NEW DELHI: In one of the biggest-ever restructuring exercise, the Centre has agreed to a loan relief for ailing power distribution companies (discoms) but is insisting that state governments and the utilities take over the entire burden of Rs 1.5 lakh crore, instead of banks taking over half the liability.
With the latest recast, the government has taken total loan restructuring to near Rs 2 lakh crore over the last two months, including Rs 35,000 debt relief for textile mills and Rs 18,000 crore for ailing AirIndia, with demand from several others, including private airlines, pending with lenders. Separately, banks have been restructuring loans of private players either on their own or through the corporate debt restructuring mechanism where a record number of proposals are being filed. Banks have also seen a rise in non-performing assets due to lingering global economic woes and a slowdown in the country.
A decision to restructure the power sector liabilities was taken at a meeting at the Prime Minister’s Office on Wednesday, which will result in state governments issuing bonds of about Rs 1.5 lakh crore along with the discoms. While the final package will be finalized by the Union Cabinet by June-end, sources said it will not be in line with the recommendations of a committee headed by Planning Commission member B K Chaturvedi that had suggested that the burden be split between the states and lenders, which were asked to provide a moratorium on interest payment.
“Banks can only provide limited funding after the states take over the liability. The cash losses for this year also need to be taken care of by the states,” said a source.
Instead, the finance ministry is insisting that states, which are responsible for the mess, do their bit by infusing equity and taking over the liabilities. In addition, they have to agree to reducing losses due to theft and raise tariffs to reflect the real cost of electricity. For states, this is a second lifeline in less than a decade as they had earlier issued bonds to power generation companies and promised reforms. Given their track record, the Centre is not keen that banks be forced to take a haircut.
The restructuring was necessitated as discoms were under financial strain and unable to pay their dues to the lenders. State governments have not been permitting an increase in electricity tariffs, while cost has gone up, resulting in stagnant revenues and losses.
The package was approved after the finance ministry agreed to a staggered restructuring under which state governments, which will bear 50% of the burden, will issue bonds to banks in line with the dues. These bonds will fetch banks interest of 9-10% and will have a maximum 10-year term, said sources. In the process, short-term loans extended to the discoms will become longer tenure loans.
On Thursday, economic affairs secretary R Gopalan had said that a final decision would be taken by the Cabinet soon, but did not disclose the details of the package.
INDIA TO GIVE $100 MILLION AID FOR NIGERIA’S POWER SECTOR
Indiahas committed a $100 million line of credit toNigeriafor improvement in its power sector that has been battling with instability and corruption.
Indian High Commissioner to Nigeria Mahesh Sachdev announced this during inauguration of the manufacturing and repair of power transmission equipment plant developed byIndia’s Skipper Group in Ikorodu area of southern state ofLagosyesterday.
“Nigerian and Indian governments will soon sign the agreement for the line of credit,” Sachdev said, adding that 12 Indian companies have shown interest to invest inNigeria’s power sector.
“India, which isNigeria’s second-largest trading partner, has both the capacity and expertise to supportNigeria’s ambitious development plans in the power sector.” he said.
He noted that unlike many other foreign companies which were content to execute projects on tactical basis, Skipper Group, over the past decade, had invested inNigeriato create manufacturing and repair capacity, transfer of technology and employment generation.
Speaking on the occasion,Nigeria’s power minister Bart Nnaji said with the completion of the repair plant, the country would no longer ship transformers toSouth Africa,Indiaand other countries for repair.
“With this repair facility, we will not be shipping transformers toSouth Africa,Indiaand other countries for repair. It costs us money; it costs us time. Now, the repair is going to be done here and on top of that, it will create local employment,” he said.
The High Commissioner also visited the site of the recent plane crash at Iju Lagos and expressed grief over the loss of innocent lives.
Nigeriahas been battling hard to improve power supply to its 150 million people but corruption has proved to be a major setback to the move.
The problems in the sector have also proved to be a major roadblock in this oil rich African country’s path to industrialisation.
President Goodluck Jonathan’s government has roped in country’s anti-corruption agencies to investigate the malpractices in the sector and fix the loopholes in a bid to improve power supply in the country by this year.
GREEN TRIBUNAL SHOWS RED SIGNAL TO 2 POWER PROJECTS
CHENNAI: The National Green Tribunal (NGT) has refused to give a go-ahead signal to two of the major thermal power projects in Tamil Nadu, which could generate up to 4,800 Mw. The projects have been developed by IL&FS Tamil Nadu Power Co Limited and Chettinad Power Corporation.
In both the cases, the Tribunal has asked the Ministry of Environment and Forests (MoEF) and other authorities to conduct a cumulative impact assessment of the project in the region and to go through certain procedures prior to extending a further nod.
In one case, the acting chairperson justice AS Naidu of the NGT, has refused to stay the earlier order suspending the environment clearance (EC) granted to IL&FS Tamil Nadu Power Co Limited for its 3,600-Mw thermal power plant in the state’s Cuddalore district.
