Captive coal block owners may get to sell surplus to Coal India

The prime minister is set to consider a proposal to allow owners of captive coal blocks to sell excess production to state-run Coal India, a move being opposed by the coal ministry.

As per the proposal mooted by the Planning Commission, three quarters of the revenue from sale of surplus coal to Coal India at notified prices would go to the exchequer while the rest would be incentive for the mining company.

The proposal will be taken up by Prime Minister Manmohan Singh on Monday when he meets coal and power secretaries along with top Commission officials to take stock of the sectors and discuss issues related to critical coal supply to power projects, future of imported coal-based projects and the financial health of distribution companies.

A senior Planning Commission official said the move could, to an extent, help tackle the problem of widening coal deficit and reduce dependence on coal imports. Coal accounts for over 50% of the country's power generation capacity. Its deficit in the country is likely to grow to 137 million tonne by this the end of the fiscal.

Of 89 thermal projects in the country, 32 have coal to run for less than four days, as against the normative requirement of 22 days. Another 20 plants have just seven days' stock.

Mining companies say the move could bring much-needed reforms in the coal and power sectors. The coal ministry, however, is against the proposal.

A senior coal ministry official said commercial mining by captive block owners would be illegal as there is no provision for it in the Coal Mines Nationalisation Act of 1973. The ministry has also warned that such a move could lead to captive coal block owners diverting coal meant for end-use projects to coal companies.

Of the 193 blocks allocated so far to cement, power and steel companies, only 28 have actually started production. "We are afraid that companies might stop their end use projects and make money by selling to coal to coal companies.

Also, the blocks were given to the companies free of charge and they should not be allowed to make money on national asset," the official said.

"Blocks have reserves matching with their end use projects. If part of reserves are diverted for other purposes, block holders would again turn to government for more coal," he said.

An executive of private power producer Adani Power said implementation of the proposal could help companies save foreign exchange spent on importing coal. A senior executive of Lanco said, "Increasing coal production in the country should be the main concern. Ways to do it can be deliberated upon."

Earlier, a committee headed by Ashok Chawla on natural resources had also recommended allowing surplus coal from captive mines to be competitively sold to registered end users via a platform created by Coal India.

The coal ministry is also in the process of drafting a policy on use of surplus coal and coal rejects by captive coal block owners.

EGoM meet on UMPP bidding norms in Orissa on December 5

The EGoM is likely to meet on December 5 and approve certain changes in the bidding norms for the upcoming UMPP in Orissa and Chhattisgarh.

"The meeting is on December 5, they are likely to discuss the changes to be made in the bidding documents for Orissa and Chhattisgarh UMPPs," a power ministry official said. The new bidding norms are likely to accommodate fuel availability risk, price risk due to change in prices of the fuel in coal-exporting countries, etc.

MoEF defers nod to Hinduja coal power project in AP

Hinduja National Power Corporation (HNPC), which has revived its 1,040 mw coal-fired power project near Visakhapatnam in Andhra Pradesh after a gap of more than a decade, has suffered a setback with the Ministry of Environment and Forests (MoEF) deciding to defer the coastal regulation zone (CRZ) approvals to the project following alleged violations by the company.

This makes Hindujas the third independent power producer in Andhra Pradesh to hit snags after the ministry acting against the power projects of Nagarjuna Construction Company (NCC) and East Coast Energy, owing to violent agitations by the local farmers and fishermen.

The expert appraisal committee (EAC) of the environment ministry dealing with CRZ matters, at its meeting held from September 21-23, has taken on record the complaints that the project is proposed in mud flats/CRZ area. The committee preferred a study into the possible adverse impact to the marine environment, arising out of industrial discharges, if any, from the project.

The environment clearance (EC) to this project was issued in 1996. But the EAC has recommended formation of a sub-committee that can look into the alleged adverse environmental impacts being alleged by the social activists and submit a report. "In view of the foregoing observations, the committee (EAC) deferred the proposal (on CRZ clearances).

The proposal shall be reconsidered after the above observations are addressed and submitted," said EAC in its minutes submitted to the MoEF.

Downplaying the impact of this deferment on the project, HNPC managing director Ashok Puri said the CRZ and environment clearances for the main project were already in place and the construction work was progressing. "The CRZ clearances now being sought are for a seawater intake-outfall system and rail corridor for coal transportation. The sub-committee of EAC has completed its study and submitted recommendations.

We are changing our designs by incorporating these recommendations and we expect the EAC to consider our request for CRZ clearances at its meeting scheduled for December," he told ET.

The 1,040-mw project, originally proposed by the Hinduja Group in 1991, was one of the eight power projects that was offered a counter-guarantee by the central government in 1992. However, the project in a joint venture first with Edison Mission Energy and later with the UK's National Power never got off the ground, owing to certain issues pertaining to land and power tariff.

The project also had disputes pertaining to fuel supply arrangement with the public sector giant Coal India. Subsequently, the counter guarantees lapsed.

Though the counter guarantees were revived during the NDA regime in 1999, the Congress-led government in AP during 2004 scrapped the power purchase agreement (PPA) with the company, citing high cost of power. "The PPA was not extended beyond September 2001 and the state government is currently taking a comprehensive view on a fresh PPA with the company," said Ajay Jain, CMD of AP Transmission Corporation.

This is the first power project of the London-based Hinduja, which has ambitious plans to create a power generation capacity of over 10,000 mw over the next 10 years at an expected investment of $10 billion across India. Alleging several violations by the company, the social activists were insisting on fresh public hearings and cumulative environmental impact assessment on the project.

EAS Sarma, former Union power secretary, said: "Hinduja's project was never subject to any meaningful public hearing and public consultation process. We have requested MoEF to order a public hearing to be conducted now on the basis of a cumulative environmental impact assessment (EIA) study as the ground conditions have vastly changed. Moreover, Hinduja has purchased a significant extent of additional land, over and above the government/ Wakf land already obtained from the government. A detailed EIA will therefore be mandatory."

Pointing out that the EC granted to Hinduja's project lapsed in 2001 as the company failed to take up work at the site within the statutory period of validity, Sarma said, adding that the ministry erroneously validated the lapsed EC based on a misleading report, which stated that the construction had started before 2001.

Huge losses due to under-recoveries: Discoms

Reliance Infrastructure-backed discoms, which were served notices by Delhi's power regulator today, said they were incuring huge loses owing to under- recoveries of over Rs 6,000 crore.

"The current financial situation of BSES is owing to lack of cost-reflective tariff for last several years. This has lead to huge under-recoveries of more than Rs. 6000 crores," a BSES spokesman said.

He said this under-recoveries has also been recognized by Delhi Electricity Regulatory Commission in its latest tariff order.

