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September 2016

Volume 5 | Issue 5 | `100

www.InfralinePlus.com

The Complete Energy Sector Magazine for Policy and Decision Makers

Make in India:
Limited impact
on energy sector

Government pushes 100% As solar rooftop goes slow,


rural electrification to government doubles target
achieve 24/7 power supply for solar parks

Amit Jain VK Arora Ravi Singhania Shravan Sampath


Managing Director Chief Mentor Managing Partner CEO
CMI Ltd Karam Chand Thapar & Bros Singhania & Partners Oakridge Energy
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&2016 Yearbook
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Key Highlights
Sector Performance Review: FY 2015-16
Key Policy and Regulatory updates
Extensive Database of Sector specific Companies including
Manufacturers, Developers, EPCs, BFSIs and Consultants
Top management with contact details
Direct exposure to top decision makers and influencers

tory 2016 tory 2016 ory 2016


Yearbook & Directory 2016 Renewable

Yearbook & Direc Yearbook & Direc ory 2016 Yearbook & Direct
Yearbook & Directory 2016 Oil & Gas

Yearbook & Direct


Yearbook & Directory 2016 Roads
Yearbook & Directory 2016 Power

Power Oil & Gas E nergy


Renewable Roads

For any further information, kindly contact us on the below mentioned coordinates:
Ashwini Solomon, (Manager Business Development)
Tel: +91-0120-6799157/100 (D), +91-9811708110 (M)
Fax: +91-0120-6799101;
Email: ashwini.solomon@infraline.com
marketing@infraline.com
InfralinePlus
The Complete Energy Sector Magazine for Policy and Decision Makers
September 2016 | Volume 5 | Issue 05

Editors Letter Editorial


Shashi Garg, Editor
The energy sector has been into an overdrive since
the last few years thanks to the quick decision
making, policy reforms and proactive measures News Team
Chetan Gupta
taken by the government. However, one central
idea behind these measures has been the policy
to promote domestic manufacturing in all sectors Analyst
under the Make in India umbrella. It has been Mohd. Arif
two years since this programme was announced,
September 25, 2014, to be precise; however, the
Content Consultant
results are yet to be seen on ground, especially in the energy sector.
News Monster
A lot more needs to be done to boost domestic production of natural
resources and manufacturing of equipment.
Nonetheless, there have been some positive developments in the
power sector of note. While the jury is still out on the claims being
made with regard to India being power surplus, there is no doubt
Business Development
that the Government is aggressively pursuing its goal of 100 percent
electrification to provide 24/7 power supply. Close monitoring is being Manoj Narang, Director
done through Gram Vidyut Abhiyanta (GVA) and various actions are also Tel.: 0120-6799106 / 100
being taken on a regular basis to expedite the progress. Email: manoj.narang@infraline.com

The Government is also trying to revive stranded gas-based power


capacity in the country. Under the governments revival plan for stranded
gas-based power plants, LNG is be imported and cash-strapped state
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power distribution companies are financially supported to buy electricity
from them. The fourth reverse e-auction to provide subsidy to buy gas Ashwini Solomon
for running stranded power projects and those operating at sub-optimal Tel.: 0120-6799157/100
Mobile: +91 9811708110 1
level is likely to be conducted after October.
Email: advertising@infraline.com
The recent revision in the rail freights has caught everyone off guard. The
move is being fiercely debated, especially by the power companies, as it
is likely to push up tariffs of power produced from coal-based plants by
8 to 10 paise per kWh. Clearly, the sector is unhappy given that it is yet to Circulation & Subscription
come to terms with the Clean Cess levied earlier this year. Sneha Pandey
A debate has also been ignited in the renewable energy sector. While Tel.: 0120 6799125
the blossoming of the solar growth story is for everyone to see, we Email: sneha.pandey@infraline.com
bring to you an interesting piece which argues that the current rapid
transformation seen in the solar sector may not be sustainable in the
long run due to various financial and technological challenges that are
Form IV
expected to arise. It is claimed that while talks of how policy making in Periodicity of its Publication: Monthly
the solar power sector is currently driving growth but it could result in Printers / Publishers /
Mrs Shashi Garg
substantial stressed assets due to various financial challenges facing Editors / Owners
the solar industry in India. It will be interesting to see how this growth Nationality Indian
14-D, Atmaram House, 1, Tolstoy Road
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Managing Director and Editor 1, Tolstoy Road, New Delhi - 110001
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owner Company
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Signature of the Publisher
September 2016
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InfralinePlus

Contents
Editors Letter
1

Cover Story 33
Make in India: Limited impact on
energy sector so far
The Make in India programme is yet to make
an impact on the ground despite a series
of measures taken by the Modi government
to improve the ease of doing business. Two
years after the campaign was launched by
Prime Minister Narendra Modi in September
2014, private investment is still trickling in. The
government is banking on public spending to
drive the growth. However, this strategy has

33
its own limitations and cannot substitute for
private investment.
2

Power Coal
4 19
News Briefs p4 News Briefs p19
In Conversation: Amit Jain, Managing Director, CMI Expert Speak: VK Arora, Chief Mentor, Karam Chand
Ltd p8 Thapar & Bros p22
Expert Speak: India Power Corporation Ltd P11 In Depth: Under utilisation of thermal power plants
cause of worry for power producers p24
In Depth: Government aggressively pursuing 100% rural
electrification to achieve 24/7 power supply dream P13 In Depth: Coal freight rate hike a mixed bag P28
Statistics p17 Statistics p31

Topics Covered Topics Covered


Power equipment Coal import
Cables and transformers Coal transportation
Rural electrification Coal production
September 2016
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Oil and Gas Renewable


39 49
News Briefs p39 News Briefs p49
In Conversation: Ravi Singhania, Managing Partner, Expert Speak: Shravan Sampath, CEO, Oakridge
Singhania & Partners p42 Energy p54
In Depth: Gas-based power plants: Gas-ping for fuel! In Conversation: Pradeep Misra, CMD, Rudrabhishek
 p44 Enterprises Pvt Ltd p56
Statistics p47 In Depth: As solar rooftop goes slow, govt doubles
target for solar parks p58
In Depth: Government looks at providing impetus to
small hydro programme p61
Statistics p64

Topics Covered Topics Covered


Legal issues Solar tariffs
3
Gas supply Solar parks
Crude oil import Small hydro production

Expert Speak/Interview

Amit Jain VK Arora


Managing Director Chief Mentor
CMI Ltd Karam Chand Thapar & Bros Off Beat
66
Event Focus: Law- Assemble India Summit by Infraline
Energy

Reports & Studies


69
People in News
Ravi Singhania
Managing Partner
Pradeep Misra
CMD
71
Singhania & Partners Rudrabhishek Enterprises Pvt Ltd
September 2016
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NewsBriefs | Power National


India powers past 6,000 MW mark in nuclear energy Power thieves in rural India steal
over 20percent of electricity
power. Once the output of Unit II is scaled
up to a full 1,000MW in two months, Indias
22 nuclear power reactors will be able to
generate 6,780MW of power and the Nuclear
Power Corporation of India Limited (NPCIL)
expects four more reactors to be commis-
sioned in a year. Unit II is functioning smoothly
as scientists seem to have incorporated the
right lessons from hitches that marred Unit Is
functioning after attaining criticality in 2013.
With synchronization of the second unit of The two 1,000MW nuclear units built with
the Kudankulam power plant, Indias civil Russian assistance have made Tamil Nadu the India is looking to its countryside to
nuclear programme has reached a couple of highest consumer of nuclear power on a daily understand how more than 20% of power
landmarks: the Kudankulam project turned a basis. Kudankulam I and II are also the last distributed by state retailers goes missing.
page on protests and a legal challenge over its nuclear units in India built with foreign collabo- Rural Electrification Corp. plans to install
safety parameters in the Supreme Court, and ration that will not attract the liability clause equipment that will transmit usage data
India crossed the 6,000 MW mark in nuclear legislated after the India-US nuclear deal. from metres at each of the countrys
100,000 rural feeder stations, one of the
Prices of gas for power projects may fall further final electricity distribution points between
power plants and customers. Data from
Power Minister Piyush Goyal expects prices to the meters, which will be installed by state
fall further in the next round of subsidy-based retail companies, will be streamed live
auction of gas for power projects, given the to the public. Tracking rural usage is part
softening of global rates and muted electricity of Prime Minister Narendra Modis vision
4 demand in the country. Generators are unable of reforming the countrys power sector
to sell power as distribution companies are and lighting every home in the country by
buying cheap electricity on a short-term basis 2019. Regional distributors lose almost
from the market, which makes for a strong 23% of the electricity they buy through
case for the bids to be even more favour- theft, unmetered usage and dissipation
able for the government. In an attempt to through old wires, hurting their finances
kick-start stranded gas-based projects, Prime and preventing them from repaying debt.
Minister Narendra Modis government had round of bids will start soon and we are look- A federal-government plan to make them
introduced subsidy-based auctions to import ing at the possibility of even lower prices given profitable has set a target of bringing that
gas and supply it to these power units. Lower that the international gas prices are much down to 15% by 2019. The data gathered
prices for gas would translate into a lower sub- lower than what they were one-and-a-half from the feeders will be posted on a new
sidy burden for the government. The fourth years back when we formulated the scheme. smartphone application.
India urges power producers to seek opportunities overseas

India is urging its power producers to look Tata Power Co. Ltd., among Indias biggest
overseas for new markets as fewer new private producers, has signed agreements to
plants are needed at home amid surplus build two wind power projects in South Af-
generation capacity. The Indian government rica and has commissioned a 120 megawatt
is encouraging state-run power producers to hydro project in Zambia. Indias coal-based
build plants overseas, Coal and Power Min- power plants used 60.9 percent of their
ister Piyush Goyal said recently. The country capacity in June, according to the power
is projected to report surplus power supply ministrys Central Electricity Authority.
for the first time in at least eight years dur- Plants operated by private companies and
ing the year ending March, even as several provincial governments reported an even
parts remain without access to electricity. lower utilization rate. That has led to stock-
State-run generators NTPC Ltd. and NLC piling of coal, which helps produce more
India Ltd. as well as private producers can ments. NTPC, Indias biggest generator, than three-fourths of Indias electricity. Coal
explore opportunities in Indias neighboring is building a 1,320 megawatt coal-based India Ltd., which accounts for more than
countries and beyond, Goyal said. Some power project in Bangladesh and is consider- 80 percent of Indias output, is also seeking
have already signed international agree- ing setting up another plant in Sri Lanka. markets to export the commodity.
September 2016
www.InfralinePlus.com

NewsBriefs | Power National


Power prices to rise, with coal freight hike, green cess Discoms to turn around by next
year thanks to UDAY, says power
a unit from its surplus availability and secretary
reduction in price in both the domestic and
international markets. According to NTPC,
after accounting for all costs, the price of
power would increase by close to 25 per
cent on an average for all its units. For
pithead plants, the fuel price escalation is
12-25p a unit and for non-pithead, 28-40p
a unit of power produced. Pithead plants
are in the vicinity of a coal mine. This might
New rate and cess increases would erode disturb the merit order of states procuring
the benefit to power plants from surplus power from NTPC. The companys energy Power distribution continues to be an
coal availability. The recent freight rate cost came down to Rs 1.69 a unit in Febru- area of concern. However, with the imple-
increase by Indian Railways for coal and ary, from Rs 2.03 a unit a year before. The mentation of Ujwal DISCOM Assurance
the clean energy cess doubling to Rs 400 decrease in price was due to rationalisation Yojana (UDAY), aimed at making ailing
a tonne for coal has offset by 15p a unit of linkages and reduction in imported coal power distribution companies (discoms)
of power of the earlier total benefit of 35p consumption. to operationally efficient, some are ex-
pected to witness a turnaround in a year,
Kudankulams second unit connected to grid said Union Power Secretary Pradeep
Kumar Pujari. Pujari said since the launch
Kudankulam Nuclear Power Projects of UDAY in November the debt service
(KNPP) second unit, which has a capacity liability of discoms has reduced because
of 1000 MW, went online recently, and of the reduction in losses and a dip in
is currently operating at 170 MW output. generation cost. The Centre has already
With this, the atomic power generation extended the deadline for implementing 5
of Nuclear Power Corporation of India UDAY by a year to March 31, 2017. About
Ltd (NPCIL) has crossed 5,000 MW. The 15 states have joined. Discoms capacity
second unit will be disconnected from the to buy, purchase and supply power 24x7
grid after four days for testing and will be is still a question. Lot of focus is being
reconnected a week later. After clearances given to distribution so that discoms
from the Atomic Energy Regulatory Board, turnaround both financially and in opera-
the power generation will be increased in unit went critical on July 10, 2016. The tional efficiency. They have to improve
stages. By November, the unit is expected First Unit (1000 MW) of KNNPP was operational efficiency, reduce aggregate
to touch its full capacity of 1000 MW. dedicated to the country early this month transmission and commercial (AT&C)
Currently, the unit has permission to by the Prime Minister. losses, which are quite high, Pujari said.
operate up to 50% capacity. The second
35 percent of Indias total thermal power capacity lying unused

More than a third of Indias 303 gigawatt to non-availability of coal. Another 5,650
thermal power capacity is lying unused mw have neither coal nor power supply
while the rest is running at a shade over contracts with any distribution company.
55% utilisation owing to inadequate The next set of 9,316 mw have coal supply
demand. Utilisation is expected to fall contracts but does not have power supply
further if more capacity is added as agreements. Yet another set of 2,940
planned by the government, portending mw have letter of coal supply assurance
losses for power firms. About 35% of the from Coal India and has managed to sign
total capacity, or 104 gigawatt, is lying idle power purchase agreements but has not
at present. The government added about been receiving coal from the state-run
24,000 mw of fresh conventional capacity miner. The last set includes 3,300 mw of
last year and plans to add 86 gigawatt by plants that do not have power purchase
2022. In addition, 100 gigawatt of solar agreements and despite Coal Indias
capacity is to be added by 2022. The list of These include 6,360 mw capacity that assurance of supplies, have not been
shut units includes a chunk of 31gigawatt does have power supply contracts with receiving coal.
capacity that was set up after 2009. distributioncompanies but is lying shut due
September 2016
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NewsBriefs | Power States


Punjab goes all out to sell excess power, but finds no buyers Chhattisgarh curtails power tariff for
industry
consuming their power. But not even a single
utility in the country has come forward to
buy that power. Hence, the state is unable
to sell the 2,520 megawatts available with
it. Highly placed officials within the Punjab
State Power Corporation Limited (PSPCL)
said that Secretary (Power), Punjab, recently
wrote to many states to sell and sign a
long-term contract for selling power from
In a desperate effort to sell excess power, two of its private thermal plants. The letter Chhattisgarh governments decision
the state government has made an offer mentions that the state power utility was to reduce power tariff for industry
to all power utilities across the country. In willing to enter into a long-term agreement had allegedly come as a shock for the
the offer, it says that is willing to dedicate to sell roughly 2,500 MW 540 MW (2x270 secondary steel makers in neighbouring
power from two private thermal plants MW) from GVK Thermal power project near state of Maharashtra. Following the fall
recently established in Punjab with an aim Goindwal Sahib and 1,980 MW (3x660 MW) in demand and high running cost, over
to sell its surplus power for which it is from Talwandi Sabo Power Limited (TSPL), 100 mini steel plants in Chhattisgarh
paying fixed charges to these plants without they said. had cut short the production over last
many months that finally culminated in
Maharashtra to soon introduce Energy Conservation policy
complete shut down on August 1. The
The Maharashtra government will soon mini steel plants across Chhattisgarh
come up with an Energy Conservation policy remained close for over a fortnight
which will aim at enhancing the technology before the state government announced
required to improve electricity generation. to curtail power tariff for the industry.
The draft of the policy, prepared in line with The annual production output from
6 the Centres Energy Conservation Policy secondary steel makers in the state
of 2001 has been uploaded on the govern- had been about 4 million tonnes (MT).
ments website and recommendations have Of which, about 25 per cent steel is
been invited from experts to strengthen consumed in the states domestic
it. Increase in development and growing warming. Also since these resources are market. Since, the steel makers were
population of the state has caused a rise in fast depleting, there may not have enough of not fulfilling the domestic demand, steel
the demand for electricity. Most of the elec- them in future. Thus these resources need from Maharashtra started coming to the
tricity being generated today is through non- to be used wisely. The Energy department local market. The average per unit power
renewable sources like coal, fuels, etc which said the new policy will ensure the govern- tariff for the industry was reduced by Rs
causes an imbalance in nature, increases ment provides sufficient infrastructure for 1.40 per unit and would remain effective
pollution and is a factor causing global the Centres 2001 policy to be implemented. till March 2017.

West Bengal is no more power surplus: CEA

West Bengal is no longer a power claimed to have started exporting power


surplus state with deficit projected to to power starved states considering
be 7,257 million units in 2016-17. The Bengals power surplus status, the CEA
Central Electricity Authoritys (CEAs) figures points out to the need of importing
Load Generation Balance Report (LGBR) power both during the peak and off peak
prepared with the inputs of Regional periods. A host of states including Delhi,
Power Committees (RPCs) says that Haryana, Himachal Pradesh, Gujarat,
West Bengals projected off peak demand Madhya Pradesh, Maharashtra, Daman
for 2016-17 has been pegged at 52,867 & Diu, Dadra Nagar Haveli, Tamil Nadu,
million units; while availability is 45,610 Karnataka, Kerala, Puducherry, Orissa,
MUs. Peak requirement for the same Sikkim, Mizoram and Tripura are now
period has been estimated at 8,439 MUs power surplus putting the countrys
against a peak availability of 8,138 MUs. average power situation to an off peak
This puts the state to a 13.7% and 3.6% surplus of 1.1% and peak surplus of 2.6%,
off peak and peak deficits respectively, power surplus status. Although West according to the CEA.
bringing the state out of the much touted Bengal chief minister Mamata Banerjee
September 2016
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NewsBriefs | Power International


ADB approves $810m for Pakistans
Chinese giant to buy Pakistani power company for $1.6 bn
energy sector overhaul
last year that will link its western Xinjiang
province to Pakistans Gwadar port with a
series of infrastructure, power and transport
upgrades. We have received the public an-
nouncement of intention for acquisition of up
to 66.4 percent of the shares of K-Electric
Limited by Shanghai Electric Limited, a
Pakistan Stock Exchange notification said.
The Karachi Electric Corporation, set up in
1913 as a public-sector company, was sold
Chinese multinational Shanghai Electric is to Saudi Arabias Aljomaih Group in 2005, The Asian Development Bank (ADB) has
set to buy the utility serving Pakistans big- who in turn sold it to the UAEs Abraaj approved an $810 million multi-tranche
gest city of Karachi, in a $1.6 billion deal that Capital. Chinese interest is tremendous in financing facility to develop Pakistans
will be the biggest private-sector acquisition Pakistan and the new deal would be quite power transmission system, to improve the
in the countrys history. China is stepping attractive to strengthen cooperation under reliability and quality of energy supply, and
up investment in its South Asian neighbour CPEC, said Taha Javed, director of research to meet increasing demand for electricity.
as part of a $46 billion project unveiled at Alfalah Securities. A reliable and sustainable power sector
is critical to the economic growth and
Brazil to seek foreign investment in its power sector wellbeing of Pakistan, said Megan Wolf,
Energy Specialist with ADBs Central and
Brazils government will organize a roadshow West Asia Department. Fast implementa-
abroad to attract investors to its power tion of this facility and related reforms to
sector, and might consider offering power alleviate power shortages will improve
delivery contracts denominated in dollars to the prospects for the economy. The loan
facilitate attraction of foreign capital, Luiz facility will help fund the staged rehabilita- 7
Barroso, head of state-run power research tion and expansion of the transmission net-
company EPE, said. The fact is that there is a work, increasing transmission capacity and
lot of money available on European invest- energy efficiency and security. It will also
ment funds ... That money flows to countries support government efforts to develop a
who offer dollar-denominated receivables, Financing has been a critical factor for power more transparent and efficient power sec-
Barroso said. Since the long-term currency companies in Brazil, as the worst recession tor by promoting reforms in the National
risk is difficult to manage, it is an idea to in generations squeezes available credit. Al- Transmission and Despatch Company
be discussed, he added. Barroso cited this though recognizing Chiles economy is much Limited, and the sectors newly established
months large Chilean power auction, where more linked to the dollar compared with commercial operator, the Central Power
bidders, mostly from Europe, were awarded Brazil, Barroso said a discussion regarding this Purchasing Agency (Guarantee) Limited.
dollar-denominated power delivery contracts. possibility should take place.

China faces massive closures of small thermal power plants

Chinas power generation companies will positions. Guodian has 130 gigawatts (GW)
have to contend with massive closures of of installed capacity as of 2015, with renew-
their smaller coal-fired power plants as ables accounting for 49 percent of the total.
government plans to shut excessive coal As the world biggest wind power supplier,
and steel capacity deprives the plants of it has 24 GW of wind power installed, or 18
customers. China Guodian Corp, one of percent of the nations total, said Zhang.
the countrys top five state-owned power Profits have shrunk at Chinas big power
companies, might stumble as less-efficient companies in the first half of the year as
zombie power plants are no longer result of sagging power demand and rising
economically viable, said Zhang Shumin, coal prices. Coal fires nearly three-quarters
Guodians chief economist. Thermal power of Chinese power plants, but plants were
plants will face difficulties in operating in standards, said Zhang. To relocate employ- operating at historically low utilization rates
the next three to five year, even edging to ees from the small thermal power plants, last year. Thermal power plants under 600
bankruptcy, especially for the small plants Guodian plans to increase wind power in its megawatts would be phased out as they are
and those that fail to meet environmental portfolio to transfer those workers to new not efficient.
September 2016
www.InfralinePlus.com

InConversation
High voltage transmission conductors
and cables to see exponential growth
The market for high voltage transmission conductors and cables
is all set to explode with various reforms being unleashed by
the government in the power transmission sector. Amit Jain,
Managing Director, CMI Ltd, talks to InfralinePlus on his outlook
for the cabling sector in India and how initiatives like Make in
India are provind a huge impetus to the industry. Excerpts:

How has Make in India impacted preferred supplier for most of the cat-
the power and industrial sector egories that we operate in.
in India? This has been visible in our growth
Make in India has provided huge im- trajectory, with us going from the
petus to the industry. With the focus on revenues of Rs. 5.6 Crore in 2004-05 to
new manufacturing facilities in India, Rs.240.22 Crore in 2015-16.
the wire and cable industry market Amit Jain, Managing Director, CMI Ltd
8 will definitely witness growth. With How has been the growth in your
the focus shifting to manufacturing in cabling business in the power (Rs. 65 Lakh Crore) investment kitty by
India, the industry wins in another way. sector? Has growth in renewable 2030. The figure includes around 40%
The Chinese sub-standard imports, that energy capacity impacted your of power gear which will be by domestic
cause trouble and give a bad name to business? manufacturing in India. This in itself is a
the industry, will possibly be replaced Currently, around 17% of our revenue stupendous figure and possibly points to
by more robust Indian counterparts. comes from the power sector. We have the explosive growth in the sector.
Indian companies in the industry already geared up and have increased We have already put in place
will start focusing on R&D, inno- our capacities substantially to meet the most modern technology in our
vation and product quality, now that with the increased demands. We expect recently acquired facilities, which are
the industry is gearing up to take the that the power industrys share of our possibly the best in the country. We
challenge head-on and is creating revenues will rise up to around 20% are amongst very few companies in the
awareness about the need for certifica- and the real numbers will possibly country to manufacture the maximum
tions and educating the influencers in double with the increased demand. range of cables being used and will,
the category. In power sector, cables and wires we hope be able to reap rich dividends
are a must and we believe that there from the investments made.
What are the key growth drivers will be many openings and avenues
for your power cabling business? available in the sector in the future. We Which are your key segments/
The key triggers for our business have the wherewithal and the product target market for high voltage
growth have been constant innovation range to service this sector as well. and low voltage power cables?
and focus on R&D. We have managed Our key segments / target market for
to stay ahead of the technology curve Please share your outlook on the high voltage and low voltage power
and this has been because of us pump- power sector going forward in cables include Power Generation &
ing money into the R&D and we have terms of demand and supply as Transmission Utilities, Power distri-
innovated new products, keeping in well as growth. bution Utilities, Refineries & Petro-
mind changing customer requirements. The Government is spending a huge chemicals, Cement & Steel Industry,
We have been also focused on amount in the power sector which is Railways & Metro Rails and Infrastruc-
quality and that is why we are the pegged at around US$ 1 trillion ture Development Utilities.
September 2016
www.InfralinePlus.com

What are the key issues facing


cabling business in India? What
suggestions would you have to
remove those challenges?
The issues are three-fold. First are input
costs, which can change majorly with
the variation of cost of raw materials.
Second is issue of Certification, which
is not standard and the third is the issue
of Quality and R&D in the segment.
The fluctuating price of raw material
(copper, etc.) is a concern area for
key players in the organized sector.
It becomes an even bigger issue for
players like us who are focused on the
B2B segment and our bottom lines are
impacted by any steep price rise in the
raw materials. Global certifications and
requirements are very different from that operates in. With the private players
in India and it is therefore important that R&D is most important entry into transmission, there is a huge
any Indian organization that is looking in any field of manu- scope for extra high voltage transmis-
at sales abroad keeps itself updated facturing activity. One sion conductors and cables, because
on the global requirements. Constant has to be updated with we believe that the focus will be on
quality checks, R&D, Innovations, and changing the legacy cables and putting
Certifications will be the way to excel in
any development in the 9
in wires and cables that can minimize
exports. Short turnaround times on cus- industry in the country distribution losses due to leakages,
tomization requirements will also help or abroad. The require- which currently accounts for as much
the cable companies in the global arena. ments of customers as 20-25% of the total power being
Research & development is most are changing. Special transmitted.
important in any field of manufacturing We believe that our market share will
activity. One has to be updated with
insulating / jacketing grow exponentially with these and we
any development in the industry in the compound with special will become an even more significant
country or abroad. The requirements parameters like fire re- player in our categories of operation.
of customers are changing. Special tarding parameters, low We already manufacture a wide variety
insulating / jacketing compound with smoke zero halogen of conductors and cables targeted at the
special parameters like fire retarding EHV transmission segment and will be
parameters, low smoke zero halogen
parameters etc are now able to capitalize on the opportunities.
parameters, TPU jacketing, lead free in demand
compounds etc are now in demand. Please elaborate on your
Similarly there are different changes in R& D activities including putting in the presence in the power and
construction of cables to meet specific most modern plant & machinery and industrial segment in terms of
requirement of customers and we take trying new raw materials. your offerings.
all necessary action to meet these spe- In the power and industrial segment,
cific requirements. The government is opening up CMI is manufacturing cables, wires &
We at CMI continuously keep the power transmission segment conductors for wide range of application.
ourselves updated with the development for private players. What are There is a wide variety of cables that we
in the industry in country or abroad & your views on this issue? have developed and have the capability
with new requirements of the customer The possibilities are immense and we to manufacture. We are in B2B segment
and keep producing cables as per believe that the opening up of transmis- and have clients in every sector.
customer requirements. We are putting sion sector will exponentially explode
in a good portion of our revenues in the market in the segments that CMI For suggestions email at feedback@infraline.com
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ExpertSpeak
UDAY needs to deliver for
actual power surplus
Amidst claims that India is likely to have a power surplus for the
first time this year, India Power Corporation Ltd analyses the
situation on ground and picks out financial restructuring of power
discoms through UDAY scheme as one of the most crucial steps
in achieving the same.

