CII suggests ways to address coal shortage

Introducing an independent coal regulator and enabling competitive bidding of coal blocks by ushering in a regime of ‘production-linked payments’ as in case of bids under Nelp are among the suggestions floated by the Confederation of Indian Industry (CII) to urgently address the coal shortage being faced by the industry.

The industry body has also proposed creating an enabling environment for private participation in exploration activity, evolving a uniform R&R framework for coal mining projects and building a road map to introduce commercial mining to tackle the shortage that has the potential to stall several infrastructure projects.

As per an assessment of the sector done by CII, the acute shortage of coal in the country has become an issue of major concern for the power sector and has led to apprehensions that the ambitious capacity addition targets of 90 to 100 gw in the upcoming twelfth plan period (2012-17) may not be met.

Coal India (CIL) has scaled down its production targets for 2011-12 to 452 million tonnes from 460.5 million tonnes targeted in year 2010-11. In 2010-11 against the target of 460.5 million tonnes, only 431.32 mt was produced due to delay in getting forest clearances, non-completion of some contracts due to litigations and law and order problems in some areas.

Rail transportation of coal is another bottleneck in the sector with several tonnes of the fuel piled at company’s various mines due to inadequate placement of rakes. For instance, Coal India. got 178 rail rakes as against the requirements of 190 rakes in April this year.

Compounding the issue further, CII said, CIL has also not signed Fuel Supply Agreements and is unable to commit delivery of coal conforming to the sanctioned linkage quantity for the last two years. Consequently, lenders are reluctant to fund new projects which are on the anvil. With the power ministry estimating that about 17,000 mw of new and upcoming projects not likely to start operations and 5,593 mw of plants likely to generate only 42% of their actual output due to fuel shortages, the Indian Power industry is clearly witnessing a crisis. “Power shortages due to lack of Coal may impact the Industry severely unless these issues get addressed,” said Chandrajit Banerjee, Director General, CII.

With a Credit Suisse report projecting the coal deficit in India to increase to 400 million tonnes in FY17, the uncertainty over assured domestic coal supply is likely to persist. “Clearly, the Indian government and the coal and power industries will collectively need to take action, says Anil Sardana, chairman, CII National Committee on Power and MD, Tata Power.”

Jaiswal meets infra cos today on coal block auctioning

Coal minister Sriprakash Jaiswal would discuss the modalities of coal block auctioning with infrastructure companies tomorrow. The ministry had announced draft guidelines for introducing competitive bidding in allocation of coal blocks for captive use in April this year.
Coal mining is an exclusive domain of the public sector, though private entities are allowed to mine for small notified captive use linked to projects. “The minister would discuss the views of stakeholders on the auctioning guidelines in the meeting on Monday. The stakeholders include mining companies and firms in the steel, power and cement sectors seeking captive coal allocations for their end-use plants,” said a senior coal ministry official.

So far an inter-ministerial committee used to allocate captive blocks to the private sector on merit. Parliament passed the Mines and Minerals (Development and Regulation) Amendment Bill, 2010, in August last year, paving the way for introduction of auction of coal blocks through competitive bidding to private companies.

The coal ministry had then prepared a draft of the framework for auctioning after months of deliberations in an inter-ministerial committee headed by the coal secretary. The draft gave four models for selection of successful bidders during the multi-step auction process.

The four models, one of which would be finalised, include upfront payment, production-linked payment, upfront payment with priority for development status of the end-use plant and production-linked payment with preference for development status of the end-use plant in power, cement and steel sectors.

“The views received so far by the ministry are varied. For instance, companies who already hold end-use projects have preferred the fourth option to get the benefit of weightage,” said the coal ministry official. Firms intending only to grab blocks are likely to prefer the first one of upfront payment. In the second (production-linked) model, payment will be made by the winning bidder on the basis of a “reserve price tag” for coal on a per tonne basis over the entire life of the coal mine.

The common thread that runs through all the four is the preference to be accorded to projects set up in the same state in which the mine is located.

Tomorrow’s meeting would be attended by the secretary and the special secretary in the coal ministry, along with the Coal India chairman and secretaries in the related ministries of steel and power. It would be followed by a meeting of the inter-ministerial committee headed by the coal secretary, in which the model most preferred by the stakeholders will be finalised for inviting bids.

Coal Ministry for strict norms on new block bids

Companies allotted coal blocks but having failed to do much on developing these are to be barred from participating in the proposed competitive bidding process for future allotments.

Besides, power projects already set up or under construction on the basis of coal being a “pass through” item of cost would not be allowed to participate. However, a bidding consortium with a mining company as its member would be given preference in the allotment of a coal block, if its bid is within 10 per cent of the highest offer and is prepared to match it.

At the same time, the central government plans to link payment schedules to achievement of successive targets in developing such blocks after the issue of letter of intent and mining lease, instead of a fixed time frame from the date of award. This is being considered since exploration and development of coal blocks depend on various factors, not all within control of the developers.
These are some of the stringent provisions being considered by the Centre to launch competitive bidding for allotment of coal blocks. As on June 23, it had allocated 286 blocks, with reserves of 43,548 million tonnes. However, due to poor performance, it has already cancelled 24 blocks. A committee chaired by the coal secretary has been appointed to prepare draft bid documents.

