The World Bank Board on Tuesday (1 July) approved $650 million towards the third loan for the Eastern Dedicated Freight Corridor (a freight-only rail line) that will help faster and more efficient movement of raw materials and finished goods between the northern and eastern parts of India. EDFC 3, approved today, will build the 401 km Ludhiana-Khurja section in Uttar Pradesh, Haryana and Punjab. The Project will help increase the capacity of these freight-only lines by raising the axle-load limit from 22.9 to 25 tons and enable speeds of up to 100 km/hr. It will also help develop the institutional capacity of the Dedicated Freight Corridor Corporation of India Ltd (DFCCIL) to build and maintain the DFC infrastructure network.“Implementing the Dedicated Freight Corridor program will provide India the opportunity to create one of the world’s largest freight operations. The corridor, which will pass through states like Uttar Pradesh and Bihar, will benefit from the new rail infrastructure, bringing jobs and much-needed development to some of India’s poorest regions,” said Onno Ruhl, World Bank Country Director in India. “Moving freight from road to rail will reduce the carbon footprint of freight by 2.25 times,” he added. The Eastern Corridor is 1,840 km long and extends from Ludhiana to Kolkata. The World Bank is supporting the Eastern Dedicated Freight Corridor (EDFC) as a series of projects in which the three sections with a total route length of 1,146 km will be delivered sequentially, but with considerable overlap in their construction schedules The first loan of $975 million for the 343 km Khurja-Kanpur section in the EDFC program was approved by the World Bank Board in May 2011 and is already under implementation. So far it has awarded contracts worth $700 million for this section. Compensation has been awarded for about 95 percent of the 1,410 ha of land being acquired from 29,253 affected farmers for EDFC1 (Khurja-Kanpur section). The second loan of $1.1 billion for EDFC2 which covers 402 km from Kanpur to Mughal Sarai was approved by the World Bank in April 2014. Under EDFC2, civil works contract for about $800 million has been awarded and contracts worth about $240 million, for establishing rail systems, are under procurement. The EDFC is part of India’s first Dedicated Freight Corridor (DFC) initiative – being built on two main routes – the Western and the Eastern Corridors. These corridors will help India make a quantum leap in increasing the railways’ transportation capacity by building high-capacity, higher-speed dedicated freight corridors along the Golden Quadrilateral. Currently, the rail routes that form a Golden Quadrilateral connecting Delhi, Mumbai, Chennai and Kolkata, account for 16 percent of the railway network’s route length, but carry more than 60 percent of India’s total rail freight. Augmenting its transport systems is a crucial element of India’s trillion-dollar infrastructure agenda. Since the 1990s, road transport has advanced more rapidly than the railways, and now accounts for about 65 per cent of the freight market and 90 per cent of the passenger market in India. “The Indian Railways urgently needs to add freight routes to meet the growing freight traffic in India, which is projected to increase more than 7 percent annually. These freight lines will wholly transform the capacity, productivity, and service performance of India’s busiest rail freight corridors. At completion, it will be able to more than double its capacity to carry freight, with faster transit times, being more reliable and at lower cost,” saidBen L. J. Eijbergen, Programme Leader, Economic Integration and the Task Team Leader for the Project Significant Green Impact: In addition to the efficiency improvement and other operational benefits, the Project is expected to bring in significant reductions of Green House Gas (GHG) emissions. A Green House Gas Emission Analysis conducted by DFCCIL for the Eastern DFC Project shows that the Eastern corridor is expected to generate about 10.48 million tons of GHG emissions up to 2041-42, as against 23.29 million of GHG emissions in the absence of EDFC – a 55 percent reduction of GHG emissions. Economic opportunities are also being explored along the freight corridor. The government is planning to set up 7 integrated manufacturing clusters using EDFC as the backbone. These clusters will be set up with an investment of about $1 billion on either side of EDFC. The loan, from the International Bank for Reconstruction and Development (IBRD), has a 7-year grace period, and a maturity of 22 years.