"The current tariff, even after the increase, doesn't even cover the cost of power purchase. There is still a shortfall of around Rs 2 per unit. Power is bought from PSUs like NTPC, NHPC and Delhi generating stations," the statement said.

The BSES will make a detailed submission to DERC in response to the notice.

BRPL and BYPL were issued notices following a communication from Delhi government which asked the regulator to take urgent steps to ensure uninterrupted power supply in Delhi as the two discoms owe around Rs 3,000 crore to a number of generation and transmission companies.

The companies have been told to file replies by December 2.

DERC Secretary Jayashree Raghuraman said a number of regulatory notices have been issued by various generation and transmission companies stating that power supply to the two discoms could be curtailed unless large outstanding dues are cleared by them.

CERC sets up fund to promote renewable energy projects

The Central Electricity Regulatory Commission (CERC) has set up a renewable energy fund (REF) to promote projects in India. This fund is aimed at compensating states if they fail to meet the target given under their schedule of renewable energy (RE) projects. All RE projects are required to provide a schedule of generation to CERC from 2012.

Officials explained REF would bear charges imposed on states hosting RE projects that fail to comply with their supply commitments.At present, only wind energy projects without sale arrangements with states are required to give declarations forecasting their generation to state load despatch centres. CERC allows 30 per cent deviation in the supply commitments, beyond which penalties are levied or incentives offered. The Electricity Act, 2003, and the National Action Plan on Climate Change (NAPCC) provide a roadmap for increasing the share of RE in total generation capacity. Under this plan, every state has to purchase five per cent of total power requirement from renewable resources like wind, solar or water.

The power purchase obligation is fulfilled by trading of RE receipts, which is a tradable receipt representing a value of one megawatt hour (MwH) of power injected into the grid through renewable resources. From 532 RE certificates issued in March, total issuances till date have gone up to 352,0260. Under the proposed fund, deviation beyond 30 per cent is proposed to be shared among all state distribution companies in a ratio of their peak demand met in the previous month. The states, in turn, would be compensated for these charges out of the renewable regulatory fund. Explaining this, an official said if a state proposed to provide 50 Mw of RE power but could supply only 40 Mw, then the state in which the project is located have to draw 10 Mw power from central pool and supply. This is termed as unscheduled interchange and is charged at a higher rate.

This extra cost will be borne by all state distribution companies, which would be compensated by REF. The logic is that some states like Gujarat, Rajasthan or Tamil Nadu are preferred to set up RE projects due to abundance of energy resources like wind or water or sunlight. Thus, the contribution of that particular state in the central pool becomes higher, whether or not it is prepared to commit such supply.

“In case there is short supply, it has to make good the shortfall by drawing power from the central pool. Since the state is naturally endowed with such a resource, it is unfair to expect that it compensates for individual projects’ shortfall. Therefore, such a compensation plan is worked out to promote power projects in states, where there is natural endowment of resources,” they added.

This facility for REF will be applicable for wind energy farms with collective capacity of 10 Mw and above, at connection points of 33 Kv and above. This is irrespective of whether the project is connected to the transmission or distribution system of the state or to the inter-state transmission system, and who have not signed any power purchase agreement with states or union territories. Similarly, for solar generating plants, the cutoff for REF eligibility will be a capacity of 5 Mw.

Power Finance Corp sets up monitoring cell to keep watch on loan-book

In the wake up difficulties being faced by the energy sector, state-run Power Finance Corp (PFC) has set up a project monitoring cell to keep an eye on the stressed loan portfolio, a top official said today.

"Though the idea of monitoring cell was conceived in 2009, we have recently set up a separate cell for this to better check the progress of the projects to which we have lent money," the official told PTI here.

Monitoring of the projects would be in a broader sense to see the debt servicing capacity of borrowers, he said. "We will do monitoring in financial terms, which will be different from a typical project monitoring unit that emphasises on execution. We will keep an eye on the critical milestones set by the company and see whether they are met or not."

Currently, financial institutions are worried about the advances extended to electricity boards of Tamil Nadu, UP, Rajasthan, Bihar, Haryana, Madhya Pradesh and Punjab, which according to rating agency Crisil, are the most vulnerable.

As per Crisil, losses of discoms rose 24 per cent to Rs 27,500 crore between 2006-07 and 2009-10, which could have risen to Rs 35,000-Rs 40,000 crore last fiscal, mainly because of problems in utilities, which are not free to revise the already low tariffs. Also, many green-field projects are stuck due to land issues and coal linkage problems.

"Many of the green-field projects are stuck due to coal linkage and land acquisition related issues. Though we don't have any control over these issues, we will try to minimise the risk by diversifying our portfolio," he said.

PFC posted net profit of Rs 419 crore in the second quarter, down 40 per cent from 700.8 crore in the year-ago quarter on the back of forex losses, despite 24 per cent rise in income to Rs 3,142 crore from Rs 2,531 crore.

Gross NPA rose 0.22 per cent in the first half of this fiscal from 0.02 per cent in the same period last year. Net NPA rose to 0.19 per cent during the period from 0.01 per cent a year ago.

'On a $7-bn order book & $5-bn top line, $2 billion debt is no big deal'

The stock price of wind power equipment maker Suzlon Energy fell almost 40 per cent over a week to hit a new low this Monday. There has been a buzz in the market that the company’s promoters have been selling stake to address margin calls to bankers. The company’s chairman and managing director, Tulsi Tanti, discusses these issues with Katya B Naidu, Vishal Chhabria & Arijit Barman. Edited excerpts:

Suzlon promoters have sold as much as two per cent of their promoter stake in the open market recently. What was the reason behind this move?

We have an end-to-end business model, we have to invest on land bank, power evacuation and infrastructure like sub-stations and lines. The promoters are using the stake sale money to set-up this infrastructure, exclusively for Suzlon. We are getting many orders, if we do not build this, we will be unable to grow.We have targeted 30-40 per cent growth in the next financial year.

But the market perception is the sale was the due to the pledges shares coming under stress due to the fall in share price… There seems to be a crisis of confidence?

The market is going on perception rather than on facts. We have not borrowed money against our pledged shares. If we had done that, we would have to pay margin money on mark to mark losses. We have pledged 80 per cent of our stock as a secondary security, which is not linked to the stock price. That's because, last financial year when we re-financed our debt, we were not making profits. Unfortunately, the market reaction was negative because of overall sentiment of the economy and the state of the power sector.

There is a buzz that lenders have stopped giving additional money to the company, So is there a cash flow problem?

That is again a misconception. Last month, we had a meeting with our bankers, and they approved an increase in working capital loans. They have done this on the back of the fact that we have been posting profits in the last three quarters, and our $7 billion (Rs 32,454 crore) orderbook. Banks understand that this volume can generate more cash. When we have a $7 billion orderbook and $5 billion topline, $2 billion in debt is not a big deal.

