For the longest time, 'roti, kapda aur makaan' , the adage popularised by Indira Gandhi in the 1960's has stood to represnt the bare necessities of life in rural India. The essentials of food, clothing and shelter symbolise the aspirations, needs and wants of Indian villagers. 2012, and 'bijli' (electricity) has also one of the basic tenets of the timeless adage. Despite the utmost significance electricity plays in our lives, it is here that India is weighed down in its surge for global supremacy. Although electricity is generated in massive quantities, the country still falls short of meeting the national consumption and power requirement, and a serious deficiency of power supply in the rural areas is a grave impediment to growth. As the demand for electricity in India is increasing at rapid pace, a McKinsey report states that the demand for power in India will soar up to as much as 315,000 megawatt (MW) (15,600 MW capacity addition per annum) by 2017. In previous years, the demand for electricity in India reached magnanimous proportions with a Base Load Requirement of 861,591 million units (MU), which when compared to the Base Load Availability of 788,355 MU resulted in a 8.5 per cent deficit. During peak hours, the demand shot upto 122 gigawatts (GW), which against the availability of 110 GW led to a 9.8 per cent deficit in the sector. What makes the situation acutely grim is the fact that India, though one of the world's largest energy consumers that boasts of an installed capacity of more than 185 GW, remains unable to meet the total power needs of the country to such an extent that 300 million citizens are left without power with one-third of rural populace and about 6 per cent of urban populace going without electricity every day.The Good, The Bad And The PossibilityOne of the major areas of concerns which hampers electrification in the rural sector is the shortage of many fuels thus leading to a scarcity of power. Other reasons such as a huge divide in urban-rural supply ratio, lack of grid discipline, inefficient use of electricity by the end consumer, inadequate power generation capacity and slow pace of rural electrification also add to the challenges thus making the rural population the major losers in this raw deal. Continuous power cuts, unreliable voltage stability and high fluctuations add to the hold-up which creates an unconstructive environment for the people.A number of government reports state that of all the power that is available for consumption, about 24 per cent is lost due to transmission and distribution problems while theft and billing discrepancies contribute to another 10 per cent of power loss. A cumulative estimate of Rs 1,00,000 crore is spent on power backup solutions which coupled with the additional Rs 30,000 crore spent on operating inefficient power back-ups reflects the sorry state of affairs that plague the power sector. Rural electricity supply in India has been lagging in terms of service, (measured by hours of supply), as well as penetration, which are barriers of economic growth. However, there's always 'light at the end of the tunnel', and there is good news for the electrification sector as well. Most recent data suggests that expenditure on electricity has been reported by 67 per cent of the rural population and 94 per cent of the urban population in 2009 (Government of India, 2011), which is an increase from 56 per cent and 93 per cent respectively when surveyed in 2006 (Government of India, 2008).It is only through a strong focused approach by the government, fast policy initiatives, public private partnership, innovation in technology, improved power generation techniques and awareness in masses on energy saving, that the mission of 100 per cent Rural Electrification can be fulfilled. In a country like India where the majority of the population resides in villages it is very significant to understand the role of rural development to thereby register the overall socio-economic growth of the nation on a global platform. Playing a significant role in rural development, rural electrification resources can bring about a sea-change in the outlook for the country. Providing, at the very minimum, services such as lighting and communications, rural electrification at a household level can increasingly meet the aspirations of the rural populations to own other household appliances. It is through rural and household electrification that one can increase the livelihood of womenfolk — more akin to reading and earning income — while also acting as a catalyst in increasing productivity whether agriculture or labour, providing better healthcare, increasing public safety and enhancing educational prospects.Power Of Smart Alternatives As far as the power solution market in India is concerned, the demand for power and its supply concentration fluctuate over the year with the gap being widest in the summer with huge consumption of electricity as opposed to winters where the demand and supply spectrum comes down. India abounds in its natural resources and with the advent of renewable energy demands, the country's scope to harness solar energy becomes plentiful where with about 300 clear, sunny days across the country, India's solar energy harness can possibly provide an output of approximately 5 Petawatt-hours per year. While the power sector in India has made remarkable progresses over decades, a lot is needed to bring