In the earlier order, which was passed on May 23, the Tribunal suspended the project till the time the EC is reviewed by the authorities and the ministry and the updated environmental impact assessment (EIA) report to be heard by the parties who filed the complaint, before a decision is taken by the MoEF.
However, the May 23 order did not quash the EC granted by MoEF, stating that “we are convinced that EC to the proposed project was granted by and large in consonance with the EIA process as required under the EIA notification, 2006. We do not feel any necessity to quash the EC granted by MoEF.”
The tribunal also directed the ministry to review its decision based on a cumulative impact assessment study and stipulate additional environmental conditions, if required.
IL&FS had sought a stay on the Tribunal’s May 23 order contending that preparatory civil works such as construction of storm water drainage and levelling of the site must be completed before the onset of monsoon in mid September 2012.
The tribunal rejected its plea saying a rapid cumulative impact assessment study can be completed before the onset of monsoon. “The civil works referred to by IL&FS may not take very long to complete if planned and executed properly,” it said in the order dated May 30, 2012.
However, it can proceed with the plantation of mangroves and development of green belt as proposed in the work plan. A mail sent to an IL&FS Tamil Nadu Power Company official remained unanswered till the time the story was filed.
Meanwhile, the tribunal suspended the EC issued to the 2X600-Mw thermal power project of Chettinadu Power Corporation in Nagapattinam district.
The Tribunal asked the expert appraisal committee, the ministry and the Government of India (GoI) to commission a cumulative impact assessment study of all the proposed thermal power projects in the area within a period of one year from the date to the judgment and impose additional conditions as may be necessary as a precautionary measure in the establishments of the project.
The 1,200-Mw power project of Chettinadu Power Corporation, which is expected to come up with an investment of around Rs 7,000 crore, was expected to be commissioned by the end of 2014 or in 2015. The order and the further proceedings, are expected to delay the project for a few months, said company sources.
JAJJAR POWER ENTERS FUEL SUPPLY PACT WITH CIL
KOLKATA: It’s private sector that is leading the race to enter fuel supply agreement (FSA) with Coal India Ltd (CIL). On Friday, China Light and Power (CLP)-operated Jajjar Power Ltd has entered the fuel pact for its supercritical 1,320-MW project at Haryana.
The 2 X 660 MW plant will receive thermal coal supplies from Central Coalfields. According to CIL sources, CLP is the six private sector operator after Ahmedabad-based Adani Power (Mundra, 600 MW), Kolkata-headquartered CESC Ltd (Budge Budge, 250 MW); Reliance Power-controlled Uttar Pradesh-based Rosa Power (3X 300), Lanco (Anpara, 2 X 600 MW) and Bajaj Energy (UP, 4X 45 MW). The combined capacity of the private sector owned plants entering FSA is approximately 4,500 MW.
CIL sources suggest that so far 17 out of a identified 48 plants, reportedly commissioned between April 2009 and December 2011 have entered FSA.
The Rajasthan State Government controlled utility is the only public sector to have entered the fuel pact so far. With private sector making a beeline to enter FSAs, the controversy is now revolving around the government owned coal and power companies.
LANCO EXPECTS PENDING SEB PAYMENTS IN 6 MONTHS
MUMBAI: The increase in power rates in Tamil Nadu is a relief for Lanco Infratech, facing delayed payments from state electricity boards (SEBs).
The company is yet to receive payments from Tamil Nadu, Karnataka, Andhra Pradesh, Uttar Pradesh and Haryana. “In the last two months, many SEBs like Tamil Nadu have increased tariffs (rates). We have also been receiving payments. It might take another six months to receive all our payments,” said Phillip Chacko, investor relations head, without revealing the amount of net receivables for the company.
A report by CRISIL, released yesterday, pegged Lanco’s receivables from its Amarkantak power plant in Chhattisgarh at Rs 555 crore as on March 2012. The rating agency downgraded the power project’s rating to moderate risk from moderate safety. Lanco Amarkantak is near Pathadi village in Chhattisgarh and sources coal from South Eastern Coalfields. The power produced from both the 300 Mw units is bought by Power Trading Corporation of India (PTC).
The report said Lanco was also undertaking various measures to improve liquidity. “LPL has approached banks and other lenders to enhance its working capital facilities and provide short-term debt; it has commenced sale of electricity on the power exchange, wherein it gets paid for the sale of power on a daily basis; it is also aggressively following up with PTC for realisation of debtors,” CRISIL had said.
SEBs have been facing financial stress due to power procurement costs in the past and fewer rises in rates. This has meant mounting debt and increase in pending payments for power generators. Over recent months, however, many of them are taking remedial measures and some went into debt restructuring. Tamil Nadu’s SEB, for instance, raised money through a state government-guaranteed bond issue.
