egNEW DELHI: With a decade’s existence of the Electricity Act of 2003 doing precious little in infusing efficiency and competition into the sector, the government has proposed some key changes in the Act to remedy the situation and prevent the loss-ridden sector, which is struggling to meet the reformist conditions of a financial restructuring package (FRP), from plumbing fresh depths.


The Union power ministry’s draft amendments to the Act, to be placed before the Cabinet soon, seek to separate “carriage from content”— meaning there will be separate licences for the wire business and the actual supply of electricity — with a provider-of-last-resort (POLR) facility, in what could eventually pave the way for open access for ordinary consumers.


While open access for even bulk buyers, despite the 2003 Act providing for it, has rarely been achieved due to the prohibitive surcharges levied by the regulators, the ministry now proposes to make open access mandatory for buyers with a load of of 1 MW and more.


According to the draft amendments, to start with, the distribution network business and supply business of the extant discom in an area will be separated with dual licensing. While for the initial one year, there will only be functional separation with common ownership, subsequently, ownership will also be segregated and additional supply licences will be given to new players. Initially, the incumbent supply licencee only will have universal service obligation (USO). This means a consumer can resort to him if other suppliers fail. Over a period of three years from the grant of licence, each supplier will also have the USO, so that consumers are not deprived of supply, even while having the freedom to switch from one supplier to another, in search of cheaper and quality power.


Experts welcomed the move saying it’ll help bring down tariffs but added that to perform the role of POLR, licencees must be given incentives as in other countries where open access at the retail power distribution level is a reality. “POLR should have recourse to a Fund which the regulator will create by way of some levy to make good any loss that could be suffered by him due to this responsibility,” said Kameshwar Rao, leader, energy, utilities and mining at PwC India. Although there are concerns over a proposal to deprive bulk consumers using open access of the services of PLOR, Rao said since suppliers usually compete to rope in large consumers, it might not be problem.


What’s important is how ably various state regulators enforce the provisions, analysts said, citing the unimpressive track record of most of them in meeting obligations under the 2003 Act like reduction in cross-subsidisation and ensuring procurement from renewable energy firms. Few state electricity regulators are able to do justice to even the reform obligations like timely revision of tariffs under the FRP introduced last year.


Of course, the ministry’s new draft recognises this and proposes to give supervisory powers to Forum of regulators (FoR) to ensure tariff rationalisation does take place. The FoR, headed by the chairman of the Central Electricity Regulatory Commission and comprising state regulators, will also have to submit a report to the government detailing the working of various state regulators.


Discoms are also concerned about a proposal to form an intermediary company and vest all existing power purchase agreements (PPAs) with it. The idea is to re-assign power from a pool of PPAs among the supply licensees on the basis of consumer mix, total consumer load with each and after factoring in transmission and distribution losses. Although the details of how this mechanism will be evolved will be clear only when the relevant rules will be framed, this could create uncertainties for discoms, while power producers will have little to worry about as the sanctity of the PPPs will be protected. “In the proposed intermediary model, licensees with cheaper power purchase pacts will lose out if they have to supply under more expensive PPAs negotiated by other licensees,” Praveer Sinha, CEO, Tata Power-Delhi Distribution said.


Apart from the changes concerning the distribution sector, the power ministry has also sought cabinet approval for amendments related to grid security, whereby significant increase in penalty has been sought to ensure discoms comply with the norms prescribed.


The proposed amendments also seek to entrench the shift towards tariff determination through competitive bidding by limiting the amount of power whose tariffs are determined by the regulators. This would mean while state-run NTPC, which has signed several PPAs between 2004-2009 under Section 62 under which tariffs are regulated by the SERCs, the avenue for private players to this route will now remain closed. The good news is that there is also a proposal to allow “automatic” pass-through of the power purchase cost. Several projects under Section 63 (where tariffs are determined through competitive bidding) are under arbitration with the procurers over adjustments sought for rising costs of fuel.

(Source: The Financial Express, October 27, 2014)




NEW DELHI: Country’s peak power deficit in the six months ended September 2014 stood at 4.7 per cent, according to official figures.


