The power sector is one of the biggest concerns in terms of potential non-performing loans of banks given the host of headwinds the sector is facing. About a quarter of banks’ total exposure to the power sector is to the stressed players. Slowdown in the economy, shortage of coal, mounting losses of state electricity boards (SEBs) and non-remunerative tariffs have stymied the sector. The government’s high-level panel to revamp the power sector headed by former power minister Suresh Prabhu will have to address these challenges at the earliest and create a roadmap for the long-term sustainability of the sector.
As the gap between demand and supply of coal is increasing, the dependence on imported coal will rise from 150 million tonnes at present. Higher production from Coal India and allocation of more captive coal blocks can increase coal availability to the power sector. Augmenting mining capacity and faster approvals for mining lease extension can result in more production. Transparent allocation of coal blocks through competitive bidding, timely environment clearances and review of coal blocks that have seen continued delays in development can also enhance coal production and save private companies from costly imports. Most of the imported-coal-based projects cannot even recover their costs at the current level of tariffs.
Increasing power tariffs will improve the financial health of SEBs as they are one of the largest borrowers. Though many states have raised power tariffs over the past few years, it has not helped much in curbing the mounting SEB losses. Many SEBs do not even generate sufficient cash flows to fund their operating costs, let alone for capital expenditure and banks fund their operating costs through short-term working capital. It has to be kept in mind that consumers would be willing to pay a higher price for reliable power. If Gujarat can revamp its power sector successfully, why can’t this be replicated in other states.
(Source: The Financial Express, July 26, 2014)
BHEL DRAWS UP PLANS TO BOOST SOLAR PRESENCE
HYDERABAD: Power equipment maker Bharat Heavy Electricals Ltd (BHEL) has firmed up plans for a big presence in renewable energy, especially solar energy. It wants to play a significant part in establishing ultra mega solar photovoltaic plants of 1,000 MW each.
The State-run company, which is involved in solar energy research and some small projects, wants to play a significant role in the Government’s plan to create 4,000 MW of solar power.
The Union Ministry of New and Renewable Energy (MNRE) had unveiled plans to set up 4 x 1,000 MW solar units on the lines of mega thermal projects. The average per MW cost in solar energy is Rs. 7.5 crore and above.
BHEL is forming a consortium with Hindustan Salts, Power Grid Corporation, Solar Energy Corporation and Sutlej Jal Vidyug Nigam to take up this challenge. The initial plants are expected to come up in Gujarat and Rajasthan, where Hindustan Salts has a considerable land bank, B Prasada Rao, Chairman and Managing Director of BHEL, told Business Line .
The company is also setting up a 500-MW capacity plant to produce silicon wafers, at an investment of around Rs. 2,700 crore. BHEL is hoping to get up to 40 per cent project-funding from the National Clean Energy Fund. The project has been cleared by an inter-Ministerial group and will be taken up shortly, said Rao .
BHEL has been involved in solar energy research and small projects for some time. There has been slow progress due to various factors related to technology and costs, but now “we are confident to grow big, especially in India, which has is having many small players”, he said.
The utility is looking at States which give competitive incentives to take up solar projects. It is also banking on the ambitious plans of the Jawaharlal Nehru Solar Mission of the MNRE.
(Source: Business Line, July 26, 2014)
DVC SEEKS 51 PER CENT HIKE IN POWER TARIFF FOR 2014-15
KOLKATA: State-run Damodar Valley Corporation (DVC) has sought a sharp hike in power tariff for the current fiscal and the next two years.
In its multi-year tariff petition to the West Bengal Electricity Regulatory Commission (WBERC), DVC has demanded an average tariff of Rs 6.38 per unit for 2014-15, a jump of 51.5 per cent as compared to the 2013-14 tariff of Rs 4.21 per unit.
DVC sources told PTI that the tariff petition has been filed with WBERC for a period of three years — 2014-15, 2015-16 and 2016-17.
