Four new windmills made by Gamesa Tecnologica whirl beside a banana grove in Kammalapatti, Tamil Nadu, driven by a breeze that is too soft to spin a group of older turbines standing idle nearby. The Spanish manufacturer replaced 10 older machines at the wind farm, gaining a toehold in India which has 4,600 wind turbines more than a decade old, many rusty or too small for today's power market.Europe's wind-turbine makers are stepping up sales in India, anticipating a boom in one of the bigger "repowering" plays that Gamesa says may be worth $3.8 billion in sales. The challenge is in taking work from Suzlon Energy and in getting funds in a market still depressed by the financial crisis. "Many good-quality wind sites have relatively old and inefficient turbines," says Amit Kansal, vice-president of sales for the Indian unit of Denmark's Vestas Wind Systems, the world's largest wind-turbine maker. "The opportunity for repowering is obvious."The 4,600 turbines have a capacity of 1.3 gigawatts, or about 9 per cent of the installed base in India, which rocketed to become the fifth-biggest wind market by offering tax credits to operators regardless of productivity. India also has the smallest average turbine size of the world's top 10 markets, according to Kenersys GmbH, a German manufacturer.Gamesa's estimate of Rs 16,800 crore ($3.8 billion) sales potential assumes 3,000 MW of installed capacity in need of replacement.All three turbine makers have lost money for shareholders over the past 12 months and are looking for new markets — Suzlon has dropped about 21 per cent in the period, Gamesa 28 per cent and Vestas has fallen 47 per cent.In India, repowering a site costs 20 per cent less than setting up a new project and no new land permits are needed, says J. Balakrishnan, a Gamesa sales manager working on a repowering project there.The smaller turbines installed in India are less efficient, require higher wind speeds and generate less power than newer models. The Indian government, too, is prodding the industry toward modernisation.Many existing wind farms in India were built to take advantage of a tax break. The measure encouraged companies to erect turbines but not to maintain them or see that they produced power, according to Renewable Energy Minister Farooq Abdullah. He wants the tax credit to be replaced by an alternative subsidy that rewards projects for the amount of energy they generate. The so-called generation-based incentive pays wind farms Rs 500 a MW-hour of electricity they feed to the grid.Still, many operators may not want to junk equipment for wind farms that has more than half its useful life left.Gamesa, which completed India's first repowering project last month, thinks installations in Spain and other European countries can be revamped too, CEO Jorge Calvet said in an interview last month in Mumbai. Kenersys, the German manufacturer, and Orient Green Power, an Indian developer of renewable-energy projects, say they are looking for ways to tap into the budding repowering market.The newer machines — with hub heights and rotor diameters more than double that of the older ones — better harvest energy from the wind. The new machines may double the farm's electricity output by the end of the monsoon season in October, helping the project pay off in five years, Gamesa estimates. Other benefits include lower maintenance costs and easier access to replacement.Older machines can use more power than they produce during low-wind seasons. Owners turn them off, sometimes for up to half the year. Obstacles to repower old sites include getting up to a dozen owners of each facility to agree and ensuring the plant can earn the same subsidised rate for energy. The waste generated by tearing down old windmills is another barrier.Bloomberg(This story was published in Businessworld Issue Dated 09-05-2011)
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In a general environment of clean-up anti-corruption campaigns by activists, arrests of tainted politicians and businessmen, and attempts (however meek) by the government to nail Indians who have money stashed in Swiss Banks — the Income Tax department recently announced its intention of doing its bit.The department has decided it would scrutinise all recent property deals in Delhi and the National Capital Region to check for the use of cash and to unearth black money, though it has not specified the period or criteria of scrutiny.It is well known that nearly all real estate transactions in India have a cash and a cheque component. In most cases, the cheque component is a few hundred rupees above the circle rate of the region, while the rest of the money is accepted in cash. Both components are equally important to the buyer and the seller, since when one uses the proceeds of a sale to buy a new property, the new seller, too, will want cash. If the cash component is very high, it can also be converted into a cheque at a small premium.Income tax officials, however, feel that little can come of such announcements for various reasons. One is that such transactions are already being scrutinised by the department although not very successfully.Millions of deals take place every day and the department simply does not have the "wherewithal" to track all of them. Moreover, even if it gets a tip-off, unless it swoops down, conducts a search and catches either party with the cash red-handed, in most cases, it is very tough to gather enough evidence to try the case in court. Even if it lays its hands on agreements (which, in many cases, actually mention the cash component), these cannot be used as evidence since they are not finalised contracts but just agreements to sell.In most cases, the department finds it cannot pin down the parties in a court of law for lack of evidence. Proof for these under-the-table deals is hard to come by, and bringing them to book is near impossible.Ironically, when a comparable deal is done legitimately, that is, all white, officials may raise eyebrows, summon the parties concerned and generally harass them. Often, to be let off the hook, the parties are forced to pay a bribe to the officers in charge.What the real estate sector needs is professionalism, lower stamp duties across the board and a regulator that is stronger than a Securities Exchange Board of India (Sebi) or a Telecom Regulatory Authority of India (Trai), is backed by law and has teeth to prosecute. These steps may be more effective than announcements that everyone takes with a large pinch of salt.Another way to tackle the problem of cash in real estate deals is to reduce the incentive to evade. As things stand, from the buyer's point of view, the higher the declared price of the house, the more he has to pay to register it. For the seller, the higher the white money component, the higher is his capital gains tax liability. Hence, both sides have a reason to avoid cheque transactions beyond a certain value.In the absence of actual changes of the kind mentioned above, if alternative attempts are to be taken seriously, they should be limited to a certain period, to deals above a certain floor (say, Rs 10 crore and above) with active use of technology by honest, incorruptible officials. This may be a tall order.(This story was published in Businessworld Issue Dated 09-05-2011)
