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Energy: India will produce 71% of its energy needs domestically by 2016-17, and 69% by 2021-22. The
remaining will be met through import.
Integrated energy policy (IEP) 2031-32
Sector
Coal
Oil
Natural gas
Hydro
Nuclear
Renewable
2003-04 (%)
51
36
9
2
1
2031-32 (%)
42-65
28-33
7-12
3-4
5-6
5-7
Coal: Indias reserve as on March, 2012 was 293.5billion tones (40% proven and some 40bn tons proven) &
Domestic production-540million tons in 2011-12 (import-100mn tons) need to increased to 795mn tons by 201617; even then there will be import need of 185mn tons.
Oil & Natural Gas: 73% import dependent, 90% import by 2031-32. Indias Refining Capacity 215mmt in
2013, exporting 60.84mmt of petroleum products worth $50bn (20 refineries: 17 public & 3 Pvt.).
Steps taken by the govt.:
New Exploration Licensing Policy (NELP), 1999- 177 oil & N. Gas discoveries in 39 NELP blocks.
Deregulation of prices: petrol, diesel-dual pricing, L.P.G- 9 cylinders/year, kerosene-direct cash transfer
through ADHAAR, underway; import parity pricing system underway.
Hydro: potential of around 1, 45,000MW: environmental, and relief and rehabilitation issues. (157 projects57,672MW, 38-mega dam with 320MW capacity, 12% free to Arunachal Pradesh).
Nuclear: 20 power plant running 4780MW, two at Kudankulam (2000MW) yet to connect to grid, five under
construction (3300MW)
Other sources:
Coal Bed Methane (CBM): 4th largest proven reserved. 33 exploration block- Assam, Gujarat, Andhra Pradesh,
Chhattisgarh, M.P, T.N, Odisha, Rajasthan Production started 0.28mmscmd (million metric standard cubic
meters per day).
Gas/Chathrate Hydrates: Methane Gas trapped inside ice in coastal sea, ocean sediments, polar seabed, and
permafrost (around 300mt deep in temperate region and nearer in polar region).
Shale Gas: 2012 draft policy for the exploration and exploitation: Shale Gas in India: look before you leap. It
is being considered by a group of ministers. India is believed to have technically recoverable resources of 96
trillion cubic feet (tcf) of wet shale gas.
Ministry of Petroleum and Natural Gas (MoPNG) has identified 6 basins as potentially shale gas bearing:
Cambay, Assam-Arakan, Gondwana, Krishna-Godavaari, Kaveri and the Indo-Gangetic basin. MoPNG has
signed a MoU with the Deptt.of states USA.
US geological survey: India has recoverable resources of 6.1 trillion cubic feet (tcf) in 3 of the 26
sedimentary basins.
ONGC: 34 tcf in Damodar basin alone with 8tcf recoverable (47tcf- total conventional reserves)
Procedure: hydro-fraction or fracking- horizontal drilling by injecting a mixture of water, chemicals (guar
gum), and sand into the well at very high pressures (8000psi-pounds per square inch) to create a no. of
fissures in the rock to release the gas. It requires minimum land area of 80-160 acres and 3-4 million
gallons per well (11,000 15, 000 cubic mts of water).
TERI- india will be a water stressed country by 2030, so the result might not be as dynamic as in the US.
India-waterportal.org: next 15-20 years, consumption of water will increase by 50%, supply by 5-10%;
resulting in to the scarcity of water.
Possibility of contamination of aquifer (both surface and sub-surface) from hydro-fracturing fluid disposal.
Nuclear Fusion: ITER-international thermonuclear experimental reactor, Cadarache, France; started in 2005-07 to
be completed by 2018. It has 7 member countries: Japan, China, India, S. Korea, US, Russia and EU. 50MW input
power to produce 500MW output.
Renewable Energy: Potential 89,760MW, present installed capacity-28,000MW & plan to double renewable
energy generation by 2017.
Small Hydro: less than 25MW, 3496MW installed with potential of 15,000MW.
1. Bio-fuel: 5% (earlier 10%) blending target, Brazil-25%.
Bio-diesel (mono alkyl esters of long chain fatty acid): jatropha, karanj, Mahua, Soyabean oil
Ethanol (water soluble alcohol30% oxygen): Bagasse (2239/5000MW), Corn, Sorghum, Potatoes, Wheat,
Sugarcane.
2. Solar: Photo Voltaic (363MW) and thermal (800MW) - 1000MW by 2013
JN National Solar Mission 20,000MW grid connection by 2022.
