Shares in state-run oil firms surged for a second day on 18 December' 2013, with ONGC gaining as much as 12.9 per cent to add around $6 billion in market value, after a government diesel price hike was seen reducing their subsidy burden. The government, which fixes the retail price of diesel, on Thursday told retailers to raise the price of the subsidised fuel in small amounts every month, a move aimed at propping up public finances that should also improve revenues in the sector. The government and state-run companies share the cost of selling subsidised diesel to consumers. Analysts said producers such as Oil and Natural Gas Corp Ltd would benefit more from the new measures than retailers because of the way the subsidy is structured. The price hike was more limited than expected, given the oil ministry last month told reporters it was working on a proposal to raise diesel prices by 1 rupee a month for 10 months, but was seen as more likely to be accepted politically ahead of state elections this year. "Investors may rightfully question the ability of the government to raise prices continuously given high inflation and social and political issues," Kotak Institutional Equities wrote in a note on Friday. "We think the companies can raise prices of diesel a few times over the next few months; the first nine months of the current calendar year are relatively free of state elections," the brokerage added. Analysts said producers such as Oil India Ltd would benefit most from the diesel price hike, given they have been selling crude oil and associate products at a discount, and could be allowed to charge higher prices. ONGC was trading up 7.8 per cent at 12:34 p.m., after earlier hitting its highest since October 2010. Oil India rose 11 per cent after gaining 4.2 per cent on Thursday. Downstream companies, such as refiners and oil marketers, would benefit far less given they are partly compensated through cash subsidies from the government as well as discounts from oil producers, making the exact benefits more uncertain. "For us, the savings will mainly be on interest cost on under-recoveries. Part of our subsidy burden was compensated by the government, but we received this after several months, so had to incur interest costs in the meanwhile. This will be saved," said B. Mukherjee, director of finance at Hindustan Petroleum Corp Ltd. "However, I don't think this will be substantial, at least for this fiscal (year)," he added. Still, shares gained, with HPCL rising 8 per cent and Bharat Petroleum Corp putting on 9.5 per cent as of 12:36 p.m. The biggest potential losers from the measures could be bulk buyers, according to analysts, as they would have to pay market rates for diesel under the new rules. However, the dual pricing of retail - lower prices for consumers and higher prices for bulk buyers - had been largely expected. Cement makers ACC Ltd fell 1.5 per cent after slumping 5.1 per cent this month as of Thursday's close.(Reuters)
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Reliance Industries has overtaken ITC as the most influential stock on BSE benchmark Sensex, after the oil & gas major's shares soared by 3.4 per cent. At the end of trade on 17 January, 2013, RIL commanded 9.33 per cent weight in the 30-share Sensex, while ITC had 9.27 per cent weight, followed by Infosys with 8.05 per cent. Shares of RIL ended the day 3.4 per cent higher at Rs 889.65, hitting a 52-week high and marking a second day of gains, ahead of its earnings on 18 January. The stock was also among the top gainers on the Nifty. The RIL counter saw good buying amid government virtually deregulated diesel prices allowing "small" hikes over a period of time. "The bullishness in the stock price also stemmed from the expectation of healthy improvement in refining margins in its quarterly results," said Milan Bavishi, Head Research, Inventure Growth & Securities. Weight of a stock is measured by the value of a company's free-float or non-promoter shares that can be freely traded in the market. ITC had first replaced RIL as the most influential stock on Indian bourses on April 17 last year, but the very next day the energy major regained the status. RIL also remains the country's most valued company in terms of market capitalisation. The energy major commands a market value of Rs 2,87,848 crore. Reliance is expected to report its first profit increase after four quarters of declining profits, according to consensus of analyst estimates, Thomson Reuters Starmine data showed. However, declining KG-D6 volumes and muted gross refining margins (GRMs) are likely to impact Reliance Industries '(RIL's) December quarter earnings. The company's petrochem segment may post better numbers on good volumes and higher base price effect, partially offsetting poor show from other businesses. Dealers say Essar results point to potentially improving refining margins at Reliance when it posts results on 18 January. Essar Oil, which reported results earlier this week, swung to a net profit in the October-December quarter, with gross refining margins at a healthy $9.75 a barrel. Investment bank, UBS, increased weightage on Reliance ahead of its December quarter earnings, thereby turning 'overweight' on the petrochemical sector from 'neutral' earlier.Nomura sees over 15 per cent upside in Reliance Industries from the current levels to Rs 1000. It says an improvement in exploration and production sentiments and more positive decisions would revive the E&P investment. According to the brokerage, the era of underperformance of the oil & gas major seems to have ended. With the Government of India (GoI) keen to end the long period of policy paralysis, decision-making has been revived and tensions between the government and contractors are finally easing. Reliance shares have been rising on media reports that recommendations from a government-appointed panel to look at gas pricing will be submitted to the cabinet for consideration soon. The recommendations are expected to lead to higher gas prices. Last week, Oil Minister M Veerappa Moily allowed Reliance Industries to explore for oil and gas within the producing fields subject to certain conditions. RIL had proposed to drill an exploration well on the flagging D1&D3 gas fields in the KG-D6 block to study reservoir characteristic.