A coal ministry official, on condition of anonymity, told Business Standard: “Identification of coal blocks for allocation through competitive bidding will be done after making sure there are no compelling factors, such as presence of wildlife sanctuaries, which will stand in the way of the forest clearance. Time allowed for commissioning of the mines will be suitably revised, taking into account the ground realities in respect of issue of prospecting licence, forest and environment clearances and time take for land acquisition and execution of lease agreement. The prospecting licence needs to be issued along with the allocation letters for coal blocks.”

The official said the two-year period for completion of exploration would be counted from the date of grant of forest clearance for exploration.

Anil Sardana, chairman, CII national committee on power and managing director of Tata Power Company, makes a strong case for competitive bidding of coal blocks by ushering in a regime of 'production-linked payments' on the lines of the production-sharing contract successfully done for the New Exploration Licensing Policy on discovery and exploitation of oil and gas reserves. Besides, there is a need to strengthen the institutional mechanism and facilitate fast-track clearances for coal mining projects through a single-window inter-ministerial body. He called for introduction of an independent coal regulator to oversee mine planning and development, adherence to investment plans and compliance with production schedule.

More, end-use plants already operational or under construction, based on coal linkage from Coal India and Singareni Collieries Company or allocation of captive coal blocks made earlier, would not be allowed to participate in the bidding unless the captive blocks allocated do not have the capacity to meet the full requirement of coal for at least 30 years. The official said a mining company which entered into a long-term agreement for supply of coal to companies in steel, power and cement sectors would be eligible to take part in the bidding process.

“A member of the consortium will be allowed the advantage of the strength of its promoters and associate company in the group for meeting the qualification criteria. More important, the basis for selection of the successful bidder will be a combination of fixed price tag and extractable reserves-linked payment,” the official said.

PowerGrid to capitalise projects worth Rs 12,000 cr each year

Power Grid Corporation of India Ltd (PGCIL) expects to capitalise projects worth around Rs 12,000 crore per year over the next few years, a top company official said here on Tuesday.

“We see an order book of about Rs 120,000 crore over the next five to seven years. A large part of this will be capitalised during the next five year plan (2012-2017). Each year, we capitalise about Rs 10,000 crore to Rs 12,000 crore, and it takes about four years to get returns on the investments we make,” Mr S.K.Chaturvedi, the Chairman and Managing Director of PGCIL, said.

The capitalisation roadmap is expected to ensure that the company would grow at the rate of more than 22-23 per cent a year.

Answering queries, Mr Chaturvedi said, “As the country takes up new nuclear plants, PGCIL will play a role in evacuation of power. As and when projects are finalised, we will also take up development of the transmission network.”

“PGCL currently wheels about 52 per cent of the country's power evacuation capacity and is (already) investing nearly Rs 60,000 crore more in nine major transmission lines.

“This capacity addition will further enhance the share of the power supply grid as not much is being added by the private sector,” he explained.

Mr Chaturvedi also pointed out that the north eastern part of the country had high hydel power generation capacity.

PGCIL is implementing a 6,000-MW high-voltage direct current bi-pole line from the north eastern region to the northern region, and with double circuit transmission this could go up to 12,000 MW.

Eight new ‘smart grid' pilot projects to be taken up

Mr Sam Pitroda, the Adviser to the Prime Minister on Public Information Infrastructure and Innovations, and Chairman of the India Smart Grid Task Force, addressing a press conference, in the Capital on Tuesday. – Kamal Narang

A high-level panel working on cutting-edge technological interventions to improve the management of load flows across the country's electricity grid has recommended that eight pilot projects be taken up nationwide. This is to be done over the next 18 months.

The Working Groups formed under the India Smart Grid Task Force (ISGTF), chaired by Mr Sam Pitroda, Adviser to the Prime Minister on Public Information, Infrastructure and Innovations, has recommended that smart grid standards be first established by the Bureau of Indian Standards (BIS).

It has suggested that low cost ‘smart meters' need to be developed to ensure that 100 per cent metering is achieved within distribution companies, an official release said.

The panel has also recommended that metering intervention be introduced in more towns under the Power Ministry's flagship power reforms programme — the RAPDRP (Restructured Accelerated Power Development and Reforms Programme.

Also, critical cyber security assets are to be identified and audits undertaken on regular basis.

The ISGTF, chaired by Mr Pitroda, was set up in May 2010 to develop a roadmap and standards for the development and implementation of ‘smart grid' related technologies in the country.

Shunglu panel may propose stricter norms for bank loans to power distribution

Short of cash because of low tariffs, State power distribution utilities (discoms) have borrowed nearly Rs 1,50,000 crore over the last two-three years from banks without the backing of a State guarantee.