For the first time in history, India will Karnataka. As many as 17


have a surplus of electricity. This un- states in all will have
precedented situation will be reflected a power surplus
in both peak (3.1% surplus) and non- in 2016-17. One
of the
peak (1.1% surplus) hours in 2016-17, Tamil Nadu key factors
according to data from the Central is pre- responsible for the plants. The government has promised
Electricity Authority. While parts of dicted to slow growth of power to electrify all villages in the country
India have earlier shown a surplus for retain its generation is the dire by 2018, as well as provide electricity
short periods of time, this is the first surplus at financial status around the clock. To accomplish the 11
time in the entirety of its existence that least until of state power latter, it has entered into agreements
the entire nation will, on average, show 2021, which discoms and action plans with 21 states. By
no deficit in power supply and demand. is further set 2022, the government plans to add 175
This stands in sharp contrast to the situ- to boost industrial GW of renewable energy to the grid.
ation a few years ago, where the deficit growth in the state. The state of power in the country
was as high as 13%. Even as recently It should also be noted that while is best captured by looking at the per
as the last fiscal, the power deficit the date indicates that the demand of capita power consumption. On average,
stood at 3.2% and 2.1% during peak state power utilities is being met, it the per capita consumption in India
and non-peak hours respectively. does not account for power failures and in 2015-16 was 1,070 kWh, less than
outages caused by rolling blackouts half the world average of 3,026 kWh.
Uneven distribution of power and technical failures. This low number can be attributed to
supply Indias massive population, the low per
The difference between power supply Reasons for power surplus capita income of its citizens, and large
and power demand has been positive The current government, which looks swathes of people not having access
since June 2016, but it is not evenly on the power surplus as a major accom- to electricity. The states of Odisha,
distributed across the country. As many plishment, has undertaken several steps Kerala, Madhya Pradesh, Mizoram,
as half of the states still have some de- to reach this outcome. One of these Tripura and Sikkim will be power
gree of power deficit, while others have has been an increase in coal produc- surplus states this year, but their per
a surplus. Southern India is expected to tion, revitalising several stalled power capita power availability is lower than
have nearly 3.3% surplus power, and plants. This has also led to India, the the national average.
new plants generating a total of 2,000 worlds largest importer of coal, to look The demand for power in India has
MW are likely to be commissioned in for export markets for domestically grown in fits and bursts, registering at
the region in the near future. produced coal. 6.6% in 2014-15 and 4.2% in 2015-16.
Tamil Nadu, once a severe power According to union power minister, Bihar, the state with the lowest per
shortage state, now has the largest Piyush Goyal, 46,453 MW of conven- capita power availability in the nation,
power surplus, ahead of the other tional power capacity has been added saw a massive jump of nearly 25% for
surplus states such as Maharashtra, to the grid under his oversight, along both these years a strong indicator of
Madhya Pradesh, Delhi, Gujarat, and with the revival of 11,000 MW of gas increased availability to the people.
September 2016
www.InfralinePlus.com

ExpertSpeak

Slow growth in power ` 430,000 crore in 2014-15 -- with COMs. This scheme aims to improve
generation portfolio interest rates of 14-15 per cent, Piyush operational efficiency, reduce power
Even with improvements in the domes- Goyal recently said. costs, reduce interest costs and enforce
tic coal supply and the falling prices financial discipline on state-owned
of international coal, India has shown UDAY the likely saviour DISCOMs.
only gradual growth in its power gener- To help rectify this situation, the Under UDAY, states will be
ation portfolio. Thermal power rose by government has instituted the Ujwal allowed to take over 75% of the
only 5.5% between 2014-15 and 2015- DISCOM Assurance Yojana, a finan- DISCOMs debt, which they can then
16 to 943 billion units; in contrast, cial turnaround and revival package offset through the sale of government
the countrys thermal power capacity for the countrys beleaguered DIS- bonds. 50% of the debt will be taken
has grown much faster, growing to over in 2015-16 and 25% in 2016-17.
2,10,675 MW from 1,51,490 MW in The remaining 25% will continue as
three years. This represents a growth Even with improve- loans with limited rates of interest
rate of 11% per annum. This means ments in the domestic imposed on them. These measures will
that the capacity utilisation at power coal supply and the provide immediate pecuniary relief to
plants has fallen, and plant load factors falling prices of inter- DISCOMs, improving their financial
are declining all over the country. health and cash flow.
One of the key factors responsible for
national coal, India has To qualify for UDAY, DISCOMs
the slow growth of power generation is shown only gradual have to meet efficiency parameters
the dire financial status of state power growth in its power through the adoption of new tech-
distribution companies (DISCOMs). The generation portfolio. nologies (such as smart meters and
accumulation of decades of inefficiency, Thermal power rose grids), upgrades to their transmission
coupled with subsidised tariffs, has led infrastructure and periodic hikes in
to these companies amassing a collective
by only 5.5% between tariffs. States are further incentivised
12
loss of ` 3.8 lakh crore (March 2015). 2014-15 and 2015- 16 to join UDAY through provisions
Unable to purchase the power needed to 943 billion units; in for additional funding from the
to continue operations, DISCOMs are contrast, the countrys Centre and increased coal supplies.
forced to shed excessive load instead. thermal power capacity These incentives seem to have had
Due to legacy issues, DISCOMs the desired effect, as 18 states have
are trapped in a vicious cycle.
has grown much faster, joined the scheme in some measure
Operational losses are being funded growing to 2,10,675 MW or other.
by debt. The outstanding debt of these from 1,51,490 MW in The government hopes that the
DISCOMs has increased from about three years improved financial situation of
` 240,000 crore in 2011-12 to about DISCOMs will enable them to increase
their power purchases, boosting
demand as well as the capacity utili-
sation levels of power plants.
According to Goyal, the role of the
central government will be that of a
catalyst, enabling states and DISCOMs
to alleviate their financial woes while
taking a hands-off approach to the
process. Through UDAY, he hopes to
reduce the systemic cost of the power
ecosystem by ` 1.8 trillion every year
by 2019, against the prior scenario. He
also says that the scheme creates strong
incentives against DISCOMs relapsing
into losses in addition to solving
current issues.
The views in the article of the author are personal
For suggestions email at feedback@infraline.com
September 2016
www.InfralinePlus.com

InDepth
Government aggressively pursuing
100% rural electrification to achieve
24/7 power supply dream

13

Center plans to electrify 18,452 un-electrified villages within 1,000 days by May 1, 2018
Mini-grids being seen as a likely solution to meet the electricity demand of vast rural population

By Team InfralinePlus

Indias rapidly growing economy rapid urbanization and industrialization b) Basic lighting c) Irrigation d)
has fuelled an intensifying demand in the country. Communication e) Water heating f)
for electricity for which supply has As soon as Modi Government Cottage industry and so on. Rural
struggled to keep pace. India is now the came to power in 2014, it launched electrification can meet most of
fourth-largest generator of electricity one of its ambitious projects of Rural these and the impact can be seen
after Japan, United States and China Electrification. The center plans to on improved farm productivity,
though still comparatively low energy electrify 18,452 un-electrified vil- improved health and education,
access rate of 81% (World Bank, 2014) lages within 1,000 days by May 1, improved communication and eco-
leaving about 237 million people 2018. Rural electrification is often nomic development through creation
without reliable access to electricity. considered to be the backbone of of employment in rural areas which
The growth in demand for power has the rural economy. Rural energy traditionally depend on agriculture
outpaced the supply of power, led by needs include energy for a) Cooking related income generation activities.
September 2016
www.InfralinePlus.com

InDepth

Current Progress and dividing village electrification yanta (GVA) and various actions are
Last month, the government declared process into 12-stage milestones with also being taken on regular basis like
that 10,079 villages have been elec- defined timeliness for monitoring. reviewing the progress on monthly
trified (till August 22) under Deen- In order to expedite the progress basis during the RPM meeting, sharing
Dayal Upadhyaya Gram Jyoti Yojana further, a close monitoring is being of list of villages which are at the stage
(DDUGJY) scheme. With the electrifi- done through Gram Vidyut Abhi- of under energisation with the state
cation of these villages, the number of Discom, identifying the villages where
electrified villages in the country has The scale of the chal- milestone progress are delayed.
reached to 10,079.Out of these 28 newly lenge the government
electrified villages, four are in Assam, has set itself to achieve 24/7 power supply: Village
five in Chhattisgarh, three in Jharkhand, electrification holds the key
10 in Meghalaya and 6 in Rajasthan.
in three to four years The scale of the challenge the govern-
Out of remaining 8,373 villages, is nothing short of as- ment has set itself to achieve in three to
525 villages are uninhabited. 5,069 vil- tonishing. It will have four years is nothing short of astonish-
lages are to be electrified through grid, to provide an electricity ing. It will have to provide an electric-
2,590 villages to be electrified through connection to roughly ity connection to roughly 80 million
off-grid where grid solutions are out 80 million households households that are still not connected
of reach due to geographical barriers that are still not con- to the grid (2011 Census). Then it will
and 189 villages are to be electrified by have to ensure the connections actually
the state government, according to the
nected to the grid buzz with uninterrupted power that
statement released by the Ministry of (2011 Census). Then it reaches 237 million households.The
Power (MoP) last month. will have to ensure the government can take some solace from
The rural electrification scheme/ connections actually the fact that substantial connections
14 project has been undertaken on buzz with uninterrupted provided between 2011-14 will lower
mission mode and the strategy for power that reaches 237 the targets to be met in four years. To
electrification comprises squeezing the million households put this in perspective, between 2001
implementation schedule to 12 months and 2011, an additional 61.6 million
households got access to electricity.
Deen Dayal Upadhyaya Gram Jyoti Yojana (DDUGJY) aims at separating the The government will have to more
electric feeders for agricultural and non-agricultural purposes. The core objective than double the rate of electrification to
of separation of feeders is to provide regulated supply to agricultural consumers cover the remaining by 2019.
and continuous power supply to non-agricultural consumers in rural areas.
The role that electricity has played in
This arrangement allows the distribution company to regulate power supply to
agricultural consumers as and when needed. The separation of feeders helps reducing poverty is especially significant
in flattening of the load curve by shifting the agricultural load to off-peak hours because rural electrification is patchy
and thus facilitates peak load management. The scheme is also concentrating and the supply unreliable. Though it is
on strengthening the electrification infrastructure as laid out in the 12th 5-year interesting to note that how an individual
plan of RGGVY. village is classified as electrified
DDUGJY is an achievement at the policy formulation level. To achieve separation when - 1) Basic infrastructure such as a
of feeders and complete electrification- the scheme allows discoms (distribution distribution transformer should be made
companies) and power departments to submit a report that is first distilled by a available within the inhabited locality
nodal agency as recommended by the State Level Standing Committee setup
of the villages revenue boundary. This
under the RGGVY. This report is then passed on to a monitoring committee,
which then approves the final project after taking into account factors like cost- standard was inserted after it became
effectiveness, human resource development and of course the final impact of apparent that many states played fast and
the project. loose with the status of electrification by
The scheme also very clearly outlines the things it will engage in like installing of simply connecting multiple villages with
capacitors, high voltage distribution systems, erection of HT lines etc. and the single line or setting up a solitary utility
things it will keep itself out of like underground cabling and service lines to APL pole without a transformer; 2) Any
consumers among others. The DDUGJY scheme envisages connecting all the public place such a school, panchayat
33 KV or 66 KV grid sub stations/ billing offices / Regional / Circle / Zonal offices office, health centre, dispensary,
of utilities by extending optic fibre network being established under National
community centre etc, should be able
Optic Fibre Network (NOFN). Provision of 100% grant has been made under the
scheme for connecting the missing links of NOFN including terminal equipment. to avail of power supply on demand.
The logic here first and foremost was
September 2016
www.InfralinePlus.com

that critical institutions such as health Figure 1: Comparison of villages electrified vs individual
centres deserve a constant supply of households electrified under rural electrification (in 2015-16)
power. Secondly, it assumes that people
who live in villages prefer to congregate Villages Electrified vs Households Electrified
in public places; thus the prioritizing (2015-16)
of electricity to communal places
such as community centres; 3) The
number of households electrified should 97% 97% 99% 100%
93% 93% 93%
86%
be minimum 10% for villages which
67% 70%
are unelectrified, before the village is 60%
56%
declared electrified. This essentially
states that the minimum criteria that
needs to be fulfilled before a whole
village is declared electrified, is that 10% Jharkhand Bihar Madhya Odisha Uttar Pradesh West Bengal
of its households need to be electrified. Pradesh
The most troubling criteria is the
Villages Electrified Households Electrified
10% figure: there is a wealth of data
and reports that shows while Indias Source: Access to Clean Cooking Energy and Electricity report by CEEW
villages continue to reach almost 100%
electrification, its rural households lag villages where connectivity to the
behind. Nearly 96% villages in India are Renewable energy grid is not feasible or cost effective.
electrified but only 69% of homes have based mini-grids is be- DDG enables electricity generation at
electricity connections. For instance, in ing seen as a possible the local level using locally available
Uttar Pradesh, Indias most populous solution to meet the resources ensuring reduced dependence 15
state, 99% of villages are electrified, but electricity demand of on external resources. Local distribution
only 60% of households have access to vast rural population of networks or mini-grids are set up over
electricity, with three out of four rural a cluster of villages and powered by
electrified households in UP receiving
India which addresses a local generating plant which may
electricity for less than 12 hours a day.
the climate change is- be based on conventional fuels such
This implies that regular and reliable sues. Various renewable as diesel, natural gas, fuel oil or on
electricity could have a salutary effect in based mini-grid models renewable energy such as wind energy,
reducing poverty, regardless of how the have emerged in India. solar energy, hydro power, and biomass.
poverty line is calculated. They have been able to RE mini-grids have distinct advan-
set examples of how tages over central grid extension and
Rural electrification through mini-grids can bring an other decentralized energy options
renewable energy in providing access to reliable and
Renewable energy based mini-grids
end to energy poverty affordable electricity.
is being seen as a possible solution to
in India. But mini-grids 1. Compared to central grid extension,
meet the electricity demand of vast ru- developed so far in the RE mini-grids can be less expensive
ral population of India which addresses country are facing sev- due to lower capital cost of infra-
the climate change issues. Various re- eral challenges structure (depending on distance) and
newable based mini-grid models have lower cost of operation by avoiding
emerged in India. They have been able geography and the current state of transmission and distribution losses.
to set examples of how mini-grids can economy and village habitations, grid 2. In countries with power shortages,
bring an end to energy poverty in India. connectivity is neither feasible nor cost electricity supply through the central
But mini-grids developed so far in the effective. Therefore, off-grid solutions grid, especially in rural areas, may
country are facing several challenges like Decentralized Distributed Gener- not be reliable. In such regions, RE
due to high capital and operating costs, ation (DDG) facilities stand as an ideal mini-grids that can be designed and
high tariff and inconsistent revenue mode for supply of electricity. operated effectively, can be more
collection, low demand in the villages, DDG can be based on either reliable than the central grid in
and bureaucratic delays etc. conventional or renewable sources providing electricity access and can
In some states with its unique and is usually implemented in remote ensure local energy security.
September 2016
www.InfralinePlus.com

InDepth

Mini-grid policies to boost rural electrification needs to be fostered and strengthened.


Case Study: Uttar Pradesh In addition to technology and project
finance, affordable end-user financing
Uttar Pradesh government released its mini-grid policy in March this year to
through local banking and credit
provide thrust to the rural electrification. Under the scheme, the state government
institutions, entrepreneur development
will facilitate the private players to set up solar plants to power rural households
and recover tariff from the users. and capacity building programmes,
The policy has limited the size of mini-grid to 500 kW. It also states conditions and a supportive policy and planning
to qualify for state governments subsidy. framework are critical.
Developers need to procure their own land for the projects.
It mandates minimum eight hours of electricity supply - three hours in the Conclusion
morning and five hours in the evening to all households willing to pay in the Access to energy is a cornerstone for
chosen area. development and essential for a bet-
Supply for production and commercial needs for six hours. ter quality of life. When this access
There is also an alternative of not opting for government subsidy. In that case, does not exist or is very poor, it has
the developers have no obligation of a minimum supply and can charge a negative impacts on everything from
mutually-agreed tariff. education, to health, employment and
One of the most important concerns of the mini-grid developers has been the irrigation - touching all aspects of life
uncertainty of the plant when conventional grid arrives. The state has, hence, and livelihood.In India today, there
laid out two exit policies for the developers: exist approximately 237 (World Bank,
The energy generated from the plant will be received in the grid by Power 2014) million people still without basic
Distribution Companies (DISCOM) at the tariff decided by Uttar Pradesh Elec-
access to electricity and no matter how
tricity Regulatory Commission/ tariff decided on mutual consent. Project de-
the GDP figures continue to grow, there
veloper will be given priority for authorisation as a franchisee by DISCOM, or
will be no link established between
Based on the cost benefit analysis of the installed project, the project will
16 be transferred to the DISCOM at the cost determined on mutual consent such an increase and an increase of the
between DISCOM and developer by the estimation of cost / profit or loss of most basic standard of living of such
the project installed by the developer. people. This highlights the need to look
beyond metrics such as possessing an
3. Mini-grid developers have the electricity connection to meaningfully
potential to access capital beyond In India today, there describe the energy access situation.
the traditional power sector, and may exist approximately Households face severe challenges of
be able to provide quicker access to 237 (World Bank, 2014) quality, reliability and duration of sup-
electricity than central grid extension million people still ply which then drive their classification
that may be prone to bureaucratic without basic access to in the low energy access regions.
hurdles and slow implementation. electricity and no matter The challenge gets even more
4. Unlike other decentralized energy how the GDP figures complicated when confronting the fact
options like solar home lighting that energy access to people, if based
systems and off-grid lighting products,
continue to grow, on existing models will only be adding
mini-grids (depending on their size) there will be no link value to one aspect of their lives while
can provide electricity to not only res- established between taking away from many others. It is
idential loads like lighting and phone such an increase and imperative to design energy access
charging, but also to commercial loads an increase of the most to those without it in such a way
like mills and oil presses. basic standard of living that it leaves a very low carbon and
5. RE mini-grid developers have strong of such people. This ecological footprint. Thus, it is most
incentives to pursue demand-side highlights the need to crucial to design inclusive growth
management, to keep capital cost of models where a low carbon and
generation equipment low.
look beyond metrics ecological footprint remain important
6. Development and operation of mini- such as possessing an with the collateral advantage of a
grids can create local jobs. electricity connection to stimulated economy, good standard
For decentralized renewable energy meaningfully describe of living plus access to a clean and
(DRE) solutions to play a role in the the energy access healthy life.
larger development and electrification situation
conversation, a supportive ecosystem For suggestions email at feedback@infraline.com
September 2016
www.InfralinePlus.com

StatisticsPower
Details of state-wise and Utility-wise AT&C losses for 2012-13 to 2014-15
Details of state-wise and Utility-wise AT&C losses for 2012-13 to 2014-15
Region State Utility 2012-13 2013-14 2014-15
Bihar BSEB 59.4 - -
NBPDCL 50.85 41.93 41.76
SBPDCL 45.77 48.7 45.28
Bihar Total 54.64 46.33 43.99
Jharkhand JSEB 47.49 26.3 -
JBVNL - - 47.01
Jharkhand Total 47.49 26.3 47.01
Sikkim Sikkim PD 53.51 71.23 42.37
Eastern
Sikkim Total 53.51 71.23 42.37
West Bengal WBSEDCL 34.43 32.05 35.35
West Bengal Total 34.43 32.05 35.35
Odisha NESCO 39.61 36.47 38.36
SESCO 49.36 41.18 42.57
WESCO 41.87 41.24 41.03
CESU 43.43 38.48 37.08
Odisha Total 42.88 39.19 39.28
Eastern Total 42.04 36.24 39.64
Arunachal Pradesh Arunachal PD 60.26 68.2 67.83
Arunachal Pradesh Total 60.26 68.2 67.83
Assam APDCL 31.85 30.25 26
Assam Total 31.85 30.25 26 17
Manipur Manipur PD 85.49 43.55 -
MSPDCL - - 49.62
Manipur Total 85.49 43.55 49.62
North Eastern Meghalaya MePDCL 41.71 39.77 34.69
Meghalaya Total 41.71 39.77 34.69
Mizoram Mizoram PD 27.55 32.53 33.51
Mizoram Total 27.55 32.53 33.51
Nagaland Nagaland PD 75.3 38.37 78.48
Nagaland Total 75.3 38.37 78.48
Tripura TSECL 34.45 41.81 38.02
Tripura Total 34.45 41.81 38.02
North Eastern Total 39.97 35.92 35.29
Delhi BSES Rajdhani 15.16 16.19 10.76
BSES Yamuna 17.94 15.51 19.68
TPDDL 13.12 9.75 10.31
Delhi Total 15.22 14.09 12.9
Haryana DHBVNL 28.31 30.89 30.71
UHBVNL 36.97 38.61 34.83
Northern Haryana Total 32.55 34.33 32.52
Himachal Pradesh HPSEB Ltd. 11.9 14.82 15.21
Himachal Pradesh Total 11.9 14.82 15.21
Jammu & Kashmir J&K
60.87 49.14 59.04
PDD
Jammu & Kashmir Total 60.87 49.14 59.04
Punjab PSPCL 17.52 17.87 17.56
Punjab Total 17.52 17.87 17.56
Rajasthan AVVNL 19.9 22.06 28.13
JDVVNL 18.97 25.71 26.99
September 2016
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StatisticsPower

JVVNL 20.91 31.08 32


Rajasthan Total 20 26.77 29.28
Uttar Pradesh DVVN 45.69 36.47 40.18
KESCO 37.61 34.29 32.02
MVVN 45.83 14.43 35.18
Pash VVN 33.39 23.49 22.19
Poorv VVN 52.37 20.09 42.91
Uttar Pradesh Total 42.85 24.67 33.82
Uttarakhand Ut PCL 23.18 19.01 18.82
Uttarakhand Total 23.18 19.01 18.82
Northern Total 28.89 24.86 28.06
Andhra Pradesh APCPDCL 15.64 17.54 -
APEPDCL 10.15 6.57 7.67
APNPDCL 13.09 20.8 -
APSPDCL 12.74 11.77 12.01
Andhra Pradesh Total 13.7 14.77 10.55
Karnataka BESCOM 20.45 18.93 17.59
CHESCOM 30.42 33.92 21.64
GESCOM 18.28 30.45 21.25
HESCOM 20.44 20.42 19.49
MESCOM 14.57 14.83 15.72
Southern Karnataka Total 20.78 22.02 18.71
Kerala KSEB 12.32 11.45 -
KSEBL - 22.99 17.64
18
Kerala Total 12.32 16.48 17.64
Puducherry Puducherry PD 9.13 16.18 16.64
Puducherry Total 9.13 16.18 16.64
Tamil Nadu TANGEDCO 20.71 22.35 24.74
Tamil Nadu Total 20.71 22.35 24.74
Telangana TSNPDCL - - 16.49
TSSPDCL - - 11.91
Telangana Total - - 13.23
Southern Total 17.4 19.08 18.22
Chhattisgarh CSPDCL 25.12 23.17 27.84
Chhattisgarh Total 25.12 23.17 27.84
Goa Goa PD 14.14 10.72 13.31
Goa Total 14.14 10.72 13.31
Gujarat DGVCL 10.4 10.83 10.81
MGVCL 14.94 14.77 11.47
PGVCL 30.41 24.12 25.18
UGVCL 14.37 9.1 10.21
Western Gujarat Total 19.87 15.93 16.06
MP Madhya Kshetra
Madhya Pradesh 29.97 29.6 32.47
VVCL
MP Paschim Kshetra
28.16 21.15 30.79
VVCL
MP Purv Kshetra VVCL 36.4 34.83 27.09
Madhya Pradesh Total 31.15 28.03 30.26
Maharashtra MSEDCL 21.95 14.39 19.75
Maharashtra Total 21.95 14.39 19.75
Western Total 23.36 18.37 21.59
Grand Total 25.48 22.58 24.62
September 2016
www.InfralinePlus.com

NewsBriefs | Coal National


Odisha to get two coal blocks Land acquisition issues hit Uppur
thermal plant

a coal block to the Odisha Thermal Power


Corporation Limited (OTPCL) for its proposed
coal-based power plant at Kamakhyanagar
in Dhenkanal district. The Union coal ministry
is also believed to have agreed to the states
demand for allocation of another block to
the state-owned Odisha Mining Corporation
(OMC), said a reliable source. The OTPCL, a
joint venture between the OMC and Odisha
Hydro Power Corporation (OHPC), is planning
The state government is in the process of to set up a 3,200 MW (4x800 MW) power Six months after Chief Minister Jayala-
getting two more coal blocks from the Centre plant with an estimated investment of over lithaa laid the foundation stone for the
after state energy minister Pranab Prakash Rs 24,000 crore. Land acquisition for the proj- 1,600 MW Uppur supercritical thermal
Das recently had a discussion with Union ect is in advanced stage and the government power plant and handed over the Rs.
coal minister Piyush Goyal in New Delhi. It is has asked the departments to expedite the 5,580-crore contract order to it, Bharat
learnt that the Centre has agreed to allocate process to get all statutory clearances. Heavy Electricals Ltd. (BHEL) has been
NTPC awaits coal linkage to start work on Pudimadaka project unable to make much headway, appar-
ently because of official apathy. After
Work on 4x1000 megawatt NTPC Pudima- receiving the order, BHEL began establish-
daka Super Thermal Power Project is likely to ing boiler, turbine and generators, but the
gain pace once the Ministry of Coal finalises work has come to a standstill as there is
the Policy for Long-term Coal Linkage. Work delay on the part of the government in
on the ultra-modern project envisaged with issuing notification under Section 3 (1) of
an investment of about Rs.26,500 crore the the Tamil Nadu Acquisition of Land for 19
largest single investment post bifurcation in Industrial Purposes Act for taking over
Andhra Pradesh will be launched after get- 767.83 acres of patta lands. The District
ting green nod from the Ministry of Environ- Collector, after issuing a notification under
ment and Forests. MoEF is awaiting details Section 3 (2) of the Act in November 2015
on coal linkage. The tendering process, which and hearing objections from landowners,
is kept on hold, will be revived once long-term foreign exchange expenditure with domestic passed an order overruling their objections
coal linkage is finalised. The project, located coal, the project is being redesigned. The coal in January and paving the way for take-
about 60 km from here, was originally con- requirement will be around 15 to 16 million over of the land. However, the government
ceived to generate power by importing coal. tonnes per annum. NTPC is making prepara- was yet to issue the notification under
However, due to Government of Indias deci- tion to ensure 100 per cent ash utilisation for Section 3 (1) of the Act and publish it in
sion to encourage power generation to curtail construction work and exports. the gazette for taking over the land.