The power company has sought Rs 7.10 per unit for 2015-16, a rise of 11.2 per cent over 2014-15. While, for the third year, it has demanded a tariff of Rs 8.81 per unit, another 24 per cent rise over 2015-16.
If the terminal year’s (2016-17) tariff is compared with the last fiscal (2013-14) rate, then it comes out to be more than 100 per cent rise.
DVC supplies bulk power at 25 KV to Railways; 33 KV, 132 KV and 220 KV to different industries and distributing licensees; exports electricity to regions and also supplies power to the states of West Bengal and Jharkhand.
The reasons which the PSU cited to justify its hike include increase in coal prices, proposed escalation of fixed cost of DVC’s generating stations and T&D system and phasing out of some old power plants during 2016-17.
Meanwhile, the DVC tariff for the period 2009-10 to 2013-14 has not yet been cleared by WBERC and provisional current billing rates were based on the Central Electricity Regulatory Commission order.
(Source: The Economic Times, July 26, 2014)
DEDICATED SECURITY FORCE FOR NTPC’S UNIT IN ASSAM
GUWAHATI: Chief Minister Tarun Gogoi has ordered for a dedicated security force to be deployed at NTPC power project at Salakati so that the personnel could work round the clock and complete the delayed project by 2015.
The project was slated to come up by 2014 however frequent ethnic clashes in trouble torn Bodoland area has hampered the project. The Chief Minister asked his Principal Secretary, MGVK Bhanu to personally visit the site and take stock of the situation.
Assam power minister, Pradyut Bordoloi told ET, “Contractors engaged there face difficulty in working in Salakati due to local problems. We are posting dedicated security force to ensure that work is not affected.”
Assam is facing massive shortfall of power and restoring to load shedding. Gogoi has asked the officials to procure power from the national grid to meet the current shortfall of 200-300 MW daily. “Government is working on both short and long terms measures to reduce the shortfall of power.”
(Source: The Economic Times, July 26, 2014)
ADANI GROUP IN DISCUSSIONS WITH JAYPEE FOR BUYING HYDEL PROJECTS
NEW DELHI: Adani Group is in talks with diversified Jaypee Group for acquiring some of its hydro projects in a deal worth over Rs 11,000 crore.
Besides, Sajjan Jindal-led JSW Energy is discussing the possibility of acquiring some thermal assets of Jaypee Group, industry sources said.
According to them, Adani Group is in discussions for purchasing Jaypee Group’s hydel projects, having total capacity of 1,700 MW, including two in Himachal Pradesh.
The deal is estimated to be worth over Rs 11,000 crore, including debt component, sources said.
The projects being eyed by Adani Group include 1,000 MW Karcham-Wangtoo and 300 MW Baspa II — both are in Himachal Pradesh.
Sources said Adani Group Chairman Gautam Adani has already held talks with Jaypee Group Executive Chairman Manoj Gaur in this regard.
The discussion comes against the backdrop of TAQA pulling out of the deal to acquire Jaypee’s two hydro projects.
When contacted, an Adani Group spokesperson said it would not like to comment on any market speculation. A Jaypee Group spokesperson declined to comment.
At present, Adani Power — part of Adani Group — has an installed generation capacity of 8,580 MW. The proposed acquisition would help it to expand its portfolio as well as diversify into hydro sector.
On Thursday, Jaypee Group announced that Abu Dhabi National Energy Company (TAQA) was withdrawing from the nearly Rs 10,000 crore deal to acquire Karcham Wangtoo and Baspa II hydel projects.
(Source: The Economic Times, July 26, 2014)
GVK SET TO LAUNCH OPERATIONS OF TWO NEW POWER PROJECTS THIS YEAR
HYDERABAD: Hyderabad-based GVK Power & Infrastructure Limited is set to commence commercial operations of two of its power projects, which are under execution, during the current financial year.
