NEW DELHI: The National Democratic Alliance (NDA) government on Thursday approved an outlay of Rs 43,033 crore to fund an ambitious initiative to supply electricity through separate feeders for agricultural and rural domestic consumption, aimed at providing round-the-clock power to village households.
In addition, the cabinet also approved spending Rs 32,612 crore on an integrated power development initiative, which involves strengthening sub-transmission and distribution systems, according to a government statement.
Deendayal Upadhyaya Gram Jyoti Yojana (DDUGJY), named after an icon of the ruling Bharatiya Janata Party (BJP), is aimed at ensuring around eight hours of quality power supply to agricultural consumers and 24-hour electricity to households.
In addition, it would also help reduce India’s aggregate transmission and commercial (AT&C) losses by five percentage points from the present 27%.
Separating electricity feeders is aimed at ensuring that while farmers receive optimal electricity, the quality of power and its availability for rural households also improves.
It will also ensure that users are billed and technical and commercial losses because of theft are reduced. The scheme is based on an initiative called Jyotigram Yojana in Prime Minister Narendra Modi’s home state of Gujarat and is named after the late Deendayal Upadhyaya, a leader of the erstwhile Bharatiya Jana Sangh, the forerunner of the BJP.
The cabinet also decided to merge the United Progressive Alliance (UPA) government’s Rajiv Gandhi Grameen Vidyutikaran Yojana (RGGVY) and the restructured accelerated power development reform programme (R-APDRP) with DDUGJY and Integrated Power Development Scheme (IPDS), respectively.
RGGVY is a programme aimed at boosting rural electrification for which an outlay of Rs 39,275 crore, including budgetary support of Rs 35,447 crore, has already been approved.
“This outlay will be carried forward to the new scheme of DDUGJY in addition to the outlay of Rs 43,033 crore,” the government’s press statement said.
The previous government last year approved an outlay of Rs 44,011 crore for the R-APRDP, including a budgetary support of Rs 22,727 crore. The outlay “will be carried over to the new scheme of IPDS”, the statement added.
In line with Prime Minister Modi’s strategy of accelerating development of infrastructure along the country’s frontier, the cabinet also approved Rs 5,111.33 crore for the North Eastern Region Power System Improvement Project for the six states of Assam, Manipur, Meghalaya, Mizoram, Tripura and Nagaland.
The project is aimed at strengthening the intra-state transmission and distribution systems in the region.
In other decisions, the cabinet approved signing and ratifying the Saarc Regional Railways Agreement. Saarc is short for South Asian Association for Regional Cooperation, whose members are Afghanistan, Bangladesh, Bhutan, India, the Maldives, Nepal, Pakistan and Sri Lanka.
The Saarc Regional Railways Agreement will strengthen transport connectivity in the region. Stronger rail connectivity will not only provide a stimulus to the economic development in the region as a whole but also promote social and cultural contact and encourage tourism amongst member-states.
The agreement will also enable low cost, energy-efficient and environmentally sustainable transportation in the Saarc region and provide trade and economic links for land-locked countries and semi-isolated regions.
The cabinet also cleared signing and ratifying the Saarc Motor Vehicles Agreement at the Saarc summit on 26-27 November in Kathmandu.
Under the agreement, member-states will allow vehicles registered in other countries that are part of Saarc to ply in their territory for transportation of cargo and passengers, subject to terms and conditions and obtaining permits. The agreement, once signed, will result in closer regional economic cooperation and integration through enhanced regional connectivity by allowing movement of goods and passengers in the region through road transport.
(Source: Mint, November 21, 2014)
GOVT READIES POWER SECTOR DEBT RECAST PLAN
NEW DELHI: The government on Thursday indicated that it will soon finalize a bail-out plan for power projects hit by funding and clearance hurdles to revive the sector and boost supply in an energy-starved economy.
Sources said the government is setting up a high-powered group comprising RBI deputy governor and power and financial services secretaries to implement the recommendations of a high-level committee chaired by IIFCL chairman and managing director S B Nayar, which formally submitted its report on Thursday. The plan to restructure loans in the sector, on a case-by-case basis, was discussed during a meeting of bank chiefs on Thursday, which was also attended by finance minister Arun Jaitley.
