NTPC commissions first super-critical 660-MW unit of Sipat Super Thermal Power Project in Chattisgarh

State-run thermal power generation company NTPC Tuesday commissioned its new 660 MW supercritical power unit, which it says is more efficient and environment friendly, at its Sipat plant in Chhattisgarh.

"First supercritical 660 MW unit of NTPC has been commissioned today at Sipat in Chhattisgarh. With this, NTPC's installed capacity has risen to 34,854 mw," the company said in a statement.

According to the statement, the country's largest thermal power producer would focus on commissioning more of supercritical technology-run power units under its low carbon growth strategy.

"These supercritical units will achieve much higher generation efficiency and are critical components of NTPC's low carbon growth strategy," the statement said.

Earlier, the company had floated tenders for nine units of 660 MW and 800 MW each for its upcoming projects in 12th Five Year Plan.

The new unit of the Sipat power plant is located 22 km from Bilaspur city in southern Chhattisgarh and has a planned installed capacity of 2,980 MW on completion of stages-I and II.

"The beneficiaries of the project are western region states of Chhattisgarh, Gujarat, Madhya Pradesh, Maharashtra, Goa, Daman and Diu and Dadra Nagar Haveli," the company said.

Currently, the total operational capacity of Sipat plant stands at 1,660 MW.

PFC may issue tax-free bonds to raise Rs 50 billion in the current financial year to finance lending to power projects

Indian state-run power projects financier Power Finance Corporation Ltd may raise Rs 50 billion via tax-free bonds in the current financial year 2011-12 to fund lending to power projects, a senior Power Ministry official told media Tuesday.

"We are awaiting the Ministry of Finance's nod to allow Power Finance Corp to raise Rs 50 billion through tax-free bonds in the current fiscal," the official said.

The Finance Ministry is expected to reply in a day or two, the official added.The fund raising will help the company reduce its interest costs -- the interest at which PFC borrows from the market for further lending – by 1.5%, the official said.Power Finance, which finances power generation and transmission projects, has set a target to borrow Rs 300 billion in this fiscal.

NTPC defers plans to raise around $500 million through a dollar denominated notes in Singapore as rates stay high

NTPC Ltd, India’s biggest power company, has put off plans to raise around $500 million through a dollar denominated notes in Singapore because of deteriorating sentiment for corporate bonds.NTPC wanted to pay an interest rate of 9.25%, whereas investors sought 9.60%, said sources familiar with the development.

With interest rates elevated in India, NTPC was hoping for a better deal abroad.“The market is not good right now. Investors are apprehensive and the situation in Greece is seen having an adverse impact on the bond market. We will have to wait for some time to raise money,” an NTPC official told DNAon Monday.The company had organised roadshows for potential investors in Singapore and Hong Kong in the last week of May.

Barclays Capital, Citibank, Deutsche Bank and Royal Bank of Scotland were the book runners.According to initial plans, the NTPC bond, with a maturity of 10 years, was to be listed on the Singapore stock exchange on June 4.

NTPC is planning to add 5,000 mw of capacity in the next fiscal for which it is raising funds from the domestic and international markets.The company also has significant expansion plans for its coal- and gas-based power plants and it is also trying to acquire coal assets abroad.

NTPC has also sought the help of the Ministry of Power to raise funds through tax-free bonds in India.The Ministry of Finance takes the final call on allowing government companies to raise funds through tax-free bonds.NTPC has around Rs20,000 crore of cash reserves on its balance sheet.With over 27 power generating stations across the country, NTPC’s total installed capacity is around 33,194 mw now.The company is currently setting up projects with a capacity of 17,000 mw and it plans to produce 75,000 mw by 2017.

Gujarat govt hikes three-phase power supply for agricultural purposes by two hours with immediate effect

With monsoon not keeping its date in Gujarat, Chief Minister Narendra Modi on Monday announced an increase in three-phase power supply for agricultural purposes by two hours with immediate effect. Post announcement, the farm sector in Gujarat would now receive three-phase power supply for 10 hours instead of eight.

"The decision has been taken in the larger interest of the farmers, so that the production should not suffer for want of water as far as possible," said Saurabh Patel, minister of state for energy, Government of Gujarat.According to Patel, In normal year the monsoon sets in the state around June 15, while this year it seems to have been delayed, resulting in hardships to the farmers in carrying out sowing operation due to shortage of water.

"Keeping this end in view, the Chief Minister has asked all the agricultural feeders to supply three-phase electricity for ten hours from June 28, 2011, in lieu of eight hours so far.

The new order will remain in force till the next one," Patel added.

Tata Power's Mundra project may trip on transmission woes

Tata Power's Mundra project, the only Ultra Mega Power Project (UMPP) that is running on track out of the four awarded so far, could be staring at possible delays due to problems in the associated transmission link.

Forest clearances and right-of-way issues are holding up the transmission line being set up for evacuating power from the project, which could result in bottling up of electricity from the initial units of the 4,000-MW power plant coming up in Gujarat.

Despite construction progressing according to schedule, commissioning of the first 800-MW unit of the project could slip beyond its targeted commissioning in September this year, Government officials involved in the process said.

State-owned Power Grid Corporation of India Ltd (PGCIL), which is developing the transmission link for the project, is now trying to make some interim arrangement to be able to evacuate around 500 MW from the first unit.