it up to the national level of sustainability. This is where the need for specialised power backup solutions comes in. Having witnessed tremendous growth in the past five years, the power backup sector has now become one of the leading generators of power. With India's economy set to grow at a brisk pace and the looming power deficit situation, the demand for alternate or backup power solutions in the form of generator sets, power inverters and UPS solution is expected to witness a healthy growth in the coming years.It is here that one needs to understand that there is also a need to enhance and promote pertinent usage of solar based lighting solutions across the country which if utilised properly can be the answer to the country's energy woes. The usage of solar photovoltaic which converts solar radiation into electricity using solar cells thus producing electricity is currently accountable for about 1 per cent of the total energy demand of the country which if harnessed properly can provide the country with all its energy needs. Another method called the Solar Thermal Power Systems which uses concentrated solar radiation as a high temperature energy source to produce electricity using thermal route, is also on advent which is more akin to large scale productions and energy usages. As per a report by the International Energy Agency, the adoption of more energy-efficient lighting systems can prevent a cumulative total of 16 Billion tons of carbon from being added to the world's atmosphere over the next 25 years. In India where a majority of rural areas are still bereft of electrification and the only sustainable source of energy for them is the age-old method of burning Diesel and Kerosene to sustain power for lighting purposes, LED based solar lighting solutions can pave the way for better rural development while reducing the carbon footprint on the atmosphere. In a country where most of the rural businesses have to be wound up by dusk because of lack of electricity, usage of energy efficient avenues like LED based solar lights can pave a way for the contribution of the rural society into the economy of the country. The way ahead in future is through the LED based solar solutions which if used effectively can work as a boon for the energy starved but solar abundant country. While factors such as high luminosity, energy sustenance, longevity and monetary sops by government work a long way in making it a preferred medium of rural energising, steps should be taken in to bring down the cost of the model to make it a viable option for the rural population. 'Roti, kapda, makaan aur bijli', is the new mantra for rural emancipation, which if implemented judiciously can help make India the economic superpower it is yearning to become.Sudhir Kalla is President, Marketing and Sales of Luminous Power Technologies
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State-run companies have won operating rights for almost half of the 16 blocks awarded under the country's ninth exploration licensing round, a government statement said, with foreign firms yet again hardly in evidence.The awards were initially approved by the cabinet last week, but details were pending.India failed to woo global players in its oil and gas exploration licensing rounds due to its dim track record of commercial discoveries and sluggish bureaucracy. Previous licensing rounds were also dominated by Indian state-run firms.State-owned Oil and Natural Gas Corp (ONGC) cornered six blocks - four as operator and two as minority partner -- out of the 16 areas that the government awarded for oil and gas exploration, but saw its bids rejected for 8 areas including five deep-sea blocks.Deep Energy, a subsidiary of US-based Deep Industries, won three onshore areas and Sankalp Oil and Natural Resources three areas each. Focus Energy, Pratibha Oil and Natural Gas and Pan India Consultants got one onland block each.In the previous eight rounds of NELP, 235 blocks have been awarded so far.RIL, which had bid for six out of the 34 areas offered in NELP-IX, was ranked number one for the Andaman deepsea blocks, AN-DWN-2010/3 and AN-DWN-2010/4, ahead of a consortia of ONGC and Oil India Ltd.But 10.95 per cent profit share offered by RIL was less than benchmark 15 per cent and therefore was deemed very low.Similar was the view for ONGC's 6.7 per cent profit share offer for two other Andaman Sea block - AN-DWN-2010/1 and AN-DWN-2010/2, where it was the sole bidder.Bid by a consortium of ONGC-OIL and GAIL for deepsea block GS-DWN-2010/1 and that of ONGC-OIL-BPRL for Kerala-Konkan deepwater block KK-DWN-2010/1 was also rejected as they offered very low profit share.Asia's third-largest economy needs private capital for exploration, and is encouraging local firms to buy stakes in foreign oil and gas projects to meet its surging energy needs.Contracts for 16 out of the 33 oil and gas blocks that were bid for in the ninth round of New Exploration Licensing Policy (NELP) were signed today.The government had offered 34 areas -- eight deepwater blocks, seven shallow water blocks, 11 on-land blocks, and 8 Type-S (or small) on-land blocks, in NELP-IX. Of these, bids were received for 33 on close of auction on March 28, 2011.Oil Secretary G C Chaturvedi said bids for seven deepsea blocks and three shallow water blocks were rejected as bidders offered "very low" profit share to the government.ONGC ranked number one in eight of these blocks and Reliance Industries top scored in the remaining two areas but the bids were rejected as profit petroleum offered was less than benchmark 15 per cent.Chaturvedi said award of five onland and two shallow water blocks to companies like Essar Oil, Deep Energy and Chinar Commerce Pvt Ltd was put-off due to bidders not meeting eligibility criteria.A total of $582.29 million has been committed in the 16 blocks that were awarded, he said.India is currently producing around 763,000 barrels per day (bpd) of oil, mostly from fields awarded decades ago - less than a quarter of its 3.878 million bpd refining capacity.India, the world's fourth-largest oil importer, ships in 80 per cent of its oil needs.(Agencies)