This overexposure of banks, mainly in the public sector, to the financially weak utilities is the startling finding of the Shunglu Committee that is reviewing the financial health of power distribution utilities in the country. The high-level committee, chaired by the former Comptroller and Auditor-General of India, Mr V. K. Shunglu, is expected to submit its report in the next two months.

The loans the discoms have taken reportedly include approximately Rs 20,000 crore worth of long-term finance taken by the utilities against capital projects, but apparently “diverted” to meet the working capital shortfall.

While political resistance to tariff rationalisation is the prime reason behind the cash shortfall in discoms, the adoption of FRBM (Fiscal Responsibility and Budget Management) norms makes it impossible for States to take responsibility of such practices by standing guarantor to banks. Yet, inexplicably, banks have been financing utilities.

Tariff reforms on cards

Preliminary estimates by the Planning Commission as well as the last Finance Commission suggest that the discoms are losing up to Rs 75,000 crore of revenue annually — almost half of which is attributed to lower tariff realisation. “This is a very serious weakness of the Indian power sector, which, if not addressed, may cripple the entire system,” the Planning Commission Deputy Chairman, Mr. Montek Singh Ahluwalia, had told Business Line in February.

Sources suggest that following the submission of the Shunglu Committee report, the Planning Commission may suggest the introduction of stricter banking prudence for lending money to distribution utilities. Aiming to suggest ways to improve the health of discoms within the existing set of laws, the Shunglu panel may also suggest a series of measures for State-level tariff reforms and incorporation of corporate governance, an area that is apparently most neglected in the operations of discoms.

Disproportionate lending

Initial findings suggest that the discoms of Tamil Nadu, Rajasthan and Uttar Pradesh account for nearly 85 per cent of the Rs 1,30,000-crore short-term borrowings from banks. More surprising is that the loans to each of these three discoms surpass their respective net worth by 150-350 per cent. The disproportionate lending is reportedly most apparent in the case of Rajasthan.

More and more State utilities are found to be turning to the banking sector to meet their ever increasing cash shortfall. Madhya Pradesh and West Bengal are two such new entrants in the list.

Exceptions

According to sources, Andhra Pradesh, Kerala and Karnataka are the exceptions. The utilities in Andhra Pradesh and Karnataka are reportedly receiving state provisioning to meet cash shortfall, if any.

BHEL starts new payment mode to plug into private sector orders

Bharat Heavy Electricals Ltd (BHEL) has introduced a payment mode specifically targeted at private power project developers.

The newly introduced ‘Usance' letter of credit (LC) allows project developers a grace period for payment to BHEL against equipment orders.

The new payment term offers better comfort to private players, who have been responsible for boosting BHEL's order books in the last couple of years and are scheduled to execute well over half the projects slated to come up in the next Five-Year period (Twelfth Plan). The move is being seen a counter to Chinese equipment suppliers, who have an advantage in terms of offering payment support to customers through low-cost China EXIM funding.

“We have introduced the Usance LC, which offers better comfort to project developers. There's been a positive response from the industry,” BHEL's Chairman and Managing Director, Mr B.P. Rao, told Business Line.

An LC, usually used in overseas shipments, is a bank guarantee issued on behalf of the buyer that the seller will receive payment on time.

For big contracts such as those executed by BHEL, an LC is an industry prerequisite for domestic orders too. A Usance LC is a deferred payment undertaking that is paid for a fixed number of days after loading of the consignment or presentation of prescribed documents.

For BHEL, there has been a sharp surge in orders from private firms in recent times, coming amid an increase in the private sector's contribution to the power capacity addition effort in the country.

In 2009-10, BHEL had secured its highest order book tally from private power utilities at Rs 33,787 crore — an over three-fold increase over the previous year. In 2010-11, in its utilities business, BHEL's private sector share was over 51 per cent. This would be even higher if its industry business segment was also taken into account.

Increasing competition for private sector orders, especially from Chinese vendors, is seen as a problem in the short term, especially in light of the funding option offered by them and lower upfront costs. Analysts, however, point out that BHEL would score over competition on account of its long-term structural business strength, especially in terms of lower lifecycle costs for its equipment.

This is buttressed by Bank of America Merrill Lynch's January report, which states that the “technical and commercial superiority of BHEL plants leads to its customer deriving 10 per cent higher free cash-flow to equity versus a Chinese power plant, even after factoring in 150 basis points lower funding cost of Chinese plants from Chinese EXIM.” The report points to there being “very little difference” between BHEL and Chinese delivery times, based on an analysis of deliveries of 40 plants of BHEL.

A recent JM Financial report has suggested that secondary fuel oil consumption of Chinese sets is 12 times more than the BHEL sets.

Despite an estimated 15 per cent initial savings on capital costs, the lifecycle cost is lower for BHEL equipment due to lower operational costs, better plant load factor and lower downtime, it states.

DPSC-IPCL to invest Rs 26,450 cr in power sector by 2015

Power generation and distribution group, India Power Corporation Limited (IPCL) and DPSC Ltd will be investing Rs 26,450 crore by 2015 in the power sector across India.