Your debt of around over Rs 9,000 crore is still huge concern How you plan to turnaround the company, and repay this debt?

Around Rs 6000 crore of it is working capital debt, and Rs 4000 crore is long-term debt, which is to be re-paid over 5-7 years. That means the total is $2 billion. In the next 12 months, our repayment obligation is $750 million. Out of that we have to repay $550 million in Foreign Currency Convertible Bonds and the balance is debt.

Now where will that come from? We have raised around $200 million from Hansen sale. Next six months we will generate $200 million in cash. We are also recovering $200 million in receivables from a single customer, in the next six months. So that will reduce some working capital requirements. Added to that, we will generate $200 million in cash in the next six months. On the top of that, we are selling a non-core asset, a wind farm, which is will bring in around $50 million. That will take care of the debt. Today, the net debt to equity ratio is 1.6 times, which will go down to 1.4 by the end of the year. By March 2013, it will be be at 1:1, and that too without raising any equity.

But with large part of your debt is rupee debt. Isn’t the interest burden now getting excessive? Last few quarters, the interest costs have gone up.

As I told you, large part of the rupee debt is long term. I do not have immediate repayment obligation on them. Last quarter we have seen interest cost corrections. It was debited in the last quarter. Because of that, temporarily interest cost goes up. In the current quarter, it will go down.
Are you seeing any improvement in prices of wind power equipment?

In the last six months in the Indian market, there is has been a 4-5 per cent improvement in price realisation. One of the reasons is reduction in commodity prices, mainly steel. We also got our energy efficient 9X product into the market. The customer will get that benefit but we should get at least five per cent benefit. Our supply chain is in India, so we are not impacted by imports. But we are exporting to the US and Brazil, where I am getting a 10-15 per cent better price realisations better because of currency depreciation in India.

That will impact your margins too?

In the last six months, we have seen major corrections in the gross profit margin. We have brought down material costs through value engineering, technology and aggressive sourcing. We have introduced new product which gives better realisations so we have enhanced the delta. With lower volume now we can breakeven. Our breakeven level is 3,000 mw. Till then, we do not generate cash. After 3,000 Mw a year with every Mw, we generate gets Rs 2 crore cash profit. If the price goes up, that increases as well. We have reduced fixed cost as well. We brought down the breakeven levels. That is giving very good efficiency level. By just 1,000 Mw addition, we can generate 2,000 core. This trend can sustain for two years.

How do you think the orderbook will grow in India? Is there good intake of orders?

A lot of global financial investors are interested in investing in Indian wind assets. Goldman Sachs already stated its plans. There are four other large international funds, which are in discussions with us to invest in the sector, and hence are likely to become our customers. Instead of putting money in equity, these funds are going for hardcore assets, which will give them annuity income for the next 20 years. They are looking at Rupee assets and they have a currency advantage, and power price will only go up. Its a good idea to put money in the renewable power sector, than in the stock markets.

The conventional power sector in India is facing issues with regards to supply of fuels like coal and gas. Will that help the renewable energy sector?

The economics of fuel-based power has become extremely vulnerable and expensive. Currency has also gone up, making energy more expensive. Wind power has opportunities in this environment. India added 2,200 megawatts of wind energy last year. This year, that grew to 3,000 Mw, and next year it will be at minimum of 4,000 Mw. We will maintain our 50 per cent market share in that.

Carbon credit prices are going down. Will that be a dampner for investors into the space?

Carbon credit market will not affect our business because whenever regulator fixes tariffs, it is based on interest costs, available revenues and capital expenditure. In India, investors in the wind power should get at least 40 per cent equity return. If carbon credit earnings are out, price will be corrected. Recently, CERC raised the tariffs for wind power.

How will the international wind market grow in the US and Europe?

Wind power market in the US is very large and will continue to be for the next two decades. In 2012, the US is expected to set-up wind power of around 10,000 to 12,000 megawatts. As the wind power policy is expiring by then, there are a lot of projects in the pipeline which want to encash the benefits. Even if there is no incentive after the policy expires (in 2012), the market in the US will continue at 6,000 megawatts. Wind assets are becoming competitive, especially in larger sizes.

There is debt crisis in the Eurozone. Do you expect orders from that market?

The debt crisis it not affecting my customers who are large utility companies. They have a daily cash revenue on their books and wind assets are a part of their strategic long-term plan. Wind power has become cheaper as there is no fuel escalation like in other fuels. Wind power is no more tax, depreciation or subsidy driven. It has become cost competitive, and we are very bullish.

Suzlon has talked about acquiring small technology companies. Have you found any such targets?

We are looking at boutique engineering groups, which will help us with next generation technology. We are working on it but there has been no progress on that.

Essar Energy synchronises first unit of Salaya-I power project with grid

Essar Energy plc, the India-focused integrated energy company, on Thursday announced that the first of two 600 megawatt (MW) units at its Salaya-I power generation project in Jamnagar district of Gujarat has been synchronised with the transmission grid.

The coal-fired Salaya-I project, with a total of 1,200 MW capacity, is one of three power plants due to be fully commissioned by March 2012.

The others are the 1,200 MW Mahan-I project and the 510 MW Vadinar P2 project, the company said in a statement here.

Together, these three projects will add 2,910 MW to the existing capacity of 1,600 MW and take Essar Energy's total installed capacity to 4,510 MW.

A further seven power projects are under construction which will take the total to 9,670 MW by the first quarter of 2014, Mr Naresh Nayyar, CEO, Essar Energy, said.

"The synchronisation of unit 1 at Salaya, together with the others due in the coming months, will almost triple our power generation capacity. The three generation projects, now nearing completion, will transform cash flows and profitability within our power business,” he added.

Work is in progress to prepare unit 2 at Salaya-I, also of 600 MW capacity, for synchronisation with the grid.

Power cuts increase, but NTPC struggles to sell to utilities

It's a paradox of sorts that at a time when most States are resorting to varying levels of load shedding, power major NTPC Ltd is increasingly finding it difficult to sell electricity to distribution utilities.

The country's largest power utility, and one of the most cost-efficient in terms of delivered electricity tariffs, has seen an estimated 10 billion units of electricity going unsold in the first seven months of this fiscal.

Last year too, around 13 billion units generated by the state-owned utility went unsold as distribution utilities failed to draw power according to the schedule declared by them.

Though the electricity going unsold is just a fraction of NTPC's total generation (around 221 billion units last fiscal), the worrying aspect is the growing tendency among distribution utilities to go in for load shedding rather than shell out a higher amount of money for buying expensive power from projects using liquid fuel or those where higher amounts of imported coal blending aretaking place.

While liquid fuel generation is evidently expensive, blending of imported coal too jacks up the electricity tariffs as such coal is relatively more expensive than domestic coal.

