The recommendations of the high-powered Expert Committee (HPEC) on Urban Infrastructure, set up by former urban development minister Jaipal Reddy, have to traverse some more distance. Constituted in 2008, HPEC submitted its findings last month on the problems of leap-frogging urbanisation and the financial measures necessary to make our cities more efficient and liveable. Kamal Nath, the current minister, has asked the committee to "revisit the report and come up with a concrete roadmap to help implement its recommendations".The HPEC, mandated to estimate investment requirements for urban infrastructure for the next 12 years, was headed by Isher Judge Ahluwalia, chairperson of Indian Council for Research on International Economic Relations (Icrier), and included Nasser Munjee, deputy chairman, Infrastructure Development and Finance Company (IDFC); Hari Sankaran, managing director, IL&FS; and P.K. Srivastava, joint secretary and mission director of Jawaharlal Nehru National Urban Renewal Mission (JNNURM).The HPEC doesn't sound the normal doomsday warnings. Figures show that India — with 30 per cent of its population living in towns and cities — is far behind other developing markets such as China (45 per cent) and Brazil (87 per cent). Unmistakably, though, the growth of Indian cities is striding forward. The number of cities with more than one million people will go up from 50 to 87 by 2020, and India's urban populace will be 600 million by 2031. HPEC sees cities as the future engines of growth. "India's economic growth momentum cannot be sustained if urbanisation is not actively facilitated," and predicts that as much as 80 per cent of the country's GDP will come from the urban sprawls by 2031.The report's recommendations are divided into three parts: First, investing Rs 39.2 lakh crore in urban infrastructure over 20 years with the bulk targeting development of urban roads, water and waste management and for re-housing slums. It also pleads for giving much more importance to urban planning and seeks a hike in investment from 0.7 per cent of GDP in 2011-12 to 1.1 per cent by 2031. Next, it pitches strongly for strengthening of governance particularly of the urban local bodies. The only way urban transformation will happen is when the current bungling and financially bankrupt municipal and local bodies are souped up with efficient and autonomous administration, improved tax collection, and the ability to raise funds from the market for specific programmes and projects.Finally, the Ahluwalia report argues for a programme-based roadmap instead of the current piecemeal project-based approach. In this context, the analysis of the JNNURM implementation is interesting. Kicked off in 2005, the JNNURM was allocated Rs 66,000 crore by the government of India. Of this, less than half — Rs 28,650 crore — has been disbursed so far, and, of the 526 infrastructure projects sanctioned, only 84 have been completed.Asked to comment on Nath referring back the Urban Infrastructure report to the committee, HPEC's chairperson Isher Ahluwalia told BW: "The minister asking for a roadmap is a compliment. The work of the Committee is over but we will constitute a small working group and submit a ‘roadmap' in a month or so."The committee has in fact put forward specific reforms and proposed delivery structures. These include creating an urban affairs ministry and an accountable and empowered Mayor at the level of the urban municipal bodies, pooling of taxes and resources between local bodies, and a suggestion for training 300 IAS officers annually as dedicated ‘urban specialists'.(This story was published in Businessworld Issue Dated 16-05-2011)
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Oil and Natural Gas Corp said it was in talks with Russia's Bashneft and RussNeft to merge its Russian assets, but no approval had been received from the Indian government.The Economic Times had reported on Monday the cabinet had approved the merger proposal that would give state-run ONGC 25 per cent stake in the combined entity and access to one of the biggest discovered oilfields in Russia."We are in discussion but nothing has been finalised. No such proposal was put up for cabinet," ONGC Chairman A.K. Hazarika told Reuters. "This news is incorrect."ONGC has long eyed a deal with Bashneft, a unit of telecoms-to-oil group Sistema as well as involvement in the Arctic fields of Trebs and Titov, as it seeks to broaden its oil and gas base in Russia, the world's top energy exporter.But a merger of Bashneft and RussNeft is a long way off.Last week, Sistema President Mikhail Shamolin said the company may consider merging Bashneft and RussNeft once the latter's debt falls below $4 billion, but given current oil prices it may be a few years before that debt falls to the required level, the Interfax agency reported.ONGC already has a stake in Russia's Sakhalin-1 oil and gas project in the Pacific, and in 2008 it acquired the Imperial Energy oil company in western Siberia.Last December, Sistema and ONGC signed a non-binding agreement to consider asset swaps and joint tapping of Russia's energy deposits.At 10:55 a.m. (0525 GMT), shares in ONGC were trading 2.1 per cent lower at 260.30 rupees in a Mumbai market down 1.8 percent.(Reuters)