"IPCL and DPSC have an installed capacity of power generation of about 77.4 Mw, and will add another 4362 Mw with an investment of Rs 25,000 crore by March, 2015 in Rajasthan, West Bengal, Bihar, Gujarat and Madhya Pradesh,&" DPSC chairman Hemant Kanoria said.

"In power transmission and distribution segment, DPSC will investment around Rs 1,450 crore" he said.

Last year IPCL, a consortium promoted by Srei Infrastructure Finance and Bhaskar Silicon, took over DPSC, a power generation and distribution company under Andrew Yule group.

India Power Corporation (Haldia) Limited, a SPV of IPCL has been incorporated for establishing 450 Mw (3x150 MW) coal-based captive thermal power plant at Haldia, West Bengal which will see an ivestment of Rs 2,400 crore. While Haldia plant is expected to be commissioned within 2013, Kanoria said, the 540 MW Raghunathpur coal-fired power plant valued Rs 32,00 crore is likely to take one more year to be implemented.

"At Haldia we have more than 200 acres of land. Construction works are going on there. And at Raghunathpur, we already have 155 acres of reqired 220-230 acres land. We are open to private purchase of more land" Kanoria said. Bharat Heavy Electricals Ltd (BHEL) has been awarded contract for both the plants.

Apart from West Bengal, 1320 MW plant in Bihar, 1320 MW plant in Gujarat and 660 MW plant in Madhya Pradesh are at various stages and the group has applied the Centre coal linkage. Moreover, in Rajasthan, 60 MW wind power plant is under implementation and expected to be commissioned by March, 2012.

On distribution network, DPSC will invest another Rs 1,450 crore to set up 220 KV and 400 KV stations within the licensed area of 620 sq km in the industrial belts of West Bengal and Jharkhand. Kanoria also said the company will participate in bidding for a few distribution licenses which were expected shortly.

Speaking on the funding of the projects, he said, "Various options are available. Internal accruals will take place. We will also tap private equity market."

Delay in power projects to threaten profitability of equipment makers

Delay in implementation of power projects is threatening the profitability of domestic equipment manufacturers who are already facing stiff competition from Chinese firms.

Equipment tenders for at least 20 projects, with aggregate generation capacity of about 34,000 mw, have been stuck for over a year due to uncertainties over fuel linkages, environment clearance and land and water availability.Equipment manufacturers fear under utilisation of their utilities if the order flow does not improve soon.

Equipment makers Larsen & Toubro and Mitsubishi Heavy Industries Alstom-Bharat Forge, Toshiba-JSW, Gammon-Ansaldo and Thermax- Babcoc & Wilcox, which have outlined India production plans, are expected t add about 20,000 mw capacity by 2014-15, against 15,000-mw annual capacity of state-owned monopoly Bharat Heavy Electricals.

"In recent months, land acquisition has become an issue and water is not available. The biggest worry is fuel availability. The coal ministry has not met even once in the past one-and-half years to allocate coal linkages," L&T Power MD Ravi Uppal told ET, adding that cost of debt had also increased substantially. Going by the industry's cost estimate of 6 crore per megawatt, these projects would require over 2,00,000 crore in investments.

The affected projects include those of Jindal Power Ltd, KSK Energy , Nevyeli Lignite Corp, Patel Engineering's PEL Power Ltd and state utilities of Rajasthan, Gujarat and Tamil Nadu.

State-run power producer NTPC's 7,260-mw tender for sourcing boilers has been held up for 15 months now because of the company's legal battle with Ansaldo Caldaie over a contract.

Domestic power equipment manufacturers including Bharat Heavy Electricals Ltd have been demanding a level playing field with Chinese firms, which account for about 33% of equipment supplied to Indian power projects. Chinese companies beat Indian equipment manufacturers not only on pricing but also in delivery time.

A senior official in Ansaldo Caldaie India said there are at least 20 projects stuck for various reasons. "No major order has been placed on private equipment suppliers in the recent past. There are many cases where we have submitted bids and not heard from power companies for one-and-half years now," he said.

Thermax India managing director M S Unnikrishnan said there was a slowdown in order placement mainly because of land and water availability issues, fuel scarcity and higher interest rates.

However, a senior official of Bharat Heavy Electricals said the company had a comfortable order book position. "We have not bagged any major order in the first quarter of current fiscal but we expect good flow during the second quarter."

The company had an order book position of over 1,64,000 crore on March 31.

A senior power ministry official said there has been a temporary slowdown in the sector due to various reasons, including coal and gas availability and delay in environmental clearances. "Equipment orders would be placed once the issues are resolved," he said.

The power ministry expects about 28 million tonnes of coal shortfall for power projects this year. The situation is similar for gas-based projects, as output at Reliance Industries' KG-D6 fields has been dipping.

Laggard power generation could derail India’s growth story

Acute coal shortage and delays in clearance of projects are hurdles to the country’s power generating capacity

India’s target of achieving a 9-9.5% growth during the 12th Plan period (2012-17) may come unstuck, with power generation unable to match pace with growing demand.