Tariff revision

Since fuel costs are pass-through for nearly all of NTPC's projects, as the blending ratio increases, the financial hit on distribution utilities and State Electricity Boards (SEBs) is higher, unless they can pass it on to the consumers.

As most SEBs have failed to revise tariffs to the extent required for passing on the actual costs faced by them, they are struggling to cope with the cost increases being passed on to them by the generators. The trend, warn experts, could only get worse , as the level of blending of imported coal is only scheduled to increase as domestic coal production has failed to keep pace with demand.

As a thumb rule, around 75 per cent of cost of power for a thermal station is on account of coal. Back-of-the-envelope calculations show that against a projected requirement of 742 million tonnes of thermal coal for fuelling coal-fired stations by the end of the Twelfth Plan, only 527 million tonnes of domestic coal are likely to be available even in the best-case scenario. This translates into a shortfall of 215 million tonnes or 29 per cent of the country's total requirement projected by 2017.

Cost implications

To get an idea of the cost implications of imported coal, NTPC's Farakka station, where the power generator is currently blending 20 per cent imported coal — the highest in all its stations, has already seen just variable component surge to Rs 2.79 per unit of electricity produced in 2010-11.

This has pushed up tariffs to well over Rs 3 per unit. Farakka's variable cost is much higher than the NTPC's average tariff of Rs 2.63 across all its 28 stations during the financial year.

NTPC is currently blending imported coal ranging between 7 and 20 per cent across its stations. NTPC's average imported coal blending during 2010-11 was close to 8 per cent in comparison to about 6.5 per cent in the previous year. This could be much higher this year, as the domestic coal shortages are increasing by the day.

Ministry proposes 5% tariff on Chinese equipment

Proposal circulated to ministries of finance, commerce and heavy industries, and Plan panel on Wednesday

To discourage the purchase of cheap power equipment from China and to provide a level playing field to domestic manufacturers, the power ministry has proposed a 5% tariff on such imports from the neighbour.

The plan may face flak from key ministries.

The proposal, made in a draft note, was circulated to the ministries of finance, commerce and heavy industries, and the Planning Commission for comments on Wednesday.

“It is not a good proposal,” said a commerce ministry official. “They are going back to what the committee of secretaries (CoS) said last July... We are not agreeing to the structure of their proposal.”

An official in the department of heavy industries, too, said the draft note favours the CoS’ recommendations and not the suggestions of the Arun Maira committee. Heavy industries minister Praful Patel earlier this month said the ministry supported “the recommendations of the Maira committee”.

Planning Commission member Arun Maira had recommended a 10% customs duty and a 4% special additional duty on power generation equipment imported from China to strike a balance between protecting local manufacturers and the need to import equipment to boost power production.

The CoS recommended a 5% import duty on power equipment imports from China apart from a 10% countervailing duty and a 4% special additional duty. But under this plan, importers would have to pay only a 9% duty in most cases as the countervailing duty (CVD) would not be applicable.

“CVD is to counter excise duty on power equipment. But as minimal excise duty is imposed on power equipment, hence, this virtually means CVD is not applicable on such imports,” the heavy industries ministry official said, adding that the government plans to implement the CoS’ proposal before the Union budget for the next fiscal year.

“The power ministry in the draft has also said that it will be applicable from the day the cabinet passes the proposal,” said the official. “The draft should go to the cabinet in a month’s time.”

Another heavy industries ministry official said the ministry broadly agrees with the draft note, but is yet to discuss it in detail. A power ministry official said the proposal is not meant for orders already placed. “One can’t have a change in policy with retrospective effect, but only prospectively,” he said on condition of anonymity.

Domestic firms including Bharat Heavy Electricals Ltd and Larsen and Toubro Ltd have been lobbying with the government to limit imports of cheap equipment from China. Heavy industries minister Patel, after a meeting on 3 November with representatives of various ministries and these companies to discuss the matter, said, “Everybody agreed that there is a disadvantage to local manufacturers. We are proposing its (custom levies) roll-out in 2012.”

At present, a 5% duty is levied on equipment imported for power projects with capacities less than 1,000 megawatts (MW). Equipment imports under the mega power policy for thermal projects of 1,000MW and above attract zero duty.

The power ministry was not in favour of such a move until after the start of the 12th Five-Year Plan period (2012-17).

The CoS last year agreed to impose the tariffs, but could not get a final clearance from the government.

On 8 November, commerce secretary Rahul Khullar said a compromise formula had to be worked out as there were differences among departments on the issue.

Sambitosh Mohapatra, executive director, PricewaterhouseCoopers, said the government has to strike a balance between its objective of achieving 75,000-100,000MW power generation capacity in the 12th Plan and the concerns of domestic manufacturers. “The government has to look at its larger objective of power generation capacity,” he said. “While it beefs up the domestic manufacturing capacity, it still has to depend on imports to meet the 12th Plan target. So the increase in import duty can be done in a phased manner.”

Power utilities place orders overseas largely because of the inability of local manufacturers to meet growing demand.

Chinese imports are relatively cheaper because equipment makers from that country benefit from low interest rates and an undervalued currency. Undervaluing the currency makes exports cheaper and increases the demand of products.

India’s move to curb Chinese imports comes at a time when the two countries have been discussing ways to double bilateral trade to $100 billion by 2015 and to plug a yawning trade gap in China’s favour. Indian exports to China were valued at $19.6 billion in 2010-11 and imports from that country $43.5 billion.

Power companies fail to lift e-auctioned coal

50 lakh tonnes of coal offered by CIL in October remains unused.

A recent and shocking development in the Indian coal sector has brought planners and bureaucrats face-to-face with the stark policy conundrum afflicting the sector. It also brought to the fore the criticality of coal as an input for key infrastructure industries in the power, steel, sponge iron, cement and fertiliser sectors.

It all began last week when cabinet secretary Ajit Kumar Seth was chairing a high-level meeting on coal shortage. The huddle saw Coal India Ltd (CIL) revealing that power utilities failed to lift even a single tonne from the 50 lakh tonne of e-auction coal the state-owned miner offered it in October.

Such kind of a mute response from the power companies to the coal quantity specially earmarked for them on demand enabled CIL -- the world’s largest coal miner -- to emerge clean in the ongoing tussle with the power ministry over fuel shortage for power plants. The Kolkata-based company had offered the quantity in a one-of-its-kind experiment involving diversion of coal meant for spot sales to the power sector.

The ministry had accused the Maharatna of curtailing supply to power companies and selling coal on e-auction to fetch higher prices. E-auction had to be stopped for a few days to accommodate the diversion experiment which worked as a litmus test for the power sector’s offtake capacity.