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The government will not factor the impact of diesel price hike by oil companies while computing the oil subsidy bill for the current fiscal, Finance Minister P Chidambaram said on 17 January; 2013. "I am not factoring that (impact of price hike on oil subsidy) at the moment. I am proceeding with the basis that the subsidy bill remains the same. When and how they (oil companies) will make small corrections, I can't say," he said. He was responding to a question on how the decision of the Cabinet to allow oil companies to increase diesel prices would impact the oil subsidy bill. The Petroleum Ministry, he added, has allowed oil companies to "make small correction (in diesel prices) from time to time". The government in December obtained Parliament approval for raising the oil subsidy bill by Rs 28,500 crore over and above the amount earmarked in the Budget for 2012-13. With the additional allocation, the total oil subsidy bill in the current fiscal will soar to Rs 72,260 crore. Concerned over under-recoveries by oil companies, the Cabinet Committee on Political Affairs (CCPA) earlier in the day authorised oil marketing companies to make price correction from time to time. Besides, the CCPA also decided to raise the cap of subsidised LPG cylinders from six to nine per household in a year. These decisions are expected to improve the bottom line of the oil marketing companies and at the same time contain the oil subsidy bill of the government.(PTI)
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In a mix of populist and reform measures, the government on 17 January virtually deregulated diesel prices allowing "small" hikes over a period of time while raising the cap on supply of subsidised cooking gas (LPG) to nine cylinders per household from six. Industrialist Ananda Mahindra tweeted, if the minister's statement on oil cos flexibility to tweak diesel prices is the first step to price decontrol, then it's a bold and overdue step. Shares in state-run oil marketing companies surged after the government authorised them to set diesel prices. Hindustan Petroleum Corp gained 5.4 per cent, while Bharat Petroleum Corp gained 3.6 per cent, and Indian Oil Corp rises 6.4 up per cent. Oil and Natural Gas Corp also rose 3.5 per cent.Despite the virtual deregulation, commentators however, remained a little sceptical about how fast or whether it will be implemented. Since the government is the owner of these companies, it is expected to always have a say in the pricing. Also, while some hoped that the move will have some bearing on the fiscal deficit, others including the FM refused to calculate any possible fiscal benefit at this point. Finance Minister P. Chidambaram felt India's budget-busting fuel subsidy bill for the current fiscal year ending in March could be expected to remain unchanged. "When they will make this small correction and how much, I can't say," he said. "So I am not factoring it." Read Also: Won't Factor Diesel Price Hike In Oil Subsidy BillRead Also: Sensex Ends Higher, Oil, IT Stocks SurgeVivek rajpal, strategist, Nomura said: "Given oil companies still need to take the approval from government authorities, I am not too excited about this news. Though the first market reaction is positive, I really doubt the sustainability of such a reaction based on this news, especially once markets take a look at details." Rupa Rege Nitsure, chief economist of Bank of Baroda said "it's better to make step-wise adjustments rather than a one-off large scale adjustment. Earlier, when petrol prices were de-regulated, they hardly responded to market forces. Today's announcement will depend on how frequently and how genuinely OMCs respond to market forces." Gautam Singh, economist, Anand Rathi Securities pointed out "even a one rupee hike in diesel will lead to an Rs 8000 crore reduction in subsidy. So, even a Rs 10 hike over a period of time, can have a Rs 40,000-45,000 crore impact on the fiscal deficit. Price Hike & MoreDiesel prices in all probability may be hiked by Rs 1.50-2.0 per litre in the first instance that can be as early as 17 January night following the decision taken by the Cabinet Committee on Political Affairs (CCPA) headed by Prime Minister Manmohan Singh. The CCPA, however, left LPG and kerosene prices unchanged. Price of diesel was last revised on September 14 when it was hiked by a steep Rs 5.63 per litre. At present, diesel costs Rs 47.15 per litre in Delhi. Subsidised LPG costs Rs 410.50 per 14.2-kg cylinder and any household requirement beyond the new limit of 9 cylinders will cost a near market price of Rs 895.50 per bottle. The increase in the LPG cap would mean an additional subsidy outgo of Rs 9,300 crore annually. State-run oil marketing companies can now raise diesel prices in line with increases in global crude oil prices, oil minister Veerappa Moily said in a move that could help the government reduce its vast subsidy bill. "Oil marketing companies have been