Power has emerged as the biggest bottleneck for India’s growth story, and inability to meet demand can hurt economic growth in the world’s second fastest growing major economy, analysts say.

Electricity for all by 2009, a promise contained in the 2004 election manifesto of the Congress party, which leads the United Progressive Alliance (UPA) government, remains a distant dream.

Chronic fuel shortages are hurting power generation and projects are faltering because of reasons as varied as delayed investment decisions, contractual problems, resistance to land acquisition, geological issues and natural calamities.

Fuel woes

While issues such as delays in environmental clearance for projects and mining sites have dogged the sector, the fuel crisis can be captured in a power ministry’s memorandum last month that sealed the fate of projects totalling at least 10,000 megawatts (MW) expected to come up by March 2017.

“Actual drawal of coal will be subject to 85% of power being tied up through long term PPA (power purchase agreement) with Discoms (distribution companies) through tariff based competitive bidding (except for PSU projects where PPAs were signed by 5.1.2011),” the order said.

In other words, only those private sector projects scheduled to be commissioned in the 12th Plan that will be awarded coal linkages will be those who have signed long term PPAs with distribution firms.

Since a significant number of private sector projects for the next Plan period are being set up on a cost-plus basis, they wouldn’t be recommended by the power ministry. Also, the interests of government owned utilities such as NTPC Ltd has been protected as the utility signed PPAs totalling 45,000MW in the last fiscal by 5 January.

“The order was issued as there is only a limited amount of coal to be allocated in the 12th Plan,” said a power ministry official, who declined to be identified.

The government plans to add 100,000MW during the 12th Plan to the current capacity of 174,000MW. The bulk of the 11th Plan’s targeted addition is coal-based, but the country is facing an increasing shortage of the fuel.

The scarcity has widened from 4 million tonnes (mt) in 2004-05 to 40 mt in 2010-11. The power sector is the country’s biggest consumer of coal, absorbing 78% of domestic production. To generate 1MW of power, around 5,000 tonnes of coal is required in a year.

“The situation would get even worse as about 65-70Gw (gigawatt) of domestic coal linkage-based power projects, which are currently under various stages of execution, would start coming on stream in the period of next six years,” Credit Analysis and Research Ltd said in a report. 1 GW equals 1,000 MW.

The growing panic of the private sector was captured in a letter last month written by Ashok Khurana, director general of lobby group association of power producers, to Montek Singh Ahluwalia, deputy chairman of the Planning Commission.

“A spectre of acute coal shortages looms large on the power sector,” Khurana wrote in the letter. “There is a severe risk of stranding of assets and the associated contracts.”

To make matters worse, no new natural gas-based capacity is being planned in the country. The initial excitement after Reliance Industries Ltd’s (RIL) production from D6 block in the Krishna-Godavari (KG) basin, India’s largest gas reservoir, has tapered because of falling production in that field.

Gas is allotted to customers by the government in line with the gas utilization policy that prioritizes users: existing fertilizer factories rank first, followed by existing power, petrochemical and city gas projects. New projects aren’t high up on the priority list.

Poor track record

India’s track record in adding power generating capacity is poor. In the five years to 2007, the country added 20,950MW of capacity, against a target of 41,110MW. The situation remains grim for the 11th Plan target, with the government set to miss the revised target of 62,374MW.

However, power minister Sushilkumar Shinde insists that the sector has performed much better compared with previous years.

“We have added a record power generation capacity in the country last year. The highest ever record capacity of 15,795MW has been added in the power sector in the country during 2010-11,” he said.

The situation is alarming because the country’s per capita electricity consumption is, at 700 units, less than one-third the global average, yet it faces a 10.2% shortage during the peak hours between 5pm and 11pm. The shortage is expected to worsen with electricity requirement expected to soar by 55.5% by the end of the 12th Plan.

Capturing the problem about ecological concerns becoming a stumbling block for development, India’s Economic Survey 2010-11 said, “There is urgent need to streamline land acquisition and environment clearance for infrastructure projects.”

To be sure, there’s a silver lining. The government’s efforts to increase power generation equipment manufacturing has yielded results. Many local joint ventures, such as between Larsen and Toubro Ltd and Mitsubishi Heavy Industries Ltd; Toshiba Corp. of Japan and JSW Group; Ansaldo Caldaie SpA of Italy and Gammon India Ltd; Alstom SA of France and Bharat Forge Ltd; BGR Energy Systems Ltd and Hitachi Power Europe GmbH; and Thermax Ltd and Babcock and Wilcox Co., have been formed.

“Going forward, our focus will be on meeting our targets,” power secretary P. Uma Shankar said. “We are confident that we will be able to do so.”

The power ministry is also focusing on energy conservation and energy efficiency improvement for demand side management. The government has targeted a 5% reduction in demand during the 11th Plan through schemes such as Bachat Lamp Yojana that promotes energy efficient compact fluorescent bulbs, standards and labelling scheme to lay down minimum energy performance standards and energy conservation building code that sets minimum energy performance standards for new commercial buildings having a connected load of 100Kw.