“Just that power companies could not lift the offered coal proves that banning e-auction, as has been demanded, is not a solution,” a senior CIL official said on Thursday. “Coal India cannot be held responsible for the power sector’s woes on fuel crunch. We have enough coal to supply to power sector utilities, but they have failed to lift it,” he told Business Standard.

The primary reason for the subdued response by power utilities to e-auction coal is logistical difficulty. As a matter of policy, any coal quantity tied up at e-auction has to be lifted from mine heads, significantly increasing the buyer’s input cost. The cost of transporting coal through road is on an average at least five times higher than Indian Railways’ Rs 125-per-tonne-kilometer charges.

Besides, the quality of coal sold in the spot market is also a suspect, according to experts. “While e-auction coal was offered to us, we did not take part because of concerns on transportation and quality,” said a senior executive from NTPC Ltd, India’s largest power generator. The state-owned energy services provider requires over 160 million tonnes of coal by the end of this fiscal to run 36,000 Mw of its installed power capacity.

The Association of Power Producers said the e-auction offered only an ad-hoc window even as the power industry was looking for a long-term solution for coal shortage. “Also, the increased price of this coal owing to transport is not a pass through for private companies,” pointed out Ashok Khurana, director-general of the industry body. “Only when these two aspects are clear that the power industry will lift coal.”

For the record, the demand for coal in the country has grown at an annual rate exceeding 8.4 per cent over the past five years. The supply, on the other hand, has fallen grossly short of it, registering a dismal annual growth rate of 5.4 per cent during the same period. For the current financial year (2011-12), India’s coal demand is estimated at 696 mt, while a mere 554 mt is likely to be available. That leaves a gap of 142 mt -- to be met through imports.

More than 80 per cent of India’s annual 530 mt of coal production comes from CIL. The 1975-founded company sold around 10 per cent of its 431 mt production through e-auction last fiscal, while 18 per cent of its revenue came from the scheme. For, coal was sold at e-auction at a premium of a whopping 81 per cent over the notified price of Rs 900 per tonne. This compelled the buyers to opt for the costly e-auction coal, thanks to historic shortages.

Despite reporting flat production in 2010-11, the company denies any lag in output. another senior CIL official said it “isn’t the power ministry’s business” to question the company’s production. “They should only ask for supply. We are providing it,” he said. Further, “thanks to evacuation constraints, we have more than 50 mt stock at the moment. But this is prone to catching fire. Thus, increasing production beyond a point will only add to stocks.”

A majority of coal transport in the country occurs through the rail route. The coal ministry had identified two chief reasons for last month’s severe coal crunch: lack of adequate rail connectivity to major coalfields and unavailability of railway rakes. That had brought a third of the total 81 power stations with a capacity of 87,000 Mw on the brink of closure. Adding to the travails were heavy rainfall disrupting transportation and a simmering unrest in Telangana region that supplies coal in a big way.

While CIL requires 200 rakes for daily offtake, the availability is only less than 180. Of these, an average 127 rakes were used for despatch of the material to power utilities in October. The coal ministry has been trying to push rakes availability to 180 for the sector.

As for the planning commission, it has identified another major bottleneck in the movement of coal to end-users: the time taken by the Railways for building critical rail links. Four rail links were identified as critical for the evacuation of coal from CIL’s coalfields during the current Plan period. This included Tori-Shivpur rail link in North Karanpura (Jharkhand), Gopalpur-Jharsuguda (Orissa) in Ib Valley, Baroud-Bijuri in Mand-Raigadh (Chhattisgarh) and Sattupalli-Bhadrachalam link (Andhra Pradesh) in Singareni Collieries Company command area.

The commissioning of these lines was expected to enable movement of 130 mt of coal to end-users, much more than the current domestic shortage of 86 mt. However, none of the links has been commissioned so far. In fact, the Jharkhand government recently rejected forest clearance for the Tori-Shivpur link.

Fund crunch forces Bengal power utility to return coal block

The Union coal ministry has taken away East Damagoria block from West Bengal Power Development Corporation (WBPDCL) at a time when the company is struggling to source coal. A coal ministry official told FE that the de-allocation was made after the government of West Bengal expressed its inability to develop the block that was allotted to WBPDCL in February 2009.

WBPDCL managing director Krishna Gupta said it was the state government’s decision that the block should be surrendered. “The government of India allotted the block to the state government and the state government transferred it to WBPDCL. So the block was de-allocated as per decisions of the state and the Centre,” Gupta said.

Power department officials said the state didn’t encourage WBPDCL to develop the block since it required huge funds, which the state was unable to bear. WBPDCL was supposed to acquire more than 100 acre and vacate two villages in the Raniganj coalfield area for developing the East Damagoria or Kalyaneswari block. It was also supposed to divert a 132KV line to the coalfield area and also build a road from there to link it to NH2, but nothing has been done since February 2009.

WBPDCL officials said the block had a 30-million-tonne reserve of coking coal, which was not useful to the power company. The government has asked the coal ministry to allot another block in Raniganj area but there has been no development on that as of yet.

WBPDCL is suffering from acute shortage of coal and is maintaining a stock of one to two days only at present. Generally, stocks below of 15 days are termed as critical stock position.

To run in full capacity, WBPDCL requires 55,000 tonne of coal per day but it uses around 50,000- 51,000 tonne per day, officials said. But sourcing that quantity has become difficult these days since ECL has stopped supplies due to non-payment of R600 crore. Besides, the tender it floated in October for importing 3 million tonne of coal over a period of three years has not received any response.

So a captive coal block could have helped the company, but the it is not in a position to make any investment nor is the state government willing to help.

A finance department official said the government instead of surrendering the block could have transferred it to West Bengal State Mineral Development & Trading Agency, which by selling coking coal could have helped the government in getting additional revenue.

According to finance department estimates, the state run power sector would post a loss of R2,400 crore in 2011-2012 against a profit of R400 crore in 2010-2011.

Discoms sever supply deals as tariffs soar

Power cos meet only 1/3 of coal import targets in current fiscal

High power tariff is forcing distribution companies to surrender secure supply contracts, a domino effect triggered by the rising cost of imported coal and high fixed costs of power projects.

Delhi has surrendered power supply contracts for the next four to five months with six projects of state-run National Thermal power Corporation (NTPC) citing high tariff. According to sources in distribution utilities, tariff from NTPC's Jhajjar project in Haryana touched a high of Rs 13.3 a unit in May and Rs 12.4 a unit in September.

While Delhi power distributor BSES blames tariff rise for the surrender of contracts, an NTPC official said it is the utility's inability to purchase and trim down losses that has forced it to do so.

When asked for a comment, a spokesperson for BSES said, "We have not received any communication in this regard." Ashok Khurana, director-general of Association of Power Producers, said, "All projects post 2009 will face this problem. Rise in international prices of imported coal coupled with resource nationalism has increased the cost of power produced."

