crore to fund these transactions.
“The company has been talking to mine owners owning assets inAustralia,IndonesiaandAfrica. The focus is to identify low-cost mines that are undeveloped so that the company may then invest in phases to make it operational,” said one person familiar with Jindal Steel’s plans.
A Jindal Steel spokesperson declined to comment on the issue. CIC Energy is engaged in the advancement of the Mmamabula Energy Complex at the Mmamabula Coal Field inBotswana,Africa.
The coal field has potential reserves of 2.4 billion tonnes of thermal grade coal. This planned Complex inBotswanaconsists of an Export Coal Project, one or more Power Projects, as well as a potential Coalto-Hydrocarbons Project.
TATA POWER SYNCHRONISES SECOND UNIT OF MUNDRA UMPP IN GUJARAT
MUMBAI: Private utility Tata Power today said the second unit of 800 MW of its 4,000 MW ultra mega power project (UMPP) at Mundra inGujarat, has been synchronised.
With this, the total power generation capacity of Tata Power now stands at 6,099 MW, the company said in a statement.
Tata Power’s wholly-owned subsidiary Coastal Gujarat Power Ltd, which is implementing the project, had commissioned the first unit of 800 MW of the Mundra UMPP in March.
With the synchronisation of Unit 2, the thermal power generation capacity of Tata Power stands at 5,247 MW while the generation through clean sources such as hydro, wind and solar stand at 852 MW.
“The synchronisation of second unit is a significant milestone given the power shortage in the country. Mundra power plant will not only provide affordable power but is also one of the most efficient and environment friendly plant due to super critical technology and various environment initiatives supporting this state-of-the-art power plant,” company’s managing director Anil Sardana said.
He said the technology used and the distinct unit sizes helps it save fuel for the project and cut down greenhouse gas emissions upto 15 per cent as compared to a sub-critical coal-fired power stations.
In addition, the choice of coal significantly lowers sulphur emissions to virtually insignificant levels, he said.
LANCO INFRATECH IN TALKS FOR RS 23,000 CRORE LOAN RECAST
MUMBAI/HYDERABAD/BANGALORE: Lanco Infratech, a builder of power plants and roads with nearly Rs 23,000 crore of longterm debt, is negotiating with some banks for an easier loan repayment schedule because of strain on its cash flow on account of lower capacity utilisation and high dues from consumers, two persons familiar with the matter said.
The company is negotiating with individual banks for extension of loan tenure and lowering of interest cost as some of its power plants have been idled by fuel shortages, said the persons who did not want to be identified. These discussions are taking place without formally applying for a restructuring under the so-called Corporate Debt Restructuring Cell since the company is hopeful of making repayments, they said. No formal application for admission into CDR Cell has been made yet, they said.
If the company’s loans are indeed admitted for a formal restructuring, it would become the biggest ever at nearly Rs 23,000 crore, surpassing the Rs 16,000 crore worth of loans of telecom tower group GTL Ltd and GTL Infrastructure restructured last year.
But Lanco Group Chairman Lagadapati Madhusudan Rao said it was seeking more working capital loans from lenders for some projects, but not a loan restructuring. “We have various special purpose vehicles executing a number of projects across the country and we are talking with some banks and FIs for additional working capital sanctions for certain projects owing to some issues,” Rao told ET. “However, we are not in discussions with any of the lenders for recasting the debt whether at the parent company level or at the SPV level.”
“It is in talks with its banks evaluating a possible debt recast,” said a banker privy to the discussions. “The final call has to be taken by the lenders. Individual banks could also restructure the account to keep it as a standard account,” the banker added.
The company would like to avoid the ‘restructuring’ tag since any admission into a formal bailout process could lead to banks shutting the funding tap to the group’s other projects where financial closure has been done, but credit is yet to be drawn. CDR Cell refers to the forum for lenders to ease loan terms for companies in financial trouble.
A loan account is eligible for CDR provided the initiative to resolve the case under the system is taken by at least 75% of the creditors by value, and 60% by number. This mechanism is to be availed by firms that are hurt due to developments beyond management control.
“Servicing interest has become a challenge as gas sourcing remains a big problem for power companies,” said an official at Lanco who did not want to be identified. “We are talking to lenders to restructure the loan for Kondapalli power plant. Our project is ready for commissioning but there is no gas, we will only start once there is surety on gas supply.”
Its long-term borrowings in the last fiscal nearly doubled to Rs 22,152 crore while revenues rose to Rs 15,280 crore from Rs 10,962 crore a year earlier. Interest expenses were Rs 1,053 crore while operating profit was Rs 1,277 crore, indicating a strain on finances, financial statements show.
The company is reportedly attempting to sell some assets, including to private equity investors, but transactions are hard to come by in a market where investor optimism is falling to new lows. Lanco is among many infrastructure companies whose business plans have run aground due to problems with fuel supply. The nation’s monopoly coal miner, Coal India, has struggled to meet demand, and natural gas flow from Reliance Industries’ Godavari basin has thinned, reducing capacity utilisation at many power plants across the country.