Major issue: Gallium, Arsenic, Selenium, Indium and Tellurium getting depleted.
Wind: more than 18,000MW in operation, and total capacity of 49,130MW.
Rare Earth Elements (REE) use in magnets in Wind Mills is available mainly in China.
Tidal and Wave Energy: ocean currents are the store house of infinite energy. West coast of India is the most
favorable region for harnessing this energy.
Geothermal Energy: when the Magma from the interior of earth comes out on the surface, tremendous heat is
released. This heat energy can successfully be tapped and converted to electrical energy. Also the hot water that
gushes out through the geyser wells is used in the generation of thermal energy. Himalayan region has major
potential.
Bio-energy/ Biomass: energy derived from biological products which include agricultural residues, municipal,
industrial and other wastes (1200MW/17,000MW).
Waste to Energy (WtE) incineration Okhla 16MW has taken off but yet to connect to Grid, Ghazipur10MW, Narela-Bawana 36MW
Ministry of New and Renewable Energys (MNRE) flagship program on energy recovery from urban and
industrial waste, announced in May 2011 aimed to generate 84MW of power from waste by providing subsidies
upto Rs 10cr to developers.
Negative effect of WtE incineration:
1. WHO: Dioxins are one of the dirty Dozen a group of dangerous chemicals known as persistent organic
pollutants (POPs) - potential of causing cancer.
Central Pollution Control Board and Chennai based Non-profit org. Global Alliance for Incinerator
Alternatives (GAIA) revealed life threatening levels of particulates and toxic chemicals including Dioxins
which is 30-40 times above permissible level in Okhla, Delhi. Those who live close to incinerator since
2009 are experiencing incidences of cancer and low birth weight.
2. The United States environmental protection agency (USEPA) recognizes incinerators emit 2.5 times more
carbon dioxide per MW than coal fired power plants.
3. Cost twice the cost of Nuclear Energy, and incinerator relies heavily on govt. fiscal and financial
incentives.
4. US largest WtE company, Covanta, recently announced its plan to conclude operations in the U.K.,
whereas, the Municipal Corporation of Hyderabad announced its plan to construct Indias largest
incinerator using Covantas technology. Europe is committed to ending the land-filling and incineration of
recyclable waste by 2020. Aiming instead to implement a resource-efficiency strategy that will boost a
circular economy; where, all waste is treated as a resource rather than requiring expensive infrastructure to
dispose of it.
(Sustainable waste management option; prevent, reuse and recycle).
Alternative: Plasma Gasification of municipal waste.
Yoshii, Japan 24tonne per day running for decade released less than 1% to that of incineration plants.
200 municipal solid waste gasification plants under construction or in operation globally.
India: Pune & Nagpur, 68 tons each/day commercial plants employing this technology have been disposing
of medical and other hazardous wastes.
British Airway partner Solena (US based bio-fuel co.) to set up plants that will gasify 1300 tons/day of
Londons solid waste to use as ATF.
Challenges in power sector: total installed capacity-2, 14, 000MW; Industrial sector-45%, domestic-22%,
agriculture-17% and commercial-8.9%); Transmission & Distribution Loss (India-24%, world average-15%, US &
EU-4%, China-7%), Power theft (20,000cr annual loss), under pricing and subsidies. The overall power shortage8.6% and peak shortage of -9%.
Power sector reform:
1.
2.
3.
4.
Power discipline: unbundle by amending states electricity act (central electricity act, 2003 amended)
Merchant sale of electricity
Integrated energy policy 2031-32
1% cut in consumption Rs1000cr saving in the economy.
National Energy Fund: 0.1% Cess of turnover in energy products for companies worth Rs100cr.
National Mission for Enhanced Energy Emission (NMEEE): to save 23 million ton oil equivalent in 5
years.
Energy Conservation building Code
Energy Security: it means having access to the requisite volumes of energy at affordable prices, i.e.,
supply must be impervious to disruptions and sufficient quantity must be available in time from variety of
sources.
Communication:
1. Telecom: 2nd largest telephone network after China.
National Telecom Policy 2012:
To secure affordable, reliable and high quality telecom and broadband services across the country.
One nation-one license across services area.
One-nation full mobile no. portability and work towards free roaming
Rural Tele-density from 39- 70% by 2017 and 100% by 2020 (total telephone in 2012-951 connections
with 96.7% wireless, urban tele-density-169%, overall- 78.66%)
Telecom, broadband connectivity as basic necessity and work towards right to broadband.