allowed to raise diesel prices in small quantities over a period of time," senior oil ministry official G. C. Chaturvedi said. He did not give details about the time-frame. The Government of India has also raised the cap on supply of subsidised Liquified Petroleum Gas (LPG) cylinders to nine bottles from six per year. There will be no change in LPG and kerosene rates, Oil Minister M Veerappa Moily told reporters here after the meeting on Cabinet Committee on Political Affairs (CCPA). "I am happy to inform the Cabinet Committee on Political Affairs has decided to raise the cap on subsidised LPG to nine cylinders per household in a year from existing six cylinders," he said. Consumers will get a quota of five subsidised cylinders between September 2012 and March 2013 and from April 1, 2013, they will be entitled to nine cylinders per annum. Drain On BudgetIndia's policy to subsidise retail prices of fuels such as diesel, which accounts for about 40 per cent of refined fuel consumption, is a major drain on the budget. Ratings agencies threatened last year to strip India of its investment-grade credit rating if the government did not take steps to rein-in a widening fiscal deficit. Finance Minister P. Chidambaram has repeatedly vowed that the deficit will not exceed 5.3 per cent of GDP this financial year. India imports more than 80 percent of its fuel needs. The government liberalised petrol prices in June 2010, but has often prevented them from being raised to reflect rising oil prices on global markets. Fuel consumption in India rose 5 per cent in the last fiscal year, its fastest since 2007-08. Shares in oil marketing companies rose while bond yields fell after Moily's announcement. The rupee rose to 54.47/4950 to the dollar from around 54.63/64 previously. Last WordA Prasanna, economist, ICICI Sec, said: "It's kind of ambiguous. But if they're able to push through the increases over a course of six to seven months, it will improve the prospects for next year's fiscal deficit. However, it will be inflationary. "This kind of signals there will be regular increases. It will push up inflation expectations, and will lead to second round effects." .
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Failure to obtain environment and forest clearances for road projects has resulted in more than 20 large and small projects being held up, with several of them facing the prospect of being terminated by the private firms involved. The first to announce termination was the GMR Group, with the Rs 5,387-crore Udaipur-Kishangarh-Ahmedabad project, where the developer had committed to pay a premium of Rs 636 crore every year to the National Highways Authority of India (NHAI). The second project that is likely to see termination is GVK’s Rs 2,815-crore Shivpuri-Dewas link in Madhya Pradesh, slated to bring NHAI a premium of Rs 182 crore a year. However, are delayed clearances the only reason for hold-ups? NHAI officials say that in many cases, the companies had bid “irrationally” for projects in an attempt to win the contract. Several others had bid close to half the premium at which GMR won the project. “At the time, companies were willing to bid anything to win projects as that would help their share value in the market,” says an official, adding that they too were surprised by the kind of premium some projects were fetching.20 road projects are held up due to delays in getting clearancesWith the economic downturn, many firms failed to achieve financial closure and, in most cases, their balance sheets were so severely leveraged that they could not put up even half the equity component required by banks to close the project. GMR officials, however, deny this, saying they had achieved financial closure for the project in 2012, and had put on the table the Rs 700 crore required as equity by the bankers. “Is it the NHAI’s contention that all the projects that are held up were bid for irrationally and all of them are using this excuse to back out of their commitments? That can be true in one or two cases, not 20,” says a GMR official, on condition of anonymity.While some developers have been trying to hawk their road assets to anyone willing to buy for the past 8-10 months, their inability to get the requisite clearances may give them the “excuse” needed to back out of the project. NHAI argues that linking the environment and forest clearances is at the root of the problem and unless the two are delinked, delays will be rampant. “The two need to be separated. What happens now is that if there is a tiny stretch of forest on a 200-km stretch, the environment clearance doesn’t come till the forest department clears it. Since forest clearances take so much time, this delays the entire project,” says an NHAI official. NHAI has now taken the matter to the Supreme Court. The construction company executives, however, blame the NHAI for the failure to acquire land in time and secure clearances. “The NHAI works as some kind of agglomeration of various PWDs (public works departments). Some parts of it work efficiently but most of it functions in the old-PWD style, which is highly inefficient,” says an executive. But as the blame game and finger-pointing between the NHAI and private developers continues, the roads sector and the country’s road-building programmes will have to suffer. Sadly, the price will be paid by the aam aadmi.(This story was published in Businessworld Issue Dated 21-01-2013)