Chacko said they had two pending rate orders from electricity regulators for two of their projects, the Udupi power plant and a second unit in Amarkantak. The receivables of these projects would be cleared after the orders were. “Ideally, we should get interest along with the receivables,” he said.
The 1,200-Mw Udupi power plant is an imported coal-based power project, which has power purchase agreements to sell 90 per cent of its power to Karnataka and the rest toPunjab. The company had defaulted on loan repayments from this unit, over receivables which were stuck with the Karnataka government.
ALSTOM BAGS CONTRACTS WORTH RS 55 CRORE FROM NTPC
KOLKATA: Alstom inIndiahas secured two strategic contracts for the execution of turnkey station control and instrumentation for NTPC’s 660 mw supercritical projects for Solapur II and Mouda II inMaharashtra. These contracts worth close to Rs 55.4 crore was awarded to Power Automation & Controls (PAC)Business India.
The turnkey scope of the projects includes a combined area of complete station control with control systems. These will be manufactured in Alstom’s manufacturing facilities inIndiaandEurope.
While the automation solutions for the project will be integrated locally by setting up a integration facility inIndia, the electronic cards and assemblies will be manufactured by Alstom facilities inEurope. Alstom manages the complete engineering, supply, manufacture, delivery to site, installation, commissioning, testing and quality of the package.
As part of the PAC India R&D setup, Alstom has established a large thermal digital control system (DCS) reference platform inIndiawhich will ensure the smooth and efficient functioning of the products. The platform is run on a 24×7 basis to subject the system to extreme conditions from a process perspective and ensure robustness of the product over its lifecycle.
This is the biggest project for Alstom in the control and instrumentation segment inIndiaand also the first contract provided to Alstom by NTPC in the 660 mw segment. As per the tender conditions, PAC India is also expected to get awarded an additional order for three units of 660 MW for the Nabinagar site located in the state ofBihar.
With this contract, a new market segment has opened up for PAC India. Alstom PAC India had collaborated with NTPC in the past for projects in the cities of Kawas and Gandhar. A total of 15.4 GW installed capacity of Alstom power plants in thermal and renewable energy sector inIndiawork with ALSPA control system technologies.
“Alstom is recognised inIndiafor its state-of-the-art solutions which aim at optimising efficiency, quality, availability and security of power generation plants and fleet. The Power Automation and Controls business is a major component of Clean Power offering of Alstom. With this contract, Alstom has reinforced its commitment towards providing clean power solutions by rising to the challenges posed by ever-surmounting energy needs of the country.” commented, Francois Carpentier, Vice President, Thermal and Renewable Power, AlstomIndia.
FOUR MORE KUDANKULAM REACTORS TO GET GREEN SIGNAL
NEW DELHI: New nuclear reactors at the Kudankulam nuclear plant will withstand crash of Cessna-type aircraft and tsunami waves several times more intense than the ones that damagedFukushimanuclear plant inJapanlast year.
These are some of the reasons likely to be cited by the environment ministry for giving approval to four new reactors at the Kudankulum nuclear plant which has witnessed a long spell of protests from local residents.
The Nuclear Power Corporation of India Limited (NPCIL) has sought the ministry’s clearance under the coastal regulation zone act for the 6,000-MW plant being set up with a loan from the Russian government. The two reactors have already been built and NPCIL had sought permission to construct four more.
The ministry’s expert appraisal committee (EAC) has asked it to approve the expansion stating that the plant has most advanced safety features.
“Active safety systems have a backup of passive systems also. To increase redundancy, each active safety systems are supplied from four independent and separated channels,” the panel said.
On structural safety, it said the plant’s elevation was designed to cope with tsunami and subsequent flooding. The plant system, structures and components are designed to withstand quakes, explosions and other natural calamities and can bear Cessna-type aircraft crash, it said. Cessna is small aircraft that can fly at a high speed. The EAC, however, has not explained why not impact of a bigger aircraft crash was assessed.
The clearance comes at the time when Aruna Roy, a member of Sonia Gandhi-led National Advisory Council, has sought Gandhi’s intervention to make the safety aspects of the plant public.Royhad written to Gandhi after the NPCIL failed to comply with the Central Information Commission’s decision to make the safety reports public.
NFC SUPPLY OF FUEL ASSEMBLY TO NPCIL TOUCHES 5 LAKHS
HYDERABAD: In a milestone achievement, Nuclear Fuel Complex (NFC) has handed over the 5 lakh nuclear fuel assembly to the Nuclear Power Corporation of India Limited (NPCIL) today.
The Hyderabad-based NFC is the sole supplier of fuel to the string of atomic power stations run by the NPCIL, which generate nuclear power.
The Chief Executive of NFC, Mr N. Saibaba, handed over the 5,00,000 {+t} {+h} fuel assembly to Mr G. Nageswara Rao, Director (Operations), of NPCIL, at a function that also marked the foundation day of the Institute.
