NEW DELHI: The subsidy burden for distribution utilities of 16 states is estimated at Rs 72,000 crore, 17% higher than the previous financial year, due to higher costs and cheaper tariff for the farm sector, said ICRA in a recent note. The note states that state electricity regulators in 16 out of the 29 states have issued tariff orders for the current fiscal so far, attributing the delay partly to the recently-held Lok Sabha elections.
The rating agency noted that subsidy dependence for utilities in Maharashtra is likely to increase sharply by about 55% on a year-on-year basis in FY15 as a result of tariff subsidy of 20% announced by the state government, and also for Jammu & Kashmir where the subsidy burden is projected to rise by 51% due to continuous support for funding the high transmission and distribution losses. The subsidy for utilities in other states is estimated to rise by 8-20% in 2014-15, against 2013-14.
Regulators are yet to issue tariff orders for discoms which have implemented financial restructuring scheme (FRS), including utilities in Tamil Nadu, Rajasthan and Uttar Pradesh. This is a deviation from the terms of FRS and remains an area of concern, noted ICRA.
Tariff increases for 2014-15 have been very modest in Haryana and Karnataka. Out of these 16 states where tariff orders were issued, regulators in Arunachal Pradesh, Bihar, Gujarat, Jammu & Kashmir, Odisha, Uttarakhand and Madhya Pradesh have not approved any tariff revision for the distribution utilities, while it declined marginally in Himachal Pradesh as a result of tariff rationalisation. In case of other eight states, tariff revision has been moderate in the range of 5-10%. In Meghalaya, tariff has been raised by 15%.
Meanwhile, actual distribution losses for utilities across most states have remained higher than the loss trajectory approved by the regulator. Among the tariff orders issued so far, a wide variation, ranging between 5-15%, is observed between actual and allowed distribution loss levels in case of utilities in Odisha, Haryana and Uttarakhand. Under these circumstances, the ability of utilities to quickly reduce losses so as to approach the approved loss trajectory remains critical.
(Source: The Economic Times, July 24, 2014)
DISCOMS TO RAISE POWER TARIFFS; MOVE AIMED AT OFFSETTING INCREASE IN FUEL COSTS
MUMBAI: Power tariffs will rise across the country to reflect the increase in fuel cost due to higher railway freight, doubling of clean energy cess and rise in customs duty on coal, executives at leading companies and analysts said.
“It is inevitable that discoms across the country will have to increase tariffs, as they will have to pass on these costs in the form of variable charges to consumers and its only prudent that they do so as they are already under financial stress,” said Issac George, CFO, GVK Power & Infrastructure.
“Consumers will have to brace themselves for higher tariffs, which are more reflective of the discoms cost structure as discoms can no longer afford to provide tariff at Rs 2- Rs 2.5 as they can’t afford it. Also, from a policy point, if petrol prices can be deregulated and hiked periodically, why not electricity?” he added.
Senior executives of GMR and NTPC agreed, saying discoms across the country will need to increase tariffs by 30-40 paise to offset these costs. Both these executives did not wish to be identified.
Analysts also expect tariffs to rise. “According to our assessment, utilities across the country will have to increase tariffs by 14-15 paise on an average to offset the overall increase in costs arising from the recent railway freight hike, doubling of coal cess and increasing customs duties on coal from 2 to 2.5%,”said Debasish Mishra, senior director, Deloitte Touche Tohmatsu India.
“The impact of increase in clean energy cess and customs duty will be about 3 paise per kWh, but the impact of rail freight tariff hike is more sizeable, ranging from 2-3 paise per kWh for projects near coal centres to 8-10 paise per kWh for states further away,” said Kameswara Rao, energy, utilities and mining leader, PwC.
“Clean energy cess is presently levied on coal, peat and lignite for the purposes of financing and promoting clean energy initiatives and funding research in the area of clean energy. To finance these additional initiatives, I propose to increase clean energy cess from Rs 50 per tonne to Rs 100 per tonne,” he said.
Industry executives said the impact would be felt in Delhi also. “Delhi gets around 70% of its power from thermal power plants and around 18-20% from gas-based power plants, also around 80% of discoms’ costs go towards purchasing power and this cost has already increased by around 300% for the Delhi discoms in the last 12 years,” said a source close to the ADAG group-owned power distribution companies in Delhi.