As against a peak power demand of 1,48,166 MW during April-September as much as 1,41,160 MW was met, leaving a deficit of 7,006 MW, as per the data by the Central Electricity Authority (CEA).


The peak power deficit – shortfall in electricity supply when demand is at the maximum – in the same period last year (April-September 2013) stood at 4.2 per cent.


North-eastern region was the worst sufferer with 11.3 per cent deficit followed by Southern region with 8.7 per cent shortage and Northern region with 8.3 per cent shortfall, during the period (April-September 2014).


The peak power requirement of the north-eastern region comprising Assam, Meghalaya, Manipur, Mizoram, Tripura, Arunachal Pradesh and Nagaland, was at 2,380 MW of which 2,112 MW was met. During the same period of last year, the region had a shortfall of 8.2 per cent, the data said.


South Indian states of Andhra Pradesh, Telangana, Tamil Nadu, Kerala and Karnataka required electricity to the tune of 39,094 MW of which the supply was at 35,698 MW. Last year, the region’s deficit was 12.5 per cent.


North India — Delhi, Haryana, Himachal Pradesh, Jammu & Kashmir, Punjab, Rajasthan, Uttar Pradesh, Uttarakhand — required 51,977 MW of power during the six-month period, while it received 47,642 MW. The region’s last year deficit was at 6.9 per cent.


This year, country’s eastern region including states of Bihar, West Bengal, Jharkhand and Odisha stood at the bottom of the list of peak power deficit regions. They reported a shortfall of 286 MW or 1.7 per cent. As against the demand of 16,628 MW, the supply stood at 16,342 MW, as per the data.


CEA, the techno-economic clearance body under the Ministry of Power, is also engaged in setting generation targets and other milestones for the power utilities.

(Source: The Economic Times, October 27, 2014)




The Supreme Court cancelled 214 coal block allocations (except the ones to government undertakings, and the ultra-mega power projects, which were awarded on competitive bidding). It asked all coal block allotees to pay R295/per metric tonne of coal extracted to date. It gave the government the option to have a committee of retired Supreme Court judges to propose a different allocation method.


Instead, the government has itself come out with an ordinance for e-auctioning the mines. It deals with the issues arising directly out of the cancellations. No existing allotees will have a right to retain the mines allotted to them unless they win it back in the auction. They have no right of first refusal. Allotees who had used illegal means to get their allotments cannot participate in the e-auction. All must pay to a Claims Agency to be created by government, a fee of R295/per tonne. A floor price will be fixed for each mine to allow for investments made by the earlier allotee be recovered. If the earlier allotee loses the mine in the auction, the end plant (power, steel, cement) can, if he wants, be auctioned so that the investor gets his money back since the plant cannot operate without the coal. There might be some allotees who invested in good faith who will lose out.


Some commentators have condemned the ordinance as inadequate. They miss the point. It is a first step. But the government should have announced the further steps. Here, we try to forecast the plan of which the ordinance is only the first step.


It must be understood that the procedure laid down by the ordinance will increase coal prices significantly to allow for a return on the cost of capital invested in the auction price. Another important fuel for power plants, natural gas, also has had its prices have increased by about 50%. Both coal and gas are essential inputs for power generation. Their prices will certainly increase power generation costs.


Other users like cement and steel, who operate in free markets, can competitively allow increases in end-product prices. But power tariffs are determined by state electricity regulators. They may or may not allow the increased costs of fuels to be passed through in full to the buyers of power.


In principle, the power sector has become financially unviable because it has not passed on all costs to buyers. Instead the real prices have been hidden by subsidies and cross-subsidies. These have burdened government deficits and corporate accounts. The method adopted by the ordinance will add substantial costs to power generation. Some staggering increases in consumer prices would have buffered the shock to buyers.