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India's upstream regulator hopes to get an investment of $600 million (Rs 3,048 crore) in the ninth exploration licensing round, its Director General S. K. Srivastava said on Wednesday.State-run companies have won operating rights for almost half of the 16 blocks awarded under the country's ninth exploration licensing round, a government statement said, with foreign firms yet again hardly in evidence.(Reuters)
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The oil ministry has sought an additional cash compensation of Rs 40000 crore from the finance ministry to partially cover revenue losses of state-run companies that sell diesel, kerosene, and cooking gas at state-set subsidised rates, the oil secretary said on Wednesday.G.C. Chaturvedi said the oil ministry has also sought Rs 5000 crore as compensation for revenue losses incurred on retail sales of petrol during the current fiscal year to March. Despite being deregulated, petrol prices have not been raised since December.The finance ministry has so far agreed to given a cash subsidy of Rs 45000 crore to state-run oil companies.(Reuters)
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The US will decide by the end of June whether to impose sanctions on 12 countries, including India and China, with regard to their purchase of crude oil from Iran, an official said.It is by the end of June the US Secretary of State, Hillary Clinton will make a determination on the sanctions, State Department spokesperson, Victoria Nuland told reporters.The United States is in conversation with these 12 countries on ways and means to avoid the American sanctions against them, she said."We are still working with all of these countries and trying to do what we can to help them to reduce their dependence on Iranian oil.As you know, we have 180 days under this legislation, which takes us into the end of June," Nuland told reporters."We have 180 days in the legislation to make a determination one way or the other. So we're continuing to work with them in the intervening period," Nuland said responding to questions on the time line of the determinations against these 12 countries.In all 23 countries import oil from Iran, last week, the Secretary of State, Hillary Clinton, had announced that 11 of these nations, mostly those from Europe and Japan, have been exempted from the Iranian sanctions act because of the significant reduction in oil import from Iran.The US says it is in talks with the rest of the 12 countries including India, China, Turkey and South Korea in this regard.(PTI)
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Two weeks after it threatened to sue the Coal India board, minority shareholder London-based hedge fund, The Children's Investment Fund (TCI), accused it of not performing adequately and harming the company. The public sector undertaking, on its part said the allegation "does not merit comments". The battle of words between TCI and the PSU is set to become a direct battle with the government and could cause damage to the foreign investment climate in IndiaSaying it was unhappy with the company's response, TCI has written to coal secretary Alok Perti to change the top management of CIL, saying the company "lacked necessary leadership to develop operationally".When asked about TCI's charge, Perti has reportedly remarked that if it is unhappy, it should sell its stake.In a letter to the Coal Ministry, the hedge fund, which is a minority shareholder, has alleged that "Coal India's board and top management are not performing adequately and are harming the company".When contacted, acting Chairman and Managing Director of Coal India Zohra Chatterji said such allegations "do not merit comments".Attacking the Coal India management for poor performance of the company, the London-headquartered fund said, it "lacked the necessary leadership..." and demanded that the board and management to be "swiftly changed."It also alleged that the government had "sold shares to the Indian public and foreign investors at the IPO (in 2010) based on misrepresentation that there is an independent board and that the price of coal is deregulated according to the law that is upheld in Supreme Court rulings."The letter further said that "if this abuse of minority shareholder is not ceased, India's current perception as a country that is a bad place for foreigners and domestic investors due to relentless government interference and regulations will be cemented into reality."This will severely jeopardise much needed investment into critical infrastructure this nation requires", it added.The fund had earlier threatened to take legal action against