According to GVKPIL, its step down subsidiaries, the Rs 4,750-crore Alaknanda Hydro Power Company (AHPC) and Rs 4,000 crore GVK Power (Goindwal Sahib) Limited will start power generation this year.
Though the 330 Mw AHPC project on river Alaknanda in Uttarakhand had to start operations during mid 2013, the unprecedented natural calamity that occurred in the state during June that year delayed operations. Incessant rains and resultant floods had breached the dyke in front of the power house submerging the already erected Units I, II and III that were ready for commissioning with a huge deposit of silt.
GVK stated in its latest annual report that AHPC has started removal of water and silt from the powerhouse by cleaning the equipment part by part, while the transmission lines are at the advanced stage of completion and expected to be ready by mid-2014 for synchronisation.
The company said Units I and II would be synchronised upon completion of transmission lines for commencing power generation. The other two units of AHPC were expected to be operational during the second half of 2014-15.
Similarly, the company said, the commercial operations of Units I and II of the 540 Mw Goindwal Sahib thermal power project in Taran Taran district of Punjab were expected to be started by the end of 2014. Around 97 per cent of the works had been completed and the two units were ready for coal firing. The company is now in the process of obtaining the consent from the Punjab Pollution Control Board to operate. It has a dedicated power purchase agreement with the Punjab government.
This apart, GVK Coal (Tokisud) Company Private Limited, which has 52 million tonnes of mineable reserves, is expected to commence commercial operations this year. It will cater to the requirement of Goindwal Sahib and the first supply of coal to the power project is scheduled to commence by the end of November 2014.
With regard to its existing gas-based power projects located in Andhra Pradesh, GVKPIL said they “are reeling under pressure due to acute shortage of gas supplies. The situation is likely to continue for the foreseeable future.”
It also stated its Deoli Kota Expressway project was expected to commence partial commercial operations during the second quarter of the current fiscal.
As much as 92 per cent of works of the Rs 823.5-crore project, implementing 83 km of road between Deoli-Kota section of national highway number 12 in Rajasthan, was stated to have been completed.
(Source: Business Standard, July 26, 2014)
GE DEAL WILL BOOST ALSTOM’S ENERGY BUSINESS IN INDIA, SAYS ALSTOM PRESIDENT
MUMBAI: The General Electric’s (GE) proposed deal with Alstom will help the French firm’s energy business globally, Alstom India president Rathin Basu told Business Standard. The deal is positive for India, too, because it will bring in capital, resources, besides providing access to the US market, he added.
Responding to query about a possible restructuring of Alstom’s operations in India after the takeover by GE, Basu said: “I don’t think there will be any job cuts and I believe GE will be keen on growth and how to grow business further in India.”
As part of the deal, GE will acquire Alstom’s energy assets globally for $16.7 billion, while the French company will retain its rail transport business.
From a global perspective, GE’s investments will lead to a long-term sustainable growth of Alstom’s energy businesses, which have been under pressure due to weakness in Europe and stiff competition from Chinese and Korean companies. Additionally, the acquisition will enable GE to expand into thermal and hydro electricity, and offshore energy business, which are Alstom’s core areas, Basu explained.
Alstom has two listed entities in India with business interests in power generation and transport – Alstom India and Alstom T&D (transmission and distribution). The French parent owns a 68.56 per cent stake in Alstom India and 75 per cent in Alstom T&D.
In May, GE proposed a Rs 2,340-crore open offer to acquire the publicly-held shares in Alstom’s two India units.
“I cannot comment on the open offer as it has been made by GE,” Basu said, when asked if there will be a revision in the offer price as it is lower than the current stock price. He however, added that the offer price made by GE was in accordance with the guidelines of the Securities and Exchange Board of India (Sebi) and there was no violation.
In FY14, Alstom T&D posted revenue growth of 12 per cent and 40 per cent profit growth. Basu said the firm has a healthy order backlog and the number of slow-moving orders (which is about 10 per cent of the total order book) are on the decline.