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It has been in the eye of the storm almost ever since it was conceived. Last week, the government gave the go-ahead to the 9,900 MW nuclear power plant at Jaitapur in Ratnagiri district of Maharashtra. Once completed, it would be the single-largest power plant in India. Jaitapur got the clearance despite opposition from the residents of the region. Apart from dislocating villagers from the mango bowl of Maharashtra, the plant is located on the coast in a seismic zone — though a significantly lower one than Fukushima, Japan. Situated 10 metres above mean sea level, the threat of a tsunami affecting operations is also relatively lower.While most countries are reviewing their nuclear power strategy, India has decided to go ahead with the Jaitapur plant. The question is why.By this decision, the government has indicated that India's nuclear power programme will continue despite Fukushima. As things stand, nuclear power could be critical in meeting the growing power demand in the country. At present, India has 20 nuclear reactors at six locations that generate 4,780 MW of power, which accounts for just 2.2 per cent of India's total power generating capacity. The government expects nuclear power plants to generate 20,000 MW by 2020 and 63,000 MW by 2032.With GDP growing at over 8 per cent per annum, India would need power generation capacity to grow at close to 10 per cent per annum. It also fits in with the government's plans to add 100,000 MW of power generating capacity during the 12th Plan (2012-17).India has been looking to expand nuclear power capacity in a big way ever since the 2008 nuclear deal with the US. It has signed preliminary agreements with the US, France and Russia for acquisition of new reactors. It is in this context that Jaitapur has got the green signal.The 9,900-MW Jaitapur nuclear power plant will have six nuclear reactors of 1,650 MW each to be set up in three phases. The first phase will have two European pressurised reactors (EPR) supplied by France's Areva. That is likely to be commissioned in 2018. The capacity at Jaitapur alone will be more than double the current nuclear power capacity of 4780 MW.While there have been concerns on the EPR, government officials point out that these are commercial reactors and not experimental reactors. They are upgraded versions of French N4 and German Konvoi reactors that have been in use for several years in these countries. French EPRs are currently under construction in Finland, France and China.The action on the nuclear front is not just limited to adding power-generation capacity. The government is expected to introduce a Bill in the next session of Parliament for the formation of an independent and autonomous nuclear regulatory authority.While that is a step in the right direction, the big issue at stake now with Jaitapur is the environmental impact of the project and long-term safety. If the government manages to address these issues directly, it could well assuage the anti-nuclear groups in the country and open the doors to setting up more nuclear power plants.(This story was published in Businessworld Issue Dated 16-05-2011)
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Falling short of targets set by the Planning Commission is nothing new for the power ministry. The question is of degrees. This year the slippage has been 40.69 per cent — only 12,160 MW of additional capacity was added against a targeted 20,359.5 MW. It, however, is a definite improvement on the past three years' (of the 11th Plan) additions of 9,263 MW, 3,454 MW and 9,585 MW respectively. The ministry is now confident of meeting the revised 11th Plan target of 51,000 MW (down from the earlier 78,000 MW), having added 34,462 MW so far. Click here to view enlarged chart Some documents of the Ministry of Power give an interesting break-up of the slippages among the power companies in various "sectors" — the central PSUs, the state PSUs and the private sector. Predictably, the state PSUs have fared the worst with a slippage of 56.7 per cent. They could only add 2,759 MW capacity, in comparison to targeted 6,368 MW. The private sector, too, does not have a stellar record — it managed to add 5,151 MW against a target of 6,877 MW, a slippage of 25 per cent.Even the existing power capacity is not being utilised optimally. Central power generators Damodar Valley Corporation (1,500 MW) and Nuclear Power Corporation (1,000 MW) showed the maximum slippage. The state power generators fell short by 4,130 MW. The shortfall for -private players was 3,305 MW — JSW and Lanco were highest at 1,275 MW and 1,270 MW, respectively.The reasons for this shortfall, the documents shows, are not all unavoidable. At least 6,638 MW of shortfall was due to factors "within control of the project authorities". Shortage of coal, external environments and poor connectivity to the grid fall in the category of causes "beyond control of project authorities" that account for 2,100 MW.Another interesting data in the ministry documents is the shortfall in the supply of plant equipment. BHEL, the national power equipment supplier, shows a slippage of close to 50 per cent, about three times that of the Chinese companies.All in all, these numbers show a not-so-bright power scenario in the country. Especially given the demand for power is expected to increase to 950,000 MW by 2030.(This story was published in Businessworld Issue Dated 23-05-2011)