Affordable and reliable broadband on demand by 2015 (175mn-2017, 600mn-2020 from 2mbps to
100mbps)
Present status: TRAI begged the total no. of internet subscribers in India as of March 31, 2013 at 164.81
million and broadband penetration-1%; 12mn, 7/8 access internet through mobile, expected to cross 165mn by
March 2014. However, comScore put the no. of internet users in India at 74 million. Net users spend the most
time on Facebook, followed by LinkedIn and twitter. While the most unique visitors sites is Google, and the
most popular site for news is Yahoo.
Broadband policy 2004: 22.8mn internet subscribers including 13.7mn broadband by 2012.
National Optic Fiber Network (NOFN)-2.5lakh broadband connections to gram panchayat for e-health, eeducation, e-governance, funded under universal service obligation fund (USOF)-7310 towers set up by 2012.
USOF has also signed an agreement with the BSNL to provide rural wire-line broadband connectivity with a speed
of 512Kbps.
Village Public Telephones Scheme has covered 97% of villages.
Two years after the Department of Telecom (DoT) decided to set up a telecom equipment testing lab at the Indian
Institute of Science (IISc), Bangalore to address security issues, foreign vendors have now refused to share their
design details with the premier academic institute as it could hurt their business interests. This sudden turn of
events will now further delay the setting up of a full-fledged Telecom Testing and Security Certification Centre
(TTSCC), which should have become fully operational by April 2013. It will also hurt Indias preparedness
towards creating the Telecom Security Directorate as mandated by the National Security Council. TTSCC could
be established under the DoT.
2. Postal Services: Amongst the largest network in the world in terms of area covered and people served. It
has broadly 4 service areas:
1. Communication services letters, post cards
2. Transportation: Parcel logistic post
3. Financial: saving banks, life insurance
4. Premium value added services: speed post, business post, retail post
Project Arrow launched in 2008: IT driven project to modernize the Post Offices to become part of core banking
solution and real time banking services, better mail delivery, remittances, insurance, saving, Speed Post-One India
One Rate Scheme for just Rs.39 for any consignment weighing up to 50gms (Leasing out land, develop shopping
complexes in postal departmental land, etc. are the other initiatives).
Operators: 15 scheduled operators including 2 regional and 2 cargos, around 419 aircrafts (Directorate
General of Civil Aviation).
9th largest in the world with 18% CAGR: 142 million passengers (14mn international) - 5% of travelling
population, 1.6 million tons of air cargo.
Worldwide Revenue-$671bn in 2012, just 1% profit, 2013-1.6% (10.6bn), need 7 to 8% profit to cover
capital cost.
Strict Entry Rules: At least 5 fleet- Rs 50cr, next 2 fleet-2cr paid up capital, International Route: 5years
experienced plus 20 fleet, 10% capacity in route II to be employed in route I (need to fly non-profitable
route), Route preferences to national carrier (Paris-exclusive for Air India).
High Excise duty on ATF: 4-40%, costing 45% operating cost (33% world average). Monopolies of the 4
state own suppliers. Import will save 25-30% of the ATF cost.
Forged Pilot license: 14, and substandard pilot training schools.
Air India Problems: Rs 5000-7000cr annual losses and 42,000cr since 2006. Retirement age 60years;
large expatriate pilots recruited with 40% higher salary. Ordered 50 Boeing (27 Dreamliner 787) & 40
Airbus aircrafts; 6 Boeing 787 delivered on Jan2013 which constitute 4% of AIs total capacity (DelhiParis, Frankfurt, 3 domestic and 1 Standby). Indian Pilots Guild-AI employees (440)-Boeing; Indian
Commercial Pilots Association-IA employees (700)-Airbus; strike for parity of pay.
Dreamliner Boeing 787: 210-290 passengers, 16,000km non-stop, 20% more fuel efficient. But due to
overheating of brakes, A/C problems, electrical fires, cracked cockpit window, battery malfunction50
dreamliners were grounded globally.
Steps taken:
Freight: 1.025billion metric tons in 2012-13 (china, US & Russia), 2011-12: 969mmt. Earnings: 30%
passenger tickets and 70% freight.
Budget 2013-14: Rs 63,363cr (Revenue-Rs.57, 863cr, 2.3% of GDP): 16 zones.