JSW Energy puts Ratnagiri plans on hold due to high coal prices

The rising price of coal has forced JSW Energy Ltd to put a 2,000 megawatts (MW) capacity expansion plan at Ratnagiri on hold.

The power producer will plan future projects on assured domestic coal linkages, vice-chairman and managing director Sajjan Jindal said on the sidelines of its annual shareholder meeting.

“Long-term contracts are not a solution as prices have to be renegotiated all the time,” Jindal said. “The only way forward is for the government to give coal linkages and we expect to hear something on this front shortly.”

Even owning coal mines abroad doesn’t help as coal has to be brought into the country at benchmark prices, he said.

Over the past year, ICE Rotterdam coal price has risen more than 26% to $124.35 per tonne, according to Bloomberg data. JSW Energy needs about 10 million tonnes of coal each year and imports all its requirement.

The company has two units producing 300MW each at Ratnagiri. A third 300MW unit started production in May, while a fourth unit of similar capacity is close to commissioning. JSW Energy had planned to add another 2,000MW.

The company declared a 42% fall in stand-alone net profit for the June quarter compared with a year earlier despite growing sales, mainly owing to rising expenses.

Stand-alone net profit for the three months ended 30 June fell to Rs.190.26 crore from Rs.327.20 crore, while net sales rose 27% to Rs.1,119.26 crore.

Total expenses soared 84% to Rs.856.07 crore, with a 77% rise in fuel costs doing most of the damage.

Other expenses also more than doubled to Rs.65.04 crore from Rs.25.50 crore.

The company’s stock fell 6.6% to Rs.71 on the Bombay Stock Exchange, while the benchmark Sensex index fell 0.4%.

JSW Energy said it plans to take various measures to mitigate the impact of rising imported coal prices and reduce fuel costs in the coming quarters, without elaborating.

CIL to spend Rs 30,000 cr on expansion during 12th Plan

State-run mining giant Coal India (CIL) today said it plans to invest about Rs 30,000 crore to augment its capacity over the next five years and the funds will be spent on new mining projects, washeries, machinery and equipment.

"We are in the process of earmarking about Rs 30,000 crore for capacity expansion during the 12th Five-Year Plan (2012-17) period," Coal India Chairman and Managing Director N C Jha told PTI.

The funds will be spent on new mining projects, as well as for building washeries and buying new machinery and equipment, Jha said.

The Maharatna firm has set a production target of 452 MT for the current fiscal and wants to take its production capacity to 556 million tonnes (MT) by 2016-17. In 2010-11, it had recorded production of 431 MT.

The world's largest coal producer has identified 142 new projects, including 107 open cast and 35 underground mining schemes with an ultimate capacity of 380.22 MT, as new projects and a part of it is likely to be added during the next plan.

CIL is in the process of setting up 20 new coal washeries with a combined capacity of 111.1 MT and is also upgrading its machinery.

At present, CIL operates 17 coal washeries, out of which 11 are coking coal and the remaining are non-coking coal washeries, with a total capacity of 39.40 million tonnes per annum (MTPA).

Meanwhile, it is also awaiting environment clearances for 168 projects that it plans to undertake soon.

"Our 168 projects that include ongoing schemes too are awaiting various environment and forestry clearances and are pending for long," Jha said.

Non-clearance for these projects has hampered production to the tune of 200 MT per annum, he said.

"We will start work on these projects as soon as the clearances are granted. Clearances would enable us to take a decision on purchase of machinery and equipment for expansion," Jha added.

The public sector firm, which accounts for over 82% of domestic coal production, has earmarked over Rs 10,000 crore as capital expenditure for the current fiscal, of which it has set aside Rs 6,000 crore for acquisitions and Rs 4,220 crore for developing different projects.

The cash-rich company would not require to raise any funds for financing the proposed capex and it is likely to be financed entirely through internal accruals.

Suzlon plans to buy remaining REpower stake

Suzlon Energy said that the cash compensation for the transfer of shares from the minority shareholders of REpower Systems has been fixed at €142.77 per share. AE-Rotor Holding BV, a stepdown wholly owned subsidiary of Suzlon, will have to pay about € 63 million for the purpose of acquiring the minority stake.

After Suzlon bought the German wind maker REpower in FY-08, it hiked its stake to 90 per cent and subsequently to 95.16 per cent in 2011.

As per the German law, a shareholding of over 95 per cent permits the majority stakeholder to initiate a ‘squeeze-out proceedings' on the minority shareholders.

This called for Suzlon to approach the district court seeking an independent valuation. The valuation, acceptable to the court, would be the price at which Suzlon would have to buy the stake of the minority shareholders.

On getting the minority stakeholders' stake, Suzlon Energy, through its subsidiary would have total control over REpower. As part of the ‘squeeze-out' proceedings, AE-Rotor Holding has informed the Executive Board of REpower on Thursday that it had set the cash compensation for the minority shareholders share transfer of REpower to AE-Rotor Holdings. A resolution on the squeeze out is proposed to be passed at the annual general meeting of REpower scheduled on September 21, Suzlon said.