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What is the government doing to develop the Sagarmala, or necklace, a series of ports and coastal and inland-shipping routes that can move cargo save energy?With India's road and rail infrastructure in most high-traffic areas running at full capacity, the government plans to raise Rs 1 lakh crore ($15.6 billion) to develop the Sagarmala, or necklace, a series of ports and coastal and inland-shipping routes that can move cargo save energy. Coastal shipping is 173 per cent cheaper than road and 64 per cent cheaper than rail. But before this happens, there are some important things to do. With India’s road and rail infrastructure in most high-traffic areas running at full capacity, the government plans to raise Rs 1 lakh crore ($15.6 billion) to develop ports and improve inland waterways. The Sagarmala (necklace) plan, as it is called, envisages a series of ports and coastal and inland-shipping routes that will not just move cargo but also reduce India’s carbon footprint and save energy. Coastal shipping is the cheapest and least polluting mode of transport, 63 per cent cheaper than road and 38 per cent cheaper than rail: Rs 0.55 per tonne-km versus Rs 0.90 for rail and over Rs 1.50 for road, according to the estimates by the erstwhile Planning Commission. The project aims to develop ports and make them drivers of economic activity by linking them to road, rail, inland and coastal waterways. But First: Improve India’s Ponderous PortsIndia’s port efficiency is low and work moves slowly, compared to leading international ports. India has 12 major ports and 200 minor ports. Ports in India carry 95% of India’s total trade in volume and 68% by value. Coastal shipping in India transports just 7% of domestic cargo. Compare that with 42% in Japan and 20% in China. India’s sea-borne traffic is 950 million tonnes with a total coastline of 7,500 km compared with China’s 9 billion tonnes with a coastline of 15,000 km. Another important drawback for coastal shipping is the slow turn-around time, the time a ship spends entering the port, loading, unloading, and departing. The average turn-around time for India, as of April-November 2014, was reported to be 2.1 days (50 hours). Singapore port, recognised as one of the best in Asia and globally, turns around ships in less than 12 hours. In Hong Kong port, container ships are turned around within 10 hours. A two-day wait for a coastal container ship increases costs in India by close to 10% for short voyages. Roads transport 57 per cent of India’s domestic cargo and railways 30 per cent . India’s inland water-transport is also poorly developed. Of 14,500 km of navigable inland waterways, only 5,200 km (36%) of major rivers and 485 km (3%) of canals can handle mechanised vessels. Only 0.5 per cent of India’s cargo traffic is handled by inland water-transport, compared to China at 8.7%, the US at 8.3% and Europe at 7%, according to this KPMG report. Ports Start To Get A Leg UpAn agreement was signed recently for a satellite port in Dahanu between Jawaharlal Nehru Port Trust (JNPT) and the Maharashtra Maritime Board. The port is expected to reduce the traffic at Jawaharlal Nehru Port. Similarly, the central government is planning six ports including the Rs 12,000-crore deep-water Sagar port in West Bengal, Colachel in Tamil Nadu, the Rs 6,000-crore Vadhavan port in Maharashtra and the Rs 1,200-crore Haldia dock 2. The capacity of all major ports was 800.52 million tonnes (MT) as on March 31, 2014, and cargo traffic was 555.54 MT. Kandla with more than 87 MT in cargo traffic in 2013-14 was India’s busiest port. Its average turn-around time was 2.9 days (69.6 hours). Building ports as part of the Sagarmala plan will, clearly, not be enough. Update: The story has been updated to correctly reflect how the cost of transporting goods by ship compares to road and rail. Chaitanya Mallapur/IndiaSpend (Indiaspend.org is a data-driven, public-interest journalism non-profit)
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Oil futures hovered below three-week lows on Tuesday (30 June) after Greeks took to the streets to protest against austerity following a bank shutdown, keeping investors away from riskier assets and putting Brent crude on course for a second month of declines.Brent crude futures were down 16 cents at $61.85 a barrel at 0200 GMT, after falling to $62.01 on Monday, their weakest finish since 5 June. The contract is heading for its second straight monthly decline.US crude dropped 20 cents to $58.13, having closed down $1.30 at $58.33 a barrel, its lowest settlement since June 8. It is set for its first monthly decline in three."Greece is still the word," said Ben Le Brun, market analyst at OptionsXpress in Sydney. "That story doesn't look like stopping anytime soon."Tens of thousands of Greeks hit the streets on Monday after waking up to shuttered banks, closed cash machines and a climate of rumours and conspiracy theories following the breakdown in talks between Athens and its creditors.Any resolution to the crisis is unlikely before a referendum on Greece's bailout is held on Sunday, after Prime Minister Alexis Tsipras announced the vote, wrong-footing European leaders and policy makers.Investors are also looking at the US government's June payrolls report on Thursday and talks on Iran's disputed nuclear programme going on in Vienna, Le Brun said.The former may reinforce ideas that the US Federal Reserve might raise interest rates as early as September, the first such hike in about 10 years.The Vienna talks would continue past Tuesday's deadline for a comprehensive agreement intended to open the door to ending sanctions in exchange for limits on Iran's most sensitive nuclear activities for at least a decade, a senior U.S. official said on Tuesday.(Reuters)