Mr Saibaba explained the steps of automation taken at the NFC and how it had resulted in improving efficiencies.
Mr Nageswara Rao said the NPCIL was in the process of setting up 700 Mw reactors atKota, Rajasthan and Kakrapar inGujarat.
He said the NFC had ensured timely supply of fuel assemblies to all the reactors in recent past.
The Chairman of the Atomic Energy Commission, Dr R.K. Sinha, in his address announced that new manufacturing facilities for Radiation Shielding Windows shall be established by the NFC.
GREENING OUR POWER SUPPLY
AsIndiafine-tunes its nuanced response to the global sustainable development agenda during the Rio Earth Summit later this month, it is mindful of the development challenges that lie ahead. A fair proportion of these challenges emerge fromIndia’s quest for energy security in an increasingly climate-constrained world.
India’s energy supply needs to grow by 4-5 times in the next two decades to realise developmental goals. It is also certain thatIndiawill continue to be reliant on fossil fuel-based energy over the next two decades. Inevitably, the growth trajectory needs to usher in innovative approaches that reduce the overall carbon intensity of the energy sector, while at the same time providing affordable and reliable access to all.
An appropriate policy response needs to be evolved to hedge against the volatility of global fossil fuel market, both in terms of availability and price.
Reducing carbon intensity in the supply side of energy value chain, improving efficiencies at the demand side, limiting leakages and promoting innovative decentralised, alternate energy systems, are some of the immediate tasks that policy makers will need to implement.
These challenges have already been articulated in the recent policy papers of the government, particularly those related to the XII Five Year Plan, and will probably find mention during theRioconference.
Cognisant of the enormous challenges of sustainable development,Indiahas, in the last few years, initiated a measured, yet significant, shift towards reducing carbon intensity in the energy sector, the power sector being a major contributor to the overall carbon emission ofIndia.
The strategic shift commenced with the Electricity Act, 2003 that requires all electricity utilities to use a minimum percentage of renewable energy in their power mix, also known as the Renewable Portfolio Obligation (RPO). The implementation of the market-based instrument, Renewable Energy Certificate (REC), has made it possible for utilities to achieve their allocated RPOs in a cost effective manner, particularly those whose service area is not amendable to setting up renewable energy projects (Delhi for instance). The RECs have also helped in promoting private investments in renewable energy.
The second dimension of the shift is the promotion of super-critical thermal power technologies. This technology increases the efficiency of generation by at least 10-15 per cent, compared with the conventional power plant, and thereby uses lesser coal for same level of power generation.
The emissions from super-critical technology-based power plants are undeniably lower than from the conventional ones. The last Five Year Plan has seen commissioning of about 6,000 MW of thermal power plants (out of the achieved capacity addition of 55,000 MW) based on super-critical technologies.
The next Plan seeks to build on this modest beginning and increase the proportion of new thermal plants using super-critical technologies to about 40 per cent, a trend that could become the norm in subsequent years.
However, like any new technology, super-critical technology also comes with an incremental price tag, which could result in higher cost of electricity to the consumer. Contrary to popular belief, the affordability of energy is extremely low inIndia. Per litre cost of petrol inIndiais about $1.5, which is almost 180 per cent of cost of petrol inThailand, and 150 per cent of the level in OECD countries. The average expenditure of a household on electricity inIndiaas a proportion of the per capita income at 15 per cent, is at least 5-6 times more than OECD average of about 3 per cent. Thus, to achieve affordability of electricity from clean technology without further straining the burgeoning subsidy bill, innovative measures are necessary.
The Ultra Mega Power Policy (UMPP) unveiled by the Ministry of Power has been able to stitch together the two seemingly dichotomous issues of reducing carbon footprint, while still being affordable into a comprehensive package that has attracted private investment in power sector perhaps not seen before.
The Ministry of Power, under the UMPP, has undertaken most of the pre-construction activities, like obtaining regulatory clearances, enabling predictable fuel supply either by a captive coal mine or firm imported fuel linkage, ex-ante environment and forest clearance and land acquisition.
This has resulted in reduced risk perception among investors. Further, the fact that each of these plants are of 4,000 MW capacity has brought in economies to scale for seamless induction of super-critical technologies. Riding on the inherent investor confidence and interest in UMPPs, Ministry of Power has adopted competitive tariff-based bidding to make sure that the benefits to consumers accrue in form of lower tariffs. The private sector has committed tariffs as low as Rs. 1.25 per unit for domestic coal-based UMPP and and Rs. 2.50 per unit for imported coal ones for the next 20 years.
UMPPs have been successful in attracting clean generation technologies, while at the same time preserving affordability. The surge in demand for super-critical technologies has resulted in most of the international power equipment manufacturers setting up facilities inIndia, that augurs well for the long-term low carbon strategy in the power sector.
Another important policy direction to reduce carbon intensity of power sector is the phased retirement of old and inefficient power plants. Over the next few years, according to the Central Electricity Authority, almost 5000 MW of such plants will be retired.
