October 2015

Volume 4 | Issue 06 | `100

www.InfralinePlus.com

The Complete Energy Sector Magazine for Policy and Decision Makers

Govt knocks
village doors
...with LPG subsidy

Higher ash
content coal
receives
OK for import

Dabhol power
plant
ready to fire again

Upendra Tripathy A Didar Singh Anil Swarup Yoshiaki Inayama

Secretary, Secretary General, Coal Secretary, MD, Toshiba JSW Power
MNRE FICCI Government of India Systems Pvt. Ltd.

We are on track to achieve Marginal field policy for In three years we should Government need to
175,000 Mw. We need CBM development will be able to mine (all the take steps and fix the
investment in generation send a strong signal to power-generating) coal health of distribution
& grid capacity addition potential bidders we require companies
InfralinePlus
The Complete Energy Sector Magazine for Policy and Decision Makers
October 2015 | Volume 4 | Issue 06

Editors Letter Editorial

At a time when India is looking at accelerating
economic growth and is eyeing foreign investment Shashi Garg, Editor
in sectors such as infrastructure, energy, technology
etc., there are challenges in terms of delivery. While News Team
the country needs to expand capacity in these Ravinder Nagar
sectors, it also needs to strengthen to the delivery
mechanism so as to make facilities available to
people in non-urban areas too. Consultant
In our cover story too, we bring you in depth Anshul Tomar
analysis of how easy or difficult it could be for
the government to reach LPG to rural areas. The Analysts
Centre is looking for ways to make it viable for rural Abhishek Gupta
dealers to home deliver cylinders, the lack of which makes consumption of
cleaner fuel slow, expensive and quite inconvenient in the hinterland. As of Content Consultants
now, the penetration in rural areas is poor, forcing households to depend Solutions FaKtory
on firewood and other cheaper fuels, which are hazardous to health.
The coal section brings you a write up on the governments move to
comfort domestic thermal power plants which source the fuel from abroad
to run their operations. The union environment ministrys expert appraisal Business Development
committee has recommended that the restriction on maximum ash content
of imported coal may be increased upto 25 per cent and environment Manoj Narang, Director
impact assessment be carried out accordingly. Tel.: 0120-6799106 / 100
Email: manoj.narang@infraline.com
In Renewable Energy segment, we have attempted to analyze if Indias
commitment of having 40 percent of installed capacity by 2030 to come
from renewable energy sources - reasonable. Experts in the industry are Advertisement
not sure if this is an achievable target. To put it in perspective, India is
Anshul Sharma
aiming to add 175,000 Mw of capacity from clean energy sources by 2022: 1
Tel.: 0120-6799136
60 per cent from solar energy, 30 per cent from wind and the balance from
Mobile: +91 9953848494
biomass and small hydro.
Email: advertising@infraline.com
In the power segment, the story is about Dabhol plant. The plant in Ratnagiri
district has been facing tough times since its inception. The project was set
up by the erstwhile US-based Enron Corporation, which went bankrupt in Circulation & Subscription
2001. In 2005, the then government asked NTPC, GAIL and the Maharashtra Mamta Negi
government to form RGPPL to implement the power project. Tel.: 0120 6799100
The project will start re-generating power from November 1 this year. It had Email: mamta.negi@infraline.com
earlier been allotted imported R-LNG and given a subsidy to procure it from
Power System Development Fund.
Our InfraWatch section, we bring you interesting write up where bigger
firms were busy in cutting debt and completing existing projects, their Form IV
smaller rivals exploited the opportunity and grabbed a number of highway Periodicity of its Publication: Monthly
Printers / Publishers /
contracts awarded this year. Editors / Owners
Mrs Shashi Garg

Between January and July, National Highways Authority of India (NHAI) Nationality Indian
awarded a total of 30 road projects spanning about 2,660 km, with a total Address
14-D, Atmaram House, 1, Tolstoy Road
estimated project cost of nearly `28,000 crore. Over two-third of the 30 New Delhi - 110001

projects were awarded under the EPC or NHAI-funded route. Do Read Place of Publication
14-D, Atmaram House, 1, Tolstoy Road
New Delhi - 110001
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Name and address of individuals who own the newspaper and partners
or shareholders holding more than one percent of the total capital Owner:
M/s Infraline Technologies (India) Private Limited, 14-D, Atmaram House,
SHASHI GARG 1, Tolstoy Road, New Delhi - 110001
Managing Director and Editor Shareholders holding more than one percent of total Capital of the
InfralineEnergy Research and Information Services owner Company
1. Mrs Shashi Garg, 60, Siddhartha Enclave, New Delhi-110014
2. Abhav Garg, 60, Siddhartha Enclave, New Delhi-110014
Registered Office Branch Office
I Shashi Garg hereby declare that the Particulars given above are true to
14th Floor, Atmaram House, Noida the best of my knowledge and belief.
1, Tolstoy Road, New Delhi - 110001 A-31, Sector 3, Noida Sd
Email: business@infraline.com Tel.: 0120-6799100 Mrs Shashi Garg
Signature of the Publisher
 October 2015
www.InfralinePlus.com