"Private players are unable to meet contractual commitments as they are locked in bid prices whereas cost-plus projects have an option of imputing this as variable costs. A solution, therefore, lies in revising contracts and consumer tariffs," he added.

Tariff for NTPC projects is determined on a cost-plus margin basis, which helps the company pass on the burden of fuel price increase to consumers, a facility not available to private companies that have won projects under competitive bidding.

NTPC is set to import 16 million tonne of coal this year, which will account for the 10% imported coal it blends with the domestic input. Blending imported coal, which currently costs about $120 a tonne in the international market, raises power tariff by 30-40 paise a unit.

The power producer had earlier expressed concern over states distribution companies reneging on their purchase commitments. "Surrendering of power by states is a problem, but not a major concern. We will sell the power elsewhere. We would still be paid for the fixed costs," the NTPC official said.

NTPC gets approval to exit ICVL consortium

The power ministry has approved NTPC Ltd’s proposed exit from International Coal Ventures Pvt. Ltd (ICVL), in a move that could hurt India’s efforts to acquire overseas coal assets.

ICVL was promoted by five state-owned firms two years ago to buy coal mines overseas. While Steel Authority of India Ltd (SAIL) and Coal India Ltd own 28% each of ICVL, NTPC, Rashtriya Ispat Nigam Ltd and NMDC Ltd own 14% each. The 14% share of India’s largest power generation utility in the consortium, which hasn’t managed to close a single purchase, is expected be split proportionately among the remaining partners.

The exit will end the acrimony among the partners that surfaced last year when then steel minister Virbhadra Singh had said that NTPC and Coal India could exit the consortium if they wished to.

ICVL was floated on the coal ministry’s initiative and has an initial equity capital of Rs.3,500 crore and authorized capital of Rs.10,000 crore.

An NTPC spokesperson confirmed that the exit is taking place and that the details will be worked out after “requisite due diligence”.

Coal India continues to be part of the consortium.

A top power ministry official, who spoke on the condition of anonymity, said earlier that it had informed the steel ministry “that NTPC would like to opt out”.

Mint reported on 21 September that ICVL seemed headed for a split with NTPC wanting to exit. NTPC subsequently made a presentation to its parent ministry elaborating on the reasons for this.

According to NTPC, while the power producer needs thermal coal to fuel its power projects back home, ICVL’s other stakeholders are largely interested in metallurgical coal reserves to feed their steel mills. And the thermal coal offered to it does not meet the utility’s technical requirements.

“Our controlling ministry has given its assent to our proposal. We have already received a letter in this regard. Now, only the process part is left. Our share will be proportionately acquired by the remaining partners,” said a senior NTPC executive aware of the development who didn’t want to be identified.

The exit could actually work to the benefit of NTPC, said an expert.

“For NTPC, the development may mean a focused approach in the pursuit of coal resources,” said Dipesh Dipu, director, consulting (mining), at Deloitte Touche Tohmatsu India Pvt. Ltd. “Chasing opportunities on its own and simultaneously being part of a consortium may have led to strategic ambiguity.”

Still, the breakup will pose a challenge to “the efforts of the government to create a sovereign fund like arrangement and create a unified acquisition resource pool in the form of ICVL,” he said.

NTPC’s decision comes at a time when the country is facing its worst coal shortage. India faces a shortage of both metallurgical and thermal coal.

A top ICVL executive who didn’t want to be identified said the company “had received a copy of the (power ministry’s) letter”. This person said the company would discuss what needs to be done with the power utility’s stake. While private Indian firms have been successful in securing coal resources overseas, government-owned entities such as ICVL and NTPC have not been able to do so. The split in ICVL only highlights the challenges involved, Dipu said.

“While government-owned firms have been in the race too it seems the compliance requirement (for) procedures and lack of tolerance to risk-taking has caused them to be slow. Alignment of individual corporate objectives may have been yet another reason for the same,” he added.

NTPC, which generates 8 megawatts (MW) of every 10MW it produces by burning coal, is looking to increase installed capacity from 34,854MW now to 75,000MW by 2017 and 128,000MW by 2032. It needs 160 million tonnes (mt) of coal in fiscal 2012, of which around 16 mt has to be imported. The utility has already placed orders for importing 12 mt of coal and placed a tender on Monday to import another 4 mt.

Govt plans to ban E&Y from power sector

Move follows CAG report on lapses in award of UMPPs; Power Finance Corp bars audit firm for three years

India’s power ministry is considering not giving any consulting assignments in the power sector to audit and consulting firm Ernst and Young (E&Y) after a report by the government’s auditor pointed to lapses in the award of so-called ultra mega power projects (UMPP), a process in which the firm was involved as a consultant.

Mint has reviewed a copy of the report which also said that state-owned Power Finance Corp. Ltd (PFC), the entity in charge of bidding out the projects, has already barred “the consultant” for three years starting July. The report doesn’t name the audit firm, but it was the only consultant helping PFC bid out the projects in question. An executive at PFC confirmed that the agency has indeed barred E&Y.

Mint’s Utpal Bhaskar says the power ministry is considering a ban on consultancy firm Ernst and Young from the power sector

The consulting firm denied that this was the case. In an email response, the company spokesperson said: “We are not aware of any Comptroller and Auditor General of India (CAG) report on the working of special purpose vehicles (SPVs) in PFC. There is no subsisting order of debarment against E&Y by any government authority or public sector undertaking.”

CAG’s latest report, a follow-up to its earlier one on the way PFC bid out the projects, is with the power ministry for comment. A top power ministry official, who spoke on condition of anonymity, claimed that inclement action against the consultant is imminent.

“We plan to ban E&Y across the sector,” added this person. The power ministry, this person said, is waiting for the opinion of the law ministry on the proposed ban.

It isn’t clear whether the ministry’s action was prompted by the decision of PFC, which reports to it, or the report of the government auditor. PFC decided to bar E&Y for three years and also withheld Rs. 51 lakh of fee (according to the CAG report).

“As part of our responsibility, we barred E&Y and asked the power ministry to take steps for the sector. What we could do for PFC, we have done,” said the PFC executive mentioned above, who did not want to be identified.

According to the executive, the role of E&Y came under the lens as early as 2007 at the time of disqualification of the consortium of Lanco Infratech Ltd and Globeleq Singapore Pte, after it was discovered that the two consortium partners had misrepresented details in their winning bid for the Sasan power project. E&Y, this person added, had not discovered these misrepresentations in time.

E&Y was the consultant appointed to help PFC award the Sasan, Mundra and Krishnapatnam UMPPs.

The government wants to set up 16 such projects, each of which will generate 4,000MW of power; four of these have been awarded—at Mundra in Gujarat to Tata Power Co. Ltd, and Sasan in Madhya Pradesh, Krishnapatnam in Andhra Pradesh and Tilaiya in Jharkhand to Reliance Power Ltd.