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Reliance Industries plans to shut a crude distillation unit (CDU) for a 10-day planned maintenance in the first half of July, it said in a statement on Monday (29 June), halving crude processing at its 580,000 barrels per day (bpd) refinery during the shutdown duration. The export-focussed refinery at the Jamnagar complex in western Gujarat state has two crude distillation units of equal size. "The planned maintenance turnaround at the refinery is not expected to have any impact on commercial commitments," it said. Reliance, owner of the world's biggest refining complex, has two mega-sized refineries in India. The older 660,000-bpd refinery at the complex also has two crude units and mainly caters to domestic demand. Other units at the Jamnagar refinery complex are planned to operate at normal throughput, it said.(Reuters)
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Saudi Arabia lost its spot last month as India's top oil supplier to Nigeria for the first time in at least four years, according to ship tracking data compiled by Reuters, as the world's top crude exporter struggles to maintain market share in Asia. The OPEC kingpin also fell behind Russia and Angola as the biggest crude supplier to China last month, official data showed this week. The Middle East country's failure to maintain its position in some markets comes despite it leading a strategy by the Organization of the Petroleum Exporting Countries (OPEC) to keep output high to drive out competitors. In India, refiners have been switching out of long-term contracts with Middle East suppliers in favour of spot purchases, often African oil. A glut of African cargoes has emerged as the U.S. shale boom cuts American demand and accelerated as OPEC keeps output high. The share of African oil, mainly from Nigeria and Angola, jumped to 26 percent of India's total imports in May, up from around 15.5 percent in April and the highest in more than four years, according to tracking data on tanker arrivals. At the same time, the Middle East share fell to 54 percent in May from 61 percent, with Saudi Arabia supplying some 732,400 barrels per day (bpd) compared with Nigeria's 745,200 bpd. The shift comes as the gap between the international benchmark Brent and the Middle East price marker narrows. The premium for Nigerian crude over Brent has plummeted in recent months, making it more attractive. "This gives advantage to the complex refiners like Reliance to buy superior grades of oil like those from Nigeria at discounted rates," said Ehsan Ul Haq, senior consultant at UK-based consultant KBC Energy Economics. Reliance Industries got about a quarter of its oil in May from Africa, the highest in at least three years. Indian Oil Corp aims to get 70 percent of its oil needs through term volumes compared to 80 percent last year, including a deal with Kuwait halved to 100,000 bpd. Another refiner, Bharat Petroleum Corp, plans to cut its dependence on term contracts to 75 percent this fiscal year from 82 percent a year ago, according to a source. Head of refinery operations at Hindustan Petroleum Corp, B. K. Namdeo, said purchases of West African oil make sense when Brent's premium over the Middle East price marker, known as Dubai swaps, is less than $2 per barrel. The spread has mostly hovered below that since oil prices crashed in the second half of last year and hit its lowest in two months this week at $1.32. KBC Energy's Haq estimates West African oil's share to India could average as much as 25 percent this year. (Reuters)
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Adani Mining has asked its four engineering contractors working on the Carmichael project to halt work around the mine, the Guardian Australia reported, citing people familiar with the matter. Halting work at this stage of the project made no sense even as a savings measure, and raises speculation that the company might scrap the project altogether, Guardian Australia said. Adani has signed up buyers for about 70 per cent of the 40 million tonnes coal the Carmichael project is due to produce in its first phase, with production expected to begin in late 2017. Guardian Australia said it is understood that about 40 engineers working for one of Adani's contractors, WorleyParsons, were among those pulled off the project. The move was anything but "Adani beginning to run up the white flag" on the project, the newspaper reported, citing a senior engineering industry source. Tim Buckley, a director of energy finance studies, Australasia, at the Institute for Energy Economics and Financial Analysis, which opposes new coal developments said halting work at this stage "just crucifies the project", the newspaper reported. "The minute Adani stops moving forward, the project is just dead, in my view," Buckley said. "And the reason is you’ve got billions of dollars of debt in Australia and they’ve got this interest bill. They’ve been drawing a line in the sand and that is that they need financial close by October 2015." The pressure on billionaire Gautam Adani to make a call on the project included a slump in the world thermal coal price, the Indian government's policy of supporting domestic coal and renewables and Adani’s own financial position, according to Buckley. SMEC, one of the contractors hired by Adani, declined to comment. Adani and its other contractors Aecon, Aurecon and WorleyParsons could not be reached for comment outside regular business hours, Reuters reported. "It's Adani’s practice not to comment on specific commercial arrangements," a spokeswoman for Adani was quoted as saying in the Guardian Australia report. Adani's ambitions in Australia have been uncertain following a surprise election result in Australia's coal-rich Queensland state, leading to a policy reversal, and heightened pressure to protect the Great Barrier Reef.