A comprehensive programme for increasing the efficiency of other thermal power plants is under implementation.
Indiahas been able to achieve modest success in greening the supply side of power sector. Innovative measures like the REC, UMPPs have started to yield the desired outcome of reducing carbon intensity while protecting consumers from high costs. These measures need to be replicated across the energy supply chain, while encouraging efficient use of energy on the demand side.
SOLAR PROJECTS VIABLE ONLY AT RS 9 A UNIT, SAYS CRISIL STUDY
MUMBAI: Developers who have bid below Rs 9 a unit in batch 2 of the Jawaharlal Nehru National Solar Mission need low-cost debt to keep margins intact, a Crisil Research report said.
The report said that in 2011 the capital costs of solar photovoltaic (PV) projects fell by 30 per cent. This was consequent to a 50 per cent drop in prices of solar PV modules. The PV modules make up half the total capital cost of projects.
Module prices have been sliding due to weak demand from key European markets following withdrawal of incentives. Further, significant capacity additions, led by Chinese, resulted in module overcapacity of about 50 per cent in 2011.
Crisil expects the decline in module prices to slow this year . Capital costs are expected to decline by 10-13 per cent to Rs 8.7-9 crore a MW in 2012, it said.
However, some players under batch 2 of theMissionhave bid aggressively anticipating a sharper decline. For healthy equity internal rate of returns (IRRs) of about 15 per cent, a tariff of Rs 9 a unit is necessary, assuming a plant load factor of 19 per cent and typical debt equity of 70:30, with borrowing costs of nearly 13 per cent, it said.
“Almost half the bids under JNNSM batch 2 have been below Rs 9 per unit and about a fourth of the bids below Rs 8.5 per unit, making these investments highly risky”, said Mr Rahul Prithiani, Director, Industry Research, Crisil Research.
These projects can become viable if solar power producers can tap low cost foreign funds. However, the domestic procurement clause imposed by JNNSM could limit access to such funds.
“In contrast, the fixed tariff of Rs 10.37 per unit and the absence of a domestic procurement clause make Gujarat state’s solar power policy more attractive, as it enables equity IRRs of 18-22 per cent”, said Mr Prasad Koparkar, Senior Director.
SUZLON SIGNS EOI WITH KARNATAKA GOVT
MUMBAI/PUNE: Suzlon Group, a wind turbine manufacturer, said it has signed an expression of interest (EoI) with the Government of Karnataka to develop 2,500 mega watt (MW) of new wind power capacity in the state between 2012 and 2017.
The EoI covers the development of new capacity in wind farms across the state, with developments planned in Bijapur, Chitradurga, Tumkur, Dharwad, Chikmangalore, Raichur,Mysore,Belgaumand Bagalkot. The investment is worth Rs. 15,000 crore. Suzlon has installed over 770 MW capacity in the state.
Under the EoI, the Karnataka Government will obtain the necessary permissions, registrations, approvals and clearances for the development of wind farms in the state. Suzlon, in turn, will play the role of a developer and facilitate the flow of investments into the state through its customers investing in wind energy.
“We are extremely pleased to sign this EoI with the Government of Karnataka. This not only reinforces Karnataka’s position as one of India’s leading markets in wind energy, but also illustrates their commitment towards creating a low-carbon economy in the state,” Tulsi Tanti, chairman, Suzlon Group, said. Karnataka has large untapped wind energy potential, with estimates ranging around 13,000 MW according to Centre for Wind Energy Technology (CWET).
Suzlon currently has over 700 MW of installed capacity in the state.
APOORVA RENEWABLE ENERGY TO MAKE SOLAR-ELECTRIC BUSES FOR TRANSPORT BODY
BANGALORE: Buses inBangaloremay soon be powered by solar energy. The Bangalore Metropolitan Transport Corporation (BMTC) has placed orders with Apoorva Renewable Energy Products to design solar-electric hybrid buses, the company CEO, Mr Suresh Babu, said on the sidelines of the Global Investors Meet 2012.
“The BMTC has asked us to provide a sample hybrid vehicle and we have accepted the order and will start working on it,” Mr Babu said.
Several other government bodies such as the Bruhat Bengaluru Mahanagara Palike (BBMP) are in talks with the company too, he said.
The company makes three-wheeled vehicles powered by electric and solar power, and customises products for Indian conditions. “Using a common technology, we design products as per customer requirements and outsource the manufacturing,” Mr Babu said.
Currently, the company’s vehicles are used inDelhiand parts of Karnataka and it will start exporting in two months from now.
“During the GIM expo, Ministers fromSaudi Arabia, Latin America,Ghanaand Europe evinced interest in our products,” Mr Babu said, adding that the company already has orders in hand fromThailandfor passenger vehicles to transport schoolchildren.
The mini school bus will come equipped with GPS capability so that parents can track their children en-route to the school and will also be able to monitor movement of the vehicle real-time.