But the project still faces transmission constraints and subsequent units could face delays on account of inadequate transmission capacity, unless the planned system for the project is completed on time.

The sticky issues holding up the line involve a wildlife and forest clearance in one of the patches, which threaten to hold up the link even if the right of way issues are resolved by PGCIL. The transmission major had earlier raised the issue of “severe” right of way problems at different locations in Mandvi, Mundra, Bhuj, Anjar, Bachua and Rapar talukas in the Kutch district and sought assistance from the Gujarat Government.

Officials said that unless the forest clearance and the right of way issues are sorted out, the mandatory clearances (Stage 1 and Stage 2 clearances) cannot come through.

Till the Stage 2 clearance comes, the construction of the line on that section cannot happen.

Late last month, Tata Power had said that it was “on track” to synchronise the first unit of the project by September 2011. The company has completed critical steam blowing process at unit-I of the UMPP, bringing it closer towards its synchronisation. The project will have five supercritical units of 800 MW each and would run on imported coal.

Apart from work on the first unit, equipment and piping erection is progressing sequentially for the remaining four units.

While the Mundra project was the second UMPP to be awarded, the Tatas brought forward the commissioning of the project from the original schedule of August 2012 to September 2011, making it the first UMPP off the block.

Other projects

Meanwhile, the first unit of the Sasan UMPP, being developed by Reliance Power Ltd, where the commissioning schedule was brought forward to December 2011, is now slated to achieve commercial operations only in January 2013, according to a Government status report dated April.

The Krishnapatnam UMPP, being developed by Reliance Power in Andhra Pradesh and where the scheduled commercial operation has been pegged for June 2013, could also face delays due to changes in unit size and work on the boiler foundation, Government officials said.

The fourth UMPP, Tilaiya in Jharkhand being developed again by Reliance Power, is scheduled to commission its first unit in May 2015.

Carbon trading holds enormous business potential for India

Lowering greenhouse gas emissions is not only good for environment, but it also may benefit an entity’s bottom line. India has a huge potential for carbon financing, which is an emerging business opportunity for Indian companies. In recent years a small, albeit fragmented, market for carbon has started to emerge, and the institutional superstructure for clean development mechanism (CDM) is being set up both internationally and nationally.

The two distinct mechanisms of CDM, a market-based instrument and a grant-based instrument (the global environment facility or GEF), have their own special roles to play as financing options. GEF works closely and integrates with the government’s institutional framework while CDM is more private-sector-driven. The GEF provides upfront grant and also seeks to leverage support from other sources, while CDM generates revenue over the years. Globally, there are more than 4,000 projects under various stages of CDM. More than 1,000 projects are already registered as CDM projects, out of which about one-third is from India. These projects are likely to have a share of about 19% of the total global CERs supply. It is important to note that projects should meet with additionality and sustainable development indicators. The project should lead to real, measurable and long-term greenhouse gas mitigation. CDM projects have inherent risks for buyers, which need to be noted and require devising appropriate guarantee instruments with assistance from the private sector.

It is estimated that 60-70% of emission of greenhouse gases (like hydro fluorocarbons, methane and nitrous oxide) is through fuel combustion in industries like cement, steel, textiles and fertilisers. They are released as by products of certain industrial processes, which adversely affect the ozone layer, leading to global warming. Carbon credits seek to reduce these emissions by giving them a monetary value. One credit gives the owner the right to emit one ton of carbon dioxide. Such a credit can be sold in the international market at the prevailing market price. This means that carbon becomes a cost of business and is seen like other inputs such as raw materials or labour.

The carbon market is expected to grow to $100 billion in the near future, and Indian firms want to reap some of the benefits. The CDM under the Kyoto Protocol allows richer countries to trade their emission-reduction targets with developing countries by buying carbon credits earned by the latter for projects reducing emission of greenhouse gases.

Recent estimates predict that uncontrolled carbon emissions could cost the global economy more than $200 billion annually by 2030 unless the pollution levels are controlled. Environmental group Greenpeace has said that shifting to renewable energy and reducing carbon emissions could save Southeast Asia $80 billion annually.

As far as India is concerned, emission trading holds enormous potential with it already being one of the leading generators of certified emission reductions (CERs) through CDM. The potential for generation and sales of CERs should be harnessed on a sustained basis. India has a great scope of earning and trading carbon credits through its diversified and potential sources of developing technologies.

Trading in CERs provides benefits including

Sellers and intermediaries can hedge against price risks.

Forward selling can help projects in generating liquidity and thereby reducing the cost of implementation.

No counter-party risks as the exchange guarantees the trade.

Price discovery on the futures exchange platform ensures fair prices for both buyers and sellers.

Buyers and sellers come on a single platform, which ensures credibility among them.

It gives an immediate reference price, which is good for the sellers.

Many Indian companies have been re-rated on the stock markets on the basis of carbon trading opportunity. SRF Ltd and Shell Trading International have entered into sale and purchase CERs. Suzlon Energy and Shriram EPC have business in wind energy, which is eligible for carbon credit benefits. Shree Renuka Sugars is also expected to benefit from carbon credits. Gujarat Fluorochemicals was among the early companies to register for a CDM project.