Basu is optimistic that the power sector – which has been facing problems owing to land acquisition issues, fuel shortage, non-payment of dues by state electricity boards – will revive within the next six months to one year. “The outlook is positive. The new government at the Centre has grasped the basic hurdles faced by the industry, but success will depend on the speed at which the corrective measures are executed. Fifty per cent of the problems are related to states and there has to be a coordination between states and the Centre. I hope good sense will prevail,” he noted.
Basu further said the company is well placed to tap opportunities in the transmission and distribution sector, including the development of the national grid, transmission corridors for renewable energy, smart grid, and smart cities. He, however, declined to give a specific revenue or order guidance.
On the Centre’s proposal to launch a high speed train between Mumbai and Ahmedabad, Basu said Asltom is keen to take part in the project. “However, the government will have to parallely upgrade the existing railway system from 80-100 km to 150-200 km, improve signalling, and carve out a special corridor for the high-speed train,” he added.
(Source: Business Standard, July 26, 2014)
TAX BENEFIT SCHEME RESTORED FOR WIND ENERGY SECTOR
NEW DELHI: In a move that will bring cheer to the wind energy sector, the Centre has reinstated the 80 per cent accelerated depreciation (AD) scheme for the sector through the Finance Bill.
AD is a tax benefit scheme that can be availed by anyone setting up or investing in a wind energy farm. Eighty per cent of the project cost is paid back if it is commissioned before September 30 of the financial year or 40 per cent of the cost if commissioned before March 31.
With the restoration of AD, the sector now has the two beneficial schemes. The other scheme is generation-based incentive (GBI) of 50 paise a unit of wind power produced, introduced in the 2011 Union Budget.
There was some confusion about the accelerated depreciation scheme this year, as the Budget speech in English did not mention it, while the Hindi version did.
“We would see a capacity addition of about 1,000 Mw of wind power during the current financial year, taking the cumulative amount to 3,000 Mw,” said a member of Indian Wind Turbine Manufacturers Association, adding the tax benefit would make sense by the next financial year.
Of the current capacity of 21,100 Mw of wind power, the installation under AD is 14,400 Mw. About 6,700 Mw was built under the GBI scheme.
“We will see massive scale-up of wind power, which suffered in the past two years due to confusion over incentive schemes,” said the Indian Wind Turbine Manufacturers Association member quoted above.
Till April 2012, the sector enjoyed two fiscal benefits — AD and GBI. AD had been in force for the industry since 2003 till 2012, when it was withdrawn.
GBI, announced in 2011 was discontinued in 2012, only to be reintroduced in 2013 in the Union Budget.
During the interim period of about a year, the sector was without any financial assistance, leading to a 50 per cent fall in capacity addition in 2012-13 to 1,700 Mw, compared with the previous year.
(Source: Business Standard, July 26, 2014)
ONLINE CLEARANCES FOR STALLED PROJECTS
HYDERABAD: Additional secretary and chairman of the Project Monitoring Group (PMG) in Cabinet Secretariat Anil Swarup on Friday said they would be launching web-based clearance system for issues pertaining to environment, mining and coal linkages of stalled projects from September.
“We have already launched the web-based forest clearances system. Now, we will be launching a similar web-based system for environmental clearances on September 1, for mining clearances on November 1 and for all coal-related clearances in the fourth quarter of the current financial year,” Swarup said after launching the state level investment tracking portal for the Andhra Pradesh government.
While 44 per cent of the problems relate to environmental issues, 60-65 per cent under the PMG radar are coal-fired thermal power projects mostly awaiting coal linkages. Set up in June 2013 to clear bottlenecks for stalled mega projects with an investment size of Rs 1,000 crore and above, the PMG had so far cleared 165 projects worth Rs 5.5 lakh crore while about 230 projects involving an investment of Rs 11 lakh crore are under processing, according to Swarup.