“We are in advanced stages of talking to schools likeBaldwinBoysHigh Schoolfor our mini school bus,” Mr Babu said.
The company makes three-wheeled nine-seaters, small cargo carriers and garbage pick up vehicles, starting Rs 75,000. “We are present only in the three wheeler segment and will not venture into other segments as there are several other big players there. Also, the audience we are targeting are the common man and the lower-end of the income pyramid who use three-wheelers,” Mr Babu said.
All the vehicles are fitted with batteries and one can switch from solar power to the batteries. The batteries, once fully charged, can cover about 120 km at a speed of 60 kmph, Mr Babu said.
With an increase in demand for the products, the company is in talks with several banks to strike deals to provide loans and financial assistance for customers, Mr Babu said. Currently, the government offers a 20 per cent subsidy on the products he added.
ENERGY EFFICIENCY OF INDIAN STATES
Biswa Swarup Misra
Securing affordable energy is a precondition for sustainable growth of a higher order. In the past 40 years, GDP has grown by 5.5% per annum. In contrast, the consumption of conventional energy (coal and lignite), crude petroleum, natural gas and electricity (hydro and nuclear) has grown by 6% per annum, but production by only 4.5% per annum. The overshooting of consumption over production has led to a heavy dependence on imports for some forms of energy like crude and coal. This makes the economy vulnerable to fluctuating prices of these commodities in the international markets and can have serious macroeconomic ramifications.
Energy efficiency at the all-India level
In this context, efficiency in energy use assumes a lot of importance. Energy intensity (EI), which measures the amount of energy consumed for producing one unit of GDP is a popular indicator of energy efficiency. A fall in EI over time suggests an improvement in energy use. The evolution of EI forIndiasuggests that efficiency in energy use had deteriorated between 1971 and 1986, but has improved since then. EI deteriorated from 0.128 KWh in 1970-71 to 0.165 KWh in 1985-86. It improved from 0.159 KWh in 1991 to 0.155 KWh in 2001. The pace of improvement in energy efficiency improved at a faster pace after 2001 and reached 0.1167 KWh in 2010-11. How has the scenario been in the states in this period of improved energy efficiency at the all-India level? We examine the efficiency in energy use in the industrial sector between two time points—2002 and 2010—for 20 states. For this, we consider per capita industrial output in the states and per capita consumption of electricity in the industrial sector. We measure the efficiency by computing the industrial output per unit of electricity consumed in the states in these two time points. Before we consider the state-level scenario, let’s have a look at the all-India picture. On an all-India basis, between 2002 and 2010, the per capita industrial consumption of electricity increased by 1.6 times from 109 KWh to 179 KWh. Between these two time points, per capita industrial output increased by 1.73 times. Thus, industrial output per unit of energy consumed increased from R58 to R61, an increase by a multiple of only 1.05.
Energy efficiency at state level
Amongst the 20 states under study,Gujarathad the highest industrial output per unit of electricity consumed in 2002 and continued to be the most efficient state in 2010.Goawas the least efficient in 2002 and continues to be the worst performer in 2010. Second, 11 states improved their efficiency in electricity use and 9 states witnessed deterioration. Although 3 out of these 11 states—Punjab, Goa and Tamil Nadu—increased their industrial output per unit of electricity consumed, the numbers were much below the national average. Third, Kerala, followed byDelhiand Madhya Pradesh, witnessed the maximum gain in efficiency in energy use. In contrast, Uttarakhand, Himachal Pradesh and Chhattisgarh posted the maximum fall in descending order.
What explains this inter-state variation in efficiency in electricity use? A number of factors, like the quality of labour force, the capital-labour ratio employed by industries, the availability of energy and, above all, the regulatory environment might have an influence on the efficiency. In addition, pricing can play a very important role. To examine the role of pricing in guiding efficiency in energy use, we consider the increase in electricity tariffs for industry in the states between 2002 and 2010.
We find electricity tariffs for industry have actually declined in the case of four states—Andhra Pradesh, Chhattisgarh, Haryana, and Uttarakhand. All these 4 states have witnessed a deterioration in their efficiency in energy use. We also find that the 11 states that witnessed an improvement in efficiency had also raised their tariffs. However, there are some states—Himachal Pradesh, Jharkhand, Uttar Pradesh and West Bengal—where, though tariffs have increased, the efficiency has declined. The decline in energy use efficiency in some of these states can be explained by two other dimensions of pricing: the absolute tariffs and the frequency of revisions in tariffs. Apart from the increase in tariffs, the absolute tariff can have an important role. For instance, in the case of Himachal Pradesh, the electricity tariff for industries was the lowest amongst all states in 2002 and second lowest by July 2006. The cheaper tariffs might have induced increased consumption of electricity in the state, but not a proportionate increase in industrial output. The non-revision of tariffs at regular intervals to reflect the resource scarcity might also be leading to an over-use of electricity and a drop in efficiency. For instance, in the case of Jharkhand, there was no revision in prices between 2004 and 2010, for Haryana since 2006, forWest Bengalbetween 2007 and 2010, and all these states have suffered a decline in their efficiency. While pricing might not be the only guiding factor driving efficiency, allowing it to reflect the scarcity can go a long way in improving efficiency in electricity use.