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The common thread through all the year-enders and forecast reports by realty analysts and brokers is that 2012 ended with mayhem in the property market; and that the headwinds of economic recession, high property prices and rising unemployment would continue through the current year too. The Indian residential and home sales market saw a decline of 30 per cent in fresh launches in 2012, against a 7 per cent fall in 2011, shows a survey by property broking firm Knight Frank. Concurring with this, another broking house report said the residential market across eight major cities witnessed a drop of 16 per cent in total new units launched over 2011. The luxury realty market suffered a bigger blow with new launches declining by up to 24 per cent. Explaining the situation, Cushman & Wakefield executive MD, South Asia, Sanjay Dutt, says, “High consumer inflation, high home loan interest rates and a slower growth of the economy had a strong impact on end users, making them more price-sensitive. Whereas, cash-strapped developers were not willing to take up projects that may fall short on interest from end users.”50% was the percentage fall in new projects in BangaloreThe commercial realty market did not fare much better. A report by CB Richard Ellis (CBRE) showed that the uptake of prime office space in India saw a 26 per cent decline to 26 million sq. ft in 2012, compared to 35 million sq. ft in 2011. CBRE South Asia’s CMD Anshuman Magazine says corporates had shelved expansion plans amid uncertainty. The Knight Frank report also connects the slower launches to developers becoming smart over the years, after being saddled with excessive inventories. For instance, the gap between the launch and absorption numbers for 2012 fell to just 32,000 units for the residential market, compared to the yawning gap of 82,000 and 94,000 units in 2010 and 2011, respectively. Figures for disbursal of credit to realtors also reflected the slowdown. Cautious developers reluctant to launch new projects and complete old ones ensured that bank credit exposure to realtors fell from the peak growth of 23.21 per cent in June 2011 to just 3.88 per cent in September 2012. The cities that bucked the trend were Mumbai, Pune and Kolkata. Mumbai — paralysed all through 2011 due to unclear Development Control Rules — woke up with a 72 per cent growth in new launches, or 22,423 units, in 2012 compared to 13,000 in 2011. On the other hand, Delhi NCR battled an oversupply situation from 2011 with a 31 per cent fall in new units launched (see Bites of Realty). To add to the economic headwinds, guarded consumer response to the marketing initiative of builders will also be a major bottleneck in reviving the realty market. A survey of potential homebuyers by Makaan.com across metros showed that “most homebuyers are unable to justify or afford the high prices”. Buyers were also sceptical of poor location and connectivity of the projects; and feared that the infrastructure development promised around these housing projects would never take place. Of those surveyed by Makaan.com, 54 per cent blamed high property prices as a deterrent to buying, while 20 per cent said poor location and connectivity were dampeners. (This story was published in Businessworld Issue Dated 21-01-2013)
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The government will take a decision on raising diesel and cooking fuel prices along with increasing number of subsidised LPG cylinders for households "as quickly as possible," Oil Minister M Veerappa Moily said on 11 January 2013.The ruling UPA's political leadership is holding consultations on options like raising diesel and LPG prices to cut an unprecedented Rs 160,000 crore revenue loss expected from selling auto and cooking fuel below cost this fiscal."Decision will be taken as quickly as possible," Moily said when asked about the impending fuel price hike.He refused to be drawn into what his ministry was proposing or when and at what forum would such a decision be taken."When decision is taken, you will be the first to know," he said.The Ministry's proposal to the Cabinet Committee on Political Affairs, the body empowered to take a decision on fuel prices, was based on recommendation of the Vijay Kelkar Committee, which was appointed by the Finance Ministry to suggest a roadmap for fiscal consolidation."Recommendation is the Kelkar Committee are under serious consideration," Moily said.When repeatedly asked if his ministry has moved a Cabinet note for raising fuel