Rating company Crisil recently downgraded Lanco Power’s Rs 8,207-crore long- and short-term loans to moderate risk from moderate safety. Crisil said Lanco Power has approached banks and other lenders to enhance its working capital facilities and provide short-term debt.
Lanco has also commenced sale of electricity on the power exchange, realising cash and aggressively following up with PTC for realisation. But these efforts may take time to pay off. “The results of these efforts will take time to fructify, which means that there will be intermittent cashflow mismatches for Lanco Power,” said Crisil.
“Use of loans from promoters instead of equity funding envisaged earlier has resulted in a sharp increase in Lanco Power’s gearing to 6.3 times as on March 31, 2012, from 3.36 times as on March 31, 2011.”
CALL ON TATA POWER AND ADANI’S RATE HIKE PLEA DEFERRED
NEW DELHI: Imported coal-based power plants will have to wait longer for higher rate. The Central Electricity Regulatory Commission (CERC) on Thursday deferred its decision on two separate pleas, by Tata Power Co Ltd and Adani Power Ltd, seeking rise in rate of power supplied by their imported coal-based mega projects at Mundra inGujarat.
While regulatory changes in coal exporting nations have made coal dearer for these plants leading to jacking up of generation cost, their buyers have refused to bear higher charges. “The commission today heard the maintainability of the two petitions. Tata Power was asked to come again with the comments of the beneficiary states (buyers) in a fresh petition in one-and-a-half months. Adani Power has also been asked to come again in four weeks with additional inputs,” a senior official from CERC told Business Standard.
Tata Power’s 4,000-Mw Mundra project was the country’s first ultra mega power project (UMPP) to go on stream. The Rs 17,000 crore project is being implemented with 75 per cent debt component by its subsidiary Coastal Gujarat Power Ltd (CGPL). First 800-Mw unit of the project was commissioned in March this year.
Fuel for the plant is being sourced largely fromIndonesiawhere Tata Power bought a 30 per cent stake in two coal mines from PT Bumi Resources for $1.1 billion in 2007. That nation’s government has now linked coal exports to international benchmarks.
Tata Power had earlier signed power purchase agreements (PPAs) for supply of power from the Mundra UMPP at Rs 2.2 per unit to Gujarat, Maharashtra, Haryana,Punjaband Rajasthan. “The Commission has suggested that the concerned parties, procurers and CGPL should meet immediately in order to explore a possibility of a specific solution. The Commission has kept the petition pending and has asked the parties to report on the outcome for it to decide on further course of action,” Tata Power said in a statement.
An Adani Power spokesperson, however, said the company’s 4,620-Mw plant has been facing the double whammy of rising cost of imported fuel and the depreciating rupee. “Our cost of generation has doubled to Rs 2 per unit in the past one year,” the official said.
LOCAL SOLAR PANEL MAKERS FACING THE HEAT
The Government should come out with conducive policy measures to reduce the cost of solar power, while simultaneously promoting local solar panel producers.
Reductions in solar power tariff were possible till recently because of the availability of cheap, imported solar panels. However, with the Jawaharlal Nehru National Solar Mission (JNNSM) increasingly restricting the use of imported panels, in a bid to strengthen local production, any reduction in tariff from now on may, at best, be moderate.
This is because local players lack the required capacity and economies of scale to compete with their global counterparts on pricing. Since the prices of solar panels play a major role in the cost of power generated, it is imperative for local players to become more competitive on costs.
Therefore, policy support, such as capital subsidies directed towards panel producers, will facilitate scale-up in capacities.
The JNNSM, the principal solar programme in the country, targeting addition of 20 gigawatts (GW) of solar generation capacity by 2022, has twin objectives — to bring down the cost of solar power, and to establishIndiaas a “low-cost, high-quality solar equipment manufacturing hub”. It seeks to reduce the cost of generating solar power, which is currently high, to levels that are comparable with those of the conventional sources of energy. In line with the second objective, JNNSM seeks to increase the local content in its solar projects.
However, it will be difficult to reduce the cost of generating solar power if localisation is pursued in the current scheme of things. Domestic panel producers, with their sub-optimal scales of operation, are not as cost-competitive as their international peers, especially the Chinese. For instance,India’s single largest solar cell manufacturing capacity is about a tenth of the average capacity (about 1.5 GW) of the typical large global manufacturer.
The local manufacturers, therefore, face challenges in offering panels at competitive prices. Notably, a decline inIndia’s solar power tariff was possible in 2010 and 2011 largely on account of reduced prices of international solar panels. In contrast, the increasing restrictions on the use of imported solar panels will slacken the pace of future decline in solar power tariffs.
Therefore, the objectives of reducing the cost of solar power and strengthening local panel production will gain a fillip if the domestic players scale up their operations. Interactions with domestic manufacturers indicate that the main hurdles to capacity expansions are the substantial investments required, and the absence of commensurate demand, post-expansion.
Typically, a 1 GW facility with module and cell manufacturing capability requires an investment of about Rs 4,000 crore. Schemes providing subsidy for investments in capacity will help domestic panel producers scale up operations and improve their cost competitiveness, and aid in the mission’s localisation objectives.