Once the buyout of the minority shareholders happens, REpower would become a stepdown wholly-owned subsidiary of Suzlon.

Accumulated losses of discoms at INR 75k cr

No substantial increase in power tariffs for the past five or six years may have helped consumers. However, distribution companies have incurred a whopping accumulated loss of about Rs 75,000 crore.

Going by the current trend, the distribution utilities are projected to suffer a loss of over Rs 1.16 lakh crore by 2014-15, according to estimates by the power ministry. The accumulated losses stood at Rs 74,977 crore in 2008-09, Rs 50,503 crore in 2007-08 and Rs 39,444 crore in 2004-05.There are about 73 distribution companies in the country. However, unbundling of 40 utilities have been done, out of which only 11 are making profits, including North Delhi Power Ltd, Paschim Gujarat Vij Company Ltd, Western Electricity Supply Company of Orissa and West Bengal State Electricity Distribution Company Ltd.

The accumulated losses are on the rise, despite a downward trend in aggregate technical and commercial (AT&C) losses, because of a mismatch in the tariffs and cost.

The average cost of supply (ACS) stood at Rs 3.41/kwh in 2008-09 from Rs 2.93/kwh in 2007-8 and Rs 2.75/kwh in 2006-07. However, the average revenue realised on a subsidy basis stood at Rs 2.91/kwh in 2008-09 from Rs 2.65/kwh in 2007-08 and Rs 2.49/kwh in 2006-07, according to data from the ministry.

There have no tariff orders since 2006 by the electricity regulatory commissions of Tripura, Haryana and Nagaland. Since 2009, there has been no tariff revision in Assam, Chhattisgarh, Karnataka, Sikkim and Delhi. In Bihar, the last revision was done in 2008.

“In Rajasthan, state utilities have been borrowing from banks and state government is giving them guarantees and regulator is not allowing interest on that loan to be charged to their expenses,” CERC Chairman Pramod Deo told Business Standard.

“There has been no tariff hike in Rajasthan for the last 6-7 years, but utilities are not starved of funds. It is like a habitual borrower, every year, if you look at their (utilities) balance sheet, no bank should lend them…but the state government is giving them guarantee,” he added.

In such a scenario, the regulator finds it difficult to increase tariff and the state government had issued a directive to discoms not to ask for a tariff hike. But, for the first time, utilities have filed a petition for increasing tariff and an order will come soon. The tariffs in Rajasthan were last revised in 2005 and discoms of the state have accumulated loss of Rs 15,540 crore.

Deo said different state governments were following various methods. For instance, before the recent assembly elections in Tamil Nadu, there was a tariff order after a gap of 7-8 years.

In the tariff order for Tamil Nadu, the state regulatory commission has treated the huge gap between a recovery of about Rs 8000 crore, which should have been recovered in consumers tariffs, as regulatory assets, he added. The discoms there have an accumulated loss of Rs 16,774 crore in 2008-09.

NTPC stresses on govt's responsibility for coal supply

NTPC on Monday stressed that even though the coal ministry had de-allocated blocks, it was the government’s responsibility to supply coal.

Speaking on the sidelines of a seminar organised by the Bengal National Chamber of Commerce and Industry (BNCCI), NTPC chairman and managing director Arup Roychowdhury said the company would not exceed imports beyond 10% of its total requirement, though it was looking for overseas coal blocks. NTPC would make offers for picking up stake in Bandana Energy on July 29. Bandana has 16 exploration blocks in Queensland, a coal rich area of Australia. But Roychowdhury did not want to say how much stake NTPC would pick up in the company or what amount of coal it was looking to get from it.

He said, “As a power producer, NTPC has proven credentials. So the government has to give us fuel either through linkage or through allocation of coal blocks. Even if the government has de-allocated five coal blocks, we will depend on it for the fuel,” Roychowdhury said.

NTPC was given five coal blocks—Chhati Bariatu (South), Chhati Bariatu and Kendari in Jharkhand and Brahmani and Chichiro in Orissa, of which the blocks in Orissa were supposed to be jointly developed by CIL and NTPC.

The five blocks together have a reserve of 3 billion tonne, of which the blocks in Jharkhand, allocated in 2006, had a reserve of 836 million tonne. The rest 2.264 billion tonne of reserves are in the blocks at Orissa.

Roychowdhury said he would hold talks with CIL chairman NC Jha on Monday regarding developing the blocks hinting that there may be a rethink on the de-allocation, though he did not want to divulge details.

In fact, Prime Minister Manmohan Singh, after learning about the de-allocation notice, said that if NTPC could give valid reasons about why it couldn’t develop the blocks, then the blocks would be reallocated to it.

Roychowdhury stressed that on matters relating to capacity addition, it would mainly depend on domestic coal and not increase its import ceiling over 10% of its total requirement.

NTPC currently generates 35,000 mw and has plans to add another 35,000 mw to emerge as a 70,000 mw generating company by 2017.