The raising of gas prices for producers will improve the revenues of producing companies, especially ONGC (and thus, of the government as well). Reliance has to wait till it meets earlier supply projections. Surely government will also change the bidding process for oil and gas exploration and production to enable more overseas companies to bid for them. If there are many explorers and producers, more gas will be produced, with end prices left to competition in the market, and an overall regulator watching to ensure that there is no exploitation of buyers, there will be more production to benefit the economy.


The same logic must apply to deregulated coal as well. The ordinance enables the government to allow producers to commercially exploit the coal, i.e., to trade in coal. This will benefit consumers. Using the energy exchange for trading in coal (or gas) will ensure that the trading is done under transparent conditions.


The government has also decided that petroleum product prices will now vary with imported crude prices. Stoppage of subsidies by government will reduce government deficits and enable market conditions to determine prices. In the case of coal, the Supreme Court cancelled all licenses except for government companies and two ultra mega power projects (in production). Commendably, the government has announced an e-auction method for auctioning these coal mines. Those who have used illegal means to get the licenses are excluded from bidding. Others are divided into user sectors-power, steel and cement. Coal mines will be identified for each sector. Hopefully, they will be in the vicinity of the user plant. This will not be easy and some might suffer.


There is to be an authority to lay down the rules for the e-auction and also to determine the floor prices for each mine, taking account of the sunk costs incurred by the developer. It is necessary that the reserves, the over burden, the time required to start production, the reforestation and resettlement needs, etc, must all be determined and announced.


Coal India is an unreliable and inefficient producer of coal. It has been weak in determining reserves in coal mines. The auction price is a capital cost and will have to be factored into the coal prices and that of the products which it is used for. When government exercises the power under the Ordinance to allow commercial use of private coal mines, Coal India will have competition in the market. It may not be nimble enough to withstand it, unless it has entrepreneurial management.


Instead of a one-time authority for these specific issues, it would have been better if an independent statutory energy regulator had been created. This regulator could have transparently and independently dealt with the auction process and issues, and later with the monitoring of production, productivity, adherence to supply contracts, coal prices, related power prices, power plant productivity, etc.


Power prices are subject to populist and political considerations. For many consumers today prices are zero or well below costs. There is no compulsion on the state governments and regulators to take auction prices into account. The forum of regulators must now be asked to agree, and perhaps a suo motu order might come from the electricity tribunal.


The Modi government must have a complete plan for energy reforms. The ordinance ensures that coal mines do not shut down on the cancellation of licenses by the Supreme Court. Other steps must follow. This government is market oriented and is for far less state control. Doubtless, an energy regulator must be part of the grand plan for the energy sector. So must be the ultimate objective of getting rid of the curse of the energy sector in India, namely the nationalisation of coal and the state control over oil and gas exploration, production, utilisation and pricing. The government should go out of all power generation and distribution. We need strong and independent regulation to ensure that quasi-monopolies and oligopolies do not exploit the market. The Nobel prize in Economics to Tirole gives a strong theoretical basis to the idea that strong and transparent regulation can make even non-competitive markets beneficial to consumers.

The author is former director general, NCAER, and is the first chairman of the CERC

(Source: The Financial Express, October 27, 2014)




NEW DELHI: Private distribution companies are concerned about some of the proposed amendments to Electricity Act, 2003, such as empowering regulators in states to revoke the licence in case the distributor is unable to meet the prescribed standards, saying the changes may hurt the viability of their investments in infrastructure.


According to the proposed amendments, electricity regulators will have a greater say in determination of time period for the distribution licences and selling the assets of the distributors after the term of licence is over or revoked. However, the private companies say they will not be able to make the desired investments if the tenure of the distribution licence is not specified.


“The government is keen to attract private investments in power distribution to improve quality of service and reduce losses. However, the proposed amendments to Electricity Act are not in line with such intentions. Private firms will not come forward if the investors are not sure about their returns,” said an executive with a private distribution firm, adding that the proposed amendments will reduce ease of doing business. India has seven private licensees — two each in Delhi and Mumbai and one each in Kolkata, Surat and Ahmedabad.


Tata Power, Torrent Power, Reliance Infra and RP-Sanjiv Goenka Group have improved power supply and reduced commercial losses in their respective distribution areas.