The committee has suggested a slew of moves including an extension of commission date for power projects by one year and implement easier funding rules. For hydel projects this date is proposed to be extended by two years. Banks have to set aside funds for delayed projects as cash flows do not begin due to delays, said sources familiar with the matter. In addition, it has called for a new refinancing model for power projects hit by cancellation of coal blocks. While additional funds will be made available, the committee has recommended that the payment period should be 80-85% of the lease period.
(Source: The Times of India, November 21, 2014)
THREE POWER TRANSMISSION & DISTRIBUTION PROJECTS GET NOD
NEW DELHI: The Union Cabinet on Thursday cleared three major schemes for strengthening the country’s power transmission and distribution (T&D) network. It also cleared three major co-operation projects on energy and transport of the South Asian Association for Regional Cooperation (Saarc).
A major decision was for the Deendayal Upadhyaya Gram Jyoti Yojana, with a Rs 43,000-crore investment, announced in this year’s Union Budget for augmenting power supply to rural areas. This project is based on the Gujarat model of power reforms (done when Narendra Modi, now the prime minister, was head of the state government) for feeder separation of agricultural and domestic usage, and strengthening of T&D infrastructure in rural areas
Announced for strengthening of sub-transmission and distribution in urban areas, including 100 per cent metering and underground cabling, an Integrated Power Development Scheme was also given approval. It requires an investment of Rs 32,612 crore, including budgetary support from the Centre of Rs 25,354 crore over the implementation period.
This scheme would also look at completion of targets under the Restructured Accelerated Power Development and Reforms Programme for the 12th and 13th five-year plans, by carrying forward the approved outlay for the latter to this one.
The Cabinet also approved a North Eastern Region Power System Improvement Project. This is for six states – Assam, Manipur, Meghalaya, Mizoram, Tripura and Nagaland. With an estimated cost of Rs 5,111 crore, including capacity building expenditure of Rs 89 crore, it would be implemented with a World Bank loan and the budget of the ministry of power, in a 50:50 ratio. Implementation would be through Power Grid Corporation, in association with the six states, in 48 months from the date of release of funds.
Extending co-operation with Saarc countries, the Cabinet cleared three major proposals aiming to strengthen energy, roads and rail transport. A Saarc Regional Railways Agreement was cleared to facilitate multilateral agreements permitting free movement of people, goods and services within the region in the roads and rail sector. On the same lines, the Cabinet cleared signing and ratifying of a Saarc Motor Vehicles Agreement for the regulation of passenger traffic between India and Nepal.
It authorised the ministry of road transport & highways to sign similar bilateral agreements with other Saarc member-states. A Saarc Framework Agreement for Energy Cooperation was also given approval. Announced last month by Piyush Goyal, minister of coal, power and renewable energy, it is aimed at improving the availability of power in the region. It would facilitate integrated operation of a regional power grid.
(Source: Business Standard, November 21, 2014)
ELECTRICITY REFORMS – GO BEYOND POWER POLITICS
India is structurally short of electricity. Power pricing is fundamentally disconnected, with retail tariffs significantly lower than the cost of production. Electricity losses, due to theft and illegal connections, account for more than 25% of power generated in India. Massive state electricity board bailouts have resulted in higher losses, mostly borne by public sector banks.
The government seeks to change this situation dramatically by easing the rules for power plant construction, arranging fuel supplies and reforming the way electricity is distributed and paid for. It seeks to construct a new bargain -regular electricity supplies for higher prices, with pilfering deterred by fines. State governments, long used to providing free electricity as a sop, will now have to consider the financial viability of their private and public generators and distributors.
There remain many pitfalls. Full power availability needs to consider the needs of the rural poor particularly in electricity pricing. Combating power pilferage and a tradition of politically-motivated free power will require changing social attitudes. A belief in markets, instead of deficits, needs to be fostered.
Coal is India’s short-term play for energy security, filling the gap until gas and renewables scale up. With marginal steps taken to build high-margin coal beneficiation plants (lowering ash content) and the utilisation of e-auction for high-margin coal sales, double-digit coal production growth will be hard to achieve. Coal India is too big to fail. It must be broken up into its constituent parts.