Coal India to give up Mozambique mining licences completely

Coal India Ltd (CIL) has submitted its (Instituto Nacional de Minas), Ministry of
application to National Institute of Mines Mineral Resources and Energy, Govern-
of Mozambique for complete surrender of ment of Mozambique, companys latest
prospecting licences which were awarded report said. CIL said in its report that the
to its wholly-own subsidiary Coal India response of the Government of Mozam-
Africana Limitada (CIAL) as mining would bique is awaited. For extraction of coal, two
be technically not feasible in the licence prospective licences covering a total area of
areas, its latest Annual Report said. A 224 sq.km. were awarded to CILs African
mineability study has been undertaken subsidiary with validity from August 2009 to
based on the findings of the geological August 2014. Out of 224 sq.km. of the total
report. The findings of the mineability study licence areas, 170 sq.km. area having no oc-
revealed that it is technically not feasible to the Government of Mozambique. Pursuant currence of coaly horizons till a depth of 500
do mining in the licence areas of CIAL. Ac- to this decision, applications for complete metre, as revealed in the geological report,
cordingly, CIL board accorded its approval surrender of prospecting licences have been was already surrendered to the Mozambique
for surrender of prospecting licences ... to submitted to the National Institute of Mines government.
September 2016
www.InfralinePlus.com

NewsBriefs | Coal National


Kamarajar Port records dip in handling of coal cargo Odisha demands grants for Pump
Storage Projects from NCEF

has reported a 15 per cent drop in cargo


volume till August 20 compared to the
same period a year ago as power producers
have slashed their coal imports. However,
this was only a temporary phenomenon
with the port recording a minimal slump
in cargo volume for July 2016. The official
said coal imports by TANGEDCO had come
Going by the phrase that one persons gain down this year through better inventory
could be anothers loss, the well-planned management and by giving priority to power
coal supply management executed by the generated by wind mills. Chettinad Coal
Tamil Nadu Generation and Distribution Cor- Terminal, which handles coal for private Noting that coal bearing states face the
poration (TANGEDCO) has resulted in a dip players, has assured that the import would adverse effect of mining, reduction in for-
in coal handling at Kamarajar Port in Ennore increase in a month as four vessels are est area, risks of environmental pollution
and other ports. Kamarajar Port in Ennore expected to call soon. and strain on water resources, Odisha
Chief Minister Naveen Patnaik has asked
CIL board okays pact with S African firm for mines acquisition the Centre to provide financial assistance
for Pump Storage Projects (PSP) from
Coal Indias board has approved signing the National Clean Energy Fund. It is re-
of a pact with African Exploration Mining quested that financial assistance (grant)
& Finance Corporation SOC Ltd (AEMFC), to the tune of 75 per cent, the estimated
owned by the South African government, coast of each PSP, may be provided
for acquisition of coal mines in that from the NCEF to bring down the cost
20 country. The CIL board has accorded of power from these projects in order to
approval to the proposal for execution make the tariff affordable, Patnaik said
of MoU between CIL (Coal India) and in his letter to Prime Minister Narendra
African Exploration Mining & Finance Modi. Patnaik further said Once the in-
Corporation, SOC Ltd (AEMFC), an entity stitutional mechanism is established and
owned by the government of South Africa in-principle clearance is accorded by the
for identification, acquisition, exploration, venue of signing of the agreement. Coal government of India, specific proposals
development and operation of coal assets and Power Minister Piyush Goyal had will be submitted by the state govern-
in South Africa, a recent report of the informed Parliament that CIL is looking at ment for execution of renewable energy
PSU said. The decision of the CIL board, entering into a pact with a South African projects including hydro-electric projects,
it said, has been communicated to AEMFC government miner to jointly acquire coal more particularly, the PSPs.
requesting them to finalise the date and mines in that country.

Coal imports in July dip 11 percent to 18 MT

Coal imports during July declined by 11.1 per real change is that with surplus generation
cent to 18.03 million tonnes (MT) on the back capacity and adequate supplies of domestic
of higher domestic availability of the fossil coal, imported coal-based power plants are
fuel. The figure stood at 20.29 MT during the largely filling in the marginal gaps in demand
same month last year, according to mjunction requirement, taking opportunistic advantage
services, an online procurement and sales of price movements, he said. Further, with
platform jointly floated by SAIL and Tata many imported coal-based load power plants
Steel. The decline in July imports this year operating at lower utilisation, the overall
against (the same month) last year can be at- volume of imports is likely to remain flat. Of
tributed to number of factors, including mon- the 18.03 MT of coal imported, non-coking
soon, when imports generally come down, coal was highest at 12.39 MT, followed by
Viresh Oberoi, CEO and MD of mjunction, said imports, added Oberoi. PwCs Kameswara coking coal at 3.76 MT, pet coke at 1.05 MT,
In addition, firmness in international coal Rao said that thermal coal imports, after a dip among others. However, coal imports in June
prices since beginning of June and higher last year, will be at similar levels. So, on the had gone up by 20.19 MT against 19.63 MT in
availability of domestic coal also impacted whole, the broader trend remains flat. The the same month of 2015.
September 2016
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NewsBriefs | Coal International


Thermal coal market analysts pinpoint Southeast Asia region for standout growth Vietnams July coal imports surge
141% on year to 1.31 million mt

coal-fired electricity is used to fuel their fast-


growing economies according to analysts. In a
10-year outlook for the Asia seaborne thermal
coal market, Mark Gresswell, chief analyst
at Australian mining consultancy group HDR
Salva said three-and-a-half billion people are
living on electricity consumption below the
level in Japan. Eight of the most populous
countries are in Asia, and 54% of the worlds
population live in Asia, he said. To move
these people to Japanese levels of power Vietnams coal imports surged 141% year
Southeast Asian countries including Malaysia, consumption will require an extra 4,300 TW on year to 1.31 million mt in July. Tradi-
Thailand and Vietnam are seen as growth of electricity generation. This step change in tionally a coal exporter, Vietnam turned
markets for the consumption of imported levels of power generation in Asia will require into an importer amid rising domestic de-
thermal coal in the years out to 2020, as an 80% increase in global coal production. mand, particularly from the power sector.
Australia was the largest supplier in July
Chinas Inner Mongolia cuts coal output by 10 pct in Jan-July at 463,131 mt, compared with 112,092
mt a year earlier; followed by Russia with
Inner Mongolia, Chinas biggest coal produc- 410,449 mt, up 168%; and Indonesia with
ing region, cut its output of the commodity 172,099 mt, up 37.1% year on year. In the
by just over 10 percent in the first seven first seven months, Vietnam imported
months of the year as part of its efforts to 8.38 million mt of coal, compared with
close 3.3 million tonnes of capacity this year. just 2.72 million mt a year ago. Australia
By the end of August, the region had shut was the top supplier over January-July 21
seven coal mines, Wang Binjun, the director too with 2.67 million mt, up almost five
of Inner Mongolias Economic and Informa- times from 586,761 mt; followed by Rus-
tion Commission, was cited as saying. The sia with 2.59 million mt, up from 551,849
region plans to close a total of 65 mines by mt a year earlier; and Indonesia with 1.5
2020 to curb crippling overcapacity in the million mt, up 57.2% from 955,878 mt a
sector. Authorities have allotted output cuts of Inner Mongolia said last week. Coal com- year ago. Vietnam National Coal Mineral
to ten companies, who will be responsible for panies in the region have posted a combined Industries Holding Corp., or Vinacomin,
implementing the cuts by the end of October loss of 4 billion yuan ($600.41 million) in the had to reduce its sales target to 36.5
to help the region meet its capacity reduc- first half, up 17 percent year-on-year, due to million mt from 39 million mt this year
tion target for the year, an official document the supply glut caused by Chinas economic due to competition from cheaper imports,
released by the Coal Industrial Bureau (CIB) slowdown, according to the CIB. Chairman Le Minh Chuan said in July.

Thailands July coal imports plummet 41% on year to 1.23 million mt

Thailand imported 1.23 million mt of coal same period last year, according to the data.
in July, down 41.2% from a year earlier. It Thailands anthracite coal imports in the
imported 527,313 mt of bituminous coal, first seven months declined 34.9% from
down 43.8% from 937,401 mt a year earlier. a year ago to 51,629 mt and came from
The top suppliers in July were Indonesia Russia (19,718 mt, from none a year earlier)
with 378,028 mt, down 22% year on year, and China (16,333 mt, up 42.6% year on
and Australia with 148,082 mt, down 67.2%. year). It imported 6.18 million mt of other
Thailand imported 4,270 mt of anthracite coals during January-July, down 6.2% from
coal in July, down 22.8% year on year, all million mt of coal, down 3.8% from 12.86 6.59 million mt a year ago, mainly from
from China. Imports of other coals were million mt during January-July 2015. Of Indonesia with 5.8 million mt, down 9.6%
701,081 mt, down 39.3% from July 2015. this, 6.13 million mt were bituminous coal, year on year. Thailand produced 8.25 million
They came mainly from Indonesia (644,220 down 0.9% year on year. The major supplier mt of lignite in the first half of the year, up
mt, down 41.5% year on year) and Russia was Indonesia with 3.79 million mt, down 7.7% from 7.66 million mt in the same period
(56,810 mt against none last year). In the 1.9% year on year, followed by Australia last year, according to data released August
first seven months, Thailand imported 12.36 with 2.26 million mt, down 2.3% from the 12 by the Energy Policy and Planning Office.
September 2016
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ExpertSpeak
Ultra Mega Power Plants should
be located at pitheads
VK Arora, Chief Mentor, Karam Chand Thapar & Bros. (Coal
Sales) Ltd., discusses two important issues facing the countrys
coal sector steps required to achieve affordable and low cost
power in every corner of the country and the issue of compulsory
washing of coal for transport beyond 500 kms. At the same time,
he feels that despite huge investment in renewables, India will
continue to depend on fossil fuel (mainly coal) for generation of
power for the next two decades.

Mr K S R Chari, an eminent mining be transmitted upto longer distances for


engineer and former Coal Secretary, had a maximum cost of Rs. 1/- to Rs. 1.5
submitted a report to the Central govern- per unit leading to a landed cost of
ment in April 1996 which, among other maximum Rs. 3/- per unit with
things, included two important recom- minimum effect on
mendations: Power stations should environment and
VK Arora, Chief Mentor, Karam Chand Thapar &
22 be located at pitheads instead of near infrastructure. Despite Bros. (Coal Sales) Ltd.
the cities. This would save transporta- This huge
tion costs for coal. Secondly, instead would investment in by SEBs as generally, a power plant
of selling power to SEBs, the stations also avoid renewables, India situated even away from the coal-
should sell them directly to power grids. setting fields is a symbolic industrial unit in
will continue to
Extending this to the present times, what up wash- the State generating employment for
is being recommended is to establish eries to
depend on coal for the local population and also catering
Ultra Mega Power Plants (> 5000 MW) reduce ash next 2 decades to the popular sentiment of the people.
near the pitheads. The possible locations percentage to
would be in Singrauli (NCL), Talcher, less than 34% for Compulsory washing of coal
IbValley (MCL) and Korba (SECL). complying with MOEF guidelines. In for transport beyond 500 kms
These places have large reserves of low any case, the washing has a cost of about As per the directive from the Supreme
grade coal, which can be exploited to set Rs. 150/- per MT which eventually adds Court from June 2016 onwards, coal
up large mines to produce upto 20 MMT to the cost of the coal as the recovery is of over 34% ash will not be allowed
/year each. These Ultra Mega Power only 80%. Pithead Ultra Mega Power to be transported by rail beyond
Plants will be set up in vicinity where Plants can be designed to use high ash a distance of 500 kms. The recent
coal could be fed by belt conveyors. coal with latest technologies to achieve notification also puts the responsibility
We have seen from a recent Ultra much better efficiency of combustion, of ensuring this not only on purchasers
Mega Power Plant set up at Sasan by with minimum impact on environment. but also on the sellers.
Reliance alongwith a captive coal block, This system of having Ultra Mega It is not understood how is this
where power is being produced and sold Power Plant would ensure availability of going to be implemented as the
at rates less than Rs. 1.5 per unit. If this power in the Northern India as well as washing capacity is still inadequate.
power is transported over long dis- Southern India at a maximum rate of Rs. CIL is still a long way off from estab-
tances, this would be better any day than 3/- per unit which incase a power plant lishing its 17 washeries for which they
transporting coal by rail over such long is set up in Northern India or Southern have been talking for a long time. The
distance which puts a constraint on the India would be much higher due to early directive of transporting less than
rail capacity and is also more expensive. higher cost of fuel, because of the high 34% ash for distances below 1000 kms
Instead, what is ideal is to invest in the cost of transportation by rail. was not being complied with because
transmission lines, where power could Ofcourse, this may not be preferred of inadequate washing capacity by
September 2016
www.InfralinePlus.com

CIL. A number of washeries were set involve 5-10 fold ramp up in capacity for bio fuel at 10 GW and hydel forming
up in the private sector. Except for a addition along with matching invest- the balance 5GW. If we achieve these
few, rest of the washeries have been for ments in distribution and transmission. targets, we shall become one of the
long inoperative as the rates quoted for In line with the pressure on largest green energy producers in
washing were inadequate resulting in government to discourage the use of the world. Present renewable energy
genuine washing not being done. This fossil fuel, India has taken up very installed capacity is 27,000 MW for
brought about the notoriety and a bad ambitious targets for renewables. The wind and 6,700 MW for solar. With
name for the washeries and some of target for green energy is 175 GW by abundance of sunlight in major parts of
them are still fighting their cases with 2022. This includes solar at 100 GW, the country, investments in solar will far
the power companies. comprising 60 GW as large and medium exceed investments in any other sector.
An honest washing plant has to be grid connected power and 40 GW as Despite huge investment in renew-
paid remunerative washing charges, rooftop solar. Target for wind is 60 GW, ables, India will continue to depend on
failing which there would be an attempt fossil fuel (mainly coal) for generation
to enforce a shortcut in the system Despite huge investment of power for the next 2 decades. Coal
benefitting no one. It is expected that in renewables, India will production in the country has been in
commissioning of CIL washeries would continue to depend on the range of 500-550 MMT per annum.
bring some sanity into the system. There have been signs of increase
Unfortunately, this commissioning is
fossil fuel (mainly coal) in the last year by about 9-10%,
still 2/3 years away. It is yet to be seen for generation of power which has brought some relief for the
whether such mega washeries can be set for the next 2 decades. beleaguered power plants who were
up to conform to the parameters set by Coal production in the earlier depending on imported coal
the CIL tenders at prices quoted by them. country has been in the or whatever little coal that was made
range of 500-550 MMT available by CIL. CIL has done well in
Increasing investment in re- per annum. There have the last one and a half years. 23
newables Will it come at the been signs of increase CIL may be able to achieve its target
cost of coal? in the last year by of 1000 MMT by 2020 but the target of
Indias total installed power capacity is 500 MMT by the captive coal blocks
298 GW (as on March 31, 2016), out of
about 9-10%, which has looks rather doubtful. With increase of
which renewables capacity forms 28% brought some relief for availability of coal, shortage of power
(including hydro) and non renewable as the beleaguered power would be virtually over by next year. The
72%. The present per capita consump- plants who were earlier country has enough capacity based on
tion of electricity is ranging around depending on imported coal and renewables meeting the power
1000 kwh which is expected to rise coal or whatever little demand of the country. The problem
upto 2000 kwh in a few years. Demand coal that was made of shortage is only on account of the
for power is expected to surpass 300 available by CIL poor financial health of the discoms.
GW over the next 10 years. This would The government has tried to address
this issue by promoting UDAY (Ujjwal
Discoms Assurance Yojana) whereby the
States will take over 75% of the discom
debt and also expecting them to reduce
the TDS losses from 25% to 15%.
If all these well intended schemes
are implemented, India should no
longer be a country with shortage of
power. All credit goes to the gov-
ernment, Ministry of Coal, Coal India
Ltd. NTPC, Power Grid Corporation
and renewable energy producers who
have achieved what looked like impos-
sibility sometimes ago.
The views in the article of the author are personal
For suggestions email at feedback@infraline.com
September 2016
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InDepth
Under utilisation of thermal power plants
cause of worry for power producers

24

Currently about one-third of Indias 211 GW of installed thermal power capacity lying idle
Stranded power capacities of 22-28 GW may have to wait for 2-3 years for securing PPA

By Team InfralinePlus

With the advent of the ambitious renew- at least four large thermal power plants capacity predominantly coal plants
able energy programme in the country, categorised as ultra-mega thermal but including some gas units as well
it seems thermal power producers have power plants (UMPPs) with aggregate is lying idle. The reasons for Indias
a cause to worry. While the Central generating capacity of 16 GW. The four vast amount of idle capacity are varied.
Government has repeatedly promoted proposed plants to be located in the Some plants have long been shut
the goal of tripling domestic coal provinces of Chhattisgarh, Karnataka, because of a lack of cooling water. A
production by 2020 to fuel a dramatic Maharashtra and Odisha would together lack of cooling water for coal-based
increase in coal power generation, the have required 46-million tons a year of power plants in Karnataka, Maharashtra
goal looks increasingly fanciful.Signifi- coal, half of which would have been and West Bengal led to repeated shut
cantly, in a more drastic step to reduce sourced through imports. downs and curtailment in electricity
coal imports, the Indian government has Currently about one-third of Indias generation. A Greenpeace India analysis
scrapped plans for the construction of 211 GW of installed thermal power of a report released in March this year
September 2016
www.InfralinePlus.com

estimates that the total freshwater con- power distribution companies, will have capacity unused. Distributors had
sumption of coal power plants in India definite impact on the buying capacity of unpaid loans of almost 4 trillion rupees
is 4.6 billion cubic meters per year. This the distribution utilities. But thats going as of last year and are in the process
is enough to meet the basic water needs to be more long term and sustainability of transferring 75 percent of that debt
of 251 million (25.1 crore) people. would depend on the overall turnaround to states as part of a federal effort to
Others plants have been shut of the distribution segment. make the companies profitable (UDAY
because of technical problems Indias regional electricity dis- scheme). In the last 13 years, gener-
requiring maintenance or idled because tributors (state-owned distribution ating capacity to the tune of 1,50,000
they are uneconomic. In other cases, companies) are curtailing purchases, MW has been successfully commis-
some plants have coal supply agree- forcing generators to leave at least sioned, effectively doubling the coun-
ments but not power purchase agree- a third of the countrys power plant trys installed capacity to 3,03,000 MW
ments while other plants have the (by July 2016). However, recent years
opposite problem. Other plants which Electricity DISCOMS are have seen tardy growth in electricity
have been built have neither fuel demand, especially industrial load, has
facing financial stress
supply agreements nor power purchase led to a sustained drop in the plant load
agreements. Compounding the thermal
due to accumulated factor (PLF) an indicator of capacity
power generators problems has been losses to the tune of utilisation of the countrys power
sluggish power demand and debt-laden INR 3.8 Lakh Crores plants. In the last one year the average
distribution utilities (discoms) pre- (as on March, 2015) PLF of thermal capacity has plum-
ferring to buy limited power because of and increasing @ 12% meted by about 8 percentage points,
their dire financial circumstances. p.a. as reported by the with the PLF of generating stations in
Electricity distribution companies the central and private sector estimated
(DISCOMs) are facing financial stress
ministry. Such financial at just a tad above 60 per cent.
due to accumulated losses to the tune stress does not allow Leading state electricity boards 25
of INR 3.8 Lakh Crores (as on March, DISCOMs to make (SEBs) of Maharashtra, Gujarat and
2015) and increasing @ 12% p.a. as fresh purchases and even Tamil Nadu have become power
reported by the ministry. Such financial prevents them from surplus and may not require additional
stress does not allow DISCOMs to floating tenders for Long contracts for the next couple of years.
make fresh purchases and prevents them Term Power Purchase Other utilities who need power are
from floating tenders for Long Term taking full advantage of the prevailing
Power Purchase Agreements (LTPPA).
Agreements (LTPPA). low spot power prices in exchanges
Over the past four years, PPAs of only Over the past four years, (less than INR 2.5/unit), rather than
12 GW have been signed under the PPAs of only 12 GW entering into long-term contracts.
competitive bidding route (Case 1 bids). have been signed under The plant load factor (PLF) of the
The Ujwal Discom Assurance Yojana the competitive bidding existing coal-based capacity for private
(UDAY), launched by the government route (Case 1 bids) independent power producers with
for financial turnaround and revival of a contract was less than 60% in FY
2015-16. While Coal India Ltds stellar
More concern for thermal power producers:
Railways hikes cost of freight for coal consumers performance over the past two years
has taken away fuel-related worries to
Indian Railways recently hiked the cost of freight for several consumers of coal, some extent, legacy issues such as new
the commodity that accounts for 45% of its receipts from transportation of coal block auctions at aggressive prices
goods: it raised the freight rates by 7-14% for distances between 200-700 km
still haunt some generators.
and imposed a INR 55/tonne extra charge on both loading and unloading. At the
same time, it reduced the freight for long-lead traffic by 4-13%.
The tariff increase will increase the fuel costs of power stations and cement Curious Case of Stranded
units closer to pitheads, while units far away from coal mines could see their Capacity
fuel/input costs decline. Electricity from plants less than 700 km from pitheads There is a huge amount of generation
could become costlier by 8-10 paise/unit, according to industry estimates. Coal capacity lying undispatched due to un-
freight rate increase comes after the recent increase in clean energy cess and availability of coal which is due to the
coal price which may further increase end user power cost. Inability to pass on policy that only plants with long term
such tariff may further deteriorate financial condition of distribution companies contracts will get coal linkage, thereby
and power generators.
rendering installed transmission
September 2016
www.InfralinePlus.com

InDepth

capacity under-utilised. On the other Table 1: Stranded Capacity (without PPAs)


hand, state distribution companies (comprising coal and gas-based capacity as well as
are not pursuing long term contracts hydro power capacity
resulting in a Catch-22 situation for the
generation and transmission capacity Stranded Capacity (without PPAs)
addition and a utilization mismatch. Already Commis- Under Construction Total
sioned (in MW) (in MW) (in MW)
Recently coal availability for medium
Coal bearing states 10873 3270 14143
term has been suggested which will go
some way but the transmission capacity Chhattisgarh 4636 990 5626
already laid for projects which do not Madhya Pradesh 1824 1200 3024
have a long term / medium term PPA Odisha 1315 1315
are stuck because they are unable to Maharashtra 3098 1080 4178
run economically since imported and Hydro 1270 855 2125
e-auction coal prices make them non- Himachal Pradesh 1174 244 1418
competitive thereby, causing a national Sikkim 96 535 631
waste of state transmission infrastruc- Uttarakhand 76 76
ture. This is resulting in a dead end Demand centers 4137 2368 6505
situation for them. Interestingly the Andhra Pradesh 1150 2020 3170
coal stocks at the pit head have swelled Gujarat 945 945
with few off takers. Maybe it is time Tamil Nadu 942 150 1092
to allow coal linkages for all power Karnataka 980 980
plants and not hold the sector through Rajasthan 120 120
an unnecessary and counter-productive Uttar Pradesh 198 198
26 situation creating a huge and growing Gas 5000 5000
liability for the banks. Total 21280 6493 27773
Demand would come back within
Source: Motilal Oswal Securities Limited (MOSL) update on power sector (July 2016)
the next few quarters with successful
monsoon and overall recovery in the high variable costs because of high
economy. Untied capacity would get India will continue to transportation costs, low operating
tied up in the next two years and the depend on coal-based efficiencies, coal pilferage and cor-
power plants will be running at better thermal generation ruption. Variable cost ranges as high
utilisation. India will continue to as INR 3-4/unit. These plants do not
for the next few
depend on coal-based thermal gen- get scheduled in merit order dis-
eration for the next few decades, but
decades, but it will patches. On the other hand, new effi-
it will become increasingly difficult become increasingly cient merchant power plants are able
to attract fresh investments from the difficult to attract fresh to supply power at total cost as low as
private sector in the next few years. investments from the INR 2.2/unit. There is nearly 14GW of
Investments could be further hampered private sector in the next stranded capacity without PPAs near
by the Central Electricity Authority few years. Investments coal mines in the states of Madhya
(CEA) projecting that India could could be further Pradesh, Chhattisgarh, Odisha and
become power surplus for the first time Maharashtra. These capacities have
hampered by the Central
in the financial year 2017. lowvariable cost and they sell to
Stranded power capacities of 22-28
Electricity Authority states like Delhi and Rajasthan (where
GW may have to wait for 2-3 years for (CEA) projecting that variable cost is high due to transpor-
securing Power Purchase Agreement India could become tation of coal) or to states in the south
(PPAs). The Ministry of Power (MoP) power surplus for the that have to either pay high transpor-
has come up with a good idea to capi- first time in the financial tation cost or import coal. Similarly,
talize on this it has started promoting year 2017 2.2 GW of hydro capacity can supply
the short-term power market. Coal to states in north India.
is being made available in a separate to come to the electronic platform for The growth of coal-based installed
e-auction window for the power sector. meeting their short-term requirements. capacity is on a decline. Touching a
At the same time, states have been asked Many generating companies have three year-low, last year the installed
September 2016
www.InfralinePlus.com