(Source: The Economic Times, October 27, 2014)





Recently, Prime Minister Narendra Modi asked the Department of Atomic Energy (DAE) to triple the country’s nuclear power capacity by 2023-24. No sooner had he done so than some quarters issued statements protesting against the proposed Jaitapur power plant in Maharashtra. This highlights the sharp responses that nuclear power generates, which are partly responsible for the slow growth of nuclear power in the country, even as India desperately needs energy.


Estimates suggest that, efforts in energy efficiency notwithstanding, India will need to at least triple electricity generation by 2030 to ensure energy access to all. Given this huge challenge, India needs to consider all sources of energy. Though renewable sources such as solar and wind will play an important role, they are intermittent and do not provide stable electricity generation. Hydro power is also seasonal in nature and biomass has limited potential to be a major source of electricity. For reliable supply, we still need to rely on fossil fuels – mainly coal and natural gas – and nuclear energy.


How do coal, natural gas, and nuclear energy compare? At a levelised cost of Rs.3-4 per unit of electricity (kWh), electricity from coal is cheaper than the other two. Electricity from natural gas can range from Rs.4-8 per kWh, depending on the price and availability of gas, and electricity from nuclear power costs about Rs. 4-6 per kWh. However, coal also emits 0.9 kg of carbon dioxide per kWh, almost double the emissions from natural gas. On the other hand, Greenhouse Gas (GHG) emissions from nuclear power are negligible.


Further, fuel cost as a share of the levelised cost of electricity is much higher for coal (over 50 percent) and natural gas (over 75 percent) than for nuclear power (less than 20 percent).


So, nuclear energy does not compare unfavourably with coal and natural gas when economics, fuel supply, and GHG emissions are considered together. But what about risk to human life?


Thus far, the operation of nuclear power plants has not resulted in any death in India. On the other hand, studies estimate a large number of deaths because of particulate emissions from coal power. As per a Forbes report, globally, the average mortality from coal is estimated at 170 deaths per billion kWh in comparison to four deaths per kWh from natural gas. The mortality rate for nuclear power is less than one death (0.09, to be accurate) per kWh, after accounting for Chernobyl and Fukushima, deaths from uranium mining and using the Linear No-Threshold Dose hypothesis. (In fact, thus far wind power has killed more people per kWh of generation than nuclear power). And this is without even considering the threat of climate change.


If this is the case, why do we find it difficult to accept nuclear power as a viable alternative? Several biases and heuristics influence our ability to perceive risk accurately. These include the availability heuristic, probability neglect, and the affect heuristic.


The availability heuristic is a phenomenon that causes us to assess the probability of an event based on the ease with which its examples come to mind. This may be particularly applicable for nuclear energy as we are more likely to remember major nuclear incidents, such as the Chernobyl disaster or the Fukushima accident, than incidents involving other forms of energy, such as the Banqio and Shimantan Dam failures in China and the British Petroleum oil spill. Also, a silent killer may not catch our attention to the necessary extent. For instance, as per the IEA, uranium mining accounts for over half of the deaths attributed to nuclear power, yet it does not evoke as much debate as the possibility of a nuclear accident or radiation exposure from nuclear waste.


Nuclear technology, whether in the form of energy, medicine, or weaponry, evokes much fear. In fact, the name of the medical diagnostic examination of nuclear magnetic resonance was changed to magnetic resonance imaging (MRI) to dispel fear associated with ‘nuclear.’ Therefore, it should come as no surprise that while people rate nuclear power or nuclear waste as riskier than other instances of exposure to radiation such as medical x-rays, a majority of experts disagree. The risk-benefit analysis is skewed further for those living close to a nuclear facility, as they face almost the entire risk but seldom benefit from the uninterrupted power supply. That nuclear reactors are usually seen as being imposed without public consultation only increases the risk perception and strengthens opposition to them.