Moreover, once the local manufacturers achieve efficiencies of scale, they can take advantage of export opportunities that are currently not possible, given their cost disadvantage. This will, in turn, ensure that utilisation levels for the expanded capacities are adequate.
It is believed that the funds for such capital subsidies can be raised well within JNNSM’s existing subsidy budget. Currently, the government incentivises solar power producers by offering higher tariff to compensate for their higher costs of generating power, compared with those of thermal or wind power producers.
Accordingly, a subsidy of Rs 8,400 crore was budgeted under the JNNSM to implement solar power generation capacities of 4,000 MW by 2017. However, based on the actual solar power tariff bid for the first two rounds of the programme in 2010 and 2011, one would believe that the overall subsidy outgo till 2017 may well be 30 to 35 per cent (Rs 2,500 crore to Rs 3,000 crore) lower.
Moreover, there is a strong rationale for the government to utilise these potential savings to strengthen local panel production, since these savings can materialise only if the cost of solar panels produced continues to decline.
COAL INDIA CAN NOW EXTRACT COAL MINE METHANE, BUT WITH RIDERS
NEW DELHI: The tussle between Coal and Petroleum Ministries over extraction of coal mine methane (CMM) has been sorted out, with the Petroleum Ministry now agreeing to the proposal of allowing Coal India Ltd to explore CMM. But, the approval comes with a rider.
“Yes, we have agreed to this. Since, the mining lease is with CoalIndia, they can extract CMM,” the Petroleum Secretary, Mr G.C. Chaturvedi, told Business Line on Tuesday.
But, for commercialisation of the gas, CoalIndiawill have to seek the Petroleum Ministry’s nod. Mr Chaturvedi said that things such as pricing and allocation had to be governed by existing norms decided by the Petroleum Ministry.
The issue was discussed between Mr Alok Perti, former Coal Secretary and present Advisor to Coal Ministry, and Mr Chaturvedi on June 27. This was followed by discussions between the Additional Secretaries of the Ministries.
The Coal Ministry is of the view that since CoalIndiais into mining, it is appropriate for the company to extract CMM too. Two companies working simultaneously in the same block is not advisable from both the financial and technical angles.
Along with the discussions between the two Ministries, the Government has also set up an inter-ministerial panel headed by Member Planning Commission, Mr B.K. Chaturvedi, to formulate long-term strategies for exploiting CMM and CBM.
The panel has met only once so far on May 16 and is yet to come up with a roadmap.
Currently, CMM is not tapped inIndiaand is blown out of coal mines with the help of fans. CMM is available on the coal bed surface, which has to be simultaneously extracted while mining out coal unlike CBM. The CBM is extracted from virgin coal mines after drilling at least 250-300 metres.
At present, there are no estimates for CMM reserves in the country. CMM may be utilised to fire captive power units installed on the pit head of mines.
Industry experts tracking the sector say that it is found in all coal blocks where mining is undertaken. There are several blocks in Raniganj where large volumes of CMM have been detected. In some cases, CoalIndiahas abandoned mines due to the higher concentration of CMM that is considered harmful.
Earlier, CoalIndiahad sought permission to extract CMM from five blocks in the leasehold areas of BCCL and CCL.
DIP IN INDONESIAN COAL PRICES BRINGS CHEER TO INDIAN IMPORTERS
KOLKATA: A sharp fall in spot prices of Indonesian thermal-coal, during the last one month, brought cheers among Indian importers. According to importers, market conditions are expected to remain weak for at least another three months.
Thermal coal is used in power generation. According to importers, the crash was triggered by refusal of contracted cargoes by a number of Chinese buyers beginning early June. The rupee has also remained relatively stable during the period, which benefited Indian buyers.
Indian end users generally enter into rupee denominated term contracts – for a maximum period of three months – with importers. The meltdown in coal prices, therefore, may soon start reflecting on the balance sheets of Indian companies.
According to Mr Abhay Chaturvedi, Vice-President of Nagpur-based Gupta Coal (India) Ltd, a prominent importer, prices of Indonesian coal dropped between 9-17 per cent depending on quality from the first week of June.
“Distressed cargoes of 4200 kilo calorie (Kcal) coal on gross as received basis is now available at $39 (FOB) or even cheaper. The same consignment was priced at $43 in the first week of June,” he said.
The landed cost should be higher by $18-20 a tonne.
Indiameets most of its thermal coal requirement fromIndonesia. And, bulk of such imports is in the 4200 Kcal category.
Prices of relatively premium varieties like 4500 Kcal and 5000 kcal dropped by 12 and 17 per cent, respectively.
Global coal prices have been softening since early 2012. But, the benefits were so far nullified by a falling rupee against dollar.
However, the recent drop is so sharp that Indian consumers have gained by 10-12 per cent in rupee terms compared last year, when the dollar was at Rs 48 against Rs 55 now.
According to a Kolkata-based importer, the demand scenario is so weak that the scheduled 15-day production holiday inIndonesia, during Ramadan in August, may not offer much support to prices.
“Coal prices may remain weak for another 80-90 days,” tillChinastarts winter stock piling, said an Adani group source.
Incidentally,Chinawent slow in the last winter.