“When PFC was given this new role, the power ministry was aware that the agency didn’t have the expertise so a consultant was brought in. As E&Y didn’t give sound advice, action was taken (against it),” the PFC executive added.

CAG also censured the government for the way it dealt, in 2007, with the consortium, as reported by Mint on 16 November. “Instead of forfeiting the bid bond of Rs. 120 crore furnished by the bidder, a token penalty of Rs. 1 crore was levied on the bidder.” Following the disqualification of Lanco and Globeleq, the project was awarded to Reliance Power.

The report of the government’s auditor, which is a follow-up to an earlier review of the SPVs (companies set up for a specific purpose; in this case, the development of a power plant) of PFC, was very critical of the appointment of E&Y, especially in the manner in which a rival consulting firm, Icra Ltd, was rejected. “The spirit of competition was undermined in the appointment of bid process management consultant for two SPVs (Sasan Power Ltd and Coastal Gujarat Power Ltd) resulting in extra expenditure of Rs. 1.56 crore.”

It also added: “As Icra had met the requisite qualification criteria as notified in the bidding documents and was found technically qualified,” its rejection was “not convincing”.

An Icra spokesperson declined comment.

The power ministry started examining the bidding for the Sasan power project after India’s Central Vigilance Commission (CVC), a body that looks into the functioning of government departments and agencies, raised questions about the process.

Mint reported on 18 March 2008 about CVC’s examination of Lanco’s bid and its direction to the government “to review the role played by consultant (E&Y), various committees and the board of SPL”, referring to Sasan Power, the SPV created by PFC for the project.

An official at CAG, who is directly involved in the audit process, said on condition of anonymity: “The very basis of the award of the contract (to Lanco-Globeleq consortium) after the preliminary audit seems to be flawed. It appears that the private consultant has failed to fulfil its obligations.”

Solar power at Rs 5 a unit could be possible by 2015

Plummeting prices of polysilicon, a raw material used in solar modules, could make power from solar photovoltaic plants as cheap as Rs 5 a unit or less by 2015 against Rs 12 a unit estimated now.

Polysilicon, made out of refined sand, was selling at $475 a kg in March 2008. Today, it is selling at $33 a kg. The industry expects the price to fall further to $20 a kg, as global capacity doubles to five lakh tonnes by 2014.

Accordingly, solar module prices have also been falling. What used to be sold at $1.7 a watt a year ago (or Rs 8.5 crore a MW) is now at around $1 a watt (Rs 5 crore a MW). The downturn is expected to continue, as leading module manufacturers strive to improve efficiency.

For example, US module maker First Solar says its panel efficiency — a measure of how much of sun's energy falling on the panel is converted into electrical energy — is expected to rise to 13.5 per cent in 2014 from 11.7 per cent now. When that happens, First Solar will be able to produce panels for as low as 53 cents a watt (Rs 2.6 crore a MW).

India's Hind High Vacuum Pvt Ltd (HHV) holds out an even bigger promise. The Bangalore-based company makes machinery needed to produce modules. The machines sell at a million dollars a MW — if you want to put up a plant that can produce 50 MW worth of modules a year, you can buy it from HHV for $50 million.

The company's Chairman, Mr Prasanth Sakhamuri, says it is possible to make modules at 80 cents a watt today, at an assumed efficiency level of 7 per cent.

HHV is working on a schedule to raise efficiency and at the same time bring down material costs, so it should be possible to make modules with HHV equipment at 40 cents a watt, or Rs 2 crore a MW, by 2014. Hyderabad-based Surana Ventures Ltd says it can sell modules for 90 cents even today. The company's Managing Director, Mr Narender Surana, notes that India's skewed Customs duty structure favours imports. Imports of raw materials attract a duty of 24 per cent. Add a 5 per cent sales tax, the cost to a buyer contains an embedded tax of 29 per cent. “Even then, we can compete against the Chinese,” Mr Surana says.

Apart from photovoltaic modules, a solar power plant requires ‘balance of systems' — a range of necessaries such as mounting frames and trackers. These cost about Rs 3 crore for crystalline photovoltaic units and about Rs 5 crore for a thin film.

Panel to finalise compensation for scrapped NTPC project

The Government has cleared the setting up an inter-ministerial panel to finalise the financial compensation for NTPC Ltd against the investment incurred by the power major on a hydro project in Uttarakhand that was scrapped last year.

The Cabinet Committee on Economic Affairs approved the constitution of the empowered committee that would also deliberate on measures for maintaining fragile eco-geological balance at the discontinued project site of Loharinag Pala in Uttarkhand, the statement said.

The panel is to be headed by the Power Ministry and would include representatives from concerned ministries, an official statement said.

Power tariffs to rise 20% each year: CERC

Consumers should prepare for a 15-20% increase in power tariffs every year for the sustenance of state distribution utilities that are struggling to stay afloat due to escalating losses and mounting debt, the Central Electricity Regulatory Commission - the regulator for central government-owned utilities - said.

In an interview to ET, Pramod Deo, chairman of CERC, said the regulator's biggest concern is that investment in the sector should not stop. "Projects that have started construction should not be stopped. If there are issues, the central government needs to intervene to sort them out."

Deo said bold steps were needed to help distribution companies, which are crushed under a mountain of debt, low tariffs and reluctance of banks to lend to the unviable sector.

"If a state has not increased tariffs for the last 4-5 years, they cannot double them in one go. With 2014 likely to be the year of national elections, we are looking at a tariff revision of around 25-30% every year in states where the revision has not been done on a regular basis. They will have to maintain that kind of hike every year, only then would they be able to make good the losses and bridge the gap," he said.

"But not all states would have to increase tariffs at that rate. There are some states which have been increasing on a regular basis. On an average, we are looking at an increase of 15-20% in a year." India's state electricity distribution companies (discoms) reported an aggregate loss of around 40,000 crore in the year ended March, which is as high as the government's annual divestment target. The losses are estimated to soar to over 1.16 lakh crore by 2014.

In the year so far, around 12 states have increased power tariffs in the range of 9-34% to ease the burden of distribution companies. States like Rajasthan, Tamil Nadu, Madhya Pradesh, Uttar Pradesh and Bihar account for 70.6% of the power distribution losses in the country. Though states like Maharashtra have been revising tariffs regularly, other states like Tamil Nadu and Rajasthan have not revised them for seven years and four years, respectively.

Deo said state power regulators need to be independent of political pressure while considering revision of power tariffs. "The power regulators were set up in 1998 so that we have an independent authority to determine tariffs and it is taken out of the political purview.