(Source: The Economic Times, July 24, 2014)
ODISHA TO UP POWER GENERATION CAPACITY, MAY GET NEW UMPPS
NEW DELHI: Coal-rich Odisha is set to take a giant leap in raising its power generation capacity by proposing two more 4,000 MW ultra mega power projects (UMPPs) in the state. The state already has one UMPP at Tilaiya in the construction stage and another one at Bedabahal where final round of bidding is expected to be completed soon.
The state government has already identified land and coal mines for the proposed two new UMPPs and has sought Centre’s approval for coal block allocation so that bidding for the projects could start soon. The state government will approve the two new sites over next couple of months and then bring the projects before the Centre for approval so that the projects could be awarded latest by first half of next fiscal.
“Two sites, Bijoypatna in Chandbali tehsil of Bhadrak district and another at Narlas-Kasinga sub division of Kalahandi district have been identified for setting up additional UMPPs in Odisha. Bankhui coal block has already been allocated for the first UMPP while Ghogarpalli and Dipside of Ghogarpalli coal blocks has been identified for the second project but coal ministry’s approval is awaited,” said an official in Power Finance Corporation, the nodal agency for the development UMPP projects through special purpose vehicle (SPV). “Once all approvals are given, we would immediately put the projects under the bidding route,” the official added.
On its part PFC has already set up two shell companies Sakhigopal Integrated Power Co. and Ghogarpalli Integrated Power Co. so that projects could be put on fast track mode once approvals are through.
Odisha is expected to get about 5300 MW of power from different proposed UMPPs. This will also be the highest in any state from these large projects. After the UMPPs are commissioned the state is expected to have surplus power to the tune of 3000-4000 MW that would be used to meet energy needs of deficit states as well as sale in the open market.
The Modi government has identified UMPP programme for giving a push to rapid capacity expansion in the country. Apart from the two new UMPPs in Odisha, exploratory exercise is also going on to initiate such projects in the states of Bihar and Jharkhand. Efforts are on to complete the bidding for two UMPPs at Bedabahal in Odisha and Cheyyur in Tamil Nadu.
(Source: The Financial Express, July 24, 2014)
PROPERTIES OF NAVA BHARAT POWER DIRECTORS WORTH RS. 186 CR ATTACHED
HYDERABAD: The Enforcement Directorate has attached properties worth Rs. 186.11 crore belonging to two directors of Nava Bharat Power Projects in the coal scam related case contending they had a windfall gain of over Rs. 200 crore.
The Directorate has attached the properties belonging to its Directors (MD) P Trivikram Prasad and Y Harish Chandra Prasad (former director) in the matter relating to alleged illegal allocation of coal blocks to Nava Bharat Power Projects.
The CBI had filed FIR in September 2012 and a charge-sheet in March 2014 for offences under Section 120 B, criminal conspiracy read with Section 420, cheating against Harish Chandra Prasad, Trivikram Prasad and Nava Bharat Power Projects, a company of Hyderabad-based Nava Bharat Ventures Ltd.
As per the charge-sheet, the directors had entered into a criminal conspiracy with unknown officials of the Ministry and had managed to get coal blocks allotted.
Thereafter, the promoters and shareholders of NPPL sold their entire shareholdings in July 2010 to Essar Power for Rs. 231 crore, as against the net worth/book value of Rs. 22 crore as per the audited balance sheet.
The ED in its statement has contended that the allocation of coal blocks had exponentially enhanced the share value of NPPL.
By selling the shares of NPPL, the promoters had a windfall gain of more than Rs. 200 crore.
The Directorate of Enforcement has trailed the proceeds of crime and has attached them.
The proceeds of the crime worth Rs. 186.11 crore were found to be re-invested by Trivikram Prasad in the form of shares of Nava Bharat Energy worth Rs. 138.59 crore and by Harish Chandra Prasad in 8.4 MW wind turbine generators in Rajasthan in the name of Malaxmi Windpower valued at Rs. 45.19 crore, land belonging to Adobe Realtors, a 100 per cent subsidiary of PVP Global Ventures to the extent of 28 acres in Ranga Reddy district ( Rs. 11.20 crore), which was transferred by Malaxmi Group to PVP Ventures.