India has emerged as the dark horse in this race as more than 200 Indian entities have applied for registering their CDM project for availing carbon credits. Currently, one carbon credit is worth 13 euros. Indian companies can have higher incomes more from carbon credits than their core business. The carbon credit market was worth $25 billion last year and is growing at tremendous space, and there is a demand to reduce 1 billion tonnes of carbon emissions in the world, so that threats like global warming could be dealt with.

Indian companies are fast realising that there is money to be made by becoming eco-friendly. With new core sector projects like power and steel coming up in India, the carbon credit market will rise once again. The 800 million farming community in India has also a unique opportunity where they can sell carbon credits to developed nations.

Recently, an Indian firm won the single largest issuance of carbon credits by the United Nations Framework Convention on Climate Change, which awarded 5.4 million carbon credits to two projects owned by India’s JSW Steel.

Ficci has said that Indian companies may earn almost $4 billion through carbon-credit sales in the near future. Indeed, an institutional mechanism is quickly emerging in India to take advantage of CDM. This is critical. Given the vast country that is India, it is essential that an organised framework reaches the grassroots level where numerous green projects could be eligible under CDM.

Being one of the largest growing economies of the world, India has a large potential for emission reduction and can thus assist developed nations secure compliance and purchase CERs at competitive prices. The revenues from carbon trade provide an additional revenue stream of up to 10% or even higher in select cases that can enhance the return on investment. CDM holds the key to reduction of greenhouse gas emission and improving financial performance of the companies. The environmental norms are bound to get stricter as time goes by. This is the right time do research, develop and implement cleaner and more sustainable technologies.

Private participation—A feasibility check

The Indian coal sector is of strategic importance to the Indian economy with coal meeting more than 50% of its energy requirements. The sector is predominately state-controlled with the government of India (GoI) carrying the ultimate responsibility for the industry including production through public sector enterprises (PSEs) such as Coal India Limited (CIL) and Singareni Collieries Company Ltd (SCCL). These PSEs are confronted with various constraints that impede efficiency, such as conflicting role and objectives—whether social or commercial, government and political control and day-to-day interference in management, multiplicity of strong and politicised trade unions, procedural delays in decision making, etc. The growing inability of PSEs to meet the increasing demand-supply gap has resulted in much talk of increased private participation in the sector. The private sector in India is currently limited to captive mining for production of iron and steel, cement, for washing, power generation, and gasification of coal, which has recently been allowed as one of the end uses of coal mining for captive use.

Promoting greater private participation is expected to hike production, increase competition, and lead to greater efficiency of existing mining players. Around 70% of coal requirements are expected to be met locally with greater private participation. However, the question here is whether greater private participation, though desirable, is feasible in the Indian coal sector.

The current institutional and policy framework governing the coal sector has been developed to bring coal resources under the control of the central government and facilitate operations of the PSEs. Various exemptions and preferential treatment have been granted to PSEs that are not extended to private players. Consequently, there is no level playing field between the public and private sectors. Moreover, the framework creates regulatory uncertainties for the private sector and discourages investments into the sector. There are special provisions in law (Coal Bearing Areas Acquisition and Development Act) that gives the central government greater public control over coal production by empowering it to acquire un-worked coal-bearing land and assume all rights on it without involving the state government. Thus, there is no security of licences issued to the private sector for prospecting and this constant threat of acquisition discourages private investments in economically and commercial viable deposits. In addition, there are uncertainties created as a result of no efforts to demarcate go/no go areas.

Mining activities have been restricted in certain areas like dense forest area, national parks and wild life sanctuaries; however, the schedule of lands where mining will not be permitted under any circumstances has not yet been prepared. Consequently, investors may carry out exploration and complete feasibility studies only to find that the diversion of forest land may not be permitted in the area. These incoherent policies create risks for private players and make them less confident in their dealing with state institutions. Recently, the a group of ministers has been constituted by the Prime Minister to demarcate go/no go areas, though the progress has been slow.

However, even if regulatory amendments are made to introduce a common legislative framework and remove regulatory uncertainties, private investments may not be forthcoming due to the monopoly structure of the coal industry and incumbency benefits accruing to the existing players, which increases the risk and cost of entry into the sector, thereby inhibiting investments by potential private players.

Captive mining emerges as an alternative option and there has been an increase in the number of blocks awarded over the past few years. However, there has not been a significant increase in production from captive mining due to flawed selection of blocks to be released to private players. Some of the blocks released have been too small and entailing non-viable reserves, others are confronted with problems in obtaining site clearances and yet others are located in areas requiring major investments in infrastructure. The guidelines for selection of blocks are not made available—the only requirement is that CIL will not be using those blocks and there appears to be no legal basis on which block are attributed to CIL. There is also no transparency in the selection of applicants by the selection committee for captive mining though the efforts to introduce competitive bidding and thereby transparency has been made in the recent amendment to Mines and Minerals (Development and Regulation) Amendment Bill, 2010.

Thus, given the current institutional and regulatory framework and the dominant position of CIL, significant private investments are unlikely into the sector. The entry of private sector is dependent on the introduction of fair and transparent procedures, a common legislative framework that provides a level playing field between the public and private sector and addressing loopholes and uncertainties in policy framework that currently throttle private investments into the sector. In addition, the role of government needs to be appraised from being the operator to a facilitator creating enabling policies for private investments to flow in.