Consider Singareni Collieries, India’s second-largest coal producer. Sta te ownership, as opposed to federal ownership, has helped it gain permissions and clearances quickly. Its local workforce has embraced mechanisation and an operational focus on growth. Coal India’s regional presence in Jharkhand, Orissa and West Bengal is hampered by state resistance to connecting railway lines and land acquisition. Far better to give states a stake in Coal India’s growth through outright ownership or equity stakes.
India’s electricity consumers are fed up of high price rises and cannot, in such middling economic circumstances, put up with continuing rises. No one doubts that coal should reflect the cost of production and pollution, with price escalation made over the coming years to shift power generation towards renewables and natural gas. But increased government royalties on production should be used to subsidise the price increase.
Unit electricity tariffs for industrial and corporate consumers are typically 30% lower than the cost of generation, excluding pilferage and political giveaways. Such tariffs should be rationalised, with firms graded according to their paying capacity . Dynamic pricing should be introduced, with industries and commercial institutions rightly facing market prices.
The reform plans seek to restructure state electricity boards (SEBs) with the right incentives. The power sector has over `. 5 lakh crore in outstanding debt, which rises by Rs 60,000 crore annually . The previous bailout plan has failed. With low tariff increases, high pilferage rates, higher electricity purchase costs and crippling debt, SEBs are due for another bailout.
The State Electricity Distribution Responsibility Bill, mandated for adoption to enforce fiscal discipline, remains in abeyance. A comprehensive programme to address operational productivity , manpower skills, fiscal responsibility and state proclivity for election-related electricity giveaways is needed. The distribution should be opened up further to the private sector, with smart grid applications and billing systems encouraged.
Solar and off-grid power are increasingly being encouraged through fiscal incentives. The Renewable Purchase Obligation (RPO) remains key . By forcing large consumers and electricity boards to purchase renewable power, this mechanism creates a ready initial market for the renewables sector. Enforcement remains patchy . In 201314, not a single major state met its RPO targets. Any financial restructuring of SEBs and utilities must be conditioned on compliance with strictly defined RPO targets. The clean energy cess, collected by Coal India, should be utilised for renewable investments.
Private investors are being encouraged to invest across the electricity value chain. Open access provision would allow major power consumers to choose among competing power companies over a common transmission and distribution grid. Power trading would lead to cheaper electricity and minimise disruption. Greater investments in transmission networks and a rationalisation of differential open access tariff structures across states would encourage this shift. With the government taking steps to address these concerns, regular 24-hour electricity may no longer be just a dream.
(Source: The Economic Times, November 21, 2014)
SPOT POWER PRICES FALL BUT STATES FACE SHORTAGE
NEW DELHI: The irony of the power market in the country is: While the prices in the spot market continue to decline, big states are still reeling under power shortages.
The power cost in the spot market touched as low as Rs 2.17 per unit for the northern region in October.
The peak shortage, however, remained high in the range of 3,000 Mw to 4,500 Mw, with stagnant volumes as states did not purchase.
Power distribution utilities in large states in terms of power consumption such as Uttar Pradesh, Punjab, Rajasthan and Haryana have long-term power purchase agreements (PPAs) with generating stations.
The cost of power is usually in the range of Rs 3.8-5 per unit.
“Indian Electricity Grid Code (IEGC) specifies that power procurement should be on the basis of merit order dispatch. In view of the above, states can buy power in the day ahead market, where the price is comparatively lower, to optimise its power procurement without any major risks,” said a senior executive at Indian Energy Exchange (IEX), country’s largest power trading platform.
Most of these states succumb to load-shedding in wake of not purchasing costly power.
Out of the total demand of 126,000 Mw, the peak shortage was 4,030 Mw in November second week.
During the peak demand season in the summer months, the shortage was 5,956 Mw.
“The total installed generation capacity in the country currently stands at 249,000 Mw, so generation is way more than the demand.
“This difference in demand and supply reflects the incapability in the transmission. If cheaper power available in the spot market is going unsold, then there is certainly a lag in the planning of power purchase and supply,” said the executive.