The author is associate dean, Xavier Institute of Management,Bhubaneswar. Views are personal
SIGN COAL SUPPLY PACTS SOON: SHINDE
MUMBAI: Undeterred by supply constraints, the power ministry has assured Prime Minister Manmohan Singh of capacity addition of 18,000 Mw in 2012-13. The ministry, however, said Coal India (CIL) should sign fuel supply agreements (FSA) soon, and accordingly, supply coal to power producers.
Power Minister Sushil Kumar Shinde, who was present at the meeting on the infrastructure sector called by the prime minister, told Business Standard, “During the meeting, 18,000 Mw of capacity addition was proposed. Give me coal and gas, and we will cross the 18,000 Mw target by the end of the current financial year. In 2011-12, the concluding year of the 11th Plan, more than 20,000 Mw of capacity was added.”
Shinde, however, said CIL should expedite the signing of FSAs, crucial for assured availability of coal to power generating companies. The power ministry has been insisting if CIL found it difficult to meet the mandated minimum supply level of 80 per cent, it should at least supply 65 per cent of the committed coal. However, CIL has indicated supplying 80 per cent of the committed coal was not possible, saying it could supply only up to 60 per cent.
It added it would raise this to 80 per cent in four years.
Shinde recalled the Planning Commission had scaled down the capacity generation target for the 11th Plan to 62,000 Mw, against the original target of 78,700 Mw. “Ultimately, more than 55,000 Mw was achieved by the end of the 11th Plan. Had adequate gas been received, another 8,000 Mw of generation capacity could have been added.”
Despite these challenges, the power sector is poised to meet the 18,000 Mw target for 2012-13, and this can even be exceeded, provided the sector receives sufficient fuel,” he said.
He added his ministry had made a case for pooled import of coal to address the rising mismatch between demand and supply. Through this arrangement, states would be given imported coal proportionate to their coal deficits.
On the availability of funds to ailing distribution companies, Shinde said he had received several complaints from distribution companies of banks rejecting funds to them. “I took up this issue during the meeting convened by the prime minister. It was decided the principal secretary to the prime minister would look into this and find a way out so that these companies can secure funds from banks,” he said.
Of late, banks have expressed concern on their exposure to distribution companies. CRISIL had, in a recent report, estimated losses of distribution companies might have risen to Rs 35,000 crore by the end of 2011-12, compared with Rs 27,500 crore in 2009-10.
NEW COAL BLOCKS TO BE AUCTIONED IN TWO MONTHS: SRIPRAKASH JAISWAL
RANCHI: Amid furore over mines allocation, Coal Minister Sriprakash Jaiswal today said new blocks have been identified and they would be auctioned in the next two months.
“New coal blocks have been identified and listed for public sector undertakings. They will be auctioned in two months,” Jaiswal told a press conference here.
Jaiswal also warned to scrap all allotments to companies if they were found sitting idle on blocks given for captive use.
Lamenting that only 29 of the 193 blocks alloted between 1999 and 2008 were operational, Jaiswal said: “Even today we will scrap coal blocks if anyone fails to operate and contribute in the capacity addition as envisaged by the government.”
He was talking to reporters here and the statement comes close on the heels of the government facing heat over leaked Comptroller and Auditor General (CAG) reports in media estimating ‘windfall gains’ to private and public sector companies on such allocations.
Jaiswal said he has already scrapped 26 such allotments after reviewing the progress of 56 in 2009, where the firms had failed to develop the same.
He admitted that forest clearance, land acquisition, resettlement and rehabilitation policy and law and order were some of the bottlenecks being faced by the companies to make their blocks operational.
The Coal Ministry, sources said, is in the process of issuing show cause notice to about 58 coal block holders for their failure to adhere to blocks development timeframe.
Refusing to be drawn into any controversy over coal block allotments, Jaiswal, said blocks could not be allotted without the consent of state governments.
“And if anyone smells a scam in it, I would like to ask them if they smell collusion between the Centre and the state government? So such allegations are uncalled for,” he said and gave an account as to how coal blocks had been allotted since 1993 by different governments.
Meanwhile, the government has come under criticism from various corners amid charges of irregularities in block allocation between 1993 and 2009. The Central Vigilance Commission has referred the case now to the CBI for probing alleged irregularities in coal block utilisation.
A media report quoted a Comptroller and Auditor General report that stated undue benefits of over Rs 1.8 lakh crore were accrued to private companies in coal block allocations.
The government, however, has said it has not received any such CAG report.