Focus on coal pricing and production shortfalls likely on July 1 PM meet

After offering a compromise for coal mining in dense forests or "no-go" areas, Environment Minister Jairam Ramesh wants the spotlight on issues such as production practices of coal companies, incentives for states, coal pricing and evacuation.

These issues are expected to dominate the Prime Minister's meeting on July 1 on production shortfalls of coal and power. A day after the last meeting of the Pranab Mukherjee-led ministerial panel, Ramesh wrote to Prime Minister Manmohan Singh listing "some of the structural issues that are plaguing the coal sector.

In his note to the Prime Minister, Ramesh reiterated the problem of piling up of pithead coal stocks. This would mean that even though the coal is being mined, it is not reaching the end-users such as a power generating plant. The quantity of pithead stocks has been on the rise.

On April 1, 2011 there was 71 million tonnes of coal which was yet to be evacuated. This is 11% from April 1, 2010, when pithead stocks accounted for 64 million tonnes of the year's production. The issue of piling up pithead stocks is important as it currently accounts for 15% of annual coal production.

Restricting e-auction of coal not a solution: CIL

In its first official response to the power ministry’s demand of temporarily stopping spot sales of coal, state-owned Coal India Ltd (CIL) has said the move would not help boost availability at power stations.

Reacting sharply to the demand, India’s monopoly coal producer said restricting e-auction sales would rather push up stock piles at its mines and aggravate coal shortage.

 “Around 80 per cent of the e-auction sale is undertaken by road, which normally cannot move to power stations. If e-auction is restricted, quantity to the tune of eight per cent of the overall production (80 per cent of e-auction which moves by road) will result in accretion in pit-head coal stock,” the world’s largest coal producer said in a recent letter to the coal ministry.

“Restricting e-auction would in no way help the power sector,” it said.

The letter was a response to the power ministry’s presentation on the matter to a 12-member group of ministers (GoM) on coal in its June 9 meeting. The company sold 43 million tonne (mt) of coal through e-auction last financial year at a price 83 per cent over the notified price of 920 mt.

Coal India currently has a total of 70 mt of stocks piled up at its mines, even as the country is estimated to face a shortage of 83 mt this financial year. The company attributes the shortages to unavailability of railway rakes for dispatch.

The company, which has recently come under pressure for making profit by selling coal through e-auction at market rates even as it has pulled down commitment under Fuel Supply Agreements (FSAs), also clarified on the issue by invoking its statutory mandate.

“It is not that CIL has been offering coal under e-auction only due to revenue generation. CIL has been restricting e-auction to the level of 10 per cent of its production, as stipulated by the New Coal Distribution Policy (NCDP),” the letter states.

The company has also made it clear that stretching availability for the power sector beyond the current level is not possible. CIL has already increased its current financial year's commitment to the power sector from 327 mt earlier to 347 mt on coal ministry’s intervention against a production of 447 mt.

“As such, the offer is already made at the threshold level and there is no further room for additional offer,” it said.

The power ministry had recently warned that CIL’s failure to meet supply commitments would result in stranded power capacity of 24,000 Mw. “As an immediate measure, CIL must stop e-auction to meet the demand of power sector,” the ministry said in a recent note prepared as an input for the draft cabinet note on coal shortages.

Against a projected production of 452 mt in the current financial year, the company has a committed supply of 463 mt including e-auction. This shortfall of 11 mt, called negative coal balance, rises to 157 mt in case letter of assurance (LoAs) signed by it earlier materialise.

Coal India’s letter to its parent ministry also indicates that its negative balance is projected to increase from 157 mt during the current year to 366 mt at the end of the 12th Plan period in 2017.

CIL alone accounts for over 80 per cent of India’s domestic coal production of 530 mt. The company’s production remained flat at 431 mt last year.

RPower may commission phase II of Rosa plant 3 months ahead of schedule

Reliance Power is working to bring online the 600 MW Phase II of its Rosa Power Project in Uttar Pradesh three months ahead of the targeted date of March 31, 2012.

As a result, revenues will start flowing in this fiscal itself.

All approvals are in place and coal linkage has been assured with the company getting a letter of assurance for supplies from the Central coal mines in Jharkhand, said Mr Vibhav Agarwal, Director, Reliance Power. The boiler hydro test was done February 18.

Phase I of the plant supplies 600 MW to the Uttar Pradesh Government, in accordance with the power purchase agreement inked with the State.

The unit tariff is about Rs 1.45 plus cost, which works to Rs 3.50 with fuel cost to the purchaser's account.

The UP Government has also committed to lifting 300 MW from the Phase II on commissioning of the 300X 2 MW, besides considering drawing the balance power, given the shortage in the State.

RPower's supply to the State as of April totals 377 million units or 7 per cent of the purchaser's receipt of 5,447 million units. Total capacity dedicated to the State is 10,081 MW, of which, RPower's share is 6 per cent.

The Rs 6,000-crore Rosa project, totalling 1,200 MW, is considered the largest private sector investment in Uttar Pradesh by an independent power producer.