the Coal India board for its failure to protect the interest of minority shareholders.In the letter, TCI had alleged that Coal India reversed a decision to raise coal prices on instructions from the government. TCI had obtained a letter written by the coal secretary to NC Jha, the then chairman of CIL, through the Right to Information (RTI) Act.The government had asked Coal India to sign FSAs at trigger level of 80 per cent and the Coal India board is scheduled to meet again on March 28 to take a call on the issue. Coal India was granted Maharatna status in April 2011. Being a Maharatna company, Coal India management can take decisions on investments amounting to Rs 5,000 crore without consulting government. This new status will also help the company to easily take decisions on investments in foreign projects on its own. Moreover, in cases relating to acquisition of other companies, the management of Coal India can take a decision without any government interference. Govt To Soon Come Out With Coal Regulatory BillFacing heat over a draft report of the CAG over allocation of coal blocks, the Coal Ministry has said it will soon come out with a Coal Regulatory Bill, 2012, that will improve transparency in the sector."I have already signed (the draft Coal Regulatory Bill) and it has been sent to the Cabinet (for approval)," Coal Minister Sriprakash Jaiswal told PTI.The bill seeks to provide level-playing field to all stake holders, besides ensuring transparency in allocation of coal blocks to companies.The coal sector regulator, as provided in the Bill, will attempt to expedite resolution of disputes relating to pricing of coal and put in place benchmarks for performance of companies in the sector.The Coal Ministry has been in the news following disclosure of a draft report of the Comptroller and Auditor General (CAG) which had pointed out that the government lost Rs 10.67 lakh crore on account of allotment of coal blocks to 100 private and public sector companies during 2004 to 2009.While replying to the questions in the Lok Sabha on March 14, Jaiswal had said coal sector would soon get a regulator as the government has finalised a draft bill for the purpose.Coal Ministry To Issue Notices To Firms Sitting Idle On MinesAmid furore over the CAG draft report estimating Rs 10.67 lakh crore losses to the exchequer on account of coal mines allocation, the government will begin issuing notices from tomorrow to firms sitting idle on blocks."We will begin the process of issuing show cause notices to around 58 block holders, including, NTPC, SAIL, Jindal Steel & Power and GVK Power, that were allocated mines for captive use from tomorrow," a top official in the Coal Ministry told PTI.The development follows reports that an initial draft by the Comptroller and Auditor General (CAG) has estimated a loss of Rs 10.67 lakh crore loss to the exchequer on account of allotment of coal blocks to 100 private and public sector companies during 2004 to 2009.The decision to issue show-cause notices to the firms sitting idle on captive coal blocks was taken by a panel looking into the development of reserves, sources said.Concerned over the increasing demand supply gap, the Ministry in January this year had reviewed the progress of mines allocated to companies, including Tata Steel, Coal India, SAIL and NTPC for captive use.(With Agencies)
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State-owned gas utility GAIL India Ltd is evaluating several proposals for equity stakes and long-term supply deals in the United States, Middle East and Southeast Asia, its chairman said on Saturday.The company's strategy is part of the country's efforts to secure overseas energy supplies to satisfy rising domestic demand.Gail signed a deal with U.S.-based Cheniere Energy in December to buy 3.5 million tonnes of LNG a year under a 20-year contract starting from 2017.It has been in talks with Macquarie Energy, which has a share in the U.S.-based Freeport LNG project, and last year, agreed to buy a 20-per cent stake in one of Carrizo Oil & Gas Inc's U.S. shale gas assets for Rs 1,536 crore."There are many proposals we are discussing," GAIL Chairman B.C. Tripathi told Reuters in an interview, adding these included projects in the United States, Middle East and Southeast Asia, but declining to give details."It is difficult to give a timeframe because we have to settle on a price. In the Indian market there is a big appetite for gas, but it is all price sensitive," he said.On Friday, a consortium of GAIL and state-run oil producer Oil and Natural Gas Corp said it was still not out of the race for Africa-focused gas explorer Cove Energy Plc."We have support of government to look for the larger energy security of the country and look for gas supplies, whether it is through buying equity, or through long-term contracts," Tripathi said.India, Asia's third-largest economy, is already the world's eighth-largest importer of liquefied natural gas (LNG).Those imports could rise five-fold in the next decade as its domestic gas output falls and demand surges.Problems at the D6 block off India's east coast, operated by Reliance Industries, have curtailed output while ONGC is struggling to arrest declining production from its ageing fields, forcing up imports of expensive LNG.India needs gas to help power its electricity generation, fertiliser sector, city gas distribution and for its expanding industries.No