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After the Hero group, Bharti Enterprises' decision to enter the renewable energy business, a completely new field for the company, is surprising but not shocking. Founded in 1976, the Bharti group has ventured into various fields including Telecom, Retail, Insurance and Wealth management. But is it so easy for a company to enter the renewable sector in India with amateur group in renewable sector like Softbank? The Japanese technology giant has a very small portfolio in the Solar energy and Foxconn which claims to have some expertise in manufacturing solar panels is known for making Apple Iphones. One must note that the Bharti group entered the retail business with an international player like Walmart and the insurance business with AXA. However, the move to invest as much as $20 billion over the next 10 years into a relatively new area for Softbank and completely unknown sectors for India’s Bharti and Taiwan’s Foxconn shows the easily available funding for the sector in the international market. According to Salil Garg an analyst at Fitch India Ratings, "Renewable energy offers huge opportunities for companies to enter the business. The government supports it with preferential tariff, renewable power obligation etc. Moreover, there is plenty of funding available for the sector. So due to tariff and tax benefits and the less time taken to set up a solar power plant, the return on equity is also very good." Moreover, a solar power plant takes around one year to reach the production cycle after funding and clearances as against a gestation period of 5-8 years for a thermal power plant. Moreover, due to rapid changes in technology, the developers have befitted and it is hoped that within next two years the solar energy would be cheaper than the thermal energy. This would not make the Return on Equity higher for the developers in the coming years. However, a major concern in the short term remains with the capability of state discoms to buy expensive solar power under the renewable purchase obligation. At present, the cost of solar power is above Rs 5 per unit, which makes it almost double the rate of average cost of thermal power under the power Purchase Agreements. Another problem that the sector faces is that of acquiring land for the projects. Given the failure of the NDA government in getting consensus on the Land Acquisition Bill it looks unlikely that this problem will be resolved anytime soon. How the company manages to sail through these challenges will decide whether Bharti will be using its own solar power panels to run its mobile towers.
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Japan's SoftBank Corp on Monday (22 June) announced investment of $20 billion in setting up solar power projects in India in partnership with telecom giant Bharti Enterprises and Taiwan's Foxconn. The joint venture entity will be called SBG Cleantech, which will be headquartered in Delhi and will focus on solar and wind energy. SBG Cleantech will have Manoj Kohli, a Bharti veteran, who until recently led Bharti’s emerging businesses, as executive Chairman and Raman Nanda, as the CEO. Softbank, the Japan-based telecommunications and Internet major, had previously committed to invest $10 billion in India over a ten year period. In a news conference, Softbank said that the three firms – Softbank, Bharti and Foxconn -- will set up 20 Giga Watts of renewable energy projects in India. SoftBank will hold majority stake in the joint venture, SBG Cleantech Ltd, while Bharti Enterprises Ltd and Foxconn Technology Group will have minority stakes. Its CEO Masayoshi Son said Foxconn will help with planned solar equipment manufacturing for the projects. The three firms are also looking at manufacturing equipment in India, he added. India has recently set a target of 100GW solar and 60GW wind target by 2022. Government of India’s mission is to achieve 24×7 power for all and the renewable energy target by 2022. India has achieved a base of 3.7 GW of solar power. The venture will invest in renewable energy plants across India. SBG Cleantech intends to participate in the 2015-16 round of solar power plant tenders under the National Solar Mission (NSM) program and state-specific solar programs. Sunil Bharti Mittal, chairman of Bharti Enterprises said: “This project will immensely contribute to the Hon’ble Prime Minister’s vision of meeting the country’s energy demands through clean sources.” "At Bharti, we believe in projects that have a transformational impact on society. In line with this vision, we are participating in a renewable energy venture with SoftBank and Foxconn which has the potential to transform the Indian economy," Mittal, said. Son and Mittal will be visiting Andhra Pradesh and Rajasthan over the next two days to talk to state government officials about potential projects, Mittal said at a news conference. He said that subject to winning project bids, land and other clearance, the first project should get off the ground in 12 to 18 month, adding that land acquisition should not be an issue since the venture will be using arid, non-cultivable and non-irrigable land. ashish.sinha@businessworld.in
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