The PMG had already put in place a paperless complaining system for projects referred to by respective companies. Clearances that are pending would also be issued online once the new initiatives come into operation.
Swarup said the main issue with stalled power projects was the implementation of fuel supply agreements. Fuel supply agreements were signed with projects with a capacity of 72,000 Mw of the 78,000 Mw capacity approved for clearances by the previous government, according to him.
Since 50 per cent of the problems of these stalled projects was in the purview of the state governments, the PMG was actively engaging them to launch a similar monitoring mechanism for those in the investment bracket of Rs 100 crore to Rs 1,000 crore, he said.
AP is the 13th state to launch a similar online project monitoring portal so far.
Responding to questions on the Hyderabad metro rail project, Swarup stated the Telangana government had been proactively supporting the project and there were no issues as far as the project alignment was concerned.
(Source: Business Standard, July 26, 2014)
COALGATE: SUPREME COURT APPOINTS SPECIAL JUDGE, PROSECUTOR
NEW DELHI: The Supreme Court on Friday appointed additional sessions judge Bharat Parashar to preside over the special CBI court set up exclusively for holding day-to-day trial in cases related to the coal block allocation scam. It also named Chandigarh-based senior advocate RS Cheema as Special Public Prosecutor (SPP) in the scam.
A bench headed by Chief Justice RM Lodha directed competent authorities to come out with notifications within two weeks on appointment of the Special Public Prosecutor and the special judge to exclusively try the cases pertaining to coal block allocation registered under the Indian Penal Code, Prevention of Corruption Act, Prevention of Money Laundering Act and other allied offences.
It also restrained other courts in the country except itself from entertaining any matter in this regard and transferred all cases pending before different courts to the special court.
It said Cheema will have access to all material and documents relating to investigations for his opinion and assistance to the special court in view of the high magnitude and compass of the case and he will be free to have his own team of lawyers to assist him.
Cheema emerged as the unanimous choice over other suggested names of advocates after the bench was informed that senior advocate and former Solicitor General Gopal Subramanium had declined to take over the job of SPP for conducting the prosecution in the matter.
The court also allowed the Income Tax Department to inspect documents seized by the Central Bureau of Investigation from the premises of Hindalco for carrying out any bonafide investigation under the tax law.
The department had sought permission to allow one of its officers to go through the documents collected by the Central Bureau of Investigation while raiding the premises of Hindalco across the country, in which unaccounted cash of around R25 crore was recovered.
The investigation agency has initiated around 16 regular cases on coal block allocations, including those against then MP Naveen Jindal and former minister of state for coal Dasari Narayan Rao in relation to coal block allocation and against KM Birla and former coal secretary PC Parakh for alleged illegality in grant of blocks to Hindalco Industries.
(Source: The Financial Express, July 26, 2014)
COAL INDIA TO GIVE UP RS 2,865 CRORES FOR WHOM?
NEW DELHI: Power & coal minister Piyush Goyal’s decision to not sell coal through e-auction will take away Rs 2865 crores from the profit of PSU Maharatna Coal India Ltd (CIL). Around 52 million tonnes of coal that CIL sells through e-auction helps them to earn them 40% more than the notified price of coal.
But which power company this coal will be diverted to has created a major controversy. According to its own distribution policy, approved by the coal ministry, CIL cannot give coal to any thermal power plants which does not have back to back power purchase agreement with the respective state electricity board or state government. Without PPA, according to ministry sources, CIL cannot sell any coal to any power company as there is a fear of diversion of coal to black market.
In all fuel supply agreements, which CIL has already signed, there is no contractual default. There are some cases where CIL is not supplying coal which maybe because of payment default. CIL officials are not ready to accept that they have defaulted in any contractual obligation.
CIL sells only that quantity of coal through e-auction which they are unable to sell through fuel supply agreements. So, it is not very clear to whom the minister is directing to sell this quantity of e-auction coal. Many state governments like Maharashtra, Gujarat and Rajasthan have stopped taking enough quantity of coal from CIL but are taking it from Adani Group through import route.