NTPC plans 200 MW wind energy project in Kerala- signed a memorandum of understanding with the government of Kerala

National Thermal Power Corporation Ltd (NTPC), the largest state-owned power generating company in India,  has signed a memorandum of understanding (MOU) with government of Kerala to plan and develop around 200 MW Wind Energy based Power Projects in the State.NTPC will build this wind power project on Build, Own & Operate (BOO) basis using state-of-the-art technology subject to establishment of techno-commercial viability.

NTPC, the state own power generation company, has informed Bombay Stock Exchange (BSE) that the Company has signed an MOU with Government of Kerala on July 18, 2011, with the objective to plan and develop around 200 MW Wind Energy based Power Projects in the State of Kerala in association with Government of Kerala.

NTPC will develop this project in a phase manner. Out of total 200 MW, first 80MW wind energy projects will be developed on fast track basis at Ramakkalmadu by NTPC. 

NTPC plans wind power plant in Maharashtra- has inked a power purchase agreement with MSEDCL

State-run power generation giant NTPCis setting up its first wind power plant in Maharashtra and has inked a power purchase agreement (PPA) of 39 MW with MSEDCL. The PPA has been recently given the green signal by Maharashtra Electricity Regulatory Commission (MERC). 

NTPC is setting up three wind power projects in the country – 75 MW at Chakala (Nandurbar district, Maharashtra), 75 MW at Madurgudda and 100 MW at Guledagudda, both Karnataka. The Maharashtra project is slated to come up in 2012 end or beginning of 2013 and NTPC has already floated tenders for it. The PPA does not state the precise tariff but it will be as per Central Electricity Regulatory Commission (CERC) rates for wind energy. NTPC had signed a PPA with power distribution companies in Karnataka at Rs 5.30 per unit. CERC has mandated a 6 % renewable energy purchase obligation (RPO) in 2011 which will increase 1% each year to 15% by 2020. A number of states including Maharashtra have fallen behind in meeting their RPO target and would need to either generate or buy green energy to meet CERC targets. Meanwhile, state-power generation company Mahagenco has awarded the contract of constructing a 125 MW solar power plant at Sakri (district Dhule) to Lanco and Megha Engineering. Lanco will build a 75 MW crystalline based solar photovoltaic plant and Megha Engineering will set up a 50 MW thin film solar plant. Mahagenco had made a foray into solar power by setting up 1 MW project at Chandrapur, the first in the state. The price for a unit of electricity for the 1MW plant was set at Rs 15 per unit with the state government contributing Rs 3 per unit and the remaining funded by Indian Renewable Energy Development Authority (IREDA). The utility has also started building a 4 MW solar plant at Chandrapur.

NTPC may drop 1,600-MW Katwa thermal project - Bengal's policy against land acquisition poses a threat

NTPC may be forced to drop the proposed 1,600 MW (2 X 800 MW) supercritical thermal power project at Katwa in West Bengal, if the Mamata Banerjee-led State Government fails to solve the land tangle.

The State has so far acquired 575 acres for the proposed Rs 9,600-crore project against a requirement of approximately 1,100 acres. West Bengal already entered into power purchase agreement (PPA) agreements with NTPC for half of the generation from Katwa. Originally proposed to be taken up by the State generation utility, the project was handed over to NTPC by the former Left Front government in 2010.

The latter had acquired the land. The pace of acquisition of the residual land remained slow due to resistance from farmers.

Having assumed office in May 20, Ms Banerjee made it clear that the State Government would not henceforth acquire land for industry. Even the acquisition for development projects would not be pursued if opposed by the farmers. To this effect the State Government had also withdrawn land-acquisition notices (issued by the previous government) for the Rajarhat New Town satellite township project.

While the State Government is yet to withdraw the land acquisition notice for Katwa project, sources suggest that NTPC was informally asked to commission the thermal power plant on the available 575 acres.

More land needed

Maintaining that the power major was “committed to the project” and was waiting for handover of the “requisite land”, The NTPC Chairman, Mr Arup Roy Chowdhury, indicated that it would not be possible for the company to set up the plant on the available 575 acres.

“We need 0.7 acres for installing every megawatt capacity. We can accommodate minor modification in land size. However, any outright modification is not technically feasible,” he told newspersons on the sidelines of a seminar organised by the city based Bengal National Chamber of Commerce and Industry (BNCCI) here on Monday.

Direct purchase

On the possibility of direct purchase of residual land, Mr Roy Chowdhury said that the company was agreeable to a “tripartite arrangement (including the State, NTPC and farmer)” for such purchases. Also the price of land should not exceed the compensation package offered under the land acquisition programme.

The Indian power major has already backtracked from its initial offer to set up another 2 X 660 MW thermal power plant at Santhaldih in Purulia district of West Bengal. “We explored the possibility of setting up a facility replacing the existing age old units of Santhaldih power station (under state utility). However, the available infrastructure was inadequate to ensure project viability,” he said.

The company's 2,100 MW Farakka thermal power station in the State suffers from relatively lower plant load factor (PLF), due to lack of regional demand in the off-peak periods.