Discoms purchase power through long-term and medium-term contracts with major generating stations and through short-term contract from the spot markets viz trading platforms such as Indian Energy Exchange (IEX), Power Exchange of India Limited (PXIL) and others.
Currently, the capacity traded under short term is just nine per cent of the total power generation of the country.
The evacuation system in the country is driven by long-term power transmission. So, while the power generation in the country is in surplus, it remains unsold at the power trading platforms.
IEX said in FY-14, 5,300 million units of electricity remained unsold.
(Source: Business Standard, November 21, 2014)
NTPC RAISES $500 MILLION FROM GLOBAL BOND MARKET
NEW DELHI: The country’s largest power generating company NTPC on Thursday announced raising $500 million (about Rs 3,100 crore) through medium term bonds offering in the international markets.
NTPC launched a benchmark size, senior, unsecured, fixed rate 10 year bond transaction with an initial price guidance of US Treasuries, on Wednesday, the company said in a statement. Medium Term Note, which usually matures in five to 10 years, will give an annulised return of 4.375 per cent.
‘We are happy with the overwhelming investor response. It is an affirmation of our leadership position in the Indian power sector by the international investors and renewed interest in India,’ Arup Roy Choudhury, CMD, NTPC said.
‘We are glad to receive a warm welcome from investors on our return to the USD bond markets after a gap and at very fine levels inside of comparable secondary levels,’ Kulamani Biswal, Director (Finance), NTPC said.
The company intends to use the proceeds to finance its ongoing and new power projects, NTPC said.
(Source: Millennium Post, November 21, 2014)
SASAN’S ABILITY TO BOOST RELIANCE POWER’S PROFITABILITY IS YET TO BE TESTED
MUMBAI: Reliance Power (R-Power), promoted by billionaire Anil Ambani, appeared victorious when it bagged the 3,960 Mw Sasan ultra mega power project in a re-bid in July 2007 after the Lanco Infratech consortium was disqualified. Reliance Power matched Lanco’s ambitiously low rate bid of Rs 1.19 a unit.
The power plant, at a coal pit-head in Madhya Pradesh, is being developed at a cost of Rs 25,000 crore and is expected to be fully operational next month, with the commissioning of the sixth 660 Mw unit. For now, 3,300 Mw capacity of the Sasan project is operational but its accounts are not consolidated with Reliance Power’s because it is not fully capitalised. The numbers will be consolidated once the sixth unit comes on stream.
However, analysts are not sure how much Sasan will contribute to R-Power’s profitability. “Sasan will certainly be a profit making unit but how much can it really contribute to R-Power’s earning will depend on final orders from regulators on the pending issues,” said an analyst with a foreign brokerage, who did not wish to be identified.
R-Power has filed four petitions with the Central Electricity Regulatory Commission (CERC) for adjustments in rates related to changes in the law during construction and afterwards, an unprecedented depreciation of the rupee and a rise in prices for bulk diesel consumers.
The Commission has reserved judgment on these petitions. R-Power did not respond to a questionnaire sent to it on Wednesday.
Besides, R-Power is booking revenue for the Sasan plant based on the third-year rate, Rs 1.3 a unit, but the billing is based on the second-year rate, of 70p a unit, according to a CERC order that refused to accept March 2013 as the date the project went commercially operational.
“Due to this, corresponding receivables of Rs 350-400 crore have accumulated in R-Power’s books,” said Sumit Kishore, analyst with JP Morgan Securities. R-Power has appealed in the Appellate Tribunal for Electricity against the CERC order.
R-Power has 6,000 Mw operational generation capacity in thermal and renewable energy. This includes 3,300 Mw at Sasan, 1,200 Mw at Rosa in Uttar Pradesh and 600 Mw at Butibori in Maharashtra. The company, which bagged three of the four ultra mega power projects awarded so far, has 15,000 Mw of capacity under implementation.
There is, however, not much progress on the 4,000 Mw Krishnapatnam ultra mega power project, which will be fed by imported coal, or the 3,960 Mw Tilaiya project, another one on a coal pit-head.
R-Power has also planned another 3,960 Mw project at Chitrangi in Madhya Pradesh for which coal availability is not yet confirmed. Its 2,400 Mw power project at Samalkot in Andhra Pradesh also faces issues over gas availability.