But a few months ago, CBI’s action against imported coal has exposed a major scam that a huge quantity of imported coal has a prescribed calorific value deficiency. CBI alleged that even though the tender condition was to supply 5600 calorific value of coal but what was supplied was even less than 4000 calorific value. But some people still favour imported coal as it brings ‘value’ to selected individuals. But being a listed company, whether the independent director of CIL board would accept the directive of the minister or not is to be seen.
Power ministry has confirmed that CIL is already fulfilling its contractual supply obligation to NTPC but because of weather conditions, requirement of power has gone up and that is why the requirement of coal has gone up for NTPC which is not CIL’s fault. He also admits that out of 25 power plants, which has critical coal supply problems, only 6 belongs to the public sector NTPC.
The rest 19 are of private sector companies which don’t have power purchase agreement with respective state electricity boards or any other power buying companies. Some of them are also merchant power companies which sells power at an exorbitant rate.
So, taking away profit from public sector companies and subsidising private companies have created a flutter in the political circle.
(Source: Millennium Post, July 26, 2014)
MAHANADI COAL’S TWO MINES FACE CLOSURE IF LOCALS DON’T RELOCATE
NEW DELHI: Two coal mines of the Mahanadi Coal Limited (MCL), with a cumulative capacity of 35 million tonnes, face the threat of closure, if labour unrest continues. “By October, the mining activity is supposed to reach the village area, where the workers are residing. In case, they remain adamant on not leaving the area, we eventually would have to stop mining and close down our operations there,” said a MCL official.
The Bhubaneswari and Ananta coal mines of 25 million tonnes and 12 million tonnes of annual capacity, respectively, based in Odisha have been able to mine around 10-12 million tonnes till date. Another 15 million tonnes of coal still remains untapped, in the area which villagers have refused to vacate.
“We would have no option then to shift our manpower and machinery and abandon the site altogether,” said the official.
These two mines have been facing resistance from the labourers since 2010, when the rehabilitation and resettlement site for the families residing near the mines were ready. But the villagers refused to relocate. The Bhubaneswari mine is operational for the past four years, while the Ananta mines has been operating since 1991.
“We gave them final notice in October 2013 and waited till May 2014 to take departmental action, which meant ceasing their services to the organisation. Around 163 families out of 285 have shifted, but the rest are still contesting,” said a MCL official.
“The ousted workers started protest from May 20 and are currently sitting on a hunger strike. They even decided to close the mine from July 25 (on Friday) but deferred the decision on last moment. However, they also refused to relocate as well,” said an MCL official, who is in the know of the matter.
This unrest is having a cascading effect on the power production and manufacturing industry as well. The Simhadri power plant of the state-run NTPC is suffering the most from supply dip at MCL’s coal fields. Its daily supply of coal has fallen to 24,000 million tonnes from the daily requirement of 32,000 million tonnes. NTPC is making up for the loss by importing coal, which the officials said, was adversely affecting its operational cost and there are a few buyers for costly power.
Even captive power producers (CPPs) of industries around Odisha and South India, with annual requirement of 27.6 million tonnes of coal have not received adequate supply from the past two months. “Around 10,000 Mw of power production capacity of CPPs is lying stagnant due to non-availability of coal. We are forced to buy costly power from thermal plants, which is not feasible,” said a senior member of Indian Captive Power Producers Association.
MCL officials said for four days from June 10 to 14, the production was shut, affecting supply of 0.1 million tonnes of coal per day but now it’s back to normalcy. “The recovery is slow but production is not halted,” he said. Senior officers at the parent company Coal India Limited refused to comment on the development citing the absence of any full time chief managing director of the organisation as the reason for ambiguity and labour unions creating anarchy.
(Source: Business Standard, July 26, 2014)
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