No energy source is risk free and that includes nuclear power as well. To assess the alternatives objectively, biases described above would need to be scientifically addressed. This also calls for more transparency with information about economics, safety, and waste disposal. Without an informed dialogue on nuclear power and energy policy, we may continue to overestimate some risks we face while ignoring others that do us more harm. And, in the process, compromise our energy security and the environment as well.


Nihit Goyal is a Research Scientist at the Center for Study of Science Technology and Policy (CSTEP). The views expressed are personal.

(Source: The Economic Times, October 27, 2014)





NEW DELHI: The ministry of new and renewable energy (MNRE) wants the government to back a 1-billion loan (aboutRs 7,750 crore) sought from German bank KfW to promote rooftop solar systems across the country.


KfW is keen on lending 1-billion for the solar rooftop project to India but hedging cost of the loan will make it expensive for borrowers and mar the purpose of accessing funds from abroad, an MNRE official said.


“Our problem is how to make these funds available at a low cost. Hedging against rupee fluctuation makes the loan expensive for domestic borrowers. If the government thinks the rupee is going to remain stable, we want to request it to take the risk and give a sovereign guarantee so that we can avail of the KfW loan,” the official told ET on condition of anonymity.


India is scouting for funds from foreign agencies in order to spur growth in the cashstarved renewable energy sector — one of Prime Minister Narendra Modi’s focus areas — and make clean energy affordable.


The ministry wants to make loans for rooftop installation available at interest rate of not more than 8%, the official said, adding that the loan, as and when it comes, will be disbursed either through Indian Renewable Energy Development Agency ( IREDA) or Rural Electrification Corporation (REC).


However, in the absence of a sovereign guarantee, the cost of funds can go up to 12%. The MNRE has assessed that the euro loan, which can be borrowed at 2%, will add 8% as insurance (hedging) charges and then become costlier by another 2%, the amount charged by the final lending agency. “We think the fluctuation risk can be taken by the National Clean Energy Fund (NCEF), which is not too happy to give an interest subvention of 4-5%. That’s why a sovereign guarantee can be very useful for promoting 1.5 gigawatt of solar rooftop installation programme,” the official said.


Hedging or insurance of the loan is required because the end user will repay in Indian rupee, which may have depreciated in another 10 years. The industry players involved in solar rooftop installations in the country say a sovereign guarantee can benefit government-related institutions the most.

(Source: The Economic Times, October 27, 2014)




KOLKATA: The government is planning to set up a Directorate General of Coal, along the lines of the agency that covers hydrocarbons as it puts together a strategy to auction the coal blocks that have to be taken back from private companies following the recent Supreme Court order cancelling allocations. The new office “would undertake similar sort of activities like the Directorate General of Hydrocarbons (DGH),” said a senior official aware of the development.


Set up in 1993 under the administrative control of the oil ministry through a government resolution, the DGH seeks to ensure the sound management of oil and natural gas resources while keeping environment, safety, technological and economic aspects in mind. DGH’s responsibilities include implementation of the New Exploration Licensing Policy through auctions of oil and gas blocks, checking production-sharing contracts for discovered fields and exploration blocks, promotion of investment in the exploration and production (E&P) sector and monitoring of E&P activities, including the review of reservoir performance of producing fields. In addition, DGH is also engaged in opening up areas for future exploration and development of non-conventional energy sources such as coal bed methane and potential future sources such as gas hydrates and shale oil.


The proposed agency is likely to get help from the Central Mine Planning and Design Institute Ltd (CMPDIL) on data and expertise. Coal India Ltd subsidiary CMPDIL is an exploration company that holds vast amounts of data on coal blocks in the country. In fact, it holds reserve data for almost all coal blocks in India. It has been given the task of auctioning three coal blocks for cement, steel and sponge iron companies.


Although there has been no clear directive from the government, CMPDIL has started rearranging the data so that blocks can be auctioned profitably. It wants to ask the government to allow it to take over the deep-seated blocks that are located below the seams mined by Coal India. “There are a few blocks in the list which do not hold reserves that are economically viable to be mined. These blocks need to be merged with the existing large blocks,” said a CMPDIL official.