InfralinePlus

Contents
Editors Letter
1

Cover Story 36

36
Govt prepares to deliver
LPG at the doorstep of rural
consumers
The government launched Give It Up
campaign urging well-off citizens to
give up subsidy so that the funds can
be utilised to offer clean fuel to poor
households. Heeding to the appeal
made by Prime Minister Narendra Modi,
over 30 lakh people have surrendered
their LPG subsidy. While the drop in
oil prices has sharply brought down
the subsidy consumers receive these
days, making it psychologically easier
for them to give up.
2

Power
4 21
News Briefs: National p4
In Depth: Dabhol power unit all set to generate
electricity yet again p6
In Depth: Changing bidding norms: What
industry wants? p9
In Conversation: Yoshiaki Inayama, Managing Director
Toshiba JSW Power Systems Pvt. Ltd. (TJPS) p12
In Depth: Tariff issues continues to dent
NTPC revenues p14
In Depth: NTPC, IIFCL, and IRFC to raise cheaper
funds from overseas p17
Statistics p19
Coal
News Briefs: National p21
In Depth: Power project developers reluctant to
mine coal from bid-out blocks p23
In Depth: Panel gives go ahead for imports of
coal with high ash content p26
In Depth: Coal India Ltds offer for sale may
be trimmed p28
In Depth: States ready to auction 71 non-coal
blocks leases this fiscal p30
In Depth: India shows interest in buying
South African coking coal mines p32
Statistics p34

Topics Covered Topics Covered

Transmission and distribution network Coal auction
Demand, supply gap Price linkage
Regulatory environment Fuel transportation
Evacuation
 October 2015
www.InfralinePlus.com

Oil and Gas Renewable

42 54
News Briefs: National p42 News Briefs: National p54

In Depth: Lower gas price may hurt Indias In Depth: Solar power industry demands
exploration projects p44 anti-dumping duty to insulate domestic industry p56

In Depth: Auction of marginal oil & gas fields: In Depth: Can India deliver on renewable energy
Whats the road ahead? p47 installation targets? p60

In Depth: Would CBM players get a higher In Conversation: States may get solar power
price for gas? p50 at new low of `4.75 per unit p64

Statistics p52 Statistics p68

Topics Covered Topics Covered

Exploration Solar technology 3
Crude oil imports Hydro power
CBM Green utilities

Quotes InfraWatch 70
Smooth road for smaller firms, bigger ones
reeling under debt