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Directorate General Of Hydrocarbons (DGH) has locked horns with India's biggest private oil company Reliance Industries (RIL) over the fall in gas production from the Krishna-Godavari D6 fields from a high of 69 million metre standard cubic metre a day (mmscmd) in 2009-10 to just 37 in 2010-11. The fields were to hit a peak of 80 mmscmd by FY 2012-13, which looks a distant dream now. "They are giving us an explanation for the depletion. (It) is not satisfactory," says director general of hydrocarbons S.K. Srivastava. The RIL spokesperson refused to comment.The two sides have been warring ever since DGH questioned RIL's move to hike the capital expenditure on the fields from Rs 12,000 crore to Rs 45,000 crore. The regulator refused to approve RIL's annual spends at KG-D6. While both sides are grappling with each other over numerous disputes, the latest is about DGH asking RIL why it hasn't dug the wells that it was supposed to to maintain the level of production. As per the field development programme (FDP), the operator (RIL) had to drill 22 wells by now. RIL has completed only 18 wells (two others are being drilled).The issue is not as simple, says a source close to RIL. "Health of the wells should not be compromised and both DGH and the company would have to work with far-sightedness. The company had tied up with British Petroleum, which has deep-water experience. Government clearance is expected by May. Hopefully, work will start in the second quarter of FY11-12."DGH and industry observers see a pattern in these arguments. Production sharing contracts are designed such that initially the private operator gets a larger share of production, while the government gets a minor share. This is to allow the private operator to recover its capex. DGH and industry rivals believe that the delay is deliberate and is meant to make the most of the widely expected increase in the price of gas. Oil and gas producers are hoping APM (administered price mechanism) — at which gas is sold to consumers — may be revised upwards from the current $4.21 per million metric British thermal units (mmBtu). Industry rivals believe the higher production is being timed to that. LINE OF FIRE DGH: RIL should have completed drilling of 22 wells by 1 April 2011RIL: Completed drilling of 18 wells, two drills were dry. Worried about the health of the blockDGH: RIL should have followed the field development programme (FDP)RIL: Provided data, but DGH says it does not match the FDPDGH: RIL should step up gas production to the approved level of 61.88 mmscmd, and maintain commitment for non-priority sector as wellRIL: Gas production is at nearly 50 mmscmd; cannot provide gas to non-priority sector, which requires an additional 7-8 mmscmd of gasDGH: DGH has held up the budget for RIL for KG-D6; work programme for 2011-12 is also on hold. DGH wants the cost of drilling additional four wells in the budgetRIL: The work programme submitted to DGH does not speak of thisDGH: Work programme and budget for 2012-13 may be revised so that the production targets are met as per the approved FDPRIL: Yet to decide on thisDGH's positionRIL's positionmmscmd: million metric standard cubic metre per day Meanwhile, an independent review by consultant P. Gopalakrishnan, commissioned by DGH, has said the delay in drilling the four wells led to fall in production. By the next financial year, RIL has to drill 31 wells. The DGH has not approved the FDP submitted by RIL for the previous financial year either. "We have not rejected it, but have told the officials to make it according to the approved FDP," says Srivastava.DGH is not the only one worried about the shrinking output. The Ministry of Petroleum and Natural Gas (MoPNG) has already raised an alarm after the industries that had been allotted gas from the block cried foul. "We have taken up the matter with various ministries concerned and are in touch with the company to sort out the matter," says an MoPNG official.Meanwhile, a three-member team of DGH had gone to KG-D6 fields to review well-wise production and reservoir performance. The team is expected to share its inferences with DGH, and would grill the RIL officials at a joint meeting called by the ministry on 5 May.anilesh(dot)mahajan(at)abp(dot)in(This story was published in Businessworld Issue Dated 09-05-2011)
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Coal India, the world's largest coal miner, is in advanced talks to buy up to 40 per cent stake in Indonesia's Golden Energy Mines in a deal valued at between $750 million and $1 billion, three sources with direct knowledge said on Thursday.Golden Energy is a coal mining subsidiary of energy and infrastructure firm Dian Swastatika Sentosa, and is estimated to have 400 million tonnes of reserves.It owns 10 coal mining areas across Indonesia including in Sumatra and Kalimantan islands in the world's top exporting nation of coal for power plants.State-run Coal India is half way through the due diligence for the asset and a final bid will be submitted by the end of June, two of the sources told Reuters.United Tractors, Indonesia's biggest heavy equipment provider controlled by the country's largest listed firm Astra International, has withdrawn from the bidding process for the asset, sources said.The sources declined to be named as the information is not public. Officials at Coal India, headquartered in Kolkata, and Dian Swastatika in Jakarta could not be reached for a comment.Indian coal, steel and power firms have been scouting for coal assets overseas to feed power plants at home. The energy-hungry nation aims to halve a near-14 percent peak-hour power deficit within two years.
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