Share BuybackGAIL, which is gradually stepping up from its primarily gas transmission portfolio to emerge as a major petrochemicals and LNG player in the local market, is looking to spend Rs 30000 crore on capacity expansions over the next four years, Tripathi said.India allowed cash-rich state companies to buy back shares and acquire stakes in other state firms earlier this month, intended to help the government's faltering divestment plan and narrow its widening fiscal deficit.Tripathi, however ruled out any share buyback by GAIL."GAIL doesn't have the option to invest in buybacks because we have a huge capex plan and we are investing in projects to build prospective capacity for the country," he said."There is no appetite for GAIL to buy back."GAIL plans to boost its petrochemicals capacity in the next three years, increase gas transmission capacity by 50 per cent and commission a new LNG terminal at Dabhol on India's western coast in the coming months.It is aiming to grow revenue at 20 to 25 per cent for the next few years, Tripathi said.The company plans to raise nearly half of its capex requirements through debt. It is looking for further borrowings from the international market through external commercial borrowings and export credit agencies.It plans to raise around Rs 512 crore through a bond issue in the next few months, he said.GAIL also said it is evaluating options for its 4.82 per cent stake in Chinese gas utility China Gas Holdings, which is at the centre of an unsolicited Rs 11,264 crore bid from China Petroleum & Chemical Corp (Sinopec) and ENN Energy Holdings.GAIL, which acquired the stake in 2005, has not yet taken a final decision on the matter, Tripathi said."There is no offer as such, but we have received some information. Depending on what kind of options are available with us and how it pans out, we will take a decision," he said.Shares in GAIL, which has a market value of Rs 46,592 crore, closed up 2.2 per cent on Friday in Mumbai.The stock is down 4 per cent this year, lagging a 12 per cent rise in the main stock index.(Reuters)
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It is not often that Anil Sardana and J.P. Chalasani find themselves agreeing with each other on any subject. Sardana is the managing director of Tata Power Company (TPC), the electricity production and distribution arm of the $87-billion Tata Group. Chalasani is the CEO of Reliance Power (R-Power), part of the $15.4-billion Reliance Group headed by Anil Ambani. Chalasani and Sardana cross swords while bidding for almost every big power project that comes up. They are fighting in the Mumbai market over a range of issues. They both bid for distribution contracts in Delhi, with TPC winning one circle, and Reliance Group's BSES bagging the other two. In fact, they are bitter professional rivals.In one area though, both men find themselves arguing the same case. Both want to renegotiate the power purchase agreements (PPA) they signed with their customers — state governments — after they had bid aggressively and won the ultra mega power projects (UMPPs) being offered by the central government.In 2005, the power ministry's UMPP plans moved into top gear. It wanted the private sector to set up 4,000 megawatt (MW) state-of-the-art plants across India (normal power plants are 600 MW or smaller). These UMPPs were planned to help the government achieve its ambitious plan of ‘Electricity for All by 2012'. The idea was to sanction 16 UMPPs in double quick time, which would then add 48,000 MW of the 100,000 MW planned by 2012. J.P. Chalasani, CEO, R-Power "Krishnapatnam project will not be viable unless tariffs are revised" The Power Finance Corporation (PFC) became the nodal agency. Tariff guidelines were notified in January 2005. The most attractive part of the concept was that the private developer was assured everything on a platter, through a special purpose vehicle (SPV). Land, water, coal blocks, forest and environmental clearances and tie-up for power sale — would all be taken care of. The power ministry was to coordinate with various ministries and states to fast-track clearances. The developer's role was to find funds and execute the project.The Central Electricity Authority (CEA), in consultation with states, finally identified 12 UMPPs. PFC floated a dozen SPVs. Five coastal UMPPs at Mundra in Gujarat, Tadri in Karnataka, Krishnapatnam in Andhra Pradesh, Cheyyur in Tamil Nadu and Girye in Maharashtra were planned. Pithead projects at Sasan in Madhya Pradesh, Sundergarh in Orissa, Tilaiya in Jharkhand and Alkatara in Chhattisgarh, besides two more in Orissa and one more in Andhra, would make up the other seven.The government also acted quickly. Invitations for expression of interest for Mundra and Sasan were issued on 1 February 2006, and the process was over in eight months. Euphoric, the government planned to award two more at Krishnapatnam and Tilaiya by April 2007. But in 2012, the UMPP dream has soured. All four awarded UMPPs are grappling with troubles and controversy. The winners say they face unprecedented problems in fuel supply and want tariffs revised. In one case, land acquisition is the main bugbear. Meanwhile, the bidders who lost out want the projects re-tendered if the tariffs are to be revised. The customers in the PPA do not want the tariffs increased. Anil Sardana, MD, Tata Power "I Don't know how or when this crisis will be