(Source: Business Line, July 24, 2014)
KNOWING INDIA’S NUCLEAR CREDENTIALS
There has been a concerted attack on India from the usual suspects in recent days even as it was entering into negotiations to formally accede to the Nuclear Suppliers Group. As if on cue, Jane’s Intelligence Review carried out a “(non)-exposé” of an Indian military nuclear facility in Karnataka. As exposés go, it was lame even by Jane’s standards. The nature of the facility and location have been publicly available since 2010. Yet, this new “exposé” was carried by all mainstream print news outlets and predictably sensationalised with everyone feigning alarm and anxiety. This manufactured outrage culminated with a sanctimonious editorial in The New York Times that was remarkable for the sheer incoherence of its own arguments. As the designated chief of the non-proliferation ayatollahs (with blinkers) and representative of a motley anti-India group in the U.S. that is shrinking ever so rapidly, this too was on expected lines.
Nevertheless, it is important to dismantle the uneasy arguments of this concerted assault on India’s credentials. The first proposition that must be taken issue with is the propagation of a falsehood that Pakistan and its reckless build-up of nuclear stockpile is somehow driven by India’s posture. While Pakistan’s careless impulse may be a result of more than one central factor, it is important to understand that this may have a lot to do with its suspicion of American intentions. The oft-quoted argument is that Pakistan seeks to equalise the conventional mismatch with India through a misguided reliance on numbers of strategic and tactical warheads. The irrationality and illogic of this behaviour has been proven by the fact that a country like North Korea has deterred both the U.S. and South Korea with explosions that may not even have been nuclear. Pakistan’s vertical proliferation has no mooring to India’s strategic programme — only to its own paranoia. The question is what fuels this? There is no denying the fact that Pakistan was able to obtain “nuclear immunity” for its sub-conventional activities against India with even 10 warheads. It may well be the fear of the U.S. that motivates its build-up today.
One motivator is the pressure the U.S. has been applying on Pakistan (without success due to the China factor) to sign onto the Fissile Material Cut-off Treaty (FMCT), which will forever cap the Pakistani arsenal. Contrary to what the commentary would have us believe, the FMCT, instead of curbing fissile material, has demonstrably accelerated Pakistan’s programme. So much for flawed logic. The second is the fear of the American “Plan B”, which involves the seizure and confiscation of much of Pakistan’s nuclear arsenal. The former has driven Pakistan to enrich their extant stockpile of radioactive material to weapons grade at breakneck speed. The latter has ensured that Pakistan is rapidly weaponising its fissile stock, in order to disperse and complicate any such weapons seizure plans. These facts are well understood in Washington policy circles. The exposés and op-eds of the past weeks are for most just another edition of Aesop’s fables.
The second issue has to be the demonstrated lack of understanding of the reality that shaped the landmark civil nuclear agreement between the U.S. and India. This nuclear deal was based on one clear principle — that India’s military programme would irrevocably be separated from the civilian programme. This was not an optimal solution for India or for the P5, but like all international agreements it was based on arriving at an outcome that would benefit all parties and enhance the global order. International Atomic Energy Agency (IAEA) Director General Mohammed El Baradei in an op-ed in the Washington Post , specifically welcomed the deal without reservation, his rationale being “either we begin finding creative, outside-the-box solutions or the international nuclear safeguards regime will become obsolete.” This is now accepted wisdom. The IAEA has gained unprecedented access to India’s nuclear facilities. India has accepted additional protocols this June, and has strengthened its own export laws. Significantly, the same journals and reports confirm that India’s own arsenal has remained stable over the period with no increases despite the turbulence in the neighbourhood. The benefits of bringing India inside the ‘non-proliferation tent’ are therefore vast, visible and tangible.
While these editorials and reports may very well have got their facts and numbers right, the analysis is so convoluted that the facts they quote cease to be relevant. The argument goes that India needs to sign the FMCT, the CTBT, and agree to mutual weapons reduction with China and Pakistan, since it is the nuclear deal with the U.S. that has set the cat amongst the pigeons. Here then is some measure of reality. India is already providing active support to the FMCT negotiations — it is a work in progress, not yet a concrete treaty. It has been Pakistan that has been blocking the work at the conference on disarmaments negotiations.
Additionally, India’s signature on the CTBT is explicitly linked to a similar U.S. and Chinese commitment. As long as they do not ratify these two treaties, India has a voluntary unilateral moratorium on testing. What is holding up Indian accession is U.S. and Chinese accession.