prices, he said the Kelkar Committee recommendations "are under serious consideration."The panel had recommended an immediate hike in price of diesel by Rs 4 per litre, of kerosene by Rs 2 a litre and of LPG by Rs 50 per cylinder. Thereafter, it suggested raising rates on a monthly basis till the revenue losses are wiped off. Sources said that since the Finance Ministry has refused to bear additional subsidy arising from raising on supply of subsidised cooking gas cylinders for households to nine a year from the current cap of six, the Oil Ministry has proposed to make up for the shortfall by raising prices.It has proposed to raise LPG rates by Rs 100 per 14.2-kg cylinder in two instalments to make up for a fifth of the Rs 490.50 per bottle loss being incurred currently.The ministry has proposed quarterly increases of Rs 50 per cylinder from April till the entire losses are wiped-off.On diesel, it has proposed a Rs 3-4.50 per litre hike in one go or in monthly instalments of Re 1 or Rs 1.50 per litre.From April, it wanted Re 1 a litre increase every month till such time that the current loss of Rs 10.16 is wiped out.Sources said the ministry has also proposed raising kerosene price by 35 paise a litre per month or Re 1 a litre per quarter till March 2015.According to ministry estimates, raising the cap to nine subsidised cylinders would lower savings to Rs 2,500 crore per annum, compared to the savings of Rs 12,000 crore estimated when six cylinders are issued at subsidised rates and the rest sold at market price.Price of diesel, which currently costs Rs 47.15 per litre in Delhi, was last revised on September 14 when it was hiked by a steep Rs 5.63 per litre. Kerosene rates have not changed since June 2011 and it currently costs Rs 14.79 per litre in Delhi.Subsidised LPG costs Rs 410.50 per 14.2-kg cylinder and any household requirement beyond current cap of 6 cylinders is to be bought at near market price of Rs 895.50 per bottle.State-owned oil companies currently sell diesel at a loss of Rs 10.16 per litre, kerosene at Rs 32.17 a litre and LPG at Rs 490.50 per 14.2-kg cylinder.(PTI)
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The viewing gallery is like the balcony of a movie theatre. But the screen is not showing the latest Bollywood blockbuster. On the contrary, it shows a maze of tables and charts. Nine engineers are glued to their seats, eyes peeled on the screen. The setting is Tata Power Delhi Distribution’s (TPDDL) SCADA (supervisory control and data acquisition) room. The onscreen maze is a real-time layout of the distribution network, tracking parameters such as flow of power, faulty transformers, etc.In another room is a group of engineers, glued to three screens each. These screens are part of the outage management system (OMS). The monitors show a labyrinth of lines marked with dots. The dots, says Parveen Kumar Verma, head, OMS technology and systems, are electric poles supplying power to 12-13 lakh consumers covered by TPDDL’s network. The OMS keeps track of each consumer and the status of his power supply. If there is anyone without power, the system has the details of who and why.Both SCADA and OMS are part of the distribution utility’s smart grid system. Faults are located instantly and affected areas are isolated promptly so that surrounding areas do not suffer power outage as well. The reaction time for restoring faults is two hours — the Delhi Electricity Regulatory Commission (DERC) allows 3-4 hours. Customers are informed through an SMS about planned shutdowns 72 hours in advance. Intimating them about breakdowns is the next step. Before privatisation, Delhi’s distribution network was bleeding with aggregate technical and commercial (AT&C) losses to the extent of 53 per cent. This has come down to 11 per cent with the automation measures adopted by distribution companies such as TPDDL. Part of this includes introducing HVDCs (high-velocity distribution centres) to prevent people from hooking on lines and stealing power. Billing systems have also undergone a change. There are 3,000 bill payment points as opposed to 19 earlier.Smart grid systems have become the latest buzzword in the global power industry. India formally joined this movement in May 2010 when then power minister Sushil Kumar Shinde launched the Indian Smart Grid Forum as well as the India Smart Grid Task Force. The forum is a non-profit voluntary consortium of public and private stakeholders. The task force is an inter-ministerial group that monitors and coordinates R&D activities as well as Prakash Nayaksmart grid projects. It has 10 working groups looking at new technologies, loss reduction, gathering data, providing reliable power to urban and rural areas, distribution, generation and renewable integration, among others.Companies including HCL, TCS, Wipro, IBM, GE and ABB have joined hands with bodies such as the Power Grid Corporation of India (PGCIL) to look at software development, equipment, etc. There are as many as 14 pilot