So, ensuring fuel supplies for such


No generation from 6 plants in 2015-16!
projects will help the Independent
Power Producers (IPPs) to avail CDM
Overall, 26 power plants have shut down since June 2015 across the country
(clean development mechanism) ben-
totalling 5,574 MW in several states with Maharashtra topping the list of states
efits / credits and will go a long way
with maximum power plants that have not generated electricity over the last one
in meeting Indias obligations under
year.The details of these closed plants were revealed by Minister of State for
Power, Coal, New & Renewable Energy and Mines Piyush Goyal in reply to a the climate change commitments and
question in the Lok Sabha last month. reduce green-house emissions substan-
Of these 26, Maharashtra accounted for a lions share of six power plants, which tially. Also, dedicated plants operating
together had an installed capacity of 3,026 MW. Andhra Pradesh comes second in open cycle in proximity to load
with two plants with a capacity of 614 MW not producing any power for the last centers can meet peak demand.
one year. A couple of power producers had to close because of lack of fuel supply
both coal and gas. The biggest among them all, Parli TPP (MAHAGENCO) with Conclusion
a capacity of 1,380 MW had to shut down because of a lack of water.. At the 21st Conference of the Parties
to the UN Framework Convention on
capacity grew by 10.77 per cent against nitrogen oxides for thermal plants, adding Climate Change (UNFCCC), COP 21
12.48 per cent in 2012. The more wor- to the cost of setting up thermal capacity. in Paris, a resolution on limiting the
rying aspect is that the 2016 pipeline A clean energy cess on coal, amounting use of coal across countries was one
for thermal power looks bleak. The to INR 400/tonne, was announced in the of the proposals put up for consid-
thermal power cycle takes four years. last Union budget, further adding to the eration. In the Indian context, this is
Even if 10,000 MW comes up by cost of coal-based power of particular relevance as coal-fired
2018-19, there will still be a mismatch power stations form the backbone of
with demand when the economy grows Gas-based power plants the Indian power generation sector
as is being envisaged. not faring any better and will continue to remain so in the 27
Against a target of installing an The uncertain future of Indian domestic foreseeable future, the Centres con-
additional capacity of 88,537 MW gas production has cascading effects on certed efforts to ramp up renewables
from conventional sources during the the overall role of gas in the countrys such as solar notwithstanding.
XII Plan (2012-17), the country has energy sector. The impacts have already Coal-powered thermal power plant-
achieved 86,565.72 MW which is been felt in the power sector where the saccount for 70% of total electricity
97.77 per cent, up to July 2016. Private PLF of gas-fired plants during the year generated in the country and represents
sector alone has added 50,817.50 MW. averaged only 18.64% in May last year 61% of the installed power capacity.Till
The share of hydro in the total installed and more recently at 23.73% (May the thermal generating capacity utili-
capacity has been on a downward 2016) due to unavailability of gas.With sation improves to 80-85%, PLF levels
trajectory for long and government natural gas accounting for just about 9% (to the existing 60% PLF level) and the
may be looking to compensate this of its overall energy mix, India is trying existing untied capacities are contracted,
loss in the XII plan targets by adding hard to increase domestic production. its unlikely that there will be any
more coal based capacity (currently Indias Liquefied Natural Gas (LNG) private sector interest in the coal-based
envisaged at 72,340 MW). sector is undergoing a major transforma- thermal generation sector. Coal has
At a time when several Independent tion as it is set to occupy a crucial part always been the mainstay of the Indian
Power Producers (IPPs) are locked into in the countrys energy portfolio after power sector and it is a view shared by
power purchase agreements (PPAs) that the central government approved the use most policymakers that it must remain
have become unviable because they do of imported gas for power generation the primary source of electricity gen-
not allow the high costs of imported and fertilizer production.LNG demand eration for at least the next three to four
fuel to be passed through. Indian power is forecast to witness robust growth over decades. This view is based on the belief
generators capacity utilisation will likely the next 5-10 years in India and project that a centralised electricity system
be limited by the financial weakness developers will have an abundant supply based on an ever-expanding coal power
of off takers, in turn constraining off- to run their plants not just at 25-30% generation base will ensure energy
take electricity demand.Due to Indias Plant Load Factor (PLF) but at the security, provide affordable energy for
commitment to reduce carbon dioxide required optimal levels of 80-85%. all and, importantly, address the issue of
emission intensity by 33-35% by 2030, Gas-based power projects are energy scarcity in India.
the government has also come out with second only to renewables and hydro
stringent norms on sulphur oxides and power in generating clean energy. For suggestions email at feedback@infraline.com
September 2016
www.InfralinePlus.com

InDepth
Coal freight rate hike a
mixed bag

28

To lead to better utilization of empty stabled rakes


Likely to reduce import of coal for power stations near ports

By Team InfralinePlus

The coal sector has been subjected to mad Jamshed, the freight rates were distances is being complemented by the
a plethora of new levies which has left raised by 8-14% for transporting coal tariff reduction on long routes. We are
the power companies a worried lot. between 200 km and 700 km and were trying to encourage long-distance coal
The most recent instance has been the lowered by 4-13% for distances above freight through this move, and it will
revision in freight rates for coal by the 700 km. Freight rates for distances up benefit several industries and thermal
railway ministry, which has increased to 200 km were kept unchanged. power plants, said Jamshed adding a
transportation cost for plants located coal terminal surcharge at the rate of
200-700 km away from the mines, at Impact on railways Rs.55 per tonne at both the loading and
the same time reducing it for those situ- Jamshed said the rate revision is unloading terminals for traffic of coal
ated further away. According to Rail- expected to be revenue-neutral for for the distance beyond 100 km will
way Board member (traffic) Moham- railways because the hike for some also be levied.
September 2016
www.InfralinePlus.com

New railways lines being constructed for additional Impact on power sector
capacities in coalfields Tariff rationalization would result in
reducing import of coal for power
In order to evacuate/transport coal from pithead three critical railway lines have stations near ports by making coal
been identified in the three potential coalfields transportation from mines cheaper
Tori-Shivpur-Kathautia Railway Line (90.7 kms) in North Karanpura in over long distances. Tariff rationaliza-
Jharkhand
tion in the freight rates for coal would
Jharsuguda-Barpalli-Sardega Railway Line (53 kms) in Ib Valley, Odisha
facilitate more generation schedules for
Bhupdevpur-KorichaparDharamjaigarh (180 kms) in MandRaigarh Coalfield,
long lead power plants by making long
Chhattisgarh
distance power plants competitive in
This would lead to better utilization liberalized Station to Station Rates, the Merit Order.
of empty stabled rakes as this would Long Term Tariff Agreements at pre- The decision has evoked mixed
result in encouraging long lead traffic determined price escalation principles response from the industry with many
and thus reduce terminal handling and further liberalized Empty flow expecting an increase in power tariff.
frequently. The aim is to increase direction policies would be introduced According to Lalit Jain, Group Chief
the coal loading volume so we have in near future. Commercial Officer & CEO (Solar
reduced the rate for the long distance Coal is the single-largest commodity International & Wind), Hindustan
transportation, Jamshed said, adding, in Indian Railways freight basket and Power Projects (HPP), Railways has
Coal rakes are lying idle so there is a any tinkering with freight tariffs creates increased the rail freight by 25-35%
need for rate rationalisation. ripple effect on electricity prices and including Additional Coal Terminal
More rationalization of freight rates the cost of other industrial goods Charge of Rs. 55/ MT has been
by bringing innovative schemes like including steel and cement. levied on both loading and unloading
terminal. With so much increase in
Tariff rationalization would result in reducing the railway freight, energy tariff from 29
coal-based power plants shall increase
import of coal for power stations near ports by by 8-10 paise/ kWh. This is yet another
making coal transportation from mines cheaper increase for coal based power plants
over long distances. Tariff rationalization in after recent increase in Clean Energy
the freight rates for coal would facilitate more Cess and Coal Price which shall further
increase end user power cost. Inability
generation schedules for long lead power
to pass such tariff shall further deteri-
plants by making long distance power plants orate financial condition of distribution
competitive in the Merit Order companies and power generators.
According to Sushil Maroo,
executive vice-chairman at Essar
Power Ltd, About 60% of the power
plants in India need to transport coal
for 200-700km, where there is an
increase in the freight rate. For them,
there is a likely cost increase of 6-7
paise per unit of power. For the others,
the impact is negligible, said.
However, according to union power
and coal minister, Piyush Goyal,
rationalisation of the coal freight tariff
will have minimal impact on power
tariff and the move would gradually
lead to domestic fuel replacing
imported coal. Supporting the move,
the minister said railways have reduced
the freight for long distances so that
the domestic coal becomes more viable
September 2016
www.InfralinePlus.com

InDepth

Coal sector reels under increasing levies translate into increase in input cost for
the manufacturers, he added. Besides,
In February 2016, the Government proposed to raise the cess on coal, the coal freight hike will impact the
lignite and peat from Rs 200 a tonne to Rs 400 per tonne. cost of power as its generation is coal
The purpose of clean energy/environment cess was for financing and dependent, he said.
promoting clean energy initiatives, funding research in the area of clean With power being another major
energy, or for any other purpose relating thereto. cost centre for cement production,
According to official data, the estimated amount of clean environment cess the effect on the sector would be
to be collected by Coal India and deposited with the government of India cascading. It is expected that cement
for the year 20116-17 based on the budgeted estimated production of CIL industry will suffer a combined impact
is Rs 23,944.4 crore of over Rs 2,000 crore. In the current
The government had increased the Clean Energy Cess from Rs 100 to 200 situation, cement players would find
per tonne of coal to finance clean environment initiatives for 2015-16. it difficult to absorb this increase and
therefore, I will not be surprised if the
in front of imported coal. This year a period of time the shift does take cement prices go up, Chouksey said.
we are hoping that we reduce the coal place, the firm said. With increase in freight rates for
imports by Rs 40,000 crore. That is our Cement Manufacturers Association railways, the cost of road transportation
mission which is why railway freight President, Shailendra Chouksey said may reduce. Railway, no doubt, needs
rationalisation is a very positive step, the move will have an inflationary more investment but the government
the minister said. impact on the sector. Coal, which must ensure that burden of the same
is the main raw material for cement should be shared by everyone and not
Impact on other sectors will on an average suffer a 20 per just the power sector.
According to experts, hike in coal cent increase in freight that would For suggestions email at feedback@infraline.com

30 freight charges by Railways will


adversely impact the domestic cement
industry with a hit of over Rs 2,000
crore and is likely to force companies
to pass on the burden to consumers.
According to Edelweiss Securities,
in near term, increase in freight rates is
negative for cement and power utilities
(merchant players). Commenting
on the rate hike, it said railway data
suggests that average lead distance of
coal shipments is declining and stands
at around 486 km versus 545 km in
2014-15 fiscal. Hence, one can infer
that such moves may bolster revenue
for Indian Railways in the short term,
however, we are unsure if this tariff
structure will arrest the long-term
declining market share trend of rail in
shipments, it added.
On doubts over the move helping
railways to check the declining market
share in the long term, it said that
overall leads in freight movements
both in bulk/ container have been
structurally declining. Probably, in
the short run none of the bulk cargo
shipments may move from rail to road.
But, as seen in the cement sector, over
September 2016
www.InfralinePlus.com

StatisticsCoal
Trends in Industry wise Consumption of Raw Coal in India(FY06 - FY15) (Million tonnes)
Fertilizers
Elec- Steel & Sponge
Year Cement Paper Textile &chemi- Brick Others * Total
tricity Washery Iron
cals
1 2 3 4 5 6 7 8 9 10 = 2
to 9
2005-06 306.04 19.66 14.97 2.77 0.29 - - - 51.85 395.59
2006-07 321.91 17.3 14.71 2.5 0.3 - - - 63.08 419.8
2007-08 350.58 16.99 15.27 2.64 0.37 - - - 67.72 453.57
2008-09 377.27 16.58 13.12 2.16 2.53 - - - 77.52 489.17
2009-10 390.58 16.45 14.66 2.34 0.27 - - - 89.5 513.79
2010-11 395.84 17.26 15.08 2.43 0.28 - - - 92.58 523.47
2011-12 437.67 47.86 26.36 2.03 0.26 21.69 2.82 0.13 69.36 608.17
2012-13 485.47 51.7 31.79 2.12 0.3 20.9 2.86 2.01 116.24 713.39
2013-14 493.25 53.05 32.46 1.91 0.36 18.49 2.64 4.01 133.19 739.34
2014-15(p) 527.1 66.37 37.95 1.54 0.42 14.68 2.69 0.11 169.46 820.31
Distribution (%) 64.26 8.09 4.63 0.19 0.05 1.79 0.33 0.01 20.66 100
Growth rate of 6.86 25.11 16.91 -19.15 16.39 -20.64 2.05 -97.18 27.23 10.95
2014-15 over
2013-14(%) CAGR 5.59 12.94 9.75 -5.71 3.82 -9.3 -1.17 -3.26 12.57 7.57
2005-06 to2014-
15(%)
31
(P): Provisional
* Includes Sponge Iron, colliery consumption, jute, bricks, coal for soft coke, fertilisers & other industries consumption.
@ From 1996-97 and onwards Cotton includes Rayon also.

Trends in Industry wise Consumption of Lignite in India(FY06 - FY15) (Million tonnes)


Steel &
Year Electricity Cement Paper Textile Others * Total
Washery
1 2 3 4 5 6 7 8 = 2 to 7
2005-06 23.36 - 0.79 0.23 1.11 4.86 30.34
2006-07 23.92 - 0.77 0.22 0.84 5.06 30.8
2007-08 26.76 - 0.96 0.35 0.77 5.83 34.66
2008-09 25.71 - 0.34 0.36 - 6.01 32.42
2009-10 28.14 - 0.38 0.82 - 4.09 33.43
2010-11 29.9 - 0.36 0.84 1.18 6.25 38.53
2011-12 32.06 0.03 1.01 0.63 3.67 4.48 41.88
2012-13 37.2 0.05 1.1 0.69 0.3 3.81 43.15
2013-14 36.34 0.03 1.49 1.29 0.73 4.02 43.9
2014-15(p) 39.47 0.02 1.27 0.69 2.89 2.6 46.94
Distribution (%) 84.09 0.05 2.7 1.47 6.15 5.54 100
Growth rate of 8.63 -23.33 -14.78 -46.51 293.86 -35.33 6.93
2014-15 over
2013-14(%)

(P): Provisional
* Includes Sponge Iron, colliery consumption., jute, bricks, coal for soft coke, chemicals, fertilisers & other industries consumption.
From 2008-09 onwards cotton is also included in others.
Note: Industry wise breakup of consumption for the period 1970-71 to 1999-2000 are not readily available, hence estimated by production data as it is observed, approximately for lignite,
production= despatch= consumption.
September 2016
www.InfralinePlus.com

StatisticsCoal

Trends in Production of Coal andLignite in India during 2005-15 (Million tonnes)


Coal
Year Lignite Grand Total
Coking Non-coking Total

1 2 3 4=(2)+(3) 5 6=(4)+(5)

2005-06 31.51 375.53 407.04 30.23 437.27

2006-07 32.1 398.74 430.83 31.29 462.12

2007-08 34.46 422.63 457.08 33.98 491.06

2008-09 33.81 457.95 491.76 32.42 524.18

2009-10 44.41 487.63 532.04 34.07 566.11

2010-11 49.55 483.15 532.69 37.73 570.43

2011-12 51.65 488.29 539.94 42.33 582.27

2012-13 51.83 505.87 557.71 46.6 604.31

2013-14 56.82 508.95 565.77 44.27 610

2014-15(p) 57.45 554.98 612.44 48.25 660.69

Growth rate of 2014- 1.11 9.04 8.25 8.99 8.31


15 owner 2013-14(%)

32 CAGR 2005-06 to 6.19 3.98 4.17 4.79 4.21


2014-15(%)
(P): Provisional
September 2016
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CoverStory
Make in India: Limited impact
on energy sector so far

33

High on ease of doing business, but private investments still trickling in


Power, coal and renewable have high potential for domestic manufacturing

By Infraline Bureau

The Make in India programme is investment flows, GDP growth is being Economic Research (NCAER), which
yet to make an impact on the ground led by consumption. had reached 148.4 in January 2015,
despite a series of measures taken by The government has envisaged slipped back to 121.6 in April 2016.
the Modi government to improve the raising share of the manufacturing The key factor holding the acceler-
ease of doing business. Two years after in the GDP to 25 per cent by 2022 ation of industrial growth is investment
the campaign was launched by Prime from the current level of 16 per cent. recovery, India Ratings and Research
Minister Narendra Modi in Septem- The sector continues to remain in the said in a recent update on the economy.
ber 2014, private investment is still doldrums after posting anaemic growth It stated that corporates, particularly
trickling in. The government is banking of 2.4 per cent in 2015-16. Measures those engaged in infrastructure, power,
on public spending to drive the growth. taken by the government have failed iron and steel and textile sectors, are
However, this strategy has its own limi- to rekindle the animal spirit in the either repairing their balance sheets
tations and cannot substitute for private economy. The Business Confidence or saddled with stagnation or even
investment. In the absence of strong Index of National Council of Applied decline in capacity utilisation. It
September 2016
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CoverStory

Make in India Week National capital goods


policy unveiled
The Make in India week held in Mumbai during February elicited investment The government has for the first time
proposals worth Rs 15.20 lakh crore. unveiled the National Capital Goods
Jharkhand government and Adani group signed pact to set a up 1,600 MW
Policy to boost manufacturing. The
thermal plant for supplying electricity to Bangladesh. The two sides also
policy aims to increase production of
entered into an agreement to a coal-based methane fertiliser plant.
capital goods from Rs 2.30 lakh crore
Yes Bank and IREDA joined hands to finance green power projects.
Tar Kovacs and Karnataka government signed agreements to set up ocean in 2014-15 to Rs 7.50 lakh crore in
based renewable energy project. 2025 and create direct and indirect
Gujarat state and Denmarks Vestas came together to set up windmill blade employment of nearly 2.2 crore. The
manufacturing in Ahmedabad. policy envisages increasing exports
from the current 27 to 40 per cent of
expects investments to grow 5 per cent production while increasing share
in FY17, mainly driven by the gov- The process of applying of domestic production in Indias
ernment capital expenditure, the rating for industrial license and demand from 60 to 80 per cent,
agency added. industrial entrepreneur thus making India a net exporter of
The good monsoon is expected to memorandum has been capital goods. The policy also aims to
boost rural demand which has been made online. Initial validity facilitate improvement in technology
sluggish due to two consecutive years depth across sub-sectors, increase
period of industrial license
of drought. The urban demand is likely skill availability, ensure mandatory
to get a lift from the implementation of
has been increased to standards and promote growth and
the Seventh Central Pay Commission three years from two capacity building of micro, small and
which will benefit nearly 1 crore years, also, two exten- medium enterprises.
34 employees and pensioners. However, sions of two years each in
all this might not be enough to drive the initial validity of three Ease of doing business:
up GDP growth rate, say analysts. But years of the industrial li- moves on taxation,
things might start changing soon with cense will now be allowed regulations and clearances
the prospect of early implementation up to seven years, which The government will bring down cor-
of landmark indirect tax reform getting would give enough time to porate tax rate for companies registered
brighter after the passage of the GST licensees to procure land in India from 30 to 25 per cent of net
Bill. Besides, the government has and obtain the necessary profits in a phased manner over the next
unveiled capital goods policy which four years starting from FY 16-17. An
clearances and approvals
should bring momentum to the Make in expert committee has also been set up
India campaign.
from authorities to examine the possibility and prepare a
draft legislation where the need for mul-
tiple prior permission can be replaced by
a pre-existing regulatory mechanism.
The process of applying for indus-
trial license and industrial entrepreneur
memorandum has been made online.
Initial validity period of industrial
license has been increased to three
years from two years, also, two exten-
sions of two years each in the initial
validity of three years of the industrial
license will now be allowed up to
seven years, which would give enough
time to licensees to procure land and
obtain the necessary clearances and
approvals from authorities.
Through eBiz portal, a business user
can fill the eForms online and offline,
September 2016
www.InfralinePlus.com

upload the attachments, make payment


online and submit the forms for pro-
cessing of the department. A dedicated
Shram Suvidha portal set up, which
would allot Labour Identification
Number (LIN) to nearly 6 lakhs units
and allow them to file online com-
pliance for 16 out of 44 labour laws.

Goods and Services Tax


(GST)
The government is gearing up to
implement the GST from next fiscal
after securing parliamentary for the
draft legislation. According to analysts,
implementation of the new indirect
tax regime will go a long way towards
boosting domestic manufacturing
which is hobbled by flawed tax system. goods and imports is achieved which
The current tax structure fragments The government is gear- is desirable. In scenario 2, there is no
Indian markets along state lines and ing up to implement the excise exemption but there is a CVD/
undermines domestic manufacturing. GST from next fiscal SAD exemption which results in a
The GST would rectify flaws not by after securing parlia- large penalty on domestic producers.
increasing protection but by eliminat- But the important and subtle point
ing the negative protection favouring
mentary for the draft relates to scenario 3 when the excise
35

imports and disfavouring domestic legislation. According to and CVD/SAD are both exempted.
manufacturing, say experts. analysts, implementa- This may seem apparently neutral
The 2 per cent central sales tax tion of the new indirect between domestic production and
on inter-state sales of goods leads to tax regime will go a long imports but it is not. The imported
inefficiencies in supply chain of goods. good enters the market without the
way towards boosting
Goods produced locally within the CVD/SAD imposed on it; and, because
jurisdiction of consumption attract domestic manufactur- it is zero-rated in the source country, is
lower tax than those produced outside, ing which is hobbled by not burdened by any embedded input
which encourages geographic frag- flawed tax system. The taxes on it, analysts point out. The
mentation of production. It is insuf- current tax structure corresponding domestic good does not
ficiently appreciated that Indias border face the excise duty, but since it has
fragments Indian mar-
tax arrangements undermine Indian been exempted, the input tax credit
manufacturing and the Make in India
kets along state lines cannot be claimed. The domestic good
initiative. Eliminating exemptions in and undermines domes- is thus less competitive compared to
the countervailing duties (CVD) and tic manufacturing the foreign goods because it bears input
special additional duties (SAD) levied taxes which the foreign good does
on imports will address this problem. which is levied on imports to offset not. In the example, the penalty on
It is a well-accepted proposition in the impact of the excise duty levied on domestic producers is over 6 per cent.
tax theory that achieving neutrality of domestically manufactured goods. In effect, a policy designed to promote
incentives between domestic pro- However, CVD/SAD exemp- domestic manufacturing through excise
duction and imports requires that all tions act perversely to favour foreign exemption creates a perverse incentive
domestic indirect taxes also be levied production over domestically produced for the exempt industry and its eventual
on imports. So, if a country levies a goods; that is, they provide negative decline, say taxation experts.
sales tax, VAT, or excise or GST on protection for Indian manufacturing. The CVD/SAD, which is levied
domestic sales or production, it should When there are no CVD/SAD and to offset the excise duty imposed on
also be levied on imports. In India, excise exemptions (Scenario 1), neu- domestic producers, is not applied on a
this is achieved through the CVD/SAD trality of incentives between domestic whole range of imports. These exemp-
September 2016
www.InfralinePlus.com

CoverStory

tions can be quantified. The effective issues in these sectors, but concurrent India, as a large energy user,
rate of excise on domestically-produced actions in localising manufacturing with ongoing investments to change
non-oil goods is about 9 per cent. have not kept pace. This has been a energy mix and provide inversely
The effective collection rate of CVDs particular drawback in certain sectors access, should have a broad based local
should theoretically be the same but like renewable energy and nuclear, manufacturing capability to support it,
is in actual fact only about 6 per cent. which are capital intensive, and over- which is currently lacking in both, gen-
The difference not only represents reliance on imported equipment places eration and in higher end T&D power
the fiscal cost to the government of significant additional costs in terms equipment, he added.
Rs 40,000 crore, it also represents the financing cost, exchange rate variation
negative protection in favour of foreign and risk premiums, Rao said. Power and coal have high
produced goods over domestically potential
produced goods. In a sense, India finds Power sector is expected to benefit
Power sector is expected
itself in a de facto state of negative most from the Make in India as it
protection on the one hand, and calls for
to benefit most from would entail a significant increase in
higher tariffs on the other. It is win-win the Make in India as it electricity consumption. Demand for
to resist these calls that would burnish would entail a significant electricity will increase manifold due
Indias openness credentials and instead increase in electricity to programmes like Make in India and
eliminate the unnecessary and costly consumption. Demand Rural Electrification, says Union power
penalty on domestic producers. minister, Piyush Goyal. Thanks to
for electricity will in-
intervention by the NDA government,
Energy sector crease manifold due to coal production has seen a significant
The government has tweaked policies programmes like Make in increase in recent years, which has
to promote domestic manufacturing India and Rural Electrifi- helped in reducing dependence on
36 for meeting equipment requirements of cation, says Union power imported coal. India is also looking
the energy sector. However, industry minister, Piyush Goyal. at deepening energy partnership with
experts say that local manufacturing Japan in clean coal technology with
Thanks to intervention
has failed to keep pace with demand, eye on Make in India campaign.
impacting capacity addition in nuclear,
by the NDA government, Back home, the government has
renewable energy and transmission and coal production has seen targeted to ensure 24X7 power supply
distribution industries. a significant increase in from 2018-19 and unveiled mega
Kameswara Rao, leader, power and recent years, which has investment plans to boost transmission
mining, PwC, says that the govern- helped in reducing depen- and distribution. The government has
ments attention has been on success- also targeted to increase coal production
dence on imported coal
fully addressing some of the policy to 1.5 billion tonnes by 2019-20.
However, the power sector con-
tinues to reel under sluggish demand
and as a consequence, generating
stations are operating at sub-optimal
plant load factor (PLF). For example,
the overall PLF of thermal plants
in the country during June stood at
the low level of 60.67 per cent. A
big chunk of coal-based generating
capacity is facing viability issue due
to absence of long-term electricity
buyers, inadequate fuel supply and
under-recovery on account of tariff
due to aggressive bidding. While
record capacity has been added during
the 12th Plan period, the government
is in no hurry to line up more projects
for implementation. An official
September 2016
www.InfralinePlus.com

moratorium on capacity addition looks


likely. That means ultra mega power
projects too will also have to wait for
take-off.