“With the Supreme Court disallowing diversion of surplus coal for commercial purposes, the fate of the Chitrangi project now hangs in the balance,” said Abhinav Sharma, an analyst with HDFC Securities.
He is also not assigning value to the Krishnapatnam, Tilaiya, Chitrangi and Samalkot projects, implying 14,400 Mw of the 15,000 Mw capacity Reliance Power under implementation may be stuck.
This explains the high hopes Reliance Power has of the Sasan plant boosting its profitability. Reliance Power reported a net profit of Rs 253 crore for the six months ending September 2014, nearly unchanged from Rs 251 crore in the corresponding period of 2013-14. This was despite revenue growing at faster rate of 35 per cent to Rs 1,784 crore during this period, indicating rising interest costs and depreciation. Reliance Power’s debts climbed to Rs 30,316 crore debt in September 2014 from Rs 30,042 crore six months ago.
(Source: Business Standard, November 21, 2014)
INDIA PUSHES FOR ENTRY INTO ELITE NUCLEAR GROUPS
NEW DELHI: Having got a thumbs up for compliance with global non-proliferation regimes, India has made a more determined pitch for early induction into four groups.
Showcasing India’s non-proliferation credentials and the potential of Indian industry, foreign secretary Sujatha Singh told the India-US high technology cooperation group that the country’s inclusion in the regimes would benefit US industry.
“The export control reforms are all about striking a balance between national security and economic interests, both of which are crucial for a sovereign state. We also appreciate that export control reforms are closely linked to policy interests as countries tend to associate the easing of export restrictions with increase in trust. A country cannot be a partner and target at the same time.
“India’s impeccable non-proliferation records, our responsible behaviour as a nuclear state for more than three decades and strict adherence to a nuclear doctrine should continue to guide the expedited easing of export control restrictions. In today’s global supply chain of multiple suppliers, these would also be in the interest of US industry,” she said.
Calling for inclusion of India within a set timeline, Singh said, “We believe that India’s membership of the four regimes will be mutually beneficial taking into account the common non- proliferation objectives, global industry linkages and the contributions that Indian industry can make with its expanding capabilities to the global economy.”
Singh added, “I believe HTCG should not only respond to bilateral cooperative needs in the fields such as export control and licensing, but should look at the level of business and industry to shape itself into a more comprehensive technology strategy initiative that charts a template for public-private partnership.”
(Source: The Times of India, November 21, 2014)
LAND ACT TO RAISE COSTS, HIT OUTPUT: CIL
Coal India (CIL) has petitioned its parent ministry saying the new land acquisition Act’s compensation clause has inflated its cost of land, potentially jeopardising a plan to double output to 1 billion tonnes in five years, reports Sumit Jha in New Delhi. “Viability of our (mining) projects will be affected adversely on account of higher cost of land caused by the new R&R (resettlement and rehabilitation) obligations (imposed by the Act), a senior CIL official told FE on condition of anonymity.
“A number of projects, though technically feasible, are not getting financially viable and are falling short of threshold requirement of 12% IRR (internal rate of return). There is a need to relax the proposed compensation clause under the new Act,” the official added.
Given the stagnation in domestic coal output that widened the demand-supply gap of the fuel, power and steel companies have stepped up imports in recent years, despite the imports being costlier. The surge in coal imports also created an additional threat to India’s current account balance. Imports this year are likely to rise nearly 100% from three years ago to 180 million tonnes.
“(Issues of) land acquisition are definitely a major roadblock to Coal India. But we have recently made headway in West Bengal where the government has responded favourably on the land acquisition process for projects that have been stuck for several years. The central government is already working to make the law more conducive to acquisition,” coal secretary Anil Swarup told FE. Finance minister Arun Jaitley had said that land acquisition law would see some industry-friendly changes whether or not some sections resisted them.
According to an estimate, investments to the tune of Rs 5 lakh crore have been hit by paucity/unavailability of coal. CIL expects to mine 507 million tonnes in 2015, up 9.6% over last year. In parallel, the government is also making efforts to augment private coal production (from captive mines) to a creditable 400 million tonnes a year by 2019 from less than 50 million tonnes now. Swarup on Thursday told Reuters that India will allow locally registered foreign firms to mine and sell coal when commercial mining is permitted as part of the opening up of the industry that was nationalised four decades ago. But a timeline for this is yet to be announced.