(Source: The Economic Times, October 27, 2014)




NEW DELHI: Last week, the NDA’s Coal Mines (Special Provisions) Ordinance, 2014, was greeted rapturously. Comforting a country facing coal shortages, it laid out a road map for ensuring coal supplies in the wake of the Supreme Court’s order last month cancelling captive coal-block allocations. But will the ordinance fix the mess left behind by the previous captive coal-block allocation policy? As the answers to these five questions show, it’s a short-term fix — and not even the best at that — but not a long-term solution.


Will it disperse mine ownership?


Among its many fallouts, the previous captive coal-block allocation policy, which gave out 214 blocks, concentrated the ownership of coal reserves among a few business groups, skewing industry dynamics in their favour. The top 10 allottees bagged 22% of reserves. The ordinance has retained the captive policy — a company can use the coal from a block allotted to it only for its end-use plants. It proposes to auction — for captive use — the 42 blocks where mining has already started and the 32 blocks where mining can start soon.


An unspecified number of the remaining 130 coal blocks will also be given for captive use. With the government retaining the captive dispensation, the risk of coal reserves concentrated among a few groups remains. “The ordinance says the government might introduce other filters, during auctions, like the quantum of investment made,” says Dipesh Dipu, a former director with Deloitte Touche Tohmatsu who now teaches at Hyderabad’s Administrative Staff College of India. “This will again concentrate coal ownership.”


Will coal supply improve?


Another fallout of the previous allocation policy was it failed to address the problem of coal supply. On the one hand, the blocks given out — adding up to reserves of 44 billion tonnes — were taken from state monopoly Coal India Limited (CIL), which therefore had less to mine and struggled to meet its commitments to end-use companies. On the other, the captive blocks struggled to start production.


Ashok Khurana, director-general of the Association of Power Producers, feels this time is different. “With these 74 mines being auctioned, the coal scarcity will be over,” he says. Khurana reckons companies that bag blocks will surrender their CIL linkages, which will be directed to other users.

In future, companies bagging blocks might also be allowed to sell coal in the open market. “The ordinance has an enabling provision to sell coal, but it doesn’t mention how the government will ensure profiteering, etc, will not happen,” counters Rajiv Aggarwal, secretary of the Indian Captive Power Producers Association. “If Indian coal prices are linked to international coal indices, it could make Indian coal very expensive.”


Is it a long-term solution?


According to Vinayak Chatterjee, chairman and MD of Feedback Infra, the sub-optimality created by the captive coal-block approach will continue. Take power producers. Even if the government reserves some blocks for the power sector (which might otherwise, as a regulated sector, struggle to bid against unregulated ones like cement or steel), he says, the economics of each block and its distance from the power plant differs.


Power producers will have to renegotiate tariffs with the state distribution companies they supply to. “It would have been preferable to hand the operating mines to a PSU — like CIL or NMDC — and ask them to extract coal through mine developer and operator (MDO) contracts signed on a cost-plus basis,” says Chatterjee. This coal, he adds, should have been sold at CIL rates and state distribution companies should have been asked to reset their purchasing tariff. “The remaining blocks should have been sold through a completely open auction.


The cost of not doing this is that we will repeat history.” A senior manager of Thiess India, the Indian arm of a leading Australian mining firm, sees a problem with a clause where companies bid for captive use, and a nod for commercial mining might follow later. “Only crony capitalists will bid using such assumptions since they are confident of their clout,” he says.


Will it improve mining technology?


“If we want to maximise coal production, what should we do?” asks Dipu. “Should we give blocks to captive companies or someone who specialises in mining?” At this time, feels the Thiess manager, foreign companies are unlikely to enter. “The current rules permit 100% FDI (foreign direct investment) in coal mining as long as it is for captive use,” he says on the condition of anonymity. “And no foreign miner will come here only for supplying coal for captive use, since that ties in their entire investment to one customer.” Also, to accommodate as many companies as possible, the coal ministry had divided coalfields into numerous small blocks. With the NDA choosing to follow that categorisation, says the Thiess official, “captive mining does not provide economies of scale.”