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UK-based oil explorer Cairn Energy, battling challenges to two major projects in Greenland and India, announced its chief executive would step up into the chairman role amid a sweeping board shake-up.The company said on Thursday that Bill Gammell, who founded the company, would move into the chairman role, leaving the CEO post to be filled by Simon Thomson, the current legal and commercial director.Corporate governance code frowns upon the practice of chief executives stepping into chairman jobs, which can make it hard for new CEOs to challenge their predecessors' decisions.Cairn said it had consulted major shareholders and said they were comfortable with the decision.Cairn is currently battling to complete two major undertakings. Its exploration plan in Greenland, aimed at opening up a new oil province with potentially billions of barrels, has been interrupted repeatedly by environmental campaigners.In addition Cairn's planned sale of most of its stake in its Indian subsidiary, Cairn India, to Vedanta Resources <VED> has also been delayed due to challenges from the government, which wants to extract higher taxes in return for approving the sale.A spokesman said Gammell had been mulling an end to his long tenure for some time and that the move was unrelated to any other issues.Cairn's shares were down 1.4 percent by 0800 GMT, underperforming against a 0.6 percent slide in the STOXX Europe 600 Oil and Gas index.Some investors had expected that Gammell would be succeeded by Mike Watts, Cairn's exploration director, who will retain his position.Malcolm Thoms, 55, chief operating officer, and Philip Tracy, 61 group engineering and operations director, will stand down from the board, as will outgoing chairman Norman Murray.Finance director Jann Brown will become managing director.Gammell, a childhood friend of former U.S. President George W. Bush who also went to school with former British Prime Minister, Tony Blair, built the multi-billion dollar exploration business from scratch.A former rugby international player for Scotland, he has become one of the most respected figures in the British oil industry.(Reuters)
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India is on track to produce 700 megawatts of solar power at a cost of $2.2 billion by December, ahead of an initial target for an ambitious plan that seeks to boost green power generation from near zero to 20 gigawatts (GW) by 2022.Under India's Solar Mission, investors bid to build solar power plants and the winning bids are determined by the electricity tariff that they accept as viable. Such has been the interest that the government has been flooded with investment pledges for the first batch of projects rolling out in December.India's 20 GW solar plan is likely to attract overall investment of about $70 billion, the government has estimates. Issued in 2009, the plan envisages India producing 1,300 megawatts (MW) by 2013, another up to 10 GW by 2017 and the rest by 2022."The entire solar industry is no longer worried about the upheavals that are taking place in the European markets because they find a very new and very promising market is developing in India," said Debashish Majumdar, chairman and managing director of Indian Renewable Energy Development Agency.IREDA, a state-run agency, is the leader in the country's solar energy financing."So far, every year the general mood was that nobody knew what would happen to the German policy or what would happen to Spanish policy," said Majumdar, who attended a global summit on clean technologies in Munich last week.Germany, the world's top solar power producer with about 17 GW installed by end-2010, is considering cutting incentives for photovoltaic energy by an additional six percentage points in another step on March 1, 2012.Germany, Spain, Italy, Japan and the United States are the leading producers of solar power in the world.While India's solar sector remains a risky venture because of a shortage of data and trained manpower, such deficiencies also open up a huge market for expertise and technology such as Colorado-based Juwi Solar, Schneider, Schott Solar."The (Solar Mission's) second phase would create a very large market for service providers, especially EPC contractors and people who can analyse data to ascertain how much resources like sunlight are available and how much (solar energy) is going to be produced," Majumdar said."These agencies would get lots of business," he told the Reuters Global Energy and Climate Summit in New Delhi, adding it was still not possible to determine the size of such a market.EPC contractors handle the engineering, procurement and construction of solar power plants.Sunshine PoliciesIf everything goes to plan, and the rollout of the first projects in December should be an indicator, solar would contribute the equivalent to one-eighth of India's current installed power base by 2022.This will help the world's number three carbon polluter to limit its reliance on coal and ease a power deficit that has crimped the world's second-fastest growing major economy.The Solar Mission has certain local content mandates, in other words some imports of equipment and technology will be allowed until 2013 after which capacity has to be built locally.The special