SOLUTION BETWEEN CIL, NTPC OVER FSA LIKELY SOON: COAL MINISTRY
NEW DELHI: The Coal Ministry today said it is hopeful of a solution soon to disagreement between power major NTPC and CIL over introduction of some new clauses in the fuel supply agreement.
“NTPC has raised some issue and we are looking into it. I hope, the board and the government will find some solution to this issue,” Additional Secretary, Ministry of Coal, Zohra Chatterji said at the Skoch Summit here.
Stressing that “Fifteen FSAs (fuel supply agreements) have been signed by power companies so far,” Chatterji said, “FSA document has already been approved and sent. Now, it is upto the power companies to come forward and sign the agreement.”
NTPC and many power companies have refused to ink fuel supply pacts with Coal India Ltd (CIL), disagreeing with introduction of new clauses.
In a letter to the Coal Ministry last month, the Power Ministry had flagged concerns raised by power producers regarding the model FSA and had requested the Coal Ministry to ensure that CIL inks fuel pacts with power companies within a month based on 2009 model FSA, by only changing the minimum supply level to 80%.
The new FSA states that CIL is not liable to pay penalty for the first three years (from the date of signing the pact) even if there is supply shortfall. This as well as clauses related to ‘force meajure’ and compensation for stone content in the fuel, are being opposed by power companies.
CIL, however, has stated that the clauses it introduced in the new model FSA are aimed at protecting the PSU’s interest.
On the other hand, the Power Ministry has contended that the model FSA, finalised by CIL has diluted the disincentive to such an extent that it would have no impact on CIL in the event of non-supply of coal. The disincentive starts only after three years and that too had been reduced to a mere 0.01%, the letter had pointed out.
In the earlier FSAs, in case of any disagreement between the developer and CIL, the issues were to be referred to the Government of India whereas now CIL would decide the issue on their own and in case of disagreement, the coal supply will be discontinued.
Earlier, NTPC Chairman and Managing Director Arup Roy Choudhury had said the company would sign the FSA only with a change in the trigger point, “because that is the direction given by the government. Why should I accept 10 or 15 more changes”.
The government, in April, had issued a directive to CoalIndiato commit itself to a minimum of 80% of fuel supply to power producers, failing which it would attract penalty. The directive was issued following a meeting between the power sector honchos and the PMO.
CHINA, INDIA LACK WATER FOR COAL PLANT PLANS, GE DIRECTOR SAYS
China’s and India’s plans to build more coal-fired power plants to meet electricity needs aren’t feasible because of a lack of water needed to cool the plants, General Electric Co. (GE) (GE)’s global strategy director said.
The two countries have not adequately considered the water needs of their proposed coal plants in their plans, Peter Evans, GE’s director of global strategy and planning, said yesterday at a seminar inTokyo.
“They have not introduced a water constraint on their model,” Evans said. “They assume the water is there. So my view is that they actually will not be able to build as many coal plants as the projections suggest.”
China’s coal demand will increase 70 percent to 3.71 billion metric tons coal equivalent by 2035 from 2009, under the country’s energy policy, whileIndia’s demand will increase 188 percent to 1.15 billion tons equivalent over that time, according to the International Energy Agency’s World Energy (MERENER) Outlook for 2011.
“Tons of coal equivalent” is a unit used by the IEA to compensate for discrepancies in energy output among various types of coal.
China’s water consumption for power generation is set to increase to 250 billion gallons (947 billion liters) a day in 2025 from 141 billion gallons in 2011, according to GE’s calculations. The 2025 figure is 167 times the total current daily water use ofNew York City, according to GE.
GE, which produces gas-fired and wind-powered turbines, solar equipment and other projects that would benefit from a shift away from coal, was not immediately able to provide comparable water-use figures forIndia.
India’s NTPC Ltd. (NTPC), Tata Power Co. (TPWR) and Reliance Infrastructure Ltd. (RELI) plan new coal plants in the South Asian country, according to a 2010 report by HSBC Finance Corp. and the World Resources institute that found 79 percent of India’s new power capacity was being built in areas of limited water availability.
InChina, coal-fired plants are planned by such companies as Shenhua Group Corp., which intends to build an 8-gigawatt generator in the southernprovinceofGuanxi, the official Xinhua News Agency reported in December.
Evans predicted that Chinese leaders would have to adopt less water-intensive power-generation strategies, such as a heavier reliance on wind farms and more expensive dry-cooled coal plants.
Water constraints will also probably promptChinato use more natural gas than it is currently targeting, since gas-fired generators also use less water than coal-fired ones, Evans said.
China’ natural gas demand is forecast to increase more than five-fold to 502 billion cubic meters in 2035 from 93 billion cubic meters under an IEA scenario where fossil fuel subsidies are cut, according to the 2011 World Energy Outlook.
“It’s interesting when you think about a new constraint like water: ’What will it do to effect the system?’” Evans said. “I think it will add more gas and wind than many people are anticipating.”
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