A K Srinivasan Parag Jariwala

Director (Finance) VP - Institutional Research,
ONGC Religare Capital Markets

Debasish Mishra
senior director,
Deloitte
Kameswara Rao
leader (power and utilities),
PricewaterhouseCoopers
70
 October 2015
www.InfralinePlus.com
NewsBriefs | Power
Tata Power partners with Cargill and Schneider Electric
As another green milestone in the Companys Centenary Year
celebrations, two of Indias first 25 MVA Natural Ester filled
transformers were recently installed in Mumbai. With this initiative,
Tata Power has once again showcased its priority in driving
sustainability by implementing path breaking green technology.
Sustainability remains a core business philosophy of Tata Power, and
the green transformers is one of the Companys many green initiatives
under its Be Green campaign. Use of Natural Ester in transformers
sets a new industry paradigm for the power sector across the country.
Pioneers of this vision, Tata Power selected Cargills Envirotemp FR3
fluid (the most widely used natural ester fluid) Schneider Electric
(specialist in energy management automation) for its transformers.
FR3 fluid provides improved fire safety, extended transformer life and
additional loading capacity with a smaller footprint.
Adani Power to supply 50 MW to Railways at
`3.69 per unit
Indian Railways has entered into a agreement with Adani Power
for supplying 50 MW electricity at `3.69 per unit for three years,
which will result in saving of around `150 crore annually. Indian
Railways have been procuring power through the State Utilities at an
average rate of `6.75 per unit. Adani Power Ltd have been awarded
the contract at a landed tariff of `3.69 per kWH (unit) for a period of
three years, Indian Railways said. Adani Power will supply 50 MW of
power from its 4,620 MW Mundra plant in Gujarat. According to the
statement, the agreement between North Central Railway and Adani
Power is signed after successful bidding using the model document
4 issued by the Power Ministry. After clarification from Power Ministry
regarding deemed licensee status, Indian Railways have embarked to
procure electricity directly from the generators to tariff.
PowerGrid wins `8,000-cr transmission project in AP
After having failed to win any of the four power transmission projects
awarded under a competitive bidding process in August this year,
state-owned PowerGrid Corp (PGCIL) managed to outbid its competitor
to win the `8,000-crore Vemagiri II project on Wednesday, sources
said. Kalpataru Power Transmission emerged as the lowest bidder
for the Alipurduar project worth `1,800 crore. While the Vemagiri II
transmission corridor in Andhra Pradesh will ramp up the power flow
capacity to the southern region to 16,000 megawatt (MW) from the
current 9,000 MW, the Alipurduar project will help supply hydro power
from Bhutan to the eastern part of the country.
First Solar Thermal Cooking System installed in
NTPC Station
Solar Thermal Cooking System, an innovative low carbon, all weather
cooking solution has been installed at an NTPC station. AK Jha, CMD,
NTPC inaugurated the STCS which is a joint initiative of NTPC Dadri
and NTPC Energy Technology Research Alliance (NETRA) at the
Main Plant Canteen of the Station. Quick start-up, thermal energy
storage, no chemicals required as steam generation is not involved
and all weather cooking solution are unique features of the system.
All modes of cooking boiling, frying, and baking requiring different
temperature regimes can be done through this system comprising
Solar and Cooking blocks. The system has capability to store
additional solar energy and makes it available for cooking during no
or low solar period due to integration with LPG fired Thermic Fluid
Heater for non/lean solar period.
EDMC to take coercive action against BSES
for tax due
East Delhi Municipal Corporation (EDMC) has decided to take
coercive action including legal proceedings against BSES for
recovery of its dues of electricity tax worth `60 crore from the
power utility. The civic bodys standing committee discussed the
issue in its meeting and decided to take stern action against
discom BSES for not paying `60 crore which it owes to EDMC as
tax for the past three years, standing committees chairperson Lata
Gupta said. BSES owes the amount of `60 crore, 5 per cent of the
amount charged by it from customers in EDMC area, as tax but it
has not paid the amount despite several efforts. I have directed the
Commissioner of municipal corporation to take necessary steps
including legal action for recovery of the amount, she said.
Coal Ministry imposes `1 lakh penalty on GVK Power
The Ministry of Coal has imposed a penalty of ?1 lakh on GVK
Power (Goindwal Sahib) for intentionally delaying the submission
of requisite documents to allow coal mining to start at the Tokisud
North mine in Jharkhand. The company, a part of the Hyderabad-
based GVK Power and Infrastructure, was the prior owner of the
mine which was sold in the coal mine e-auctions earlier this year
to Essar Power (Tokisud North mine) for a price of `1,110 a tonne.
GVK Power had also participated in the bidding but had lost out to
Essar. The mine has extractable reserves of 51.97 million tonne
and fetched the highest bid amongst those reserved for the power
sector. The Coal Ministry has also asked GVK Power to submit the
documents by September 15.
Tata Power to scale up generation capacity to 18,000
MW by 2022
Tata Power has issued its strategic intent for the year 2022, which
lays emphasis on scaling up generation capacity and value-added
businesses, including services and trading. By 2022, the company
plans to increase the generation capacity from 8,750 megawatt
(Mw) to 18,000 Mw, with 20-25 per cent from clean and green
sources (both 25 tonnes per annum of coal and coal equivalent),
4,000-Mw distribution and decentralised distributed generation
and 10-x growth in value-added businesses. According to the
company, the potential future growth areas in India include the
1,600-Mw coastal Maharashtra, Dehrand project, the 380-Mw Dugar
hydroelectric joint venture project; and 1,980-Mw Tiruldih power
project. Tata Power completed the acquisition and possession of
private land for Dehrand in 2014-15.
CG bags `300 crore order from Power Grid
Corporation
Avantha Group company CG has bagged `300-crore order from
Power Grid Corporation (PGCIL) for supply, erection, testing and
commissioning of power transformers at various sub-stations
across the country. The orders include 765 kV transformers for
the Chittorgarh and Ajmer sub-stations, both part of the green
energy corridor, an initiative by the government, to facilitate
evacuation of renewable energy into the national grid, the company
said in a statement. CG has also bagged orders for the supply
of 400 kV transformers and reactors to Power Grid, a large
part of which is meant for the Green Energy Corridor, for the
evacuation of solar power to the 400 kV grid in addition to system
strengthening projects.

NewsBriefs | Power
CERC allows 24-hr trading at power bourses
Power regulator CERC has extended the trading session time up to 24
hrs a day on energy bourses IEX and PXIL to help optimum utilisation
of capacities by producers and distribution companies. In its order, the
Central Electricity Regulatory Commission (CERC) has directed the
Power Exchange of India Limited (PXIL) and Indian Energy Exchange
(IEX) to start operation of extended market session by August 1.
However, the two exchanges have already extended their market
sessions. We expect the market to greatly benefit the distribution
companies and generators manage and balance their systems better.
The market will also facilitate the utilities in large-scale integration
of renewable energy, especially wind and solar capacities as also
envisaged by the government, IEX said in a statement.
ABB India bags `125-cr order from Power Grid Corp
Power Grid Corporation of India Ltd (PGCIL) has awarded an `125
crore order to ABB India for the extension of three substations in
Vadodara, Manesar and Malerkotla. The order, which is a part of a
larger contract (valued `175 crores) awarded to ABB Group, was
booked in the second quarter of 2015. Gas-insulated switchgear
(GIS) will be used to accommodate the expansion of all three
existing