incentive package offers a capital subsidy up to 25 percent on investments for setting up solar cell manufacturing plants. A plant has to be worth at least $225 million to qualify.With about 250-300 clear sunny days a year, India's solar power reception is about 5,000 trillion kilowatt-hours per year, meaning just 1 percent of India's land area can meet the country's entire electricity requirements till 2030.Coal, available in abundance in India, provides power at about 2 rupees (4 cents) a unit, compared to a kilowatt hour of solar power at 11 to 12 rupees.The renewables sector comprises 6 percent of India's total power mix.Consulting firm KPMG said last month aggressive policy implementation could see solar power prices decline at a rate of 5-7 percent annually over the next decade, ensuring "grid parity", or the point when solar power costs the same as conventional power, as early as 2017/18.(Reuters)
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It was to be a swap felt around the world -- a plan privately discussed by the world's largest oil exporter and the globe's biggest consumer to take the heat out of $120-plus oil prices.In the weeks leading up to the failed June OPEC meeting, US and Saudi officials met to discuss surprising the market with an unprecedented arrangement: exchanging urgently-needed high-quality crude oil stored in the U.S. emergency reserve for heavier, low-quality oil from Saudi Arabia, according to people familiar with the plan.The idea involved shipping some of the light low-sulphur, or "sweet", crude out of the US Strategic Petroleum Reserve to European refiners, who needed it after the war in Libya cut off shipments of its premium crude varieties coveted for making gasoline and diesel.In return Saudi Arabia would sell its heavier high-sulphur or "sour" crude at a discount back to the United States to top up the caverns that hold America's emergency stocks.It was a striking suggestion, one that would have demonstrated Washington's readiness to put the SPR to extraordinary use and Riyadh's willingness to work creatively with consumers to quell high prices.But it did not make it past the drawing board, four sources familiar with the talks confirmed. The sources disagree on which country proposed the plan. Two said it fell apart because Riyadh was not willing to subsidize European or US customers by discounting its crude prices below market value.Pain In The PollsThe swap idea illustrates a recently deepening engagement between Saudi Arabia and the United States on oil affairs under President Barack Obama, and shows how high the stakes were ahead of the meeting of the Organization of the Petroleum Exporting Countries on June 8 in Vienna.With gasoline prices topping $4 a gallon in many parts of the United States, Obama was seeing his support ebb in opinion polls, just as the White House was beginning to focus on the 2012 election.The Saudis were concerned about the health of the global economy with oil prices surging above $100 a barrel. Riyadh knew that high prices, while good for short-term income, would cut fuel demand over the longer term.Washington had pressed Saudi Arabia to boost oil production at least twice ahead of the OPEC meeting that ended in failure, sources told Reuters.After war broke out in Libya and its oil output fell, the Saudis complied with the initial request, but they weren't happy when European refiners didn't jump to buy their crude, even a "special brew" of lighter quality, an Arab official said."We need someone to take our crude. We don't just want to store it," the official said.Industry sources described a "difficult" Riyadh meeting that a US delegation held about a month ago with Saudi Oil Minister Ali al-Naimi."They were told, 'If you're going to find us extra refineries that are asking for demand, we'll supply that,'" the Arab official said.Deputies from the US Energy and Treasury departments also visited Riyadh to make the case for stepped-up oil production, a source close to the Saudi government said, although the timing of this meeting was unclear.One of the officials who attended that meeting was Jonathan Elkind, Principal Deputy Assistant Secretary for Policy and International Affairs at the Energy Department, a source told Reuters.Within days, Elkind was flying to Paris for a regular meeting of the board of governors of the Paris-based International Energy Agency, which speaks for 28 industrialized oil consumer countries.After that meeting, the governing board released an unusually blunt statement urging OPEC to raise output and announcing that it would consider using "all the tools" at its disposal -- a clear reference to emergency reserves.The US State and Energy Departments would not comment on whether the meetings took place or offer other details, while the White House has acknowledged regular talks with producers without being specific about their content.Pressures BuildSet up in 1974 to protect oil consumers after the Arab oil embargo, the IEA has held an open and cordial dialogue with OPEC ever since the Gulf War in 1990-1991, one of only two times it has authorized a global release of strategic stocks.But the May 20 missive suggested a new cooling in the relationship between the world's big oil consumers and producers, and provoked a backlash from some in OPEC."Strategic reserves should be kept