Transmission line

RPower is also erecting a 10-km 400kV transmission line to evacuate power from Rosa II to the Central Grid (Power Grid Corporation Grid) at a cost of Rs 22 crore. This is primarily to enable flexibility in power evacuation, said Mr Agarwal.

For Rosa I, a 200kV transmission line is in place to evacuate the power generated by the 600 MW unit.

RPower sources said contrary to aspersions cast on the efficacy of Chinese equipment, the Shanghai Electric machinery at the plant has been able to maintain an average plant load factor of over 90 per cent since January.

5,000 MW by 2012

While announcing the results of FY11, Mr J.P. Chalasani, Chief Executive Officer, said the company had moved into the operating phase last fiscal and RPower's generation would be 5,000 MW by 2012.

Both the 600 MW Butibori project and the Rosa phase II (600 MW) are scheduled for commissioning in FY11-12, besides which RPower plans to commission its 2,400 MW gas-based Samalkot project by early next year.

Three sets of two turbines each are slated for commissioning between December and February.

GOM Likely To Meet On July 2 To Decide Fate Of 8 Coal Blocks

Stalled by environmental hurdles, the fate of eight coal blocks allotted to firms like ADAG, Essar, Adani and the Aditya Birla Group for fuelling their thermal power plants is likely to be decided by a ministerial panel early next month. A Group of Ministers (GoM) on Coal has asked the Ministry of Environment and Forests (MoEF) to outline the current status of these eight blocks at its next meeting, scheduled on July 2.

Interview: L Madhusudhan Rao, Lanco Infratech

'In 10 years, we will commission 5,000 Mw internationally'

Private infrastructure and power company, Lanco Infratech, has gone for a rebranding exercise after 25 years to represent the changing times, its global aspirations and diverse businesses. In an interview with Mansi Taneja, Executive Chairman L Madhusudhan Rao talks about the the company’s plans to invest Rs 35,000 crore to take the installed capacity to 15,000 Mw by 2015. Edited excerpts:

Why did you feel the need to change the logo and, in a way, changing the company's identity after 25 years? Are you trying to move away from an image of a regional player?

We are looking to build a brand from a global perspective, from a regional player to an international one. We are equally distributed in the country today, not just Andhra Pradesh. But our roots, of course, will always be there. We have shifted our headquarters to Gurgaon. It makes good business sense with regards to connectivity, consulting and financing point of view. Having a base in Hyderabad did not add value since the senior leadership was always away.

Further, we wanted to be recognised as a professional organisation, committed to business excellence.

You have changed your tag line to ‘Always Inspiring’ from ‘Inspiring Growth’. What does the new logo represent?

The new Lanco is about youthfulness and a modernity, and the red colour represents energy. We started from being a regional player, now we are expanding across the globe. In this new journey, inspiration will be our foundation. That is what our new tag line represents.

What are your expansion plans?

Currently, we have an installed capacity of 3,300 Mw. We have achieved financial closure of another 6,000 Mw, which is under construction. The remaining 6,200 Mw is under advanced development and will need an investment of Rs 35,000 crore. We plan to have an installed capacity of 15,000 Mw by 2015.

How do you plan to fund this investment?

The money will be raised through debt/equity ratio of 80:20. We are in discussions with various banks and financial institutions, including Chinese, to raise the money. We may look at multiple model of financing for the new projects.

What is your strategy for overseas market, especially new projects? Last year, you had acquired coal mines in Australia, Griffin Coal. Are you eying any other?

After Griffin, we have been evaluating some options. Griffin will meet our requirements for next seven to eight years. Currently, we are looking for coal mines in Australia, Africa and Indonesia. If we get a good opportunity, we will definitely look into it.

We have bid for new engineering, procurement and construction (EPC) power projects in emerging markets. We have a qualified team, which is looking into this. We have qualified in various regions and expect to bag some EPC projects in Bangladesh and Indonesia, soon. Power projects require a long gestation period. So, it needs to be looked from a 10-year perspective. In the next 10 years we will look at commissioning 5,000 Mw internationally.

You have mentioned your plans to hive off core businesses. When will that happen, and what's plan about list them?

We have five business verticals — power, solar, construction, natural resources and infrastructure, and most of our revenues come from power and construction segment. We want to list all our verticals, eventually. That may happen in the next two years.

Australia may Allow Uranium Export to India

MELBOURNE In a bid to strengthen bilateral ties, Australian government could review and lift the long standing ban on uranium export to India later this year,a media report said on Thursday. Later this year, the (Julia) Gillard government is likely to take two very big decisions affecting relations with the US and India. It will provide much greater access for US military forces to northern Australia. This could ultimately lead to US ships being based in Australia. And it will likely lift the ban on selling Australian uranium to India. Both decisions should be seen against the backdrop of China, The Australian said.

Power cos seek govt help to tackle coal price hike

Private power producers, including Reliance and Tata, have sought the government intervention to tackle the possible spurt in imported coal prices, apparently making a case for increase in power tariff for consumers.

The plea of the private power utilities comes at a time when Indonesia’s—the largest coal supplier to India—mining laws are making it mandatory that coal prices be based on international market rate.

In a letter to Power Secretary P Uma Shankar, the 14-member Association of Power Producers (APP) has called for setting up of an “expert committee” to find an appropriate solution to price issues related to imported coal. Apart from Reliance Power and Tata Power, other association members include Essar Power, Adani Power, GMR Energy and Jindal Power.