Oil and gas sector


The petroleum ministry has envisaged
enhancing Indias crude oil refining ca-
pacity through 2040 by setting up a high-
level panel, which will work towards
aligning Indias energy portfolio with
changing trends and transition towards
cleaner sources of energy generation.
The Hydrocarbon Sector Skill Council
(HSSC), set up by the government
under Skill India initiative, plans to train
over 1.9 million people in the oil and gas
sector over the next 10 years, to cater to The petroleum ministry investment in nuclear power generation
the rising skill needs of the industry. has envisaged enhancing in the next 15 to 20 years.
The Union Cabinet has allowed Indias crude oil refining The petroleum ministry has
state-owned oil firms to evolve their own announced a new Marginal Fields
capacity through 2040 by
crude oil import policies which involve Policy which aims to bring into
freedom to choose source companies as
setting up a highlevel pan- production 69 marginal oil and gas
well as pricing for their crude oil imports, el, which will work towards fields with 89 million tonnes or Rs 37
thus allowing them to compete in the aligning Indias energy 75,000 crore worth of reserves by
market effectively. In a major drive to portfolio with changing offering various incentives to oil and
enhance the petroleum and hydrocarbon trends and transition gas explorers such as exemption from
sector, the government has intro- towards cleaner sources payment of oil cess and customs duty
duced initiatives like the Hydrocarbon of energy generation. The on machinery and equipment. The
Exploration Licensing Policy (HELP), government has entered into bilateral
Hydrocarbon Sector Skill
marketing and pricing freedom for new discussion with Norway to extend
gas production, grant of extension to
Council (HSSC), set up co-operation between the two countries
the Production Sharing Contracts and by the government under in the field of oil and natural gas and
assigning the Ratna offshore field award Skill India initiative, plans hydrocarbon exploration.
to ONGC for development. to train over 1.9 million To strengthen the country`s energy
The petroleum ministry has released people in the oil and gas security, oil diplomacy initiatives have
the Hydrocarbon Vision 2030 for sector over the next 10 been intensified through meaningful
North East India, with the objective years, to cater to the rising engagements with hydrocarbon-
of leveraging the north-eastern rich countries. The government has
skill needs of the industry
regions hydrocarbon potential to approved a mechanism for procurement
enhance access to clean fuels, improve
availability of petroleum products, Domestic manufacturing of LNG ships makes little progress
facilitate economic development and As part of the Make in India initiative, the Government had planned to
to involve local population in the construct three liquefied natural gas (LNG) carriers at Indian shipyards to
economic activities in this sector. allow GAIL to ferry gas from the US to India for 20 years, starting 2017.
The government has also unveiled However, the plans fell flat as there were no takers for the tender issued by
a new policy to incentivise gas GAIL, since local yards inexperienced in building such ships failed to get
production from deep-water, ultra expert LNG shipbuilders to share technology for the same.
deep-water and high pressure-high Eventually, GAIL has to postpone the bidding deadline several times.
temperature areas which are presently Only Cochin Shipyard, which has acquired full certification from GTT to built
not exploited on account of higher LNG carriers, is now the only company looking to compete for the tender in
partnership with Samsung Heavy Industries.
cost and risk, and also to augment the
September 2016
www.InfralinePlus.com

CoverStory

of ethanol by public sector oil mar- High potential in Renewable Energy


keting companies to implement ethanol
blending programme. India is the fourth largest importer of oil and the 15th largest importer of
petroleum products and LNG globally. The increased use of indigenous
renewable resources is expected to reduce Indias dependence on
Renewable energy expensive imported fossil fuels.
The RE-INVEST 2015 hosted by the
The government is playing an active role in promoting the adoption of
Ministry and New and Renewable
renewable energy resources by offering various incentives, such as
Energy attracted commitments generation-based incentives (GBIs), capital and interest subsidies, viability
from investors to set up green gap funding, concessional finance, fiscal incentives etc.
energy projects worth 2.66 lakh The National Solar Mission aims to promote the development and use of
MW. Encouraged by the positive solar energy for power generation and other uses, with the ultimate objective
responsive, the MNRE is hosting of making solar energy compete with fossil-based energy options.
similar RE-INVEST 2017 in The objective of the National Solar Mission is to reduce the cost of solar
Ahmedabad. During RE-INVEST power generation in the country through long-term policy, large scale
2015, 14 banks and financial deployment goals, aggressive R&D and the domestic production of critical
institutions, 8 PSUs and private raw materials, components and products.
manufacturers, 15 private sector Renewable energy is becoming increasingly cost-competitive compared to
companies gave their Green Energy fossil fuel-based generation.
Commitments. 2800 delegates from
42 countries participated in the three commitments for financing 72 GW depreciation. The government has
day RE-INVEST 2015 . 202 speakers renewable energy projects. also amended the Electricity Act and
addressed various sessions, out of India is already an exporter of Tariff Policy for strong enforcement
which the 40 international speakers wind power equipment. The focus on of Renewable Purchase Obligation
38 were from 29 countries. Make in India has led to increase in (RPO) and for providing Renewable
MNRE Secretary Upendra Tripathy domestic manufacturing capacity for Generation Obligation (RGO).
Secretary said 14 companies from solar equipment. However, domestic It has also envisaged setting up of
seven countries have their Green manufacturers are unable to compete exclusive solar parks; development of
Energy Commitments for 58 GW. with imports. power transmission network through
Similarly, 22 PSUs for 18 GW, 257 The government has taken Green Energy Corridor project;
private companies for 190 GW and several initiatives to increase usage identification of large government
the Railways for 5,000MW have of renewable energy, including complexes/ buildings for rooftop
submitted their commitments for enactment of an offshore wind energy projects; provision of roof top solar
renewable energy. In addition, 27 policy and support of generation- and 10 percent renewable energy as
banks have also submitted their based incentives and accelerated mandatory under Mission Statement
and Guidelines for development of
smart cities. The government has
also amended building bye-laws
for mandatory provision of roof top
solar for new construction; provided
infrastructure status to solar projects;
granted permission for raising tax-
free solar bonds and extended long
tenor loans.
Initiatives like Make in India are
definitely a progressive move to boost
domestic economy and all related
sectors. However, it is still early days
for the programme and its actual
results may only be visible after few
more years.

For suggestions email at feedback@infraline.com


September 2016
www.InfralinePlus.com

NewsBriefs | Oil & Gas National


OMCs bullish on renewable energy segment HPCL in $8 billion drive to boost oil
refining margins

at expanding their renewable energy plans.


IOCL, the countrys largest oil marketing
company, plans to generate 260 megawatt
(MW) of renewable power in the next five
years. HPCL, on the other hand, has plans to
generate 1,000 MW in the same time period.
IndianOil has ambitious plans to broaden
its energy basket with alternative energy
options. The corporation envisages setting
up 260 MW of renewable energy (wind and
In a bid to reduce carbon footprint and solar) over the next five years, IOCL said Indias fastest-growing fuel seller will
look at avenues beyond the conventional in its annual report for 2015-16. IOCL has spend $8 billion over the next five years to
sources of energy, oil marketing companies installed wind power systems totaling 69.3 help its 60-year-old refineries earn profit
(OMCs)Indian Oil Corp. Ltd (IOCL), Bharat MW in Gujarat and Andhra Pradesh. A 5 MW margins closer to modern processors such
Petroleum Corp. Ltd (BPCL) and Hindustan grid-connected solar power plant at Rawra, as billionaire Mukesh Ambanis Reliance
Petroleum Corp. Ltd (HPCL)are looking Rajasthan, is also in operation since 2012. Industries Ltd. You can definitely expect
$2 to $3 addition to the refining margin,
LPG market gets ready for private oil firms Mukesh Kumar Surana, chairman and
managing director at Hindustan Petroleum
With the central government restricting lique- Corp., said. These projects will improve
fied petroleum gas (LPG) subsidy to consum- distillate yields and improve our margins.
ers earning less than Rs 10 lakh per annum, This will bring our margin much closer
a ready-made market is now available for to other complex refiners. Government-
private oil companies. This, coupled with the owned HPCL, sold 34.2 million tons of oil 39
lure of higher margins, is pushing them to products in the year ended in March, an
aim for a larger pie of the cooking gas market increase of 7%, the fastest pace among the
in India. Indias total LPG consumption rose countrys top three fuel retailers. Indian
from 18 million tonnes (mt) in 2014-2015 to Oil Corp. and Bharat Petroleum Corp.s vol-
19.6 mt in 2015-2016, according to Petro- umes increased 5.3% and 6%, respectively.
leum Planning and Analysis Cell (PPAC) data. HPCL reported a gross refining margin
The three state-run oil marketing companies two private refiners vying for the LPG market of $6.68 a barrel last financial year. In
(OMCs) have 274,000 connections in the in India. Mahesh Advani, head of direct sales comparison, Reliance, which operates the
waiting list across the country, PPAC data at Essar Oil, says they have a potential mar- worlds largest refining complex at Jam-
show. This shows that there is a huge market ket in the non- subsidised LPG customers and nagar in western India, reported a refining
to tap. Essar Oil and Reliance Industries are commercial users. margin of $10.80 in the same period.

Oil ministry seeks uniform taxes on LPG for domestic, commercial use

The oil ministry is seeking to rationalise LPG about a third more expensive than
taxes on cooking gas sold to all types of domestic. In Delhi, non-subsidised cooking
consumers in order to block diversion gas costs about Rs 34 per kilogram while
of cylinders meant for domestic use. It the commercial LPG costs about Rs 45
has written to the finance ministry to per kg. About 90 per cent of the total
impose uniform taxes on cooking gas, or LPG consumed in the country is used
liquefied petroleum gas (LPG), used for by households, although it is suspected
domestic and commercial consumption. that some subsidised cylinders meant for
The finance ministry will take a final call household use are diverted for commercial
on the demand that was also made in the purpose. Besides not having to pay taxes,
past. Gas cylinders meant for domestic households also get subsidy on 12 cylinders
use attract no taxes at present while excise duty of 8 per cent. In addition to of gas they consume in a year. The subsidy
commercial users have to pay a basic central taxes, commercial users have to has sharply shrunk to Rs 64 per cylinder
customs duty of 5 per cent, additional pay local levies imposed by states. All due to a nearly two-thirds fall in crude oil
customs duty of 8 per cent and a central these duties together make commercial price in the past two years.
September 2016
www.InfralinePlus.com

NewsBriefs | Oil & Gas National


State-run oil firms to form JV for jet fuel Indias crude production down 3 per
cent in first quarter current fiscal

end of this year. AAI is also likely to be an


equity partner in the JV. The public sector
OMCs have, however, spurned private fuel
retailers. This comes at a time when Mukesh
Ambani-led Reliance Industries (RIL)
approached the petroleum ministry and the
AAI to be part of the JV. The venture will
cover majority of the fuelling facilities in
India, except Delhi, Mumbai, Hyderabad and
State-run oil marketing companies Indian Bengaluru, where private parties are also The countrys total crude output de-
Oil Corporation (IOC), Bharat Petroleum involved. IOC, which owns more than 60 creased 2.9 per cent in the first quarter
Corporation (BPCL) and Hindustan per cent of the aviation turbine fuel market, current financial year (2016-17). Also,
Petroleum Corporation (HPCL) are set to is likely to hold 37.5 per cent stake in the natural gas output was down 3.8 per
form a joint venture to manage fuelling venture, while AAI will get 25 per cent and cent. Crude production has dropped to
facilities at all airports controlled by the the remaining two oil companies will have 12078.34 thousand metric tons(tmt)
Airports Authority of India (AAI) by the 18.75 per cent each. this year compared to 12445.18 tmt for
the first quarter last year. Natural gas
ONGC hires consultant to assess reserves in GSPC KG gas block production is also down by 3.8 per cent to
10449.30 Million Metric Standard Cubic
State-owned ONGC has hired US-based Meters (mmscm) compared to 10862.42
consultant Ryder Scott to assess natural mmscm for the same time period last
gas reserves in Gujarat State Petroleum year said the report. The government
Corps (GSPC) Deendayal block before is attempting to increase domestic oil
40 deciding to buy a stake in it. Since the production to reduce its dependence on
BJP-led government came to power at the imports, and also boost infrastructure
Centre, the Gujarat government firm GSPC development in the country. The ministry
has been seeking to sell a majority stake stated closure of oil wells due to repair,
in its KG-OSN-2001/3 (Deendayal) block in replacement, strikes, and blockades are
Bay of Bengal to ONGC to avoid defaulting stated as the reasons for lower crude
on loans. ONGC initially was not keen to production. Sick older wells, power
buy stake in the block as it felt the block shutdown & less gas injection pressure
had reserves far less than what GSPC was been asked to evaluate gas properties in have also contributed to the decline of
claiming and the asking price for the stake the GSPC block and independently certify crude. The ministry said 24 oil wells
was not commensurate with the returns. the reserves quantities. were closed in the Kadali-Tatipaka &
Ryder Scott Petroleum Consultants has Endamuru-Oduru GAIL pipelines.

RIL focuses on domestic market for refined products

Mukesh Ambani-led Reliance Industries rose eight per cent to 74.63 MT, according
(RIL) is looking to increase focus on the to data available with the Petroleum
domestic market for its refined products. On Planning and Analysis Cell. Ratings agency
July 15, in its results, RIL said its exports India Ratings & Research (Ind-Ra), in its
of refined products from India were at Rs outlook for FY17, said, Growth was driven
28,610 crore during the April-June 2016 by strong pick-up in automobile sales,
quarter, compared to Rs 32,352 crore in particularly passenger vehicles. Ind-Ra
the same period a year ago. In terms of expects petrol consumption to further
volume, exports of refined products were increase by eight to 10 per cent in FY17,
at 9.8 million metric tonnes (MMT) during driven by strong passenger vehicle sales.
the April-June 2016 quarter, compared Diesel consumption, the rating agency said,
to 8.5 MMT in the corresponding period a and disposable income increase. For the is likely to grow by five to six per cent on
year ago. RIL expects growth in Indias financial year 2015-2016, Indias industry improved sales of commercial vehicles,
diesel and gasoline consumption for the sales for petrol rose 15 per cent, to 21.84 however, offset to some extent by lower
next 10-15 years, as the countrys economy million tonnes (MT), and sales for diesel consumption of diesel in power backup.
September 2016
www.InfralinePlus.com

NewsBriefs | Oil & Gas International


Indonesia offers 10 blocks for exploration to Petronas Australian state to permanently ban
onshore gas fracking

Affairs Luhut Binsar Panjaitan in a meeting.


Zahid said with the invitation, Petronas had the
opportunity to participate in the open tender
by Pertamina, Indonesias state-owned oil
company, for the exploration of new blocks
in other locations. This is a good offer as
Petronas is basically focusing on exploration in
Asean countries. Zahid said the meeting also
opened a new chapter for Tenaga Nasional Bhd
Petronas has been offered to explore 10 new (TNB) as the utility company had now been
blocks of oil and gas (O&G) fields in Indone- allowed to negotiate directly with coal suppli- The state of Victoria plans to ban shale
sia, said Deputy Prime Minister Ahmad Zahid ers in Indonesia to ensure a continuous supply and coal seam gas fracking in what
Hamidi. He said the invitation involving seven of high-quality coal. He said the two countries would be Australias first permanent ban
exploration blocks in the Exclusive Economic also agreed that the cooperation between TNB on unconventional gas drilling, citing the
Zone and three in Natuna Island was made by and Perusahaan Listrik Negara (PLN) Indone- concerns of farmers and potential health
Indonesias Coordinating Minister for Maritime sia be done on a business to business deal. and environment risks. However the gov-
ernment left the door open to allowing
Shell assessing possibility of supplying LNG to Pakistan onshore conventional gas drilling after
2020. The decision was made despite the
Shell Exploration Company BV is assessing fact that most of eastern Australias gas
the possibility of supplying Liquefied Natural supply is produced from coal seam gas
Gas (LNG) to Pakistan, as it keeps a vigilant and comes as a blow to manufacturers
eye on developments regarding construction who have been clamouring for more gas
of the second LNG import terminal in the supply to help keep prices down. Our 41
country. At the moment, the possibility and farmers produce some of the worlds
options of providing LNG to Pakistan are being cleanest and freshest food. We wont put
assessed, Shell Pakistan said. Recently, Shell that at risk with fracking, state Labor
Exploration Company BV, Engro Corporations Premier Daniel Andrews said. Farmers
Elengy Terminal Limited and Pakarab are worried that groundwater reserves
Fertilizers Limited (a Fatima Group company) and commercial feasibility of the fast-track could be depleted or contaminated by on-
signed a joint cooperation agreement to project before moving it to the final investment shore gas drilling. Victorians have made
assess the development of a liquefied natural decision (FID) to provide the cleanest fossil it clear that they dont support fracking
gas receiving and re-gasification terminal fuel to help meet the countrys growing energy and that the health and environmental
at Port Qasim, Karachi. The three parties demands, it added. Royal Dutch Shell remains risks involved outweigh any potential
will continue work to assess the technical an active trader of the gas internationally. benefits, Andrews said.

Chevron LNG supply deal with Chinas ENN may boost spot market growth

Chevron Corps LNG supply deal with and the North West Shelf, the company
Chinas ENN LNG Trading Co may boost said. Companies such as Chevron with
the formation of a spot market for the the flexibility to match their supply with
fuel in Asia. Chevron signed a 10-year customers around the world are growing
term supply deal with ENN to supply up in dominance. By depending on a number
to 650,000 metric tons per annum of LNG of supply terminals rather than simply
with first delivery expected in 2018 or in one site to supply ENN, the deal may help
the first half of 2019, Chevron said. ENN is the formation of so-called spot market
a subsidiary of ENN Energy Holding, which for LNG. This would help to replace the
is one of Chinas largest gas distribution dominant sales model of multi-year
companies and operates in 150 Chinese contracts from one supply site to a buyer,
cities. The firm is also constructing a said Sophie Corbeau, a research fellow at
LNG import terminal in the northeastern ENN through its existing LNG assets, the King Abdullah Petroleum Studies and
city of Zhoushan that is planned to start including the companys Australian Research Center.
by 2018. Chevron expects to supply LNG interests at Gorgon, Wheatstone
September 2016
www.InfralinePlus.com

InConversation
Slow dispute resolution eroding
confidence of foreign investors in India
Timely and efficient dispute resolution arising out of
commercial contracts is key in todays era where our country
is looking to increase investments. Arbitration disputes in
India have been rampant in the major sectors including
construction, infrastructure, and oil and gas sectors.
This is primarily due to the nature of these businesses
and exigencies attached in running the business. Ravi
Singhania, Managing Partner, Singhania & Partners, LLP and
governing member of the Indian Council of Arbitration having
a vast experience of more than two decades in handling
Arbitration related matters, talks to InfralinePlus on various
issues involved in arbitration in these sectors. Ravi Singhania, Managing Partner, Singhania
& Partners, LLP and governing member of the
Indian Council of Arbitration

42 Please share your outlook A step forward in this direction has


towards Arbitration as a mode been shown by the legislature by recently also the choice of the parties to select
of dispute resolution in the introducing appropriate Amendment to an arbitrator possessing the necessary
Infrastructure Sector. the Arbitration and Conciliation Act, skills, experience and expertise to pro-
Most Infrastructure and Construction 1996 in January 2016. It includes various vide a quick and effective resolution of
projects include Arbitration as important changes including an endeavor disputes. Such expertise is useful to the
a dispute resolution process in to complete the arbitration within a year parties in sectors such as Infrastructure,
their contracts owing to various of the commencement. Such modifica- Construction and Energy owing to the
factors such as speedy disposal, tions are sure to make Arbitration in India technicalities and nuances involved.
availability of expert panels etc. as a favorable mode of dispute resolution The major disadvantage of Institutional
The Infrastructure sector has gained in this sector. Arbitration is the heavy costs involved.
importance owing to its key role in An Ad-hoc arbitration in com-
Economic Growth. What would you suggest as a parison is usually less expensive, but
However, today the government preferred mode of Arbitration? the parties are left to determine all
is facing the challenge of lack of There are normally two modes for the aspects of the arbitration themselves,
confidence in Foreign Investors to conduct of Arbitration, Institutional from the number of arbitrators, to the
infuse funds in the Infrastructure and Ad-hoc. In Institutional arbitra- procedure for conduct of arbitration
Sector. Since 2006, 50% of the total tion, the entire arbitration process is etc. Therefore, where claims are
inbound private-equity has been made administered by a specialized institu- smaller, ad-hoc arbitrations are the pre-
to the infrastructure sector but these tion like Delhi International Arbitration ferred form of dispute resolution. The
projects have seen a lot of delays Centre, Indian Council of Arbitration, choice of the mode thus would really
due to various factors including slow Construction Industry Arbitration vary depending on the intention of the
dispute resolution processes. In such a Council, Singapore International Arbi- parties and the desired results.
scenario the importance of Arbitration tration Centre, International Chamber
increases manifold and it is important of Commerce, etc. Amongst the several How important is it to choose the
to select the right mode and method of advantages of Institutional Arbitration, right seat of Arbitration?
Dispute Resolution while drafting and the most important ones are, having a Identification of the seat of arbitration
negotiating these Agreements. predetermined procedure in place and (which is different from the location
September 2016
www.InfralinePlus.com

where the hearings take place ie the does not have a reciprocal arrangement International Centre for Settlement of
venue), is one of the most important with India. These factors always need Investor Disputes (ICSID) ICSID or
features of an arbitration clause. This is to be kept in mind while drafting the initiating arbitration under the United
because the selection of the seat deter- Agreement between the parties. Nations Commission on International
mines the law governing the arbitration Trade Law (UNCITRAL) rules. A
procedure and often, more importantly, Please share your views on growing number of countries are
the process and rights relating to seek- Investment Treaty Arbitration? getting engaged in this mode of dispute
ing of interim relief and enforcement of Today Foreign Investors enjoy interna- resolution and treaty based arbitration
arbitration award. In view of the same, tional legal protection through various is likely to gain more importance in the
it is best to specifically mention the investment treaties. The trend of having time to come.
seat in the arbitration clause itself and various Bilateral Investment Treaties
avoid ambiguity. (BITs) had begun in India since the What do you think about the
In India, the law of arbitration 1990s and has gained greater momen- dispute resolution under PPP
provides for a simple procedure of tum now. The most important advantage models? Do you think any
enforcement if the seat is located in that a foreign Investor enjoys under In- changes need to be made in the
a country which has signed the New vestment Treaties is the option to initiate existing regime?
York Convention and with which arbitration against the State, with which As a firm we are dealing with innu-
India has a reciprocal arrangement. it has entered into an agreement without merable disputes arising out of PPP
However, foreign awards are difficult approaching their own government. projects. The most common form of
to enforce in India if the country where As far as Indias BITs are con- dispute resolution clauses in Highway
the award has been passed has not cerned, most of them have an option projects that we have come across are,
signed the New York Convention and of approaching the World Banks that initially the disputes are endeav-
ored to be amicably resolved between
In India, the law of arbitration provides for a simple the parties, failing which, the Engineer/ 43
Independent Consultant has to give its
procedure of enforcement if the seat is located finding on the disputes. The next step
in a country which has signed the New York is that the disputes are referred to a
Convention and with which India has a reciprocal Dispute Review Board which places
arrangement. However, foreign awards are its recommendation within a specified
difficult to enforce in India if the country where the period. If the recommendations are not
award has been passed has not signed the New acceptable to either party, the dispute is
referred to arbitration.
York Convention and does not have a reciprocal PPPs in infrastructure are a valuable
arrangement instrument to speed up infrastructure
development in India. For the PPP
model to be most effective, the
dispute resolution process under these
contracts needs to be improved. One
method of doing this could be to
make the dispute resolution process
institutionalized, which could lead to
enhanced efficiency. Inspiration can
be taken from the National Highways
Authority of India which has for-
mulated the Society for Affordable
Redressal of Disputes (SAROD) with
its own rules for all cases of domestic
arbitrations which has lead to evidently
faster disposal rates.

For suggestions email at feedback@infraline.com


September 2016
www.InfralinePlus.com

InDepth
Gas-based power plants:
Gas-ping for fuel!