Experts in Beijing claim that China’s expansion and modernisation of its nuclear forces is being driven by the ill-advised and deeply destabilising withdrawal of the U.S. from the Anti-Ballistic Missile (ABM) treaty. This has nothing whatsoever to do with India.
India, therefore, is first being made the whipping boy for the failure of the American non-proliferation lobby in their own country and then it has to accept blame for the complex relations the U.S. shares with Pakistan and China that is driving these Asian allies to increase their arsenals. Can we get real, please?
(Samir Saran is vice-president and Abhijit Iyer-Mitra is programme coordinator at the Observer Research Foundation.)
(Source: The Hindu, July 24, 2014)
GOVERNMENT FORMS PANEL TO STUDY REVISION OF ROYALTY RATES ON COAL
NEW DELHI: The government has constituted a panel to consider revision of rates of royalty of coal which is at the present 14 per cent ad-valorem on price of the fossil fuel.
In order to consider the question of revision of rates of royalty of coal, “a Study Group…is hereby constituted,” according to an official memorandum. Ad valorem means according to worth. The term ad valorem can apply to any tax, fee, or duty that is charged as a percentage of the value of products, services, or property.
The nine-member panel under the Chairmanship of Additional Secretary Coal will submit its report to the Coal Ministry within six months. The panel has members from the ministries like mines and power.
The panel will examine whether the present rate of royalty on coal should be revised keeping in view the impact, if any, of such rates on consumers of coal. It would also study as to what should be the percentage hike or otherwise in the rates of royalty on coal from the present 14 per cent ad-valorem on price of coal.
The government had in April 2012 approved the adoption of ad-valorem regime for charging royalty on coal and lignite at 14 per cent and six per cent, respectively. The development helped the coal-rich states to generate an additional Rs 1,000 crore in revenues a year.
The rates of royalty on coal and lignite were also revised in August, 2007 on a hybrid formula, based on the recommendation of Committees — Economic Advisory Council to Prime Minister (EAC) — and the committee on royalty set up by the Ministry of Coal.
(Source: The Economic Times, July 24, 2014)
ALLOW PRIVATE MINERS IN COAL PRODUCTION, PLANNING COMMISSION TO TELL PMO
NEW DELHI: The Planning Commission plans to recommend to the Prime Minister’s Office that the government should allow private miners to sell coal, a move that could augment the efforts of state-run monopoly miner Coal India and boost fuel supply to starved power plants.
The Commission is set to make this recommendation on July 26 as part of its presentations on performance of various infrastructure ministries, a senior Coal ministry official told ET.
“The presentation will stress on supplementing efforts of coal PSUs (public sector units) with production from private sector,” the official said on condition of anonymity, adding that the commission would also emphasise on simplification of procedures to grant time-bound environment and forest clearances to coal mining projects.
Many of India’s power plants have been running below capacity for want of coal supply and Coal India has been finding it difficult to meet the rising demand for the fuel. Coal mining in several key states has been held up due to regulatory issues.
Secretaries of various ministries including coal and power are also expected to be part of the meeting where the commission will make the presentations.
(Source: The Economic Times, July 24, 2014)
COAL PROJECTS: ENVIRONMENT MINISTRY EASES CLEARANCE RULE
NEW DELHI: The Union environment ministry has decided to consider group clearances for adjacent mines of Coal India Limited (CIL), the near-monopolist in the sector, rather than considering individual project proposals. There would be only one public hearing, a prime necessity for environment clearance, for the identified cluster, instead of examining one mine at a time.
The request to do it this way had come from the coal ministry, which was keen to raise production and sidestep environmental objections.
“It will be prudent to adopt a cluster approach for mines situated close by, so that the cumulative impact of mining on the environment could be documented and that only one public hearing for this cluster is held,” the ministry said after holding discussions in its Expert Appraisal Committee meeting on the proposal. It has said the cluster classification should be based on multiple factors.
CIL mines which already have clearance, the coal ministry had also said, could be re-arranged into clusters for future clearances and earlier okays could be “treated as group environment clearance”. The ministry has identified 94 such clusters in various CIL units.
The coal ministry was clear that the aim was to boost production. It said while granting clearance to cluster mines, the pollution parameters in the area could be laid down by the environment ministry, instead of “restricting the production limit of the cluster mines…it would facilitate enhancement of production of the cluster/mines by taking additional pollution mitigating measures to offset the impact of additional production on the environment.”