While it was easier for CIL to acquire land under the Coal Bearing Area Act, 1952, which deals with land likely to contain coal deposits, the task becomes onerous when land is to be acquired under the new land acquisition Act for purposes not directly related to coal mining like setting up of offices or other permanent infrastructure, sources explained. The new Act stipulates compensation to the people affected by land acquisition for projects of public purpose should be four times the market value of the land in rural areas and twice the market rates in urban localities.
To achieve the 1-billion-tonne output target by 2019, CIL envisages taking up 126 new projects, with an estimated maximum output of 375 million tonnes per annum, in addition to 149 ongoing ones. Only 49 of these projects have already been approved by the firm after techno-economic studies. The rest of the projects are being considered by the firm and its respective subsidiaries.
“It (the target) would indeed be challenging in view of the progress being made. The government will have to ensure that both ongoing and new projects get requisite land in a time-bound manner since the gestation period involved in ramping up production after the possession of land is about three to five years,” the CIL official added.
CIL expects that the timely execution of three crucial railway lines in eastern and central India will help ramp bump production by 150 million tonnes. The other immediate steps being planned are equipment procurement for the new projects in a manner that leaves no scope for re-tendering, a common occurrence that has led to delays in several projects earlier. The Maharatna PSU also needs to put a special dispensation in place to obtain environmental and forest clearances. Recently, many of its projects got these clearances after the Modi government fast-tracked them.
(Source: The Financial Express, November 21, 2014)
BMS SPLITS WITH CIL UNIONS, EASES WAY FOR STAKE SALE
NEW DELHI: A rift between the five powerful labour unions at Coal India (CIL) is set to clear the way for Prime Minister Narendra Modi’s government to complete a stake sale in the state company that is critical to hitting budget targets.
A strike is scheduled to be held on Monday to oppose plans to sell 10 per cent stake in CIL and let private firms to mine and sell coal. Hoever, one of the unions, close to the Prime Minister’s nationalist party, says it has the backing of half of CIL’s 3,70,000 workers and will not join the strike.
“A strike is not the right process to get your demands met,” Baij Nath Rai, president of the Bharatiya Mazdoor Sangh (BMS) trade union, told Reuters.
The share sale could fetch the government a third of its US $9.5 billion annual disinvestment target. Asset sales are running behind schedule, pressuring a deficit target of 4.1 per cent of gross domestic product (GDP) for the financial year ending March 31, 2015.
Officials have marketed the sale in the United States and roadshows will follow this week in London and Singapore. However, no date has been set for the actual launch of the sale, sources with knowledge of the matter said.
The stake sale in Coal India would follow a 5 per cent divestment in state-run Oil and Natural Gas Corp (ONGC), worth US $2.8 billion and slated for December.
In 2013, the unions thwarted the previous government’s attempt to sell a stake in the public sector undertaking. Officials are now counting on PM Modi’s clout to push the sale through as part of broader efforts to end the country’s coal production crisis.
The unions rarely break ranks. With the BMS staying away, union leaders and company officials told Reuters, the one-day strike is likely to have little impact on CIL’s daily output of up to 1.5 million tonnes.
The BMS is part of the same Hindu nationalist umbrella group to which the Modi-led Bharatiya Janata Party belongs.
“The divestment will go through soon and worker unions will come on board. Coal India officials are in talks with them,” said a senior government official.
Hoever, the official, who spoke on conditions of anonymity, said the government did not believe in “steamrolling” anyone and was working on other ways to make the strike fail. He did not elaborate.
A senior CIL official said the BJP’s election victory in May had boosted the BMS’s influence over other unions, helping stem opposition to government measures and curb output losses.
“We don’t want to quarrel with the BMS but their leadership is under pressure,” said Jibon Roy, general secretary of the All India Coal Workers Federation.
“We oppose divestment, we oppose commercial mining by private firms, and we oppose anything that will lead to the demise of Coal India and bring slavery to India”.
(Source: The Financial Express, November 21, 2014)
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