projects planned across the country in the distribution sector to test competence in areas such as AT&C losses, reduction in peak power purchase costs, reduction in outages and transformer failures. Smart grids are essential to prevent AT&C losses. Right now, they average 25-30 per cent. Says R. Dhamodaran, director of Smarter Planet Solutions, IBM: “The ‘smart grid’ is no longer just a concept, it’s a necessity... Governments, regulators and utility companies in India need to ensure that cities will survive under the crush of demand for access to the power grid.”However, progress in smart grid adoption has been slow; none of the 14 pilot projects has begun yet. Some say, they are stuck for want of funds, though Rs 500 crore has been earmarked under the National Smart Grid Mission for the projects. WHAT IS A SMART GRID?An electrical grid that maps consumer and supplier behaviour to enable reliable, efficient, sustainable and economically viable production and distribution of energy. Its key aspects include automation in the transmission and distribution infrastructure and demand-side management through smart metering and time-of-day tariffs.Most of the problems occur in distribution, says Prakash Nayak, chairman of the Institution of Engineering and Technology’s (IET) power panel, a platform of stakeholders in the power industry. “More than anything, we need participation from utilities,” he says, adding, “Many private utilities have gone in for this and are seeing benefits.” But public utilities lag behind. For them, the success of the 14 pilot projects will determine adoption of smart technologies. Experts say the cost-benefit advantage is immediate. Benefits from reducing losses due to theft and technical issues, and better revenue collection outweigh a seemingly large capital investment. WHAT WILL IT DO?Make power supply reliableImprove quality of power supplyBring transparency between users and suppliersReduce transmission, distribution, aggregate technical and commercial lossesManage peak loadOptimise revenue cyclesHave a self-healing gridIntegrate renewable energy sources into the grid efficientlySource: India Smart Grid Forum break-page-breakWhen it comes to India’s smart grid prowess, there seems to be a general consensus that the transmission network is way ahead of distribution. “The high voltage transmission network is pretty robust,” says Banmali Agrawala, President and CEO of GE Energy, India. The gaps, he feels, are in connecting the southern grid with the national and regional grids. Low voltage distribution, he feels, leaves a lot to be desired. He is echoed by Rathin Basu, managing director, at Alstom T&D India: “Since 2002, India’s transmission grid is ‘smart’. It has all the technologies required to make the grid reliable, to manage power flow and to even shed power.” Alstom won the contracts for three regional despatch centres as well as the National Despatch Centre, which was commissioned in 2007. “States are not at the same technology level as the PGCIL,” he says. He attributes this to SEBs’ lack of fiscal power while PGCIL has always been profit-making. Basu also believes that PGCIL’s tendering of contracts for technologies has been focused and segregated. In contrast, at the distribution level, civil contractors are included in the tendering package that calls for advanced software expertise. “Consequently, the qualified people are not the guys implementing it,” he says.Agrawala, however, says the problem lies with the structure. “The bulk of transmission is handled by a central, nodal agency. That brings in a certain amount of discipline.” Distribution, however, is a state subject and requires a political process. Consequently, “there is a lack of action on the distribution side. The pace of reforms is slow.” Load-shedding is another aspect. “We cannot have a regime of load-shedding with smart grids. The benefits would be minimal in this case,” Agrawala adds.There is a third aspect. Says IET’s Nayak: “What is missing is integrating consumers.” This is where smart meters come in to create that two-way communication between suppliers and users. Combined with preferential or time-of-day (TOD) power tariffs, a supplier can map usage patterns; consumers, on the other hand, are now incentivised to actually switch loads from peak hours to off-peak hours with TOD tariffs. TOD has already been introduced in some states for industrial consumers.Take, for instance, the partnership between TDDPL and the Delhi Jal Board (DJB). “They (DJB) don’t need to pump water during peak hours and have already shifted their load,” says TDDPL CEO Praveer Sinha. The distribution company is working with industrial consumers on automated meter readings (AMR). Says Sinha, “We needed to reach out to consumers. We needed to ensure power supply to them and needed to know their power consumption.” TDDPL has some 40,000 AMRs which provide consumer data every 15 minutes. At Rs 4,000 apiece, AMRs are more expensive than normal meters but they have