Jindal Power gets green nod for 2,400 MW plant at Chhattisgarh

Jindal Steel and Power today said its subsidiary Jindal Power has got environmental clearance for construction of 2,400 MW expansion project at Tamnar, Chhattisgarh, from the state environment authority.

"The Chhattisgarh Environment Conservation Board ( CECB) has granted consent to establish the expansion project of 2400 MW today," the company said in a statement.

It added that the green clearance will end the long wait for the implementation of the project, which was earlier scheduled to come up March, 2012.

"Due to the unreasonable delays in getting environmental clearances (EC), the project has been delayed for more than one and a half years," the statement said.

Without giving any time line of beginning the construction, the statement further said, "finally the construction work will be started on 2400MW Power Plant of Jindal Power Limited, (JPL) at Tamnar, Chhattisgarh".

Jindal Power currently operates 1,000 MW at the site. Early this year, the company had got the green clearance from Ministry of Environment and Forest for the 2,400 MW project in two phases. The project was later cleared by Ministry of Coal, which has also approved coal linkage for half of the capacity (1,200 MW).

Financial closure of the project was achieved in March, 2010, the statement said, adding that Jindal Power has already placed orders for 4 units of 600 MW with BHEL in early 2009.

The main plant of the expansion project will be constructed within the 360 ha area, in which present 1,000 MW plant is running.

Wind power capacity likely to rise 5,000 MW in 12th plan

The government plans to add 5,000 MW of capacity in the 12th Five-Year Plan by encouraging retrofitting of older wind power farms, and tightening existing rules that let promoters enjoy tax breaks even without producing electricity.

Although the ministry of new and renewable energy resources has not finalised a policy yet, its draft paper aims to re-power, or install new turbines, at these old farms, most of which were set up in the 90s. This 5,000 MW target is in addition to the 15,000 MW planned through new projects.

The ministry plans to push states into signing "renewable purchase obligations", which aim to ensure that new wind turbines are not just put up for availing of tax benefits, said joint secretary Shashi Shekhar. Such purchase obligations mandate state governments to buy some of their power requirement through renewable sources.

The draft proposes setting up more wind projects in other states such as Karnataka and northern Rajasthan, where turbines have been installed recently. "The government will also look at offshore wind projects," said another government official.

India's total wind power installed capacity is about 14,000 MW, with Tamil Nadu accounting for 43%.

Ministry officials said they are waiting for a response from wind farm companies but said it may be "hard to convince" them to invest large sums to modernize their plants. Windmills installed before 2005 need to be replaced as their capacity cannot be increased.

Australia PM backs uranium sales to India

Australian Prime Minister Julia Gillard is pushing to revoke a ban on selling uranium to India, potentially widening access to the scarce resource for India’s ambitious nuclear energy programme and untying knots in bilateral relations.

Gillard made her thoughts public in an article published Tuesday in the Sydney Morning Herald ahead of next month’s meeting of her Labor Party. She urged her colleagues to drop their support for the ban, describing India as a close partner.

“I believe the time has come for the Labor Party to change this position. Selling uranium to India will be good for the Australian economy and good for jobs,” Gillard told reporters. “This will be one way we can take another step forward in our relationship with India.”

India, the second fastest growing of the world’s major economies, is heavily dependent on fuel imports and is seeking to diversify its energy basket to power economic growth. It aims to upgrade its nuclear power generation capacity to 20,000 megawatts (MW) by 2020, from 5,000MW now.

Australia has nearly 40% of the world’s known uranium reserves, but supplies only 19% of the world market. It has no nuclear power stations.

India’s foreign minister S.M. Krishna welcomed the initiative. Australia has recognized “our growing energy needs, our impeccable non-proliferation record, and the strategic partnership between our two countries”, he said in a statement. “We attach importance to our relations with Australia, which are growing across the board. Energy is one of the key areas of bilateral cooperation.” Bilateral trade between India and Australia is worth about $20 billion (around Rs.1 trillion) a year.

Gillard’s Labor Party, on coming to power in 2007, suspended talks the previous administration was having with India on the sale of uranium, the main source of fuel in a nuclear reactor. Its main objection was that India was not a signatory to the Nuclear Non-Proliferation Treaty that forbids countries from sharing or trading nuclear technology and material with non-signatory states.

In 2008, India concluded a landmark civil nuclear energy deal with the US that enables it to acquire sensitive technology and source atomic power plants from international vendors.

Under the terms of the deal, India agreed to separate its civilian and military programmes, and to use the technology and resources acquired from abroad only for civilian purposes. Following that, India has entered pacts with many countries, including Canada and the Central Asian republic of Kazakhstan to source uranium for its civil nuclear programme.

Australia supported the US-India nuclear agreement as a member of the Nuclear Supplier’s Group, but had continued to refuse to sell uranium to India. “It is time for Labor to modernize our platform and enable us to strengthen our connection with dynamic, democratic India,” Gillard wrote in her article.

Australia has four mines—BHP Billiton Ltd’s Olympic Dam, potentially the world’s biggest; Energy Resources of Australia Ltd’s Ranger mine; the Beverly mine, owned by US company General Atomics; and Honeymoon mines, owned by Uranium One and Mitsui and Co. Ltd

C.U. Bhaskar, a former head of the National Maritime Foundation think-tank in New Delhi, said the nuclear issue has been a “knot in bilateral relations” between India and Australia.

“It had become a bipolar issue with the John Howard government in talks for the sale of uranium to India and the Labor Party opposed to it... Now Australia seems to be in the middle of a holistic review of its policies vis-a-vis Asia and India in particular,” he said.

The Labor Party will debate lifting the ban at its conference next month. The move should easily pass with support from Labor’s dominant Right faction. The policy does not need to go to Parliament for approval, but the conservative opposition also supports uranium sales to India.

Discoms announce power cut as generation falls

Lower water levels at key reservoirs and shutting down of some thermal power units in the state have severely affected the total power availability forcing the distribution companies (discoms) to announce cut in power supply for a limited period in a day.

“Out of our total requirement of 3,300 Mw, we are currently getting only 1,650 Mw. We are buying 800 Mw from outside to maintain a supply of about 2,400 Mw. Hence, there is a necessity to slash power supply at various places,” B C Jena, chief executive officer of Central Electricity Supply Utility (CESU), one of the discoms, said.

Orissa has the hydro power production potential of about 2,000 Mw.Though the state received more than enough rains towards the fag end of monsoon that caused devastated back-to-back floods, the key reservoirs situated in the southwest area did not receive ample rainfall.

As a result, Indravati power station, which has the capacity to produce upto 600 Mw energy, is currently generating 125.25 Mw. Similarly, Balimela with 510 Mw capacity is producing 190 Mw power and Hirakud with more than 350 Mw capacity, is generating just 130 Mw.

The thermal power stations, already crippled with coal supply problems from key mines, reduced power production recently due to machinery failure in some plants.