resolved" (BW pic by Umesh Goswami) Of the four, Tata Power won the Mundra project, while R-Power wrested the other three — Krishnapatnam, Tilaiya and Sasan, originally won by Lanco, which was later disqualified. Take TPC's UMPP. The firm is on schedule in plant execution, but finds all its fuel calculations have gone awry. On 9 March, TPC began operations of the first 800 MW phase at Mundra. It says the first phase was completed in a record 48 months. But Sardana says he loses money on every unit of energy produced, unless tariffs are revised. The Mundra PPA was signed to sell power to Gujarat, Maharashtra, Punjab and Rajasthan governments at Rs 2.26 per kilowatt hour. Sardana says that his cost of production currently is closer to Rs 2.90 per kilowatt hour.The issue, he says, is the Mundra project was built around Indonesian coal. It was selling for $35-40 a tonne when the PPA was signed. Now, a change in rules by the Indonesian government has caused coal prices to shoot up to $120 per tonne. TPC is lobbying for a change in PPA, which envisages an immediate increase of 70 to 90 paise. It also wants a clause to protect it from sudden and steep rise in fuel costs. Incidentally, the original PPA was signed for 25 years.The four procuring states are stoutly opposing the company's moves. Meanwhile, the central government has constituted an empowered group of ministers (EGoM) to study the problems facing the four UMPPs. Sardana says he will try to persuade the government to revise the tariff as soon as possible, otherwise TPC's subsidiary, Coastal Gujarat Power (CGPL), which is setting up Mundra, will go bankrupt. "Mundra is a national asset and we will stick to our commitment. I don't know how or when this crisis will be resolved, but we will continue production till our shareholders say enough is enough," he says.If Sardana has taken the softer approach for now, Chalasani has taken a harder line while asking for almost exactly the same things in the case of the Krishnapatnam UMPP. In June 2011, Reliance stopped work on Krishnapatnam citing changes in Indonesian regulations. It won that project under the nose of TPC and others by agreeing to sell power at Rs 2.33 per kilowatt hour, based on Indonesian coal as fuel.Chalasani is categorical that he will not resume the project unless the selling price is revised. "If Krishnapatnam is operated at full capacity at current level of input costs (imported coal), our loss will be about $450 million a year," he says. TPC officials estimate that Mundra too will lose roughly Rs 500 crore in the first year of operations, if the selling price is not revised.Meanwhile, the four customers of the Krishnapatnam UMPP — Andhra Pradesh, Tamil Nadu, Maharashtra and Karnataka — want R-Power to pay them Rs 400 crore as penalties for abandoning the project. R-Power has got a reprieve from the Delhi High Court, which has ruled against any "coercive action" being taken by the purchasers until the hearing is complete. The other two projects of R-Power — Sasan and Tilaiya — are not based on Indonesian coal. Both are mired in their own controversies and fuel problems. But we will come to their problems later. First, how Mundra and Krishnapatnam got into trouble.break-page-breakIndonesian Miscalculation In terms of bragging rights, India has the fourth largest coal reserves in the world, with about 197 billion tonne, and is one of the top producers of coal. There are two problems with Indian coal reserves, though. First, most of them have poor quality coal, with high ash content and low fuel value. This cannot be used for industries such as steel. Second, at least 40 per cent of Indian coal reserves fall in forest areas and are unlikely to get environmental clearances to be mined.That said, Indian coal is suitable for most thermal power plants being built in the country. But due to problems with getting captive mines allocated or proper and regular supplies from Coal India, many power projects conceived in the past five years banked on Indonesian and occasionally Australian and South African coal as fuel. These countries produce superior coal, but power plants that plan to use this coal need to use vastly different equipment. A power plant designed to use Indian coal cannot start using Indonesian coal, and vice versa.Because of Indonesia's geographical proximity, and also because of the cheap availability of the fuel, both Tata and R-Power moved to secure long-term fuel supplies from the country. In March 2007, TPC acquired 30 per cent stake in two major Indonesian thermal coal producers, Kaltim Prima Coal (KPC) and Arutmin Indonesia (Arutmin), owned by Bumi Resources, for $1.1 billion. The purchase was to secure fuel for its upcoming power projects on the west coast of India, which included the 4,000 MW plant at Mundra. The Tatas calculated they would need a total of 21 million tonne (MT) per annum of Indonesian coal for their new power plants, of which 10-12 MT per annum would be consumed by Mundra alone. The Tatas also floated a shipping subsidiary and developed coal handling facilities at Mundra port to transport coal.ON COLLISION COURSE: The demand to revise PPAs has triggered a debateMeanwhile, in June 2010, R-Power acquired Indonesian coal miner Sugico to access two billion tonne of coal reserves owned by group companies, Srivijaya Bintangtiga Energi and Bryayan Bintangtiga Energi. R-Power made an upfront payment of $106 