Indonesia move not to raise coal import cost: Lanco Infra

The Indonesian government decision to cut discounts on coal exports from September this year will not push up India's import costs substantially, feels Lanco Infratech executive chairman Madhusudhan Rao. Speaking to FE on Wednesday, Rao said that contracts entered into in 2005-06 and earlier would be impacted more by the development.

Indonesia and Australia account for over 50% of India's imported coal. Most of that coal is used for power plants and so the formula notified by Indonesia’s directorate general of minerals — to sell at prices notified by the government there — has the potential to upset electricity tariffs in India. The benchmark notified price is to be based on a formula that links the average coal index price in accordance with international market rates.

Most Indian importers have contracted supplies after 2008-09, when domestic prices began to flare. Coal India, the domestic monopoly supplier of coal, is unable to push production above 534 million tonnes for the last two years.

While media reports pointed at coal becoming costlier by around R1,500 per tonne for Indian power companies due to the new formula, Rao told FE: “With Indonesia selling coal at the index price, only projects which had an earlier contract at a very low price will be hit. The new projects (post-2005-06) will not be impacted.” Rao elaborated that today no coal producing company would sell at a low price. “Five or six years back, when coal supply was very low, people had contracted at low price for a long period without probably knowing the market. What is there at $120 today, in 2006 it was only $55. So those who have entered into contact in 2005-06 will be effected by this law, but for those who want to develop projects now or had initiated them two years back, it is very clear that no one will undersell coal, whether there is a law or not, any coal supplier will sell at the index price. Just as Lanco has Griffin Coal, if we have to sell coal, we will also sell at the index price,” he said.

Rao also expressed his surprise at the media reports which are surfacing now, as according to him, this law has been in place in Indonesia since two years now. “Indonesian coal duty has been there from the last two years. I don't know why it has been making headlines in the last 10 days.

Indonesia had this provision in their Coal Contract of Work (CcoW), which had a clause where the government could exercise control of price on exports, and they started exercising it in the last two-three years when they saw the prices going up. So they started mandating that the export price should be maintained as decided by the authorities concerned in Indonesia,” he said. Rao added that Australia too had a similar law and Indonesia followed it.

Rao affirmed that with the law coming in place, coal blocks would have to sell at the mandated price, without any differentiation, which went well for the Indian companies that were acquiring natural resources overseas. Indian power developers are reportedly also seeking government intervention on this law and asking the power ministry to set up an expert committee to find appropriate solution.

CoalMin Warns NTPC of Deallocation of Blocks

The government on Wednesday warned two firms, including NTPC, for delays in developing their coal blocks, saying that they would be taken back if no immediate action is taken by the companies to rectify the situation. Power major National Thermal Power Corporation (NTPC) was warned for two coal blocks each in Jharkhand and Chhattisgarh,and Utkal Coal for its block in Orissa. The allocatee (s) are hereby warned and further directed to take immediate action to develop the coal block (s) as per milestones fixed for different activities.In case of failure to achieve milestones ... action will be initiated as per the terms and conditions of allocation including de-allocation of the coal block(s), the Coal Ministry said.

Power problems

Shortages, outages, load shedding, poor-quality supply and transmission and distribution (T&D) losses continue to haunt India’s power sector. Despite these problems, India has now acquired the capacity and capability to add at least 15,000 Mw a year, having demonstrated the ability to add 12,000 Mw a year in the past five years. This still compares poorly with China’s ability to add 100,000 Mw every year. Clearly, the challenge of adding capacity remains a major problem for India’s power sector. Equally important is the challenge of making investment in power pay for itself and ensuring delivery of good- quality power for all consumers. Recent trends do provide some basis for optimism, though the past five years have been hugely disappointing as far as getting a forward-looking power policy in place is concerned. The sharp rise in private sector participation in generation, thanks to the landmark Electricity Act, 2003, has helped. Its contribution to incremental capacity addition during the 11th plan has been approximately 40 per cent and is expected to increase even further to 50 per cent during the 12th plan. Moreover, Bharat Heavy Electricals Limited, still the largest domestic supplier of power equipment, is expected to boost production from 15,000 Mw to 20,000 Mw by the end of FY12. Domestic production of power equipment will be augmented as output from a spate of joint ventures between Indian and foreign firms (L&T-Mitsubishi, BGR-Hitachi and Bharat Forge-Alstom) comes on stream within a year. These developments have engendered a well-founded optimism that India’s power deficit will decline to 3.8 per cent by 2013.

These successes, however noteworthy, should not be allowed to camouflage the serious structural problems that afflict the sector as a whole, ranging from the problems of land acquisition to the establishment of secure fuel linkages. Coal India’s inability to meet commitments has been compounded by regulations that restrict access to coal reserves in “no-go” areas and the belated realisation that many private sector players allotted mining rights do not have the required experience. While larger players in the power space have been aggressively acquiring assets abroad, these are second-best solutions, given the high transaction costs involved. Distribution continues to be the sector’s biggest bugbear! The stubborn resistance of state electricity boards (SEBs) to liberalise T&D segments has precluded any secondary reform. As a result, the collective losses of SEBs during FY11 were of the order of Rs 78,000 crore (approximately 1 per cent of GDP). An analysis of these losses identifies the following reasons: unacceptably high aggregate technical and commercial losses (28 per cent against a target of 15 per cent), inability to raise tariffs and cross-subsidies that are not compensated by the respective state governments. The upsurge in generation capacity risks being seriously undermined by bottlenecks in distribution. While the generation segment will continue to be the power sector’s star performer, especially as both private- and public-sector players internalise the experience gained from project execution in the 11th plan, policy reform in the distribution segment, including getting all consumers to pay, will remain a major challenge, limiting not just future investment but also the ability to derive the full benefits of existing investment in power.