Also, a clamp on production in one unit could be allowed to be compensated by enhancing production from the other mines, keeping the overall production limit of the cluster within the limit set while giving a green nod.
The coal ministry has often blamed delay in environment clearances as the reason for shortfall in coal production across the country.
The production target for CIL has been fixed at 507 million tonnes (mt) for 2014-15. It had produced 462 mt in 2013-14, about 20 mt below the target.
Pressure for this also comes from the power ministry. In June, the country’s power shortage was estimated at an average of 5,295 Mw. To ensure adequate availability of coal for the power sector, the coal ministry has asked CIL to step up output.
(Source: Business Standard, July 24, 2014)
CIL FORCED TO RECALL 122 SACKED STAFF
NEW DELHI: Coal India (CIL) has been forced to recall 122 employees who were sacked in May for indiscipline — an instance that highlights the extent of political intervention in the day-to-day operations of public sector undertakings.
The workers were sacked during general elections for not vacating land in lieu of which they were offered jobs in Mahanadi Coalfields Ltd (MCL), a subsidiary that contributes to about quarter of CIL’s production. The employees began agitation, leading to production loss to the company.
MCL on Monday announced recall orders of the employees as a ‘goodwill gesture’, but officials in the coal ministry said the company was under pressure from local politicians to take back the employees and end agitation that was impacting production.
While reinstating the employees, the company has exempted them from submitting affidavit that they will vacate their dwellings by October 31.
Submission of affidavits was a pre-condition to reinstating the employees as agreed during tripartite meetings held between MCL management, employees and the district administration.
A coal ministry official said a written agreement from workers was required to prevent them from back tracking. The employees were recruited in the Talcher coalfield between 1995 and 2009 and as per the terms of appointment they were supposed to vacate their land within five months of joining the company.
The employees did not vacate the land despite several notices by the company . A final notice was issued in November last year, asking the villagers of Hensmul and Jalinda to shift to resettlement sites.
“The terminated employees are backed by local politicians and trade unions in agitations that threaten closure of mining operations in Jagannath area of Angul district in Odisha that is expected to supply 40 million tonnes coal in 2014-15. MCL is forced to negotiate with them,“ the coal ministry official said.
A senior MCL official said re-appointment letters have been mailed to the workers and the same has been communicated to them. However, the employees continued the strike till late on Tuesday.
(Source: The Economic Times, July 24, 2014)
MAHANADI COALFIELDS STARING AT 10-MT PRODUCTION LOSS
KOLKATA: The Union Government wanted Sambalpur-based Mahanadi Coalfields Ltd (MCL), a subsidiary of Coal India Ltd, to be a front runner in meeting the nation’s fuel needs. The miner was mandated to contribute nearly 40 per cent of the total incremental production of Coal India in 2014-15.
However, the company’s plans to ramp up production hit hurdles when at least 122 villagers of Hensmul at the Talcher coalfields, Odisha, refused to vacate their land for MCL’s mining operations. The company had earlier terminated the villagers from service after they refused to vacate the land in lieu of which they were given employment. The Biju Janata Dal (BJD)led State Government, which wrested the Talcher Assembly constituency in the 2014 election, convinced MCL to withdraw the termination against the 122 and, oblige to their fresh set of demands.
The villagers, however, rejected the company’s offer, and have called another round of indefinite strike from Friday. MCL is now staring at a nearly 10 million tonnes (mt) production loss from two large mines — Bhubneswari (25 mt) and Ananta (10 mt) — in the rest of the fiscal.
At stake is nearly 2,000 MW electricity generation in the southern States.
“Helpless MCL awaits closure of the Talcher mines,” the company said on Wednesday. Sources say MCL sent an alert to the State Government on July 22. But it failed to yield any response so far.
Production at both the mines came to a near grinding halt as it’s risky to continue mining in the wake of villagers’ protests.
MCL Chairman AN Sahay said he is working on a contingency plan. But the advancing rains have made his job difficult.
As the rains were delayed this year, the company could produce 4 mt (17 per cent) more coal in the first three months of this fiscal. The situation has reversed since July 13.
According to Sahay, MCL mines recorded more than double the average rainfall in the last 10 days, meaning production has hit a slow track and a reversal is unlikely till October-November.
(Source: Business Line, July 24, 2014)
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