million and the balance was to be paid linked to production targets, in a deal worth $1.6 billion. The acquisition was mainly to fuel the Krishnapatnam UMPP.But in September 2010, the Ministry of Energy and Mineral Resources in Indonesia brought in a regulation that barred any Indonesian mine from exporting coal at prices below the global prices. This law became effective on 23 September 2011 and applied to even contracts that were signed earlier.The new rule meant Indian firms that owned coal mines in Indonesia could not use the coal for projects in India cheaply. Sardana and Chalasani had both banked on Indonesian coal at $35-$40 per tonne. Now, they are looking at paying three times more. The Indian private developers tried appealing to the Indonesian government. The Tata delegation met with the Indonesian officials several times. Anil Ambani himself met Indonesian political leaders and officials. But they got no concessions.Why didn't either Chalasani or Sardana anticipate that coal prices would rise? After all, they were signing a 25-year PPA and planning to sink in Rs 16,000 crore-plus in each UMPP. Chalasani says they did project fuel prices going up. But they had simply looked at the past decade's global data. "The Central Electricity Regulatory Commission had circulated a transparent document detailing the coal price fluctuations in international markets for the past 12 years. In that period, coal prices never rose more than 4 per cent annually. But prices have tripled or quadrupled in the past few years," says Chalasani.The MisadventuresThe Sasan project was actually awarded along with Mundra in 2006 — Tilaiya and Krishnapatnam were awarded in 2007. In December 2006, the letter of intent was issued to successful bidders — Mundra for TPC and Sasan for Lanco with Globeleq Singapore as its lead partner. Eleven bidders had qualified at request for qualification stage for Mundra and TPC's bid was for Rs 2.26 per kilowatt hour (kwh), ahead of R-Power's Rs 2.66, Adani's Rs 2.69 and Essar's Rs 2.80. Lanco-Globeleq picked up Sasan by quoting Rs 1.296 per kwh. Even when Sasan was awarded, many bidders said the quote was unrealistic — the cost of generating power even then was not that low. Many felt Lanco would not be able to complete the project and would have to go to the government for a revision.Lanco never got a chance to prove it had calculated correctly. Seven months after awarding the letter of intent for Sasan, Lanco-Globeleq's bid was declared invalid by a group of ministers for "misrepresenting facts". An EGoM had to sit five times to decide the future of Sasan. Three other qualifiers — R-Power, NTPC and Jaiprakash Associates — were asked to bid afresh. R-Power bagged Sasan by bidding Rs 1.196 per kwh, the same as Lanco. Surprisingly, this was lower than their original bid of Rs 1.296 per kwh. Sasan was transferred to R-Power in August 2007 — 10 months behind schedule.By November 2007, almost six months later than planned, the government managed to award the third UMPP at Krishnapatnam. R-Power emerged the lowest bidder at Rs 2.33 per kwh. But it took almost two more years to award Tilaiya, the fourth UMPP. Five companies including NTPC, R-Power, Lanco, Jindal Power and Sterlite Energy were among the bidders. In January 2009, R-Power bagged the project at Rs 1.77 per kwh, again a bid many felt unrealistic.break-page-breakFor Sasan, which was almost a year behind schedule in awarding, R-Power wants to commission the first unit by January 2013 and the sixth unit by June 2014. Chalasani says it will be able to commission the project as per schedule.But Sasan has run into problems related to mining. As per the latest assessment by the CEA, only 20.9 per cent or 1,567 acre have been acquired out of a total of 7,488 acre earmarked for mining. Of this, 5,243 acre is forest land. While the environment clearances are in place for Mohar and Amolhri mines, the forest advisory panel of the environment ministry denied permission for the Chhatrasaal block.There is also an issue of overlapping land for Northern Coalfields. This is now before an EGoM. R-Power is going ahead with its mining plans and says it will use modern equipment to boost productivity, minimising environmental impact. "We will start mining at Mohar and Amolhri by the middle of this year," says Chalasani. But another row has cropped up in Sasan. R-Power managed to get permission to utilise coal from mines earmarked for Sasan in its other plants. This is being contested by the Tatas, who have filed a case arguing that if this was allowed, they could have matched the R-Power bid.Meanwhile, at Tilaya, land acquisition is proving to be a headache. The SPV was transferred and PPA was executed in August 2009. So far, only 19.48 per cent or 470 acre, out of the required 2,412 acre, have been acquired. The mining plan has been approved for two blocks, but R-Power is yet to get possession of any coal blocks spread over 11,120 acre. CEA's remarks reveal the files for clearances are stuck at various central and state offices. But R-Power has time till May 2015 to commission the first unit and Chalasani thinks he can meet the target.In the past three years, the PFC could not award any more UMPPs. More than that, the fate of rest of the imported coal-based UMPPs hangs in the balance. "In the case of Orissa and Chhattisgarh UMPPs, there were issues related to environmental clearances of linked mines, which