Zones
HQ
Northern
Central
Southern central
Northern central
N. Delhi
Mumbai CST
Secunderabad
Allahabad
Broad gauge
Meter gauge
Narrow gauge
Major Issues:
Earnings: passenger
%
15
14
8.3
6.7
1.676mt
1mt
0.762mt
Goods %
Total %
9
8
8.8
8.7
11
10
8.7
8.1
74%
21%
4%
Cross-subsidy: Garibh rath/student concession/passand freight charges & upper class ticket set high.
Competition from other modes of transport: Road-4-6 lane, expressway & golden quadrilateral &
waterway- coastal shipping, pipelines, and cheap airplanes.
Steps required:
Gauge conversion
Doubling of existing single lanes
Electrification
Steps initiated:
Hyderabad-Chennai
Chennai-Ernakulum
Howrah-Haldia
Delhi-Patna
9. New Initiatives:
Engineering Procurement & Construction (EPC): contact for far flung areas not viable under BOT (toll).
100% govt. funding-to reduces cost and time overrun.
Introduction of Radio Frequency Identification (FRID)
Less than 5hectare areas not to insist on environment clearance by MoEF.
Select highway projects to private players under Operate, Maintain and Transfer (OMT).
19. Viability Gap Funding (VGF): 20% cost to be borne by the govt. with a corpus of Rs.2000cr; 13 new
projects qualified under VGF-cold chains and post harvest storage, education, health, and skill
development, NIMZ, oil/gas/LNG storage facility, irrigation, telecom, infrastructure in agri. Market
20. PPP: toll, annuity, VGF, Negative grantBOT-expressway, BOO-Mobile tower, BOOT- highway, DBOT
(design built operate transfer), DBFO (design built fund operate), BLT (built lease transfer)
21. WB report- India received almost half of Pvt. Participation in Infrastructure (PPI) since 2006, in
developing countries, and 98% of the total regional investment with a total investment of $20.7 billion in
2011. By end dec.-2012, there were 900 PPP projects in infrastructure sector.
22. Challenges:
Resources requirement: 47% pvt.; FDI- decline in inflow in the last few years due to regulatory
uncertainties, slower growth, and delays in acquisition of land; Long term resources-Banking, Insurance,
Pension
Pricing: subsidy, under-pricing, cross-subsidization
PPP model: sufficient?
Govt. inefficient spender
Dovetailing- Planning Commission
Apolitical
23. ## ONGC acquisition of Crude oil asset abroad: (Indian companies investment commitment to date in
overseas market-$100billion, actual investment-$25billion)
24. Overseas oil assets dont constitute energy security-neither ONGC Videsh Limited (OVL) nor its Chinese
counterpart actually brings any significant quantities of oil from any of its overseas assets. Most of OVLs
overseas oil production is sold in the local or international markets and the company is compensated in
cash payments. Gazprom was nominated the sole export agency for gas exports from Sakhalin. As for gas,
OVL does not bring to India even a molecule of gas produced in its own fields in Sakhalin, Vietnam or
Myanmar. China fares better in this regard, primarily because it has had the foresight to build transnational
gas pipelines. Even in the case of producing fields, equity participation is subject to certain contractual
terms with the host government. Sharing equity with other partners as in a consortium or joint venture is
also subjected to the terms of the consortium or joint venture agreement or the operating agreement
between parties.
25. August: OVL acquired 10% stake in Mozambique gas field from Anadarko Petroleum Corp of US. It also
acquired in June, along with OIL, 10% stake in the same block from Videocon Group, and 2 blocks each in
Columbia and Bangladesh.
26. Types of participation:
27. Production sharing agreements-usually has an express provision with the host government wherein the
foreign investor can take his share of production in kind (ownership of the mineral vests with the host
government, except in the U.S. impose Domestic Market Obligations where the operator is required to sell
part or all the production to the local market). Sometimes, the domestic market has prior claim and only
surpluses can be exported. Certainly OVL can exercise its option to take its profit share ex ante and bring
the oil or gas to India wherever it is able to do so.
28. Service contracts- envisage only a pre-determined fee, not a share in production,
If the circumstances allow it, OVL can swap its equity oil with other buyers, for example; it can swap
Sakhalin/Venezuelan oil with Japan and divert oil bound for Japan from the Persian Gulf region to our
ports.
When international prices of crude/gas reign high, a risk-free asset whose production/development costs
are reasonable can make an excellent investment option, provided we have not paid a higher-thancompetitive price for acquiring the asset.
29. References: Indian Economy by Dutt & Sundaram and Ramesh Singh, India year book, Economic Survey,
The Hindu, Times of India, Yojan and, Union Budget.
30.Ringthing Hongchui
31.