Will it balance industry and environment?


When CIL was the only company mining coal, it had the option to first mine in areas with low density of population or marginally forested areas. However, a company with a captive coal block did not have such options. The outcome: India began losing her prime forests, like Mahan and Hasdeo Arand, faster.


With the government expressing its intention to auction all 204 cancelled coal blocks in the immediate future, the threat of avoidable environmental damage remains. According to the Coal Controller’s Provisional Coal Statistics (2009-10), the peak rated capacity of all captive blocks allotted by March 2010, which should come into production by 2015, was 705.8 million tonnes (MT) per year. That’s the new production that can happen.


By comparison, India imported 110 MT of coal in 2013-14. In other words, India could end up opening many more mines than it needs. Also, the ordinance says companies will be allowed to supply coal from their mines to multiple end-use plants, which is likely to lead to an intensification of mining in these areas.

(Source: The Economic Times, October 27, 2014)





CHENNAI: Navaratna company Neyveli Lignite Corporation (NLC) is expected to improve its operations gradually over the next few days after a settlement was reached between the Joint Action Council of the 10 labour unions and the NLC management.


NLC’s power production has dropped to around 1300-Mw, as against a total generating capacity of 2740-Mw.


The contract labour had been on a strike for the last 52 days, which came to an end on October 24. According to union sources, NLC has agreed to increase the wages of unskilled labourers, adding almost Rs 110 a day from Rs 370 per day, and higher salaries to semi-skilled and highly skilled individuals.


The other allowances apart from the basic salary have also been increased. This was agreed after several talks between the management and the unions in the presence of the labour department officials had failed in the past weeks. An agreement would be signed between the management and the workers in a meeting scheduled next week, said another union official.

(Source: Business Standard, October 27, 2014)




HYDERABAD: State-owned International Coal Ventures (ICVL) will invest $ 500 million to create logistic and other infrastructure support in the next 2-3 years at its recently acquired coal mines in Mozambique, a senior official of the PSU said.


ICVL is also looking to appoint a full-time official with rich experience in coal mining to head the operation of the Mozambique mines to turn them into a profitable venture, he said.


ICVL signed the pact on July 28 to buy Rio Tinto’s 65 per cent stake in Benga and 100 per cent each in Zambeze and Tete East coal assets in the African nation for $ 50 million.


Currently Benga, the only operational mine, produces about 5 million tonnes per annum and is making cash losses. The mines need creation of about 500 km railway line and port, he said.


“There are logistic issues. At this point of time it (mining operations) is making cash losses. There are about one billion tonnes of coal reserves available. It needs another $ 500 millions in the next two to three years. It is a very good strategic investment,” the official told PTI, adding that the immediate goal is to ramp up the production to 12 million tonnes per annum.


As of now, five million tons of coal is yielding two million tonnes of washed coal which is being taken by Tatas, a partner in Benga with 35 per cent stake, he said.


As of now there is no plan to rope in a third partner for creation of necessary infrastructure for ramping up of production, he said.


“It needs about Rs 3,000 crore ($ 500 million). All the PSUs can put together and invest over a period of time. I don’t see any necessity for an outsider to join us,” the official explained.


ICVL, a joint venture of Steel Authority of India, Coal India, Rashtriya Ispat Nigam, NTPC and NMDC, was created to ensure long-term security of supply of the critical raw material for the steel industry. NTPC has expressed its intention to opt out of the JV.


Replying to query, he said the PSU is mulling to appoint senior and experienced person to head Mozambique operations.


“We are trying to put a core team headed by an expert (in coal mining for Mozambique). The person may not necessarily be from the four PSUs. He could be an outsider also. Except Coal India, none of the partners have much of coal mining experience,” the official added.


Rio Tinto had bought these assets through acquisition of Riversdale Mining Limited in 2011 for $ 4 billion. However, in 2013, it wrote off $ 3.5 billion of the purchase price.


All three assets put together are estimated to hold about 2.6 billion tonnes of coal reserves.

(Source: The Economic Times, October 27, 2014)

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