44

Close to 25 gigawatts of gas-based capacity running at less than a quarter of their potential
Fourth reverse e-auction to provide subsidy to buy gas likely after October

By Team InfralinePlus

With natural gas accounting for just supported to buy electricity from them. provide subsidy to buy gas for running
about 9% of Indias overall energy Though generation from such plants has stranded power projects and those
mix, the government is trying hard to significantly picked up in the last couple operating at sub-optimal level is likely
increase its domestic production. Indias of months, its the offtake of power by to be conducted after October once the
Liquefied Natural Gas (LNG) sector is DISCOMs that is a big challenge. Power current phase (June to September) ends
undergoing a major transformation as plants seldom use high-priced imported on September 30. As basic fuel costs
it is set to occupy a crucial part in the LNG as power produced from this fuel increase, especially in thermal coal,
countrys energy portfolio. Under the would cost much more than the power more expensive fuels such as LNG will
governments revival plan for stranded produced from a domestic gas-fired or emerge as more viable alternatives.
gas-based power plants, LNG will be coal-fuelled plant and there would be no Auctions for the 1st phase (June
imported and cash-strapped state power takers for such expensive power. 1 to September 30, 2015) of PSDF
distribution companies will be financially The fourth reverse e-auction to Support to gas-based power plants was
September 2016
www.InfralinePlus.com

held in the months of May, 2015. A stranded projects and 24 domestic According to the Central Electricity
combined total of 10,270 MW plants gas-based plants. Authority, the average PLF has come
were able to secure gas allocation. The However, falling price of LNG in the down to 60% in June 2016 from a high
entire process was completed in less global markets has enabled the gov- of more than 70% a couple of years back.
than a month and gas supply by GAIL ernment to launch a subsidy scheme to The position is really worrisome for state
started on June 1, 2015. Auctions for revive gas-based power plants. Recent units and private entities for whose plants
2nd Phase (October 1, 2015 to March spot LNG contracts were struck at prices the factor was about 54-57%. Given the
31, 2016) were held in the month of as low as $10.5 per MMBtu, nearly 45% limited financial capacity of states, this
September 2015 and helped in revival down from year ago period and 25% cannot be a viable power generation unit
of gas-based generation plants with down from those struck in August 2014. performance on a sustained basis. There
installed capacity of 11,717.72 MW. These contracts are for delivery after are still a very large number of gas-based
The countrys gas-fired plants, two months and hence deliveries will be plants which continue to be particularly
with nearly 25 gigawatts of gen- effective from January 2015. There are poor performing in view of lack of fuel,
eration capacity, are running at less indications the trend will continue well which is natural gas, at affordable prices.
than a quarter of their potential. in future. However, LNG imports will Fortunately, the international prices of
Transportation costs and taxes have subject these companies to the vagaries liquefied natural gas are coming down
countered the 27% decline in spot of foreign exchange markets, besides and this should help them improve their
LNG prices in the past year. Com- natural gas ones. performance.
panies such as NTPC, Essar, GMR, The cost of power generation may
Lanco, GVK, Tata Power, Torrent go up in the coming years due to low Pricing Policy
Power, GSEC, RGPPL (Dabhol) and plant load factor (PLF) of thermal plants. Another major constraint is the distorted
CLP India are expected participate The capacity utilization of plants has retail pricing structure in the power sec-
in the future auction for as many 31 been going down in the last few years. tor that currently limits the competitive-
ness of gas-fired generation. As per the 45
Falling price of LNG in the global markets has en- Central Governments Gas Utilisation
abled the government to launch a subsidy scheme Policy, NELP producers cannot sell gas
on purely commercial basis. The gas is
to revive gas-based power plants. Recent spot allocated by the government, limit-
LNG contracts were struck at prices as low as ing upstream investments as the high
$10.5 per MMBtu, nearly 45% down from year ago cost of off-shore exploration cannot
period and 25% down from those struck in August be recovered from the priority sectors
2014. These contracts are for delivery after two that are highly price sensitive. Power
months and hence deliveries will be effective from producing companies cannot raise tariffs
January 2015. There are indications the trend will without the consent of the state electric-
continue well in future. ity boards. If the latter do not agree to
an increase, the power company has
to either reduce the quantity of power
generation or bear the losses.
In addition, under subsidy mecha-
nisms, power tariffs are kept artificially
low, which fails to send proper pricing
signals to those who can adjust con-
sumption to price changes. Similarly, it
undermines the cost-recovery prospect
of the investors. Hence there has been a
demand from the industry for ratio-
nalisation of the pricing mechanism to
attract investors into this sector.
The uncertain future of Indian
domestic gas production has cascading
effects on the overall role of gas in the
countrys energy sector. The impacts
September 2016
www.InfralinePlus.com

InDepth

have already been felt in the power robust growth over the next 510 years
sector where the PLF of gas-fired in India and project developers will NTPC not keen on buying
expensive RLNG power
plants during the year averaged only have an abundant supply to run their
18.64% (May 2015) and more recently plants not just at 2530% PLF but at the State-run NTPC Ltd., Indias biggest
at 23.73% (May 2016) due to unavail- required optimal levels of 8085%. power producer, is said to be seeking
to terminate a long-term supply con-
ability of gas. As the economy expands As the economy grows, it is inevi-
tract for imported natural gas as it says
and industries and households increase table that our requirements for natural the fuel is too expensive to be used in
their consumption of natural gas, the gas will also grow at a much faster rate power generation. NTPC signed a 20-
dependence on imported LNG will than our domestic production. However, year contract with GAIL in 2009 to buy
only increase since the domestic output our capability to enhance imports is 2 million metric standard cubic meters
a day of gas.
has been declining for years. seriously crippled by the capacities of
LNG terminals (India currently imports NTPCs combined 4 GW of gas-fired
generation account for about 9% of its
Infrastructural challenges 40 mmscmd of gas annually, while the total capacity. Its seven gas plants ran
Increasing focus on expansion of gas existing capacity to handle imports is at 25% of their capacity in the year end-
pipeline infrastructure in the country, only 60 mmscmd). Hence, it is pertinent ed 31 March, compared with 33% in the
rising demand for natural gas from for the government to support expansion prior year. Petronet LNG, Indias biggest
power and industrial sectors and favour- plans and new greenfield investments on gas importer, renegotiated a contract
with Qatars RasGas Co. for 8.5 million
able government policies makes LNG new LNG terminals. tons of LNG annually through 2025.
a commercially viable and suitable fuel According to industry estimates, the Petronet sells the fuel to companies
for various end users in India. As a re- gas demand will rise to ~275 mmscmd including GAIL and Indian Oil Corp.,
sult, LNG demand is forecast to witness by 2019-20 and ~330 mmscmd by which have their own deals to sell it on
to end consumers, such as NTPC.

As the economy grows, it is inevitable that our 2024-25, from the current demand
potential of more than 225 mmscmd.
46 requirements for natural gas will also grow at a Natural gas power has the potential to
much faster rate than our domestic production. play an important role in meeting Indias
However, our capability to enhance imports energy demand, but some reforms
is seriously crippled by the capacities of LNG have to be in place if the country has to
terminals. Hence, it is pertinent for the government realise this potential. Several suggestions
to support expansion plans and new greenfield have been put forward like having an
investments on new LNG terminals attractive gas pricing to attract invest-
ments, development of fully-integrated
national gas grid that assures effective
Figure 1: State-wise distribution of gas-based power plants
in India third party access etc.
Gas supply contracts are characterised
State-wise distribution of gas based power plants by high level of take or pay obligations
on fuel buyer. It also needs to be ensured
that gas-based plants do not face dispatch
risks during their intended hours of
operation (peak/intermediate load).Gas-
Delhi, 2208 MW based peaking power if integrated into
(9%)
Others, 3574 MW the total electricity generation system can
(15%)
lead to carbon reduction efficiencies even
higher than renewables like wind or solar
power. Hence it is suggested to extend
the fiscal benefits to gas based peaking
Andhra Pradesh, Maharashtra,
3207 MW
power projects at par with the renewable
7579 MW
(31%) Gujarat,
(13%) energy projects or Ultra Mega Projects-
7579 MW specifically, zero customs duties and
(31%)
taxes and interest rate subsidy.

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September 2016
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StatisticsOil & Gas


Month Wise Crude Oil Processed by Refineries (2016-17) (As on July, 2016) (000 MT)
OIL COMPANIES APR MAY JUN JULY TOTAL
Indian Oil Corporation Ltd.(IOCL)
IOCL-KOYALI, GUJARAT 1215 1240 1233 1273 4962
IOCL-MATHURA, UTTAR PRADESH 797 814 797 755 3163
IOCL-PANIPAT, HARYANA 1316 1386 1357 1400 5459
IOCL-HALDIA, WEST BENGAL 692 713 682 659 2747
IOCL-BARAUNI,BIHAR 559 577 547 576 2259
IOCL-GUWAHATI,ASSAM 75 73 68 86 302
IOCL-DIGBOI,ASSAM 52 46 43 24 164
IOCL-BONGAIGAON,ASSAM 212 215 200 215 841
IOCL-PARADIP,ODISHA 394 538 257 697 1887
IOCL TOTAL 5313 5602 5183 5686 21784

Hindustan Petroleum Corporation Ltd.(HPCL)


HPCL-MUMBAI,MAHARASHTRA 714 725 623 689 2751
HPCL-VISAKH,ANDHRA PRADESH 804 815 798 731 3148
HMEL-GGSR, BATHINDA, PUNJAB 920 945 878 909 3652
HPCL-TOTAL 2438 2485 2299 2329 9552

Bharat Petroleum Corporation Ltd (BPCL)


BPCL-MUMBAI, MAHARASHTRA 1146 1169 1163 1210 4688
BPCL-KOCHI, KERALA 895 933 897 923 3647
NRL-NUMALIGARH, ASSAM 217 238 233 237 925
BORL-BINA 534 617 532 502 2184
BPCL-TOTAL 2791 2957 2825 2872 11444

Chennai Petroleum Corporation Ltd (CPCL)


CPCL-MANALI, TAMILNADU 821 807 878 951 3457
CPCL-NARIMANAM,TAMILNADU 56 50 33 48 187
CPCL-TOTAL 877 856 911 1000 3644

Oil & Natural Gas Corporation Ltd.(ONGC) 47


ONGC-TATIPAKA,ANDHRA PRADESH 7 6 8 7 28
MRPL-MANGALORE,KARNATAKA 1166 1232 1274 1332 5004
ONGC TOTAL 1173 1239 1282 1339 5032

Reliance Industries Ltd. (RIL)


RIL,JAMNAGAR,GUJARAT 2732 2856 2727 2814 11129
RIL-(SEZ), JAMNAGAR,GUJARAT 3115 2183 3215 3425 11937
RIL TOTAL 5846 5039 5942 6239 23066

ESSAR OIL LTD.,VADINAR,GUJARAT 1719 1779 1720 1760 6978

GRAND TOTAL 20157 19955 20162 21224 81499

Production of Petroleum Products by Refineries and Fractionators (Apr-July,2016) (000 MT)


PRODUCTS APR MAY JUN JULY TOTAL
LPG 841 870 906 954 3572
NAPHTHA 1361 1364 1529 1738 5992
MS-III 815 887 867 799 3369
MS-IV 762 804 734 831 3131
MS Others 1392 1525 1436 1438 5792
ATF 1159 1057 1170 1114 4500
SKO 507 583 586 616 2292
HSD-III 2805 3004 2932 2893 11634
HSD-IV 2448 2501 2421 2719 10089
HSD Others 2784 2602 3303 3426 12116
LDO 35 37 25 30 127
LUBES 79 87 94 93 353
FO 1037 1131 925 1038 4131
LSHS 18 29 28 22 97
BITUMEN 590 578 475 268 1911
RPC/Petcoke 979 962 1065 1104 4110
Others 1937 2068 1705 1624 7333
TOTAL 19548 20090 20201 20707 80547

REFINERIES 19295 19796 19924 20406 79421

FRACTIONATORS 253 294 277 301 1126


19548 20090 20201 20707 80547
September 2016
www.InfralinePlus.com

StatisticsCoal

Production and consumption of petroleum products (Million Metric Tonnes)


April-March 2016 (P) 15-Jul July 2016 (P) April-July 2015 April-July 2016 (P)
Products Con- Prodn Prodn Prodn Con-
Prodn Prodn
sumpn Consumpn Consumpn Consumpn sumpn
LPG 10.6 19.6 0.8 1.6 1 1.7 3.2 6 3.6 6.5
MS 35.3 21.8 3 1.7 3.1 1.9 10.9 7.1 12.3 7.8
NAPHTHA 17.7 13.4 1.4 1.2 1.7 1.1 5.7 4.4 6 4.4
ATF 11.8 6.2 0.9 0.5 1.1 0.6 3.3 2 4.5 2.2
SKO 7.5 6.8 0.7 0.6 0.6 0.5 2.4 2.3 2.3 2.1
HSD 98.6 74.6 7.9 5.7 9 5.8 32.1 24.9 33.8 25.9
LDO 0.4 0.4 0.04 0.03 0.03 0.04 0.1 0.1 0.1 0.1
LUBES 1 3.2 0.08 0.3 0.09 0.3 0.3 1.1 0.4 1.1
FO/LSHS 10.7 6.7 1.1 0.5 1.1 0.6 3.7 2.1 4.2 2.4
BITUMEN 5.2 5.8 0.3 0.3 0.3 0.3 1.7 1.9 1.9 2.1
OTHERS 32.5 24.9 3 2 2.7 2.2 10.7 7.6 11.4 8.8
ALL INDIA 231.3 183.5 19.2 14.4 20.7 14.9 74.2 59.3 80.5 63.7
Growth (%) 4.80% 10.90% 8.50% 8.00% 8.00% 3.90% 3.90% 6.90% 8.50% 7.30%
Note: Prod - Production; Consump - Consumption

Refineries: Installed capacity and crude oil processing (MMTPA/ MMT)


Crude oil processing
Installed
Com- 2015- July April-July
Refinery capaci- 2014-15
pany 16(p) 2015 2016 2016(P) 2015 2016 2016(P)
ty(1.4.2016)
(Actual) (Target) (Actual) (Target)
IOCL Barauni (1964) 6 5.9 6.5 0.5 0.4 0.6 2.1 2.1 2.3
48
Koyali (1965) 13.7 13.3 13.8 1.3 1.3 1.3 4.2 4.8 5
Haldia (1975) 7.5 7.7 7.8 0.7 0.7 0.7 2.6 2.7 2.7
Mathura (1982) 8 8.5 8.9 0.8 0.7 0.8 2.9 2.9 3.2
Panipat(1998) 15 14.2 15.3 1.2 1.3 1.4 5.1 5.2 5.5
Guwahati (1962) 1 1 0.9 0.1 0.08 0.09 0.37 0.32 0.3
Digboi (1901) 0.7 0.6 0.6 0.05 0.01 0.02 0.18 0.18 0.16
Bongaigaon(1979) 2.4 2.4 2.4 0.2 0.2 0.2 0.9 0.8 0.8
Paradip (2016) 15 - 1.8 0 0.9 0.7 0 3 1.9
IOCL TOTAL 69.2 53.6 58 4.7 5.5 5.7 18.3 22 21.8
HPCL Mumbai (1954) 6.5 7.4 8 0.7 0.7 0.7 2.3 2.6 2.8
Visakh (1957) 8.3 8.8 9.2 0.5 0.5 0.7 2.6 2.7 3.1
HMEL Bathinda (2012) 9 7.3 10.7 0.9 0.8 0.9 3.6 3.1 3.7
HPCL-TOTAL 23.8 23.5 27.9 2.1 1.9 2.3 8.6 8.4 9.6
BPCL Mumbai (1955) 12 12.8 13.4 1.1 1.1 1.2 4.5 4.6 4.7
Kochi (1966) 9.5 10.4 10.7 0.9 0.9 0.9 3.7 3.6 3.6
BORL Bina (2011) 6 6.2 6.4 0.6 0.5 0.5 1.8 2.1 2.2
BPCL-TOTAL 27.5 29.4 30.5 2.7 2.6 2.6 9.9 10.3 10.5
CPCL Manali (1969) 10.5 10.2 9.1 0.7 0.9 1 3.4 3.5 3.5
CBR(1993) 1 0.5 0.5 0.05 0.05 0.05 0.18 0.2 0.19
CPCL-TOTAL 11.5 10.8 9.6 0.8 1 1 3.6 3.7 3.6
NRL Numaligarh (1999) 3 2.8 2.5 0.3 0.2 0.2 0.7 0.9 0.9
ONGC Tatipaka (2001) 0.1 0.1 0.1 0.005 0.004 0.007 0.019 0.013 0.03
MRPL Mangalore (1996) 15 14.6 15.5 1.1 1.1 1.3 5 5 5
ONGC TOTAL 15.1 14.7 15.6 1.1 1.1 1.3 5 5 5
RIL* Jamnagar(DTA)(1999) 33 30.9 32.4 2.8 2.8 2.8 10.3 10.3 11.1
Jamnagar(SEZ)(2008) 27 37.2 37.1 2.5 2.5 3.4 11.6 11.6 11.9
EOL Vadinar (2006) 20 20.5 19.1 1.8 1.7 1.8 6.9 6.8 7
All India 230.1 223.3 232.9 18.7 19.3 21.2 74.9 79 81.5
* RIL target for 2016-17 is previous year crude processing. Note: Some sub-totals/totals may not add up due to rounding off at
individual levels.
September 2016
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NewsBriefs | Renewable International National


Govt mulling subsidised solar water pumps for farmers in all states Gujarat becomes the first state to
ing upon their agricultural production and distribute 2 crore LED Bulbs under
UJALA
demand. The cost of the rest amount will be
borne by both Central and State Governments.
The Government is in process to provide
solar water pumps in subsidised rates to the
farmers of almost all states in the country.
Haryana has already started this initiative, and
I think other states will follow soon. The aim
of Government is to ease the farm activities
In a move to promote farm activities using so- in productive way and ease the farm activities
lar power in the country, mostly in rural areas, across the country, mostly in rural areas, said Gujarat has become the first state to
the Central Government is mulling subsidised officials in the Ministry of New and Renewable distribute 2 crore LED bulbs Under
solar water pumps of different capacities Energy. It is expected that the subsidy may the Governments Unnat Jyoti by
(horsepower or HP) for farmers in almost all vary from 75 to 95 per cent to meet the de- Affordable LEDs for all (UJALA) scheme.
states soon. The subsidy of such pumps is mand of the farmers, while the cost of pumps Gujarat has reached this milestone in
expected to raise upto 95 per cent for farmers from 5 to 25 per cent will be borne jointly by 96 days and over 42 lakh households
and it will vary from state to state, depend- both Central and State Governments. have benefited from the scheme.
Indian Prime Minister Narendra Modi
Adanis solar equipment mfg facility may commence by year-end while congratulating Gujarat on the
achievement said, There is competition
Gautam Adani-led Adani Enterprises is between states to outdo each other in
expecting to commission the first phase terms of LED distribution. Gujarat, in
of its solar power equipment facility being less than 100 days is now leading in
set up in Gujarat by year-end. In the first terms of LED distribution across the
phase, the company, which has set up a nation. I congratulate the entire team for 49
special purpose vehicle (SPV) Mundra Solar implementing the LED Bulb programme.
PV for the project, is setting up 1,200 MW I am confident that every household
of manufacturing capacity and will invest in Gujarat will adopt LEDs and save on
Rs 2,000 crore. In the second phase, the electricity bills. The state will save a lot
company will not only enhance the capacity of energy and will also lead the way in
to 2,000 MW but also manufacture other of solar panel production on site, including helping protect the environment. The
components like silicon wafers, PV back polysilicon refining, ingots, wafers, cells, PV distribution of 2 crore LED bulbs has led
sheets among others. The second phase of back sheets and panels production, with to an annual energy savings of 259 crore
the project is likely to go operational in the a broader ecosystem involving extended kWh which is equivalent to lighting up 5
second quarter (April-June) of 2017. This supply chain for raw materials and lakh Indian homes for an entire year.
facility will vertically integrate all aspects consumables.

US assures to provide finances to India for renewable energy

US has assured India of doing more the challenge of climate change, Kerry
by providing it finances for innovative said during the joint press interaction with
renewable energy projects while asserting External Affairs Minister Sushma Swaraj
that it is the only way of meeting during Second India-US Strategic and
the challenge of climate change. US Commercial Dialogue. He said that US will
Secretary of State John Kerry said that soon make the promise made by more than
the civil nuclear cooperation between 190 nations at the Paris Climate change
both the countries will bring affordable summit last year a reality by officially
and clean energy to tens of millions joining the global climate agreement.
of Indian households. To build on our Our civil nuclear cooperation will bring
shared leadership in combating climate affordable clean energy to tens of millions
change, the US is going to do more to help energy projects and clean energy of Indian households as we move closer in
India upgrade its power grid and work entrepreneurs.That is the only way we will the use of safe, modern, latest generation
with our private sector in order to help have a chance of adequately meeting the nuclear power.
provide financing for innovative renewable promise of Paris and adequately meeting
September 2016
www.InfralinePlus.com

NewsBriefs | Renewable National


Government plans two funds to charge up power sector MNRE seeks comments to standardise
norms for solar equipment
Fund (NIIF). NIIF is the fund of funds
within which we will set up a sub-fund which
will focus on renewable energy projects and
give investment support for faster ramp up
of renewable energy. It is under our active
consideration and we may launch it in the
near future, power minister Piyush Goyal
said. We are also in dialogue with certain
bankers to see if we could look at a stressed
power asset fund. It may take us some
more months to put its framework in place.
The power ministry plans to set up two Asked about the size of the funds, Goyal said, In a bid to standardise norms for solar
funds of $1billion each to enable alternative Each of these funds could easily be of the equipment, the Ministry of New and
financing options for stressed power assets size of $1billion. The government set up the Renewable Energy has sought comments
and renewable energy projects. The two Rs 40,000 crore NIIF in as an investment from various stakeholders on technical
funds have been proposed under the ambit of vehicle to fund commercially viable regulation for the sector. Toughening its
the National Investment and Infrastructure greenfield, brownfield and stalled projects. stand on dumping of poor quality solar
equipment, the government had earlier
Govt to set up Rs 1.5k crore payment security fund for solar projects
decided to regulate imports of such prod-
Government is in the process of setting up ucts under the Bureau of India Standards
a Rs 1,500-crore fund to avoid delays in re- (BIS) Act. In view of enhanced target
leasing viability gap funding (VGF) to solar of 100 GW Solar Power by 2022, the
power developers under the Jawaharlal ministry has decided to bring out techni-
Nehru National Solar Mission (JNNSM). cal regulation for Solar Photovoltaic
50 State-run Solar Energy Corporation of Systems/Devices/Components Goods, a
India (SECI) will set up a Rs 1,500 crore senior ministry official said. This exercise
payment security mechanism (PSM) to is part of the process of bringing out a Lab
ensure timely payment of VGF to the devel- Policy for Renewable Energy Sector for
opers of solar power capacities under the Testing, Standardisation and Certification,
JNNSM, a senior official said. The official he said adding that the comments can
further said, This fund will have a corpus be provided by September 6, 2016. Once
to cover three months payment for the 100GW of solar power by 2022. The fund the standards are inserted in the rules
various VGF schemes approved by Ministry will also cover delays/defaults in payments of BIS Act, the importers would have to
of New & Renewable Energy (MNRE) from to SECI by entities (discoms/state utilities/ seek certified test reports of the products
time to time. The fund is significant as the bulk consumers), so that timely payment to under the order.
government has set the target of adding developers could be ensured.

ReNew Power targets 3.500 Mw extra capacity every year

The Goldman Sachs-supported ReNew Pow- It has raised $650 million equity and has an
er plans to add 3,500 Mw every year to main- asset base of $2 billion. Sinha said the Centre
tain its share of 10 per cent green capacity was promoting renewable energy but there
by 2020. The company, which has 1,130 were state-level issues like grid curtailment.
Mw of commissioned capacity, will require He said the next stage of capacity addition
$10-12 billion funding, of which equity will be in renewable energy would have to be driven
around $3 billion. India plans to add 175 Gw by grid management through forecasting
capacity by 2020, for which 35,000 Mw will and scheduling. Savings through this have
need to be added every year. Of this 35,000 placement of equity and an initial public offer. to be understood better and transferred to
Mw, we plan to take a 10 per cent share, ReNew Power had last year planned an IPO bidders as an incentive, currently this goes to
Sumant Sinha, founder and chief executive but put it on hold. Besides Goldman Sachs, the states, he said. He said with the roll-out
officer, ReNew Power said. ReNew Power which has invested $385 million in equity, of the debt restructuring scheme for power
would require $8-10 billion in debt funding the company has funding from the Asian De- distribution companies, their finances were
over the next five years. The company is velopment Bank, the Abu Dhabi Investment likely to improve, giving them more space to
looking at funding options, including private Authority and the Global Environment Fund. buy power.
September 2016
www.InfralinePlus.com

NewsBriefs | Renewable International States


Odisha targets 70 Mw rooftop solar projects by 2022 43 per cent solar street lights non-
functional in Gujarat, says CAG
projects are likely to be taken by the govern-
ment, private companies and individuals,
said a government official. In 2016-17 and
2017-18, the Green Energy Development
Company Ltd (Gedcol), the nodal agency
for implementation of renewable energy
projects, will implement 10 Mw roof top
projects at a cost of around Rs 80 crore.
Recently, the Odisha government has signed
implementation agreement with Azure
In an effort to harness the non-conventional Power Mercury Pvt Ltd for developing the
sources of energy, Odisha targets to gener- countrys first grid connected Mw scale roof Despite incurring huge expenditure, the
ate 70 Mw exclusively from rooftop solar top project on net metering basis. It will be purpose of installing solar photovoltaic
projects by 2022. The target to generate a four Mw project to be set up on about 190 street lighting system for the rural popu-
70 Mw from rooftops is likely to see an government buildings in the twin cities of lace in Gujarat has been defeated, says the
investment of around Rs 500 crore. The Cuttack and Bhubaneswar. Comptroller and Auditor General of India
(CAG) that not only found 43 percent of
Madhya Pradesh to provide state guarantee for 750 Mw Rewa ultra mega solar project these systems non-functional, but also
found several of them installed within
To ensure viability of its ultra mega solar the residential premises of elected gram
park at Rewa, the Madhya Pradesh govern- panchayat members or private parties. The
ment is slated to extend state guarantee to state government had executed the work of
the flagship project. This would ensure that installation of solar street lighting systems
there wont be any default in payment to under the Samras Yojana and MPLAD
the Rewa Ultra Mega Solar Ltd (RUMS), a schemes. During field visits, CAG found 51
joint-venture of the states Urja Vikas Nigam that in three gram panchayats Naglod,
and the Union government-controlled Solar Ranela and Shanbar four of the solar
Energy Corporation of India. The park is street lighting system were installed in the
expected to have a capacity of 750 Mw. premises of private parties while in Dehari
Nearly 75 per cent power generated would and (Umargaon) Ranela gram panchayat
be procured by the Madhya Pradesh Power separate power purchase agreements (Santrampur), it found 15 such systems
Management Company (MPPMC) and the (PPAs) would be signed for drawing power installed in the residential premises of
balance 25 per cent by Delhi Metro Rail by each of the procurers. This apart, the elected members of gram panchayat which
Corporation (DMRC). Besides, the imple- land use purchase agreement will be signed was in contravention to the provisions of
mentation support agreement and coordina- for the 1,530 hectare of land required for the scheme guidelines, stated a CAG report
tion agreement would also be signed since the project. on local bodies.

UP becomes lab for green energy firms looking to tap rural market

Uttar Pradesh, home to about 16% of Khan, vice-president, initiatives and


Indias 1.2 billion population, many of strategy at the Rockefeller Foundation,
whom have poor or no access to power, is which has committed $75 million of debt
emerging as the preferred testing ground financing and early investment capital to
for non-profits and companies trying out energy services companies in India, the
new business models as they seek to tap market for mini-grids in Uttar Pradesh is
rising demand for electricity in rural India. promising. More consumers are signing
Across the state, these organizations are up, no one has dropped out of the mini-
testing the viability of supplying electricity grid ecosystem and more energy service
from mini-grids and solar-powered lighting companies are coming up, said Khan. The
systems specially designed for villages foundation provides finance for setting up
and small enterprises. The first customers micro-grids, helps these utilities in finding
are telcos whose telecom towers in and shops, even individual households, anchor customers (mostly telcos), and in
remote parts of the country have, until in villages that were hitherto illuminated marketing power to households and small
now, been powered by diesel generators; by kerosene lanterns. According to Zia commercial establishments.
September 2016
www.InfralinePlus.com

NewsBriefs | Renewable International


Sri Lanka eyes 70% renewable energy share in power generation by 2030
Indonesia will add 5 GW of solar over
sustainable power generation in the country. next 3 years through feed-in-tariffs
The Battle for Solar energy program
aims to encourage the small consumers
to install solar panels at their roof-tops
and consumers will be paid for any excess
energy exported to the grid. With this new
program, government expects that at least
20% of the consumers produce electricity
on their own. Deputy Minister of Power and
Renewable Energy Ajith P. Perera said that,
Sri Lankan government intends to for excess energy exported to the national Solar electricity in Indonesia could
significantly increase the share of renewable grid, electricity board is ready to pay feed-in grow markedly in the next few years,
energy in electricity generation by the end tariff for power generated by the consumers. through the use of Fits. The Ministry of
of the next decade. Sri Lankan Cabinet of The scheme will be implemented in stages Energy & Mineral Resources (ESDM) has
Ministers has approved a Battle for Solar and first stage will cover Northern, Southern issued a Government Decree to provide
energy program which aims to boost the and Eastern Provinces. support mechanisms for utility-scale
solar photovoltaic systems, exhibition
Chile breaks Dubais record of solar power output at low cost and management services. The driving
support mechanism will be the solar
Chile has broken Dubais record of promis- FiT priced at up to USD 0.25 per kWh.
ing to produce solar at the worlds cheapest The fundamental points of this decree
rates. During June, Dubai announced that involve Feed-in-Tariffs (FiTs) for solar
it would produce solar power at Rs 2.01 power from USD 0.145 cents to USD
per unit in June, in August Chile broke the 0.25 per kWh of solar power. The goal of
52 record with a new low of Rs 1.95 per unit. this decree targets adding 5.000 MWp
According to reports, SunEdison set a new of solar PV capacity in 2-3 years. The
record-low solar bid at 2.91ents per unit. ESDM is optimistic that projects will be
This beats the 2.99 cent per unit Masdar implemented smoothly. This program
Consortiums bid for an 800 MW solar power will offer quotas to Independent Power
project in Dubai. As part of an auction held power generation. However, the intermittent Producers (IPPs). Through the regula-
in Chile this month, power producers were nature of these renewable sources would tion, Indonesia could get an additional
asked to bid on the price at which they could either require large power storage systems investment of up to Rp 156 trillion (USD
supply power irrespective of the generation or thermal power to be the base load, said 12 billion). The government of Indonesia
source. Solar won the war that too at a new an analyst. Solar power plants does not has set aside USD 100 million for subsi-
record low. These new lows are increas- generate power during cloudy days and at dizing renewable energy in 2017.
ingly turning out to be threat for thermal night. Wind power can suddenly stop.