is being addressed," says K.C. Venugopal, minister of state for power. ‘WE HOPE TO CRACK THE CRISIS'K.C. Venugopal, minister of State for Power K.C. Venugopal (BW pic by Bivash Banerjee) Are soaring coal prices hitting India's coal power dreams? BW's P.B. Jayakumar spoke to minister of state for power K.C. Venugopal to find out the government's plans.Your plans to address various issues dogging UMPPs...These were conceptually great initiatives. The initial plan was to launch some 16 UMPPs and build major power hubs catering to each region. But we still face the perennial issue of major clearances. While conceiving UMPPs, the government took the burden of all clearances to hasten approvals. We have already awarded four projects during 2006-09. All these are at various stages execution. In Orissa and Chhattisgarh, there are issues related to environmental clearances of linked mines. We are hopeful of cracking such issues.But how will you ensure coal for all these projects? The 12th Plan projections of capacity addition are yet to be finalised. As far as imported coal-based power plants in coastal India are concerned, these are not fresh proposals. These were conceived in the 11th Plan and to be commissioned in the 12th Plan. On the availability of imported coal at cheap rates, certain developments over which we do not have control are driving prices. So we are reviewing our strategy. The issue needs inter-ministerial consultation and a committee is chalking out a solution. On issues regarding private developers of UMPPs, the very structure of UMPP is built on an agreement between developers and procurers. Procurers mean the respective state distribution firms in the respective regions. Among those procurers, there are identified lead procurers with whom we had discussions and asked them to review the progress within the provisions of the agreement.But is there any clause in the agreement for penalising bid winners for delay of UMPP?Yes, there are exclusive clauses to address such issues.What are your options to resolve the coal crisis, as our domestic output is inadequate. We are looking at a shortfall of 292 million tonnes in the next five years.The capacity addition in the 11th Plan is impressive, as it has gone up twofold or more compared to the last plan. But there was no commensurate growth in coal production. By the terminal year of 12th Plan, our imported coal need is about seven times of what we draw now. We are seriously into sorting out this roadblock. In the long term, we have a two-pronged strategy — speed up clearances for mine development and catalyse production from captive coal blocks. We are also developing effective demand-side management. We need to enhance our fleet of renewable energy developers as well. The coal ministry is committed to the development of coal resources. But one has to see the mounting social compulsions. There is no point in blaming stakeholders in coal mining, as it is deeply about conflicts of interests and positions. We just can't afford to have more coal production at the cost of heavy ecological losses. Cheap Power At StakeThe concept of UMPP is the most viable idea to leapfrog capacity-addition quickly with the help of the private sector, all experts agree. The problem is whether it makes sense for the government to allow companies to revise tariffs after the project has been awarded.In the case of Indonesian coal, the Tatas and R-Power say the change in rules was unprecedented. They have their sympathisers in the central government, who are seriously looking at whether the Indonesian situation should be taken into account for allowing a change in the PPAs. On the other hand, many of the companies that lost out in the bidding process say that Tata and R-Power bid extra low to win the bids and were not realistic in their cost estimates. They also say that if tariffs are to be revised now, the projects should also be offered to those who had bid in the original round of the bidding. There are others who feel that tariffs sought by many state governments are artificially low. Also, there are some who point out that the government has not lived up to its own promises of giving land, water and captive coal mines that could be utilised quickly.These are things the government is trying to correct. In January, Prime Minister Manmohan Singh constituted a committee of secretaries under his principal secretary, Pulok Chatterjee, to work out an action plan to sort out coal issues and power tariffs. The committee asked Coal India to sign supply agreements within a month with plants commissioned up to 31 December and with plants that are going to be commissioned by March 2015. If Coal India could not deliver, it would have to meet commitments with imported coal, warned the committee.The power ministry has also come up with drafts of fresh standard bid documents (SBD) and power purchase norms for awarding new UMPPs. "I believe the current coal issue may be resolved since such changes are cyclical, but we have to look at the big picture of energy security for the country", says Sardana. Tired, Tata Power is looking at setting up power plants outside India to meet its internal growth targets, he says. Meanwhile, the country's power crisis has started becoming acute again.p(dot)jayakumar(at)abp(dot)in(This story was published in Businessworld Issue Dated 02-04-2012)
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