NTPC arm gets cross-border power trade mandate

The transmission lines between India and Bangladesh are being set up under a pact signed between PowerGrid and the Bangladesh Power Development Board in July last year.

NTPC Ltd's trading arm has been given the mandate to carry out cross border electricity trade between India and Bangladesh.

NTPC Vidyut Vypar Nigam Ltd (NVVN), the state-owned power major's trading arm, will sign a power purchase agreement with the Bangladesh Power Development Board (BPDB) shortly, official sources said.

This will mark NTPC's entry into cross-country electricity trading, where the market leader in the country's power trading business, PTC India Ltd, has a head-start.

The transmission lines between India and Bangladesh are being set up under a pact signed between Power Grid Corporation of India Ltd and BPDB in July last year. The links are expected to be in place by early 2013 and are being executed at a cost of $192 million (around Rs 907 crore), with a capacity to wheel around 500 MW.

Once the links are in place, Bangladesh, which is facing acute power deficits, will be allocated 250 MW by the Indian Government. For procurement of additional power in excess of 250 MW by Bangladesh from the Indian electricity market, NVVN has been earmarked the nodal agency by the Indian side.

The arrangement will broadly be on the same lines as the mandate bagged by power trading major PTC India, which is the nodal agency for the purchase and sale of surplus power from Bhutan. PTC has power pacts with distribution utilities in India to sell the power offered from three hydro stations in the Himalayan kingdom.

The interconnection between India and Bangladesh is being established through a 500-MW HVDC (high voltage direct current) link between India's eastern region and the western grid of Bangladesh.

“Bangladesh is a power deficit country and it would initially import 250 MW from India through the proposed HVDC link and subsequently, based on the power supply position of the two countries, the quantum of power exchange will be bilaterally determined. The pricing would be done on a commercial basis under the bilateral agreement,” an official on the Indian team said.

The Indian portion of the link, scheduled to be completed by September 2012, includes an 85-km 400 kV line while the Bangladesh portion, which includes a 40-km link, is slated to be through by March 2013.

The Indian portion, entailing investments of Rs 169.86 crore, is to be executed by PGCIL and funded through domestic loans and Power Grid's internal resources.

The Bangladesh portion, entailing a cost of Rs 736.84 crore, will be executed by the Power Grid Company of Bangladesh Ltd under funding through ADB loan.

Coal shortages may hurt power sector: Fitch

Persisting coal supply issues are likely to hurt the country's power sector as well as weaken investor sentiment towards new power projects, according to rating agency Fitch.

The domestic power sector, which expects to have over 80,000 Mw capacity addition in the next five years, is heavily dependent on coal-based thermal power projects.

"India's power generation companies could be adversely affected by coal shortages, which are likely to persist over the short-to-medium term," Fitch Ratings said today.

Coal-based projects accounted for 54% of power capacity at the end of April and 66% of total electricity generated in the last fiscal.

"Amid uncertainties over coal supply, the investor sentiment seems to be weak, especially towards new power projects," Salil Garg, who is a Director in Fitch's energy and utilities team, told PTI.

He said that lower-than-expected increase in domestic coal production -- particularly due to delays in the development of captive coal blocks allocated to the power generators -- had added to the demand-supply gap.

Among others, Ultra Mega Power Projects (UMPPs) in Orissa and Chattisgarh have been delayed due to issues with captive mines, which fall in the Environment Ministry's 'no go' zones.

The Coal Ministry has projected a coal supply shortfall of up to 142 million metric tonne in FY12.

Fitch's comments come after a recent decision by the government to prioritise coal supplies to generators, that sell electricity through Power Purchase Agreements (PPAs). These players would be given priority than merchant generators or those entities that run on 30% imported coal.

"Actual drawal of coal will be subject to 85% of power being tied up through long-term PPA with discoms through tariff-based competitive bidding [except for PSU projects were PPAs were signed by January 5, 2011]," as per the latest memorandum from the Power Ministry.

The move aims to ensure that the cost of power (distributed) is low and prices are determined through competitive bidding process, a Power Ministry official said.

This criteria has been added for getting coal linkage for power projects in the 12th plan.

The government has set up a 12-member Group of Ministers (GoM) to sort out tussles between ministries on the environmental norms affecting projects, especially in the coal sector.

Coal India, NTPC in war of words over coal supply, utilisation

Coal Ministry's intervention sought to settle issue

At a time when the power sector is vocal about the “shortage” of domestic coal, Coal India Ltd (CIL) has accused the power major NTPC of lifting less than half the promised quantities for its Farakka and Kahalgaon power stations in the East, leading to accretion of pit-head stock. Countering the charge, NTPC has accused CIL of supplying a fraction of the requirement, leading to low capacity utilisation at Kahalgaon.