been quite fruitful. The consumers, says Sinha, are more than happy since they are getting cost-effective power. The next step is moving to smart meters. But “for smart meters to work, there must be connectivity (about 40 per cent are still to be connected to the grid) as well as reliable 24x7 power supply,” he says. "SMART GRIDS ARE IN THEIR INFANCY"Sam Pitroda, chairman of the India Smart Grid Task Force, spoke to BW’s Yashodhara Dasgupta on the need for smart grids and the challenges that need to be overcome. Excerpts: Why smart grids?The predominant reason was to understand and learn from global experiences and technology as to how they can help us in Indian conditions. During the first meetings, there were a lot of examples on how the western world has benefitted and plans to use smart grids. My main thrust was a little different. I said I really need to focus on, one, how to use smart grids to reduce the leakage in the system because over 30 per cent of our power is stolen. Two, how do we create smart meters with wireless capabilities to provide a proper, tamper-proof, low-cost billing mechanism. Our biggest challenge is leakage and lack of proper billing. I am told that most of our power companies don’t have good computerisation for billing. It is not acceptable. What other aspects, apart from smart meters, are you looking at?Smart metering is one of the aspects. We have decided to do eight trials but everything takes too much time in the government. We have spent three years and I’m not happy with the progress we’ve made. We’ve identified the power companies to do trials. We can learn different things from these trials and then we can scale up. Has automation in distribution been slow due to poor tendering?I think the real issues are how do we develop local capabilities and how do we design a service that benefits Indian networks as opposed to copying what the western world has done. Everybody is trying to push their agenda. The industry is trying to push its agenda. The government is trying to push its agenda. What is your main focus area?The main focus area is on how to use smart grids to improve productivity and efficiency, and how to create local capabilities. At the end of the day, the focus is on affordability, scalability and sustainability, in that order. The world over, smart grids are in their infancy. We are learning and, hopefully, the next couple of years can give us some clarity. Why have none of the 14 pilot projects been commissioned?That’s because the tendering process is taking too much time. There is very little trust within the system. So there are checks and balances and we lose a lot of time. I’m trying my best to speed it up. (Click here to read full interview)The ChallengesBut putting a smart grid system in place poses many challenges. It is costly. A smart meter costs around Rs 10,000. Engineers have to be trained for using IT-embedded electrical systems. Then, there are questions over the security of the system and the information generated. “Anyone with mala fide intentions can introduce a virus. So, we have to design a system that can isolate the affected areas,” says a Central Electricity Authority (CEA) official. Smart grids have many applications. As the CEA official put it, “The smartness of the concept is only limited by imagination.” For instance, consumers can actually ask for the type of power they want — coal, gas, wind, etc. We can connect captive generation points to the grid. Most importantly, a smart system has the potential to reduce India’s growing power deficit (at present, it stands at 10 per cent) by addressing transmission and distribution efficiency, mapping consumer behaviour and through better peak load management. For now, projects are still stuck at the pilot stage and so are policies and investments that can give them a push. “At this stage, the regulator’s role is limited since it is in the pilot stage,” says Pramod Deo, chairman of Central Electricity Regulatory Commission (CERC). He brings in an additional aspect: separate supply lines for agriculture. This, he says, will show the actual loss from technical and commercial reasons, which is otherwise passed off as agriculture supply. Gujarat went in for this in 2006. Called the Jyoti Gram project, it provides a separate lines for domestic use and agricultural supply. Now, domestic consumers no longer have to go without power when supply to agriculture is stopped.“The thing to remember is that the electrical system has remained unchanged in structure since the late 19th century,” says Bazmi Husain, MD of ABB India. For India, he says, the biggest advantage and opportunity is the absence of adequate infrastructure for providing electricity. As it takes more time and costs more to overhaul an existing system than to build a new one, India’s poor power network is ripe for the taking.bweditor(at)abp(dot)in(This story was published in Businessworld Issue Dated 21-01-2013)
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