for their purpose and not used as a weapon against OPEC," OPEC Secretary General Abdullah al-Badri told the Reuters Global Energy and Climate Summit on Tuesday."We never interfere in the IEA and really we don't want them to interfere in our business. They should do it in a professional manner. We should not talk to each other through the media."Washington appears to have mostly heeded that comment, and kept quiet about its engagement, in contrast to previous administrations.In April, Obama -- who has several times blamed speculators for the run-up in prices -- made a rare public call for world oil producers to boost production."We are in a lot of conversations with major oil producers like Saudi Arabia," he said in a Detroit television interview.The tension within the cartel boiled over last week in Vienna, when seven members of the group balked at a Saudi-led plan to increase production. While ministers said the breakdown was caused by differing views over the market outlook in the second half of this year, Iran blamed unspecified "consumer countries" for influencing the debate."What happened shows OPEC is an independent organisation," OPEC governor Mohammad Ali Khatibi told Reuters. "If one wants to exert pressure to make the others give up -- no."The Kingdom declared it would go it alone. Sources say Saudi Arabia is raising production in July by nearly 1 million bpd to around 10 million bpd, although Brent crude oil prices have continued to press higher, reaching a five-week peak of more than $120 a barrel on Tuesday.(Reuters)
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For real estate companies, it has been an unusually bad year. Poor sales, few new launches leading to poor ‘booking' income, and a race against time to reduce high debt have defined the year. In case of some of the big realtors such as DLF, even while total income increased in FY 2011, net profit declined on poor margins and high input costs.DLF reported a consolidated total income of Rs 10,144 crore in 2010-11, up from Rs 7,851 crore in the previous financial year. However, net profit fell 4.7 per cent to Rs 1,640 crore from Rs 1,720 crore in the previous year. For the past quarter, net profit fell 19 per cent to Rs 345 crore as the company adjusted Rs 475 crore towards "one-time cost reset due to input price inflation". The company admitted sales volume had declined 20 per cent to 10 million sq. ft in FY 2011 from 12.5 million sq. ft in the previous year.For Unitech, too, total income rose 9 per cent to Rs 3,187 crore for FY 2011, but net profit slumped by over 16 per cent to Rs 581 crore from Rs 695 crore in the previous year. Another big Delhi realtor, Omaxe, pushed up consolidated sales from Rs 1,001 crore to Rs 1,522 crore through FY 2011, but net profit plummeted nearly 18 per cent to Rs 93 crore from the previous year's Rs 113 crore. Mumbai-based realtor HDIL performed marginally better. The group's annual top line grew 24 per cent to Rs 1,900 crore, while net profit went up 45 per cent to Rs 823 crore for the year ended 31 March.The fourth quarter has proven to be the biggest drag with a slowdown in sales volumes and high input costs squeezing margins. According to an Enam Securities report on the Q4 performance of realtors, revenues for the January-March quarter of 2011 for most developers (with the exception of Godrej Properties and Indiabulls Realty) declined 10-30 per cent due to slowdown in sales. Simultaneously, high input costs hit margins in the range of 2-10 per cent. DB Realty, whose credibility has taken a knock with its promoters Shahid Balwa and Vinod Goenka jailed for their role in the 2G spectrum scam, saw its Q4 profit-after-tax sink to just Rs 8 crore on sales of Rs 392 crore for the quarter. Click here to view enlarged image Interestingly, there has been some spin-off effect from the slowing realty sector on engineering, procurement and construction (EPC) companies, which came under severe earnings pressure in the latest quarter. An analysis by Angel Broking of construction companies showed that except for Sadbhav and MPL, which showed robust growth in net profits, most others including Simplex reported a fall in net profits. "Margin pressure due to high commodity prices and spiralling interest cost resulted in disappointing earnings despite decent top-line growth," the report said.Investor confidence, or the lack of it, has been ahead of the results. In the past 18 months since January 2010, the BSE Realty Index has plunged 44 per cent, compared to a 5 per cent rise in the BSE Sensex. "The market was expecting capital infusion from operations would help improve the financial health of real estate companies. But failing to sell sufficient stock has led to a poor show by these companies," says Varun Goel, head of equity-PMS at Karvy Private Wealth. Property pundits feel the paralysis in the market may pan out over another 3-4 quarters before sales begin to move. "There is sufficient demand in the market, but property buyers are waiting for a 15-20 per cent correction in prices, while sellers aren't willing to bring down prices," explains Goel. Governance issues have now become evident after a string of scams, and that has further eroded market confidence.(This story was published in Businessworld Issue Dated 20-06-2011)
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