Talking to Business Line, Mr Rakesh Sinha, Chairman of Eastern Coalfields Ltd (ECL) — a wholly owned subsidiary of CIL — said the company developed 2.5 million tonnes inventory of coal at its Rajmahal mines in Bihar due to low offtake by NTPC for its Farakka (2,100 MW) and Kahalgaon (2,340 MW) power stations.

“We have sought Coal Ministry's intervention to resolve issues with NTPC,” Mr Sinha said.

According to ECL, NTPC's merry-go-round (MGR) — connecting Rajmahal with Farakka (West Bengal) and Kahalgaon (Bihar) — can carry 13 rakes of coal a day. To keep pace with projected rise in offtake from the power major, ECL has invested in a wharf siding (a raised platform where coal is stacked for loading in wagons using pay-loaders) capable to load an additional 3 rakes a day.

Delay in unloading

“As against projected offtake of 16 rakes (each carrying approximately 3,000 tonnes of coal), NTPC is lifting hardly six-seven rakes a day,” Mr Sinha alleged. According to him, the problem cropped up due to “delay in installing wagon tipplers — for mechanical unloading — at NTPC plant end.”

To add to the problem, there were “several incidents of strikes” by workers involved in unloading of coal at NTPC facilities, the ECL Chairman said. “The delay in unloading of coal, especially at Kahalgaon, has severely impacted the offtake,” he added.

NTPC denial

NTPC, however, described ECL's allegations as “absurd”. In a mailed response, the company said the 2,340 MW Kahalgaon power station is generating merely 1,300 MW (55 per cent of capacity) “due to shortage of coal” as ECL failed to load and dispatch the requisite coal.

“The generation at Kahalgaon is suffering due to lack of coal. For June, an average seven rakes were received by NTPC from Rajmahal through MGR, whereas we received only six rakes during June 13-18 and merely two rakes on June 19,” a company spokesperson said.

According to the company, Kahalgaon requires 43,000 tonnes of coal a day to run at full capacity, while Farakka needs 30,000 tonnes daily to generate 1,600 MW out of a total capacity of 2,100 MW. Farakka is reportedly witnessing low demand for electricity in the region.

PM to review coal, power projects on July 1

Concerned over delays in execution of projects due to inter-ministerial differences, Prime Minister Manmohan Singh has called a high-level meeting to resolve issues like coal shortages and environment clearances with the respective ministers on July 1.

"The meeting will be held on July 1 to assess the progress made in the first four years of the current Plan and resolve the differences among the ministries," a senior Power Ministry official said.

This will include the power capacity addition targets-- achieved between 2007-08 and 2010-11 -- and projects stranded due to coal shortages and environment clearance, he said.

The meeting, to be chaired by Singh, will be attended by Finance Minister Pranab Mukherjee, Power Minister Sushil Kumar Shinde, Coal Minister Sriprakash Jaiswal, Steel Minister Beni Prasad Verma, Environment Minister Jairam Ramesh and Planning Commission Deputy Chairman Montek Singh Ahluwalia.

The meeting would make an assessment on the actual requirements of Power, Coal and other ministries for the terminal year (2011-12) of the current Plan Period and next Five-Year Plan (2012-17).

According to an estimate made by the Planning Commission, the demand-supply gap for coal in the ongoing year, which is also the terminal year of current Five-Year Plan, has been assessed at 142 million tonnes (MT) with domestic availability of only 554 MT against the requirement of 696 MT.

Coal ministry is of the view that 'no-go' policy of Environment ministry, under which mining in 203 coal blocks is not allowed, has been the major reason for the increase in coal shortages.

According to the ministry, the 'no go' mining issue has affected a potential production of 660 MT of coal per annum.

Last month, Coal Minister Sriprakash Jaiswal had said that the Prime Minister Manmohan Singh was concerned over the economic growth being hampered by the bottlenecks in the coal production.

At the same time, the Prime Minister was also keen that the issues raised by the Ministry of Environment and Forest (MoEF) should also be resolved, he said.

The Group of Ministers, headed by Finance Minister Pranab Mukherjee is already on the job to find a common ground between the MoEF on the one hand and coal, power and steel ministries on the other.

According to the Planning Commission, the country's coal shortage may soar to 200 MT by 2017 against 142 MT by 2012. The demand for dry fossil fuel by 2016-17 has been projected at 1,000 MT against a production of 800 MT.

Against this backdrop, the Power Ministry has projected that more than 40,000 MW new power generation capacity will be left stranded due to the shortage of coal in the next Plan as most of the newly planned power plants are to be run on coal.

Power Ministry has set an ambitious target of adding 1,00,000 MW generation capacity in the next Plan Period (2012-17) .

The high-level meeting will also review the performance of the Power Ministry, which is already struggling to meet the capacity addition targets of current plan.

During the mid-term review of the current plan (2007-12), the Planning Commission had scaled down the target to 62,000 MW against the originally envisaged target of 78,700 MW.

However, going by the trends, the ministry is unlikely to achieve even the revised targets and the actual new power capacity addition is expected to be about 51,000 MW during the current plan, a source said.