Pakistan to add 1 GW of wind energy capacity by 2018

Pakistan is expected to see a huge jump in under construction. Six projects with 308 MW
installed wind energy capacity over the next of capacity are already operational. The Sindh
two years as 21 projects are lined up for com- government has taken several measures to
missioning. Government officials in Pakistan promote the renewable energy sector. Last
have revealed that almost two dozen wind year, it approved the allocation of 15,089
energy projects are currently at various stag- acres of land to set up 21 solar and wind en-
es of development, and 1,012 MW capacity is ergy projects, amounting to a total installed
expected to be added to the grid by 2018. All capacity of 1,880 MW. The government will
of these projects are being developed in the also allocate an additional 6,622 acres land
eastern province of Sindh, which shares an for 12 more renewable energy projects later.
international border with the Indian states ects, including China Three Gorges Corpora- Several European and Chinese companies
of Rajasthan and Gujarat. These states have tion, China Sunec Energy, and Tricon Boston have already invested in Pakistans renewable
some of the largest installed wind energy Consulting Corporation. Nine projects with a energy market. Foreign investors poured over
capacities among all Indian states. A number cumulative capacity of 479 MW have already $3 billion into the renewable energy sector in
of foreign companies are planning these proj- achieved financial closure and are currently Pakistan over the last year.
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September 2016
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ExpertSpeak
The first signs of stress in
solar power
Shravan Sampath, CEO, Oakridge Energy - a specialized stressed
asset re-construction company in the power sector talks of how
policy making in the solar power sector is currently driving growth but
could result in substantial stressed assets due to various financial
challenges facing the solar industry in India.

The year that went by saw some path- spot power markets are trading at his-
breaking achievements in solar capac- toric lows and power is available at Rs.
ity additions over 3,019 MW of new 2 / kWh for the taking. In fact, several
capacity added, and tendering of over states like Haryana, Uttar Pradesh,
21,000 MW. Large developers like Sun Punjab and Rajasthan are backing
Edison, SoftBank and Fortum drove down installed capacities due to
bidding to record lows, and tariffs have lack of demand in
now settled at Rs. 4.3 / kWh, among the backdrop of Solar Shravan Sampath, CEO, Oakridge Energy
the lowest in the world. Is it time to an inter- sector
rejoice about the grand success of our national Local villagers and leaders take ad-
54 needs to evolve
solar mission? Is it time to make even demand vantage of this pressure by making
grander targets for the coming year? drop and
specialist lenders land acquisition and transmission
Or does all this appear to be a prelude decline in that are accurately line difficult. It would make far
to another meltdown as was seen in the commod- able to identify more sense for the government to
thermal power sector after years of ag- ity markets. risk and finance stipulate upfront that the develop-
gressive growth up until 2012? In addition, projects ment timeline is twenty-four months.
over 20,000 Developers would be free to take
Structural flaws in bidding MW of thermal advantage of any future likely drop in
The present bidding framework for power capacity is lying idle and shut panel prices. In any case, distribution
solar power suffers from several struc- down due to lack of buyers and a long- utilities are facing no great pressure
tural flaws. For starters, it is unclear term PPA. of power shortage for them to require
why states are indulging in so much construction of solar projects in such a
tendering, while it appears they re- Stringent timelines tearing hurry.
ally have no demand for such large Another area of concern is the stringent
volumes of power. Several bids have timelines for completion of solar power Need to impose adequate
defied reason. For instance, on the one plants. Most bids stipulate financial bank guarantees
hand, the state of Jharkhand already closure within seven months of PPA Perhaps this solar hysteria is being
has backed out of PPAs from several signing, and commissioning within fuelled by the fact that most states are
thermal power plants citing lack of fifteen months. The stated rationale not imposing adequate bank guarantees
demand. On the other hand, they have appears to be that the government (bid bond guarantees) for bidders
called and successfully concluded 1200 does not want the developers to take to participate. States like Telangana
MW of solar bids. Telangana, a state advantage of falling solar panel prices. had bank guarantees of only Rs. 10
with a total installed capacity of 5850 However, this stringent timeline makes lakh / MW while calling for tenders
MW, has called and concluded bids for proper appraisal by banks virtually im- for over 2000 MW. This brings in all
2000 MW of solar power (over 35% of possible, and lending is becoming more kinds of non-serious bidders who are
its total installed capacity). It is unclear and more ad-hoc. The fifteen-month only interested in picking up projects
why states need so much contracted stipulation for project execution also to sell in the secondary market. It is
long-term power, particularly when puts undue pressure on the developer. precisely for this reason that the market
September 2016
www.InfralinePlus.com

is today flooded with over 3000 MW systemic risks to the power sector. adequate track record of stable
of solar power projects for sale where For instance, for all the path-breaking performance. While developers are
the bidders had won at attractive tariffs capacity additions, we do not have equally in the dark, lenders and other
but have no intention to build. Since a long term proven track record stake holders are only to be content
the PPA stipulates that these projects as we do for wind power or hydro with manufacturer performance
are not to be sold before achieving power. Such large capacity additions commitments that are supposedly
commissioning, complicated but frail are being funded by banks without valid for 25 years. However, in the
option structures are suggested by volatile world of solar bankruptcies,
bright lawyers to circumvent these While developers are it remains to be seen whether these
provisions. Several of these structures manufacturers would be able to
are waiting to fail in case the original
equally in the dark, sustain themselves for 25 years in
seller decides to play foul after the lenders and other stake order to fulfill these commitments.
project is fully built. holders are only to be In the last five years, we have seen
The biggest challenge in devel- content with manu- several new issues coming up in solar
opment of solar capacities is the facturer performance project performance, such as the
payment risks of such high priced commitments that are potential induced degradation (PID)
PPAs. Most states continue to be in supposedly valid for 25 issue that could result in almost 50%
a precarious financial situation, and years. However, in the degradation in 5 years.
its very likely that they may default With loans of over Rs. 71,000 crore
on such high priced PPAs. This could
volatile world of solar sanctioned to the green energy sector,
have a trigger effect across the solar bankruptcies, it remains with most of this to the solar sector, it
sector and result in a string of non- to be seen whether appears that our solar power sector needs
performing assets. these manufacturers to evolve specialist lenders that are accu-
would be able to sustain rately able to identify the risk and finance 55
Systemic risks to power themselves for 25 years projects in the solar power sector.
sector in order to fulfill these
As the size of our solar power sector commitments The views in the article of the author are personal.
increases in size, it poses several For suggestions email at feedback@infraline.com
September 2016
www.InfralinePlus.com

InConversation
Smart Cities are as much about
infra as about citizens
Cities are projected to be the primary growth drivers of the
economy in coming years. But most of the Indian cities are
overcrowded and their infrastructure overstretched to cope with the
needs of growing population. The Modi government has launched
ambitious projects to rejuvenate existing cities even as new urban
centres are proposed on the North-East and North-West corridors.
Pradeep Misra, CMD, REPL (Rudrabhishek Enterprises Pvt Ltd),
a leading urban planner and infrastructure consultant, shares his
views on Smart City mission and urban development. Excerpts:

What are Smart Cities all about? Do you think not only existing
A lot of new investment was cities should be rejuvenated
expected to pour into such proj- but new ones too be developed Pradeep Misra, CMD, REPL (Rudrabhishek
56 ects. But now it turns out states under the Mission? Enterprises Pvt Ltd)
are passing off existing projects Some new cities have come up on
as Smart City projects. What is their own and some have been de- the government focus was mostly
your take on that? veloped by governments. Ghaziabad on villages due to the political
See, it has always been so. States tend was not there before 30 years but it necessity of keeping in good humour
to restructure their existing projects has now become a city. Noida was rural population which was large in
to secure central government funding. just a just village of Ghaziabad tehsil size. Because of this village-centric
So it would not be surprising if states then. But now Noida has overtaken approach, urban centres got ignored.
are doing so under Smart City Mis- Ghaziabad in importance. Urban Existing infrastructure built by the
sion. Smart City Mission is a positive development happens only under Britishers in cities were meant for a
thing. Infrastructure will improve in two situations first, when there is a certain population and had a certain
100 cities that are to be taken up for big city that acts as a magnet and the life. Not surprising if these cities have
rejuvenation under the Smart City Mis- other, when development is induced become overcrowded.
sion. When that happens, it would act through development of some mega
as a catalyst for other cities. So overall, project. Delhi is a magnet that attracts India has planned massive
Smart City projects will have a positive investment and it is an example of the investment in urban infrastruc-
effect on urban infrastructure. first model. ture. What do you think are chal-
The other scenario in which devel- lenges in undertaking develop-
In what ways, Smart Cities will opment happens is when some big ment?
be different from traditional power plant or refinery is set up at a The biggest challenge is our legal
urban infrastructure? place that spurs development of urban set-up. Due to socialist mindset of our
Smart City is not an alien concept. infrastructure in the area. For example, country, there are lots of challenges in
The purpose of the Smart Cities is along the North-east and north-west infrastructure development. For any
to optimise infrastructure to match corridors being built with Japanese large scale infrastructure development,
with the requirements of the popula- help, several large urban centres are we need support from both the central
tion. If citizens can lead their lives proposed. and state government. Certain issues
in a hassle-free manner, then a city is If we look back at the 1947-2000 are central government issues, certain
called a Smart City. period of our country, we find that issues are state government issues. In
September 2016
www.InfralinePlus.com

a number of cases, their policies are have been overturned, relooked or even into those projects which are oth-
not in alignment. challenged. Most of the policies erwise not FDI-compliant. Hopefully
The second concern is inconsis- were either scrapped or amended. So results should be good. Policy change
tency in policy. Our governments take there is a big question mark over the is a kind of revolution, which was not
policy decision and people move on sanctity of the policy. expected. In India, our cities are over-
that. But when half of the work is burdened by population. If services
completed, policy is relooked at by the Government has eased condi- are delivered to users in a hassle-free
government or by court or by media tions for foreign direct invest- manner, then it is a smart city.
trial. Policy is again reworked. Cred- ment inflows into real estate. Security concerns are electronically
ibility of policy is a big question mark What do you think will be its managed. Infrastructure is optimised
on arrival of big investment. There is a impact on the sector? to cater to the requirement of popu-
sudden change in policy. FDI norms for the real estate sector lation. Smart cities are as much about
Policy decisions taken by the were never so liberal. Permission has infrastructure as about citizens.
government over the last 50 years been allowed for foreign fund inflows There is no fund shortage for smart
city projects. World situation too is
There is no fund shortage for smart city favourable as no other major economy
is doing as well as India. If investors do
projects. World situation too is favourable as not get return, they will never invest. If
no other major economy is doing as well as investors are unable to get their money
India. If investors do not get return, they will out, then also they will not bring
money. Municipalities in India are not
never invest. If investors are unable to get their groomed to handle large-sized infra-
money out, then also they will not bring money. structure projects. Municipalities will
Municipalities in India are not groomed to never take unpopular decisions. 57
handle largesized infrastructure projects
For suggestions email at feedback@infraline.com
September 2016
www.InfralinePlus.com

InDepth
As solar rooftop goes slow, govt
doubles target for solar parks

58

Presently 21 solar parks have been approved with a cumulative capacity of 19,900 MW
Govt banks on aggressive mode shown by the developers in recent solar auctions

By Team InfralinePlus

The Ministry of New and Renewable wasteland, uncultivable land or systems in an economically feasible
Energy (MNRE) is planning a second fallow land, will receive significant manner on site.
phase of setting up solar parks across portion of the funding from the central The difference between Solar Zones
the country with comprehensive plans government. Moreover, the U.S. and Solar Parks is that the Government
to increase the capacity to about 40 Agency for International Development will only facilitate the purchase of land
GW. The ministry is also said to (USAID) and the Asian Development for the zones, but will not actually
have sanctioned plans to implement Bank (ADB) have already signed acquire it. Furthermore, instead of
10 Solar Zones each consisting of a memorandum of understanding having transmission provided, solar
at least 10,000 hectares of land to (MoU) with the central government to zones will have several intercon-
encourage solar PV project developers, provide $848 million of funding for nection points set up in a manner
manufacturers and investors to help the development of solar parks across that prevents any developer from
achieve the countrys massive 100 GW the country. The zones will be able having to build a line for more than 25
by 2022 solar targets. This scheme, to cover more than one patch of land kilometres. JNNSM, Guidelines for
which will run up to 2020/21 using at a time. To count as a solar zone, it Development of Solar Parks, which
government or privately-owned must be possible to install transmission was released by the MNRE in Feb-
September 2016
www.InfralinePlus.com

ruary this year, states, The solar park market response to rooftop solar has included. Bids for the first ever solar
is a concentrated zone of development been rather weak compared to the solar projects to include storage at scale
of solar power generation projects park program. Industry watchers have have been invited in the latest round
and provides developers an area that expressed doubts about the huge roof- of tenders in India. The preliminary
is well characterised with proper top solar target. This, perhaps, could program, first announced in March,
infrastructure and access to amenities be a reason for increasing the capacity involves the states of Andhra Pradesh
and where the risk of the projects can addition target under the solar park pro- and Karnataka, as well as the Solar
be minimised. Solar Park will also gram. Last year, Reliance Group had Energy Corporation of India (SECI),
facilitate developers by reducing the signed an MoU to develop Solar Park who will implement 300 MW of solar
number of required approvals. and Solar Projects of 6,000 MW capac- and storage large-scale projects and
ity, spread over nearly 30,000 acres, will seek two initial, 50 MW bids in
Present status over next six years, with a potential to Andhra Pradesh. These solar projects
At present, the Ministry has approved attract investment of about INR 60,000 will also be developed with a 5
solar parks in 21 states with a cumula- crore in Rajasthan. MW/2.5 MWh battery storage system
tive capacity of 19,900 MW. Phase In the first phase, the MNRE included, and the same specifications
II of the program will add another 20 provided financial support through are also being outlined for four 50
GW of capacity. India plans to have viability gap funding (VGF) of INR MW solar parks in Karnataka.
100 GW of operational solar capacity 20 lakh per MW, or 30% of the cost Each park under Phase-I has a
by March 2022. This includes 20 GW of developing the park, whichever solar power park developer (SPPD)
from solar parks and 40 GW from roof- was lower. This may be increased usually, a venture between the SECI
top solar power projects. However, the in the second phase if storage is and the nodal agency for renewable
energy in the state where the project is
Another encouraging measure has been the coming up.
The scheme has been conceived
move to develop a separate project for evacua- on the lines of Charanka Solar Park
59

tion of power from solar parks. The state-owned in Gujarat which is a first-of-its-kind
Power Grid Corporation of India (PowerGrid) large scale solar park in the country
aims at evacuating power from 20 solar parks with contiguous developed land and
transmission connectivity. This scheme
planned by 12 states. Accordingly, inter-state envisages supporting the states in
lines will be laid by the corporation and the intra- setting up solar parks at various loca-
state ones will be installed by state transmission tions in the country with a view to
utilities or by calling tenders. create required infrastructure for setting
up of solar power projects. The solar
parks will provide suitable developed
land with all clearances, transmission
system, water access, road connec-
tivity, communication network, etc.

Govt banks on aggressive


bidding
The government is banking on the ag-
gressive mode shown by the developers
in recent auctions for the success of
solar park scheme. The latest Indian
solar auction has seen wining tariffs
return to extreme lows at INR 4.35/
kWh for 130 MW of PV in the Indian
state of Rajasthan. The auction, held by
NTPC, was for capacity outside solar
parks and the three successful players
were all Indian firms.
September 2016
www.InfralinePlus.com

InDepth

Details of 130 MW PV solar project auction in Rajasthan However, a total of 16 developers


were all willing to put in bids below
Developer Bid (INR/kWh) Capacity (MW)
five rupees per unit. Tariffs below
Shapoorji Pallonji 4.35 50 five rupees have divided industry
Mahindra Susten 4.35 60 commentators over the last six months
Adani 4.36 20 as they speculated over just how
Source: PV Tech, Bridge to India
bankable and viable such projects are.
The guidelines for solar power parks
Oil refineries plan to diversify into solar now! also states that large projects have the
potential to bring down the cost of
Indian downstream oil companies are the latest to express interest in de- solar power. It adds, Therefore, ultra
veloping large-scale solar power projects to meet electricity demand. Two mega solar power projects having a
of the leading oil refining companies in India Indian Oil Corporation capacity of 500 MW or above have
and Oil India are planning to set up 1 GW of solar capacity in state of been planned in India. Large chunks
Madhya Pradesh to power their operations. of land are available in some states for
Over the last few months, several entities across the country have express solar park development. Smaller parks
intentions to source electricity from solar projects. With the steep fall in tar- in Himalayan and other hilly states
iff bids, they hope to sign long-term power purchase agreements (PPAs) where contiguous land may be difficult
with solar projects and bypass rising coal-based power costs. Solar PPAs to acquire in view of the difficult
will also help them fulfil their renewable purchase obligations (RPOs). terrain are also being considered.
Indian miner and power producer Neyveli Lignite Corporation Ltd (NLC), is Smaller parks are also being considered
interested in building a 300 MW solar power facility in Odisha state. NLC in states where there is acute shortage
had earlier announced its intention to construct solar parks totalling 50 of non-agricultural lands.
MW in Andaman under an action plan prepared by MNRE. Under the scheme for the
60
development of solar parks, another
Under the scheme for the development of solar encouraging measure has been the
parks, another encouraging measure has been move to develop a separate project
for evacuation of power from solar
the move to develop a separate project for evacu- parks. The state-owned Power Grid
ation of power from solar parks. The state-owned Corporation of India (PowerGrid)
Power Grid Corporation of India (PowerGrid) aims aims at evacuating power from 20
at evacuating power from 20 solar parks planned solar parks planned by 12 states.
by 12 states. Accordingly, inter-state lines will be Accordingly, inter-state lines will
laid by the corporation and the intra-state ones be laid by the corporation and the
will be installed by state transmission utilities intra-state ones will be installed by
state transmission utilities or by
calling tenders. Out of 20 capacity of
ultra-mega solar power parks envisaged
in 12 states, about 17 GW would be
evacuated inter-state and the rest by
state transmission utilities.
As roof-top installations progress
is slower than anticipated and U.S.
company SunEdisons projects
are threatened by its bankruptcy,
the ministry is banking on solar
power parks to set the benchmark
in achieving 100 GW solar target
by2022.

For suggestions email at feedback@infraline.com


September 2016
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InDepth
Government looks at providing
impetus to small hydro programme

61

Small hydro has a target of just 5 GW compared to 100 GW of Solar and 60 GW of Wind
MNRE estimates the potential of SHP in India to be about 20 GW

By Team InfralinePlus

Clean power is the new buzzword addition. As the Government of India and wind sector. However, this vision
in the Indian power sector. Keeping (GoI) moves towards fulfilling its for the future does not accord the same
in mind Indias global commitment commitments under the COP21 of the priority to other sources of renewable
towards climate change obligations and United Nations Framework Convention energy, especially small hydro which
increase of renewables in the total ener- on Climate Change (UNFCCC), the has a target of 5 GW, compared to 100
gy mix of the countrys installed capac- development of renewable energy with GW of Solar and 60 GW of Wind.
ity, several projects in solar and wind a view to provide reliable, sustainable
sectors have been planned over the and affordable energy to all consum- Current Progress
course of next 5-6 years. Contrary to ers is becoming a top priority. After unveiling its big plans for har-
this, the share of hydropower in coun- The government has set ambitious nessing solar energy and wind energy,
trys energy mix is falling precipitously targets for 2022 for renewable energy the government seems to have turned
due to the rather slow pace of capacity involving a huge expansion in the solar its focus on small hydro sector with
September 2016
www.InfralinePlus.com

InDepth

a draft mission document (National Plan budget for small hydro pro- Mini - 101 to 2000 kW and Small -
Mission on Small Hydro) already been gramme. No direct subsidy to private 2001 to 25000 kW.
prepared, with the aim of setting up sector projects is envisaged in Phase II
5000 MW of small hydro projects in of the Mission.This gap in priority has An alternative to big dams?
the next five years. to be looked at more closely because if According to a new study, small hydro-
National Mission on Small Hydro is small hydro projects (SHP) are imple- power projects (SHPs) (projects up to
essentially to address difficulties being mented and planned with expertise, 25 MW) are considered safer than big
faced by the private developers. These they can lead to a non-consumptive dams in Indias quake-prone western
require some policy changes and some and non-polluting use of the coun- Himalayas, but projects to build them get
fiscal facilitations more than direct trys vast water resources to provide bogged down by administrative delays
financial benefits. However, some reliable power. Further, this power can and other factors. While Indias total
activities of the Phase I of the Mission be used to counter the infirm nature of installed capacity for small hydro power
would require financial investments. It other sources of renewable energy such (SHP) units reported a significant in-
is assessed that the financial require- as solar and wind. crease from 1,909 MW as in March 2006
ments of Phase I of the Mission, which The MNRE estimates that the to 4,274 MW (as of May 2016) thereby
is more of a preparatory to the Phase II, potential of SHP in India is about 20 taking up SHPs share of the countrys
can be met within the XII Plan alloca- GW and present installed capacity total installed renewable energy (RE)
tions for the small hydro programme. is 4.27 GW. Generally, all hydro capacity to almost 12%, considerable
The funds required for Phase II will projects under 25 MW are classified potential still remains untapped across
be worked out in the second year of as small hydro, these are further sub- states with favourable SHP potential.
phase I and would be part of the XIII divided into Micro Up to 100 kW, The low utilization of the countrys
SHP potential is attributable to several
National Mission on Small Hydro is essentially to factors, including: challenges in setting
up plants in difficult and remote terrain;
62 address difficulties being faced by the private de- delays in acquiring land and obtaining
velopers. These require some policy changes and statutory clearances; inadequate grid
some fiscal facilitations more than direct financial connectivity; and high wheeling and
benefits. However, some activities of the Phase I of open access charges in some states. The
the Mission would require financial investments. further development of small hydro
It is assessed that the financial requirements of projects has been hampered mainly by
rising costs, with the construction costs
Phase I of the Mission, which is more of a prepara- of these projects increasing to INR
tory to the Phase II, can be met within the XII Plan 8.5 Crore to 9.5 Crore per MW from
allocations for the small hydro programme between INR 5 Crore and 6 Crore per
MW a few years ago.
Small hydro projects usually do
not require building a reservoir and
therefore, mitigate the problems of
resettlement and deforestation. They
have the potential to meet the require-
ments of remote areas and have zero
emissions while generating electricity.
Further, they can either be connected to
the grid or can be in the form of decen-
tralised generation (micro hydel and
watermills). According to research and
ratings agency ICRA, small hydro plants
have certain inherent advantages. They
generate clean energy at a competitive
cost; have features that make them
suitable for peaking operations; are less
affected by rehabilitation and reset-
September 2016
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tlement (R&R) problems as against large aforementioned issues. Along with often leads to delay in installation and
hydro power plants. They can also meet these, procedural delays have impaired implementation of the project.
the power requirements of remote and the development of this segment to a
isolated areas apart from using mature large extent. These procedural delays Conclusion
and largely indigenous technology. are closely tied to the issue of acquiring To develop the sector sustainably, there
These are typically run of the land and environmental clearance that is a need for specific policy and regula-
river hydro that just need a turbine to tory support for the promotion of small
generate and can be easily maintained hydro. Also new technologies that
Smaller hydro power
without causing a lot of hassles. Plus, maximises efficiency and minimize
something like a pumped storage can
projects require higher environmental damage (for example,
be used to shave power demand peaks, level of investments, damage to fish) have to be promoted
which would be very helpful as the which means higher along with ensuring that there is a
peak load spikes further. tariffs to become eco- single window system of clearances.
Smaller hydro power projects nomically viable. This is A multi-stakeholder approach may be
require higher level of investments, adopted before clearance of project
further compounded by
which means higher tariffs to which involves the local community,
become economically viable. This
the regulatory challeng- which will not only mitigate the social
is further compounded by the es to determine tariffs implications of such projects but also
regulatory challenges to determine as costs can vary widely shield the developers from future
tariffs as costs can vary widely for for similar projects bottlenecks relating to ecological and
similar projects under different under different geo- socio-political concerns.
geographical conditions. In terms of With greater policy and regulatory
graphical conditions. In
its positioning, its remoteness is often support for developers and a greater
counterproductive as it leads to higher
terms of its positioning, emphasis on minimizing socio- 63
transmission costs and often there is an its remoteness is often ecological damage, small hydro can
absence of high voltage transmission counterproductive as it go a long way in helping the country
lines in such locations leading to heavy leads to higher trans- achieve its aim of 24x7 clean power.
line losses. Operation and maintenance mission costs
costs also rise as a result of the For suggestions email at feedback@infraline.com
September 2016
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StatisticsRenewableEnergy
1) Programme/ Scheme wise Physical Progress in 2016-17 (& during the month of July, 2016)

FY- 2016-17
Cumulative Achievements
Sector Achievement (April
Target (as on 31.07.2016)
- July, 2016)
I. GRID-INTERACTIVE POWER (CAPACITIES IN MW)
Wind Power 4000.00 663.70 27441.15
Solar Power 12000.00 1299.14 8062.00
Small Hydro Power 250.00 30.30 4304.27
BioPower (Biomass & Gasification 400.00 29.50 4860.83
and Bagasse Cogeneration)
Waste to Power 10.00 7.50 115.08
Total 16660.00 2030.14 44783.33
II. OFF-GRID/ CAPTIVE POWER (CAPACITIES IN MWEQ)
Waste to Energy 15.00 1.23 161.39
Biomass(non-bagasse) 60.00 0.00 651.91
Cogeneration
Biomass Gasifiers 2.00 0.00 18.15
- Rural 8.00 0.00 164.24
- Industrial
64
Aero-Genrators/Hybrid systems 1.00 0.10 2.79
SPV Systems 100.00 3.40 325.40
Water mills/micro hydel 1 MW + 500 Water Mills 0.10 MW + 100 Water Mills 18.81
Total 187.00 4.83 1342.69
III. OTHER RENEWABLE ENERGY SYSTEMS
Family Biogas Plants (in Lakhs) 1.00 0.05 48.60

Source: MNRE

2) REC Trading Volume and Price for August 2016


Through IEX
Buy Bids Sell Bids Cleared Volume Cleared Price No. Of Month of
REC Type
(REC) (REC) (REC) (INR/REC) Participants Auction

Solar 21,937 2,192,565 21,937 3,500 516


August 2016
Non-Solar 136,352 7,336,837 136,352 1,500 853

Source: IEX

Through PXIL
MCV
Buy Bid Sell Bid MCP
REC Type (No. of certificate) Month of Auction
(No. of certificates) (No. of certificates) (INR / Certificate)
Qty. (MWH)
Non Solar 122539 5407315 1500 122539
August 2016
Solar 18041 1290791 3500 18041
Source: PXIL
September 2016
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3. Commissioning Status of Grid Connected Solar 4. State-wise installed capacity of grid connected
Power Projects (as on 31-07-16) solar rooftop systems
Sr. Total cumulative capac- Sl. Capacity Commissioned
State/UT State
No. ity till 31-07-16 (in MW) No. (as on 30.06.2016) (MWp)
1 Andhra Pradesh 935.800 1 Andhra Pradesh 5.1
2 Arunachal Pradesh 0.265 2 Assam 0.1
3 Bihar 80.100
3 Bihar 0.6
4 Chhattisgarh 123.780
4 Tamil Nadu 50
5 Gujarat 1123.363
5 Chandigarh 8
6 Haryana 15.387
7 Jharkhand 16.186 6 Gujarat 37
8 Karnataka 238.322 7 Punjab 33.4
9 Kerala 13.045 8 Jharkhand 0.4
10 Madhya Pradesh 790.370 9 J&K 1
11 Maharashtra 385.756 10 Haryana 18.3
12 Odisha 66.920 11 Himachal Pradesh 0.2
13 Punjab 520.700 12 Kerala 1.2
14 Rajasthan 1294.600
13 Karnataka 18
15 Tamil Nadu 1267.414
14 Madhya Pradesh 4.1
16 Telangana 845.843
17 Tripura 5.000 15 Maharashtra 11.7
18 Uttar Pradesh 143.495 16 Mizoram 0.1
19 Uttarakhand 41.145 17 Odisha 0.9
20 West Bengal 11.772 18 Delhi 29.5
21 Andaman & Nicobar 5.100 19 Rajasthan 6.2
22 Delhi 23.870 20 Chhattisgarh 18.8 65
23 Lakshadweep 0.750 21 Telangana 15.9
24 Puducherry 0.025
22 Uttarakhand 6.1
25 Chandigarh 6.806
23 Uttar Pradesh 17.8
26 Daman & Diu 4.000
27 J&K 1.000 24 West Bengal 2.6
28 Himachal Pradesh 0.201 A Sub total 287.2
29 Mizoram 0.100 B Others (Railways, Delhi 28.6
30 Others (PSU/channel partner) 100.924 Metro, Airport Authority of
under Rooftop India, Other PSUs etc.)
TOTAL 8062.039 Total (A+ B) 315.8
Source: MNRE Source: MNRE

5. Installed Capacity of Biogas Plants as on 31/07/2016


Total nos. of biogas plants set up Total nos. of biogas plants set up
State
during the period (2012-13 to 2015-16) during 2016-17 (upto 31.07.2016)
Assam 28497 1500
Sikkim 718 NR
Odisha 15851 176
Rajasthan 2667 95
Gujarat 10821 300
Maharashtra 61303 870
Telangana 18999 806
Kerala 12689 178
Chhattisgarh 12715 269
Punjab 33112 835
Total 197372 5029
Source: MNRE
September 2016
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OffBeat
Infraline conducts Indias first legal
conference for energy sector
Conference was attended by prominent legal experts from the energy
sector in the country
Focused on developing more sustainable and efficient legal and regulatory
framework for energy sector

66

By Team InfralinePlus

Infraline Energy recently conducted Law- Assemble India Summit - Indias first legal
conference for the energy sector. The two-day conference was attended by legal experts
from the energy sector. The event focused on developing more sustainable and efficient legal
and regulatory framework for the energy sector in India. Various legal issues were discussed
such as litigation, compliance and risk, M&A, IP, Trademarks, patents, regulations driving the
energy sector, taxation, fraud, management, e-discovery in energy sector etc.
September 2016
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Sohail Barkatali, Jatinder (Jay)


Partner, Hogan Cheema, Partner,
Lovells on the Cyril Amarchand
changing face of the Mangaldas on LNG
energy sector and Sale and Purchase
what does it mean Agreements
for lawyers? Risk dynamics include
A rapidly changing global price volatility +
power sector with fewer Current over-supply situ-
ultra mega projects, higher demand for renewable ation, makings of a buyers market, deciding whether
energy projects, changing role of global utility com- its a buyers market or sellers market, risk allo-
panies and emergence of secondary market cation in a dynamic world, game-changer - LNG
A very different global oil and gas environment with con- regasification infrastructure and difference between
tinued slide in crude oil prices, reduced spending on Business risk and Commodity risk
Delivery issues include who has the responsibility for
new upstream developments and limited M&A activity.
arranging shipping and insurance, who must deal with
Commodities have also been heavily impacted import and export formalities, at what point does the
whereby mining and resources sector is also being commodity risk pass from the seller to buyer and has
directly impacted by continued downward pressure seller off loaded his business risk onto the buyer?
on prices. Product specifications include agreed specification,
How it has impacted legal profession: extent of any flexibility and off-specification LNG
Lesser deals means there is less to go around deliveries.
Smaller projects means lower legal budgets Defining the requirements and obligations regards
Opportunities in new areas such as rooftop solar, loading and unloading facilities, including buyers and
renewable energy projects, captive power plants, sellers respective obligations at loading and unloading
secondary markets and dispute resolution ports, requirements for notices (e.g. pre-arrival notices),
vessel preparation for loading and unloading, responsi- 67
Softer fiscal forms of government support to help
projects, with a much greater emphasis on local bility for charges for delay and associated costs during
legal development and training of nationals, aca- loading and unloading and assumption of the buyers
demia, etc. or the sellers ship-or-pay obligations.
Force majeure includes standard of care, termination
More broadly, the legal profession is also currently
rights and relief for the buyers, downstream events of
undergoing considerable reform on a global scale
force majeure, such as events affecting either parties
Clients are increasingly looking to build real part- vessel or its regasification facilities, non-natural force
nerships with advisors, requiring their advisors to majeure events and total loss and constructive loss.
work on a value added rather than strict time Commercial issues like diversion rights separate
based basis, are aware of the social impact of considerations for buyers and sellers, price and price
their projects, seeking diversity from their advisors reviews, base price and indexation, crucial difference
and also interested in the CSR, pro bono and between data and information in a non-trans-
other activities of their advisors parent market and taxation

Mr. Alok Pandey, Deputy General Manager, Powergrid Corp. Ltd., on


Arbitration
The Arbitration & Conciliation Act enacted in 1996 regulates all the Arbitration in our
county.
The Arbitration and Conciliation (Amendment) Act, 2015 (Amendment Act) was
passed by both houses of parliament in the winter session, pursuant to which it
has received Presidential assent on 31 December 2015. The Act was notified in the
Gazette of India on 1 January 2016 and has now come in to force.
The intent of the legislature both times seems to be clear and yet we seem to be
already falling short in appreciating the same.
First and foremost the issue as to who should be an arbitrator needs some insight.
Secondly, the procedural aspects should be given some thought because as per Section 19 of the Act, if the
parties are free to determine their procedure and are not bound by CPC, in which case is it not possible to dis-
pense with hearings in every case except Cross-examination and Evidence?
Thirdly, the issue of fee was and is still a major bone of contention between the parties as sometimes it appears
that a fee higher than
September 2016
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OffBeat

S. Ravi Shankar, Arbitration lawyer & Senior Partner, Law Senate


on The Impact Arbitration & Conciliation (Amendment) Act, 2015 in
Energy Disputes
Some of the attractions to foreign entities with respect to India seated international
arbitrations include:
Power to Chief Justice to designate an Institution to appoint arbitrators
Arbitrator from a Neutral Country mandatory S.11(9)
Fees fixed for the ad-hoc arbitrators on the basis of the value of the dispute (4th
Schedule) (No sitting, reading & writing fee)
Arbitral Institutions are allowed to have a higher Fee scale
An arbitration has to be completed within 12 months
Both parties can jointly extend the completion period by 6 months
Fast Track Arbitration S.29B to be completed with in 6 months
If Arbitrator can not complete the arbitration within the time limit he looses the mandate to continue the arbitration
Interim orders can be granted by Indian Courts in support of Foreign seated International Arbitrations
No automatic stay on filing of an appeal challenging an Arbitral award S.36, while granting stay courts can
impose terms

Richa Pandey, Partner, Yogesh Singh,


Krishna & Saurastri Partner, Trilegal
Associates on Patent on Mergers &
prosecution challenges in Acquisitions in
68
India energy sector
She discussed issues relating Investment
to patent filing trends in India, routes FDI,
Section 8, working requirement, Portfolio
divisional application and claim amendments. investment, FVCI and ECB/loans
Working requirement: Section 146 (2), every patentee shall M&A structures- share purchase and asset
furnish statements as to the extent to which the patented purchase
invention has been worked on a commercial case in India, Key transactional issues pertain to financial
84. Compulsory licences, (1) at any time after the expiration strength of counterparties, financing, land,
of three years from the date of the grant of a patent, any regulatory, environment, HR, antitrust,
person interested may make an application to the Controller deferred payment and anti-corruption
for grant of compulsory licence, on patent on any of the fol- Fund raising in M&A through internal accruals,
lowing grounds, namely (c) that the patented invention is issue of bonds, overseas leverage, NBFC
not worked in the territory of India.that a fee higher than deals and overseas funds

Mr. Prasad Shetty, Dr. Surat Singh, K. R. Nair, Director, Anupam Sharan, Mr. Pranav Mago,
Executive Director Managing Partner, President, Indian Wind Director, Sr. Leader Head (South Asia)
Ernst & Young (LLP) Dr. Surat & Associates Power Association Legal, Contract, Singapore International
(Northern Regional Compliance, American Arbitration Centre
Council) Express

For suggestions email at feedback@infraline.com


September 2016
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Reports & Studies


Indias current solar module capacity inadequate to meet annual demand: RBSA

The governments ambitious target of 60 in the short-term. According to the Reserve


Gw of solar power projects in the country Bank of India (RBI) data, bank loans worth
is not void of challenges, especially in Rs 7 lakh crore (about $103 billion) were
terms of funding and equipment. As per a under stress as of the end 2015. Currently,
latest report by consulting and advisory 19 developers have bid for 2.9 Gw of solar
firm RBSA on solar power in India, the projects below Rs 5 (about $0.0735).
requirement of 5,00,000 MVA by 2022 will About 1.2 Gw of these projects have signed
need an investment of Rs 43,000 crore. power purchase agreements (PPAs), the
However, at 5.6 Gw per annum, Indias solar report stated. As per the RBSA report, the
module manufacturing capacity would be World Trade Organization. Laying out other ambitious target for solar power could also
inadequate to meet the annual demand for key challenges in meeting the target, the face funding blues. At a capital cost of Rs
15 Gw as of now. At the same time, India report states that low bidding levels through 5.30 crore per Mw, the cost of setting up
has mandated use of locally manufactured reverse auctions have been a major concern 1,00,000 Mw of solar plants works out to
solar cells for 3,000 Mw installations at a time when the Indian banking sector Rs 5.30 lakh crore. Even at a debt-to-equity
(where developers have sought subsidies). is going through its own challenges, which ratio of 1:3, this will require debt to the tune
The US has challenged these norms at the could make borrowing much more difficult of Rs 3.5-4 lakh crore.

India will be oils next big growth centre: S&P Global Platts

the recent rising momentum of demand for initiatives to promote clean fuels lifted LPG
cleaner cooking gas or LPG. For most of demand to record highs in March. And the
last year, demand has seen average of 10 momentum continues. We saw demand
per cent growth. Demand for most oil prod- growing by 9 per cent in June and around
ucts hit record highs, the American agency 10 per cent in the first half, Mohanty added.
said in a report. Market participants expect The report noted that the government has 69
gasoline and gasoil to rebound to levels plans to provide more subsidies for 50 mil-
closer to double digits in the second half lion new LPG connections for lower income
of the year, said S&P Platts Oil News and families. This is leading analysts to believe
Analysis Editor Sambit Mohanty. In addi- that LPG demand growth will be closer to
tion, the policy move last month lifting sala- double-digits for the whole of 2016, it said.
Commodities price reporting agency S&P ries of government employees could boost In addition to LPG, a booming petrochemi-
Global Platts has projected that India would car demand, which in turn could lift gasoline cals sector has also come as a blessing for
become the next big growth centre for oil consumption, he said. Meanwhile, LPG has naphtha, which saw demand growth of 16
based on the fact that demand for most added a silver lining to the Indian growth per cent in June, it added.
oil products hit record highs last year and story, the report said. A raft of government

Fitch sees no change in OIL rating post royalty math revision

Fitch Ratings said it does not expect state- oil company, Rosneft, is expected to weaken
owned Oil Indias rating to change follow- OILs leverage beyond what is comfort-
ing revision in how royalties on crude oil able for its standalone credit assessment.
produced from onshore fields are calculated. However, Fitch believes OILs leverage will
However, the resulting additional payments improve in 2017-18 in the absence of large
will lower the headroom under OILs BBB- M&A even though the higher royalty pay-
standalone credit assessment, Fitch said. ments will reduce the companys netback,
The government recently announced that Fitch said. Netback is the revenue after all
state-owned upstream oil producers must the costs for bringing one unit of oil to the
pay state royalties on the gross value of market. Fitch estimates OILs royalty charg-
crude oil produced domestically instead of Fitch estimate, OIL will need to pay a one- es under the revised formula - and based on
the previous method of using the net price time royalty fee of around Rs 1,150 crore, the existing subsidy-sharing mechanism be-
after discounts to state-run refiners. The amounting to about a quarter of its projected tween the state and state-owned upstream
new formula applies retrospectively from Ebitda for 2016-17 end. This, along with and downstream companies - to increase by
February 2014, resulting in a back-payment payments for acquisition of a share in Taas around USD 0.2 per barrel (bbl) at a crude
to cover the period up to 2015-16. As per Yuriakh and Vankor from Russias national price of around USD 50 per bbl.
September 2016
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Reports & Studies


24x7 power for all, a humongous but achievable feat: PwC Power prices at five years low
governments aim to provide power 24x7,
a joint study by PwC and CII pointed out.
The study says achieving the objective of
Round- the-clock power supply pro-
gramme will not be an easy task. But im-
proved fuel availability scenario, achieving
target capacity additions well within time
or even earlier, increasing investments,
and aggressive bids for renewable energy The short term prices of power bought
projects are some of the encouraging through exchanges have dipped five years
Unrealistic power demand forecasting, trends that indicate that India can achieve low, according to a report by Edelweiss.
lack of information on existing power this humongous feat in the near future. This has led an increase of 30 per cent in
assets, inadequate planning without Nevertheless, concerns related to fund power bough through exchanges in the
systematic system studies, delays in ap- availability due to poor financial condition last 6-9 months. A recent trend in the
provals and competencies of electricity of utilities, lack of standard specifications short-term power market is that exchange
utility staff are some of the roadblocks and utility centric tender conditions have traded volumes (IEX and PXIL) have
that would heavily come in the way of been haunting the sector. surged sharply average 30 per cent year
on year jump over the past 6-9 months,
Shah panel says RIL must pay penalty to govt
said the report. The average power prices
locus standi to bring a tortious claim against have touched lows of Rs 2.16 a unit (down
RIL for trespass/conversion since it does to Rs 2.35 in South). State discoms have
not have any ownership rights or possessory been using this opportunity to buy cheaper
interest in the natural gas. The committee power and back down the expensive
did not quantify the restitution, leaving it to medium/ long term power, said Edelweiss.
70 the government to decide. It said whatever It said private independent power producer
benefit RIL received in terms of the migrated (IPPs) with some open capacity (Jindal
gas is liable to be returned to the government. Power, Derang, DB Power, JP Nigrie, among
The panel said it faced limitations in providing others) and located closer to coal mines
The A P Shah committee has asked the a figure to the final value of the migrated gas have been supplying in the exchange
government to claim restitution from Reli- produced by RIL during the term of its lease, market possibly earning some spread over
ance Industries (RIL) for the unjust benefit because of the lack of data and the commit- their marginal cost Rs 1.8- 1.9 a unit.
it received from the migration of gas from tees inherent technical limitations. While the Meanwhile, the report said that the onset of
state-run Oil and Natural Gas Corporations D&M (DeGolyer and MacNaughton) Report monsoon has resulted in decline in power
(ONGC) block in the Krishna-Godavari basin has to form the basis for the migration of gas off take over the past 45 days. This year,
to the adjacent fields owned by the Mukesh up till 2015, subsequent migration of gas post- rainfall has largely been normal, leading to
Ambani-led company. However, it states that 2015 has to be inquired into by the Govern- subdued power demand from agricultural
ONGC has no right on the restitution and no ment of India, it said. and cooling demand, it said.

Power costs may reduce by 50 paise per unit for plants


Coastal movement of coal could cut power this mode costs one-sixth that of rail cost
costs by 50 paise per unit for power plants at about 20 paisa per tonne against about
besides saving Rs 17,000 crore annually, Rs 1.2 per tonne. More than 90 per cent of
a report under governments ambitious the rail routes relevant to coal are running
Sagarmala project has said. Sagarmala is an at over 100 per cent utilization. With the
ambitious port-led infrastructure develop- expected ramp-up in coal production by Coal
ment programme of the government to India Limited, India may need to move 1,000
harness Indias 7,500 km coastline and its to 1,200 MTPA coal across the country by
perspective plan was launched by Prime 2025, creating tremendous pressure on the
Minister Narendra Modi in April. Using the already congested railways, the report said.
right infrastructure and institutional sup- report on cargo projections under Sagar- It carried out a logistics cost comparison for
port, India can coastally move 190 to 200 mala. In 2013-14, nearly 740 MTPA of coal all modal mix combinations for Indias 400
million tonne per annum (MTPA) of coal, moved through the country predominantly thermal power plants. The report said that
and save around Rs 17,000 crore per annum, through rail and of this barely 23 MTPA by using right infrastructure power costs to
by 2025, said the governments final draft moved through coastal shipping even though power plants could be cut by 50 paise.
September 2016
www.InfralinePlus.com

People in News
Urjit Patel named as the new RBI Governor

The Indian government has named insider ment) at Reliance Industries (RIL); member
Urjit Patel as the new governor of the Re- of the Integrated Energy Policy Committee
serve Bank of India, to replace popular of the Government of India; and member of
central banker Raghuram Rajan when his the Board, Gujarat State Petroleum Corpora-
term ends in September. The promotion of tion Ltd. As part of the core team of experts
deputy governor Patel ends weeks of fever- selected to frame the countrys energy policy
ish speculation by the Indian media since (IEP) in 2005 -- along with the likes of the
Rajan caught investors off guard in June then planning commission member Kirit
by announcing he was leaving to return to Parikh, Administrative Staff College of In-
academia. Patel is deft not just at monetary dias T L Sankar, and Department of Atomic
policy formulation and the larger economic Energy Secretary Anil Kakodkar - Patel
policy reforms, the 52 year-old inflation played a key role in working out the blueprint
fighter is an expert at handling energy of the policy that has guided Indias energy
sectors issues too. Patels experience in level committees between 2000 and 2004 sector reforms over more than a decade.
the economic sphere boasts of an impres- in the previous National Democratic Alliance The policy formulation turned around the
sive connection with the countrys energy (NDA) regime including the Prime Ministers performance of the energy sector through
sector. From power distribution reforms to Task Force on Infrastructure and the Expert multiple ambitious reform initiatives includ-
the economics of climate change and the Group on State Electricity Boards (SEBs). ing market-linked resource allocation and
contentious energy pricing issues to the in- Prior to his appointment as the deputy pricing of fossil fuel-led energy generation,
tricacies of upstream oil and gas production governor at the RBI in January 2013, Patel introduction of competitive energy markets
- Raghuram Rajans lieutenant has dabbled was advisor (energy & infrastructure) at The for the first time, transparent and targeted
in all. A product of the London School of Eco- Boston Consulting Group. His other assign- subsidies, strengthening the role of indepen-
nomics (LSE), Patel was part of several high ments include president (business develop- dent regulators for tariff setting.

Ashok Chawla is new Chancellor at Teri University 71

retary Ashok Chawla as the new Chancellor sion of India and Finance Secretary, Chawla
of Teri University. The decision on the ap- is also the Chairman of the National Stock
pointment was taken in its last meeting on Exchange. His work experience of over 40
August 19 by the governing council of Teri. years spans various sectors in the Govern-
With this, Teri ended its last association with ment of India and in international agencies.
former Chancellor and Head R.K. Pachauri. The Council also inducted three new mem-
Pachauri stepped down as chairperson of bers into the Governing Council, including
the UN Intergovernmental Panel on Climate Co-Chairman of Forbes Marshall Naushad
Change in February 2015 and proceeded on Forbes, Prof. Basabi Bhaumik from Depart-
leave from Teri, where he was the director ment of Electrical Engineering, IIT Delhi
general. New Chancellor Chawla is also the and Founder of Institute for Sustainable
The Energy and Resources Institute (Teri) Chairman of Teri since February 2016. A Development and International Relations
has officially appointed former Finance Sec- former head of the Competition Commis- (Paris) Prof. Laurence Tubiana.

Sekhar Basu gets 1-year extension as Atomic Energy Commission chief

Noted scientist Sekhar Basu today got one- played a lead role in multiple areas of nu-
year extension, till September next year, clear science and engineering and is a major
as Atomic Energy Secretary and Atomic contributor in establishing India as a leader
Energy Commission Chairman. He was in nuclear field. He had been Director of
appointed to the posts in October last year Bhabha Atomic Research Centre (BARC)
and his tenure was to end next month. The and chief executive of the Nuclear Recycle
Appointments Committee of Cabinet has Board (NRB). Basu, who was instrumental in
approved extension of tenure of Basu for a setting up reprocessing and waste manage-
period of one year beyond September 19, ment facilities at Indira Gandhi Centre for
2016, an order issued by Department of Atomic Research in Kalpakkam, is a recipi-
Personnel and Training (DoPT) said. Basu is ent of Padma Shri award.
an engineer of exceptional ability who has
September 2016
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People in News
L&Ts Naik says Subrahmanyan to take over from him Oct 1, 2017

Larsen & Toubros head AM Naik said of CEO. They added that decision on who
that SN Subrahmanyan, who is currently holds chairmanship is yet to be taken.
deputy managing director and CEO, will For years L&Ts succession plans have
take over as his successor from October been in limelight amid speculations on
1, 2017. Speculations regarding Naiks whether Naik will finally hang his boots
successor have been doing the rounds and announce a successor. In 2012, when
since 2012, when Naik was scheduled to he was to retire and new leadership was
step down. Naik was given an extension to be announced, the company surprised
and while earlier this year he hinted that everyone by splitting the post of chairman
Subrahmanyan could take the top job. He and managing director.
will succeed me from October 1, 2017.
Theres no doubt, Naik said. It is learnt
that Subrahmanyan will be elevated as
Managing Director and will retain the post

Rathi Steel & Power Managing Director resigns

Group. In June, the firm had informed


that its CEO Udit Rathi has also resigned
from his post with effect from May 17,
2016. Besides, its Board in meeting held
in June had considered and approved the
demerger/or hiving of the Ghaziabad and
Orissa units of the company on slump sale
72 basis to unlock the value and to arrive at
long term viability solutions. Its Ghazi-
abad unit consists of steel rolling mills
having an installed capacity of 1.25 lakh
Rathi Steel and Power recently informed Managing Director of the company with ef- tonnes per annum (LTPA), a wire rod mill
that its Managing Director Pradeep Kumar fect from July 28, 2016, it said. Rathi, who and steel melting shop with 40,000 TPA
Rathi has resigned from the post with has been on companys Board of Directors installed capacity comprising for manufac-
effect from July 28, 2016. The company, since August 27, 1994, was monitoring the turing high end value added stainless steel
after due considerations, on August 24, day to day affairs of the company. Rathi and alloy steel products.
2016 has accepted Pradeep Kumar Rathis Steel & Power (erstwhile Rathi Udyog
request to vacate his office as Director and Ltd) is a part of the Delhi-based P C Rathi

GK Satish takes over as Director (BD), IOC

G K Satish has taken over as Director is developing city gas distribution (CGD)
(Planning and Business Development) of networks in various cities across the
Indian Oil Corp (IOC). Prior to this, he country, and Chairman of IndianOil LNG
was executive director in-charge (Gas Pvt Ltd, which is setting up an LNG import
Business) at IOC. He replaces Debasis Sen terminal at Ennore near Chennai. He is
who superannuated on August 31, 2016. A also a Director on the Boards of Green Gas
Graduate in Mechanical Engineering from Ltd, which is operating CGD networks in
the National Institute of Technology, Surat Agra and Lucknow, and GSPL IndiaGasnet
and a Post-Graduate in Management from Ltd and GSPL IndiaTransco Ltd, which are
Management Development Institute, Gur- implementing cross-country natural gas
gaon, Satish has over 30 years experience pipelines. IOC also named Satish as its
in IOC in the areas of marketing opera- nominee director on Petronet LngLtd to
tions, logistics, business development, replace Sen. IOC holds 12.5 per cent stake
international trade, natural gas business in Petronet and has right to nominate one
and human resources. He is also Chair- director on board of Indias largest lique-
man of IndianOil-Adani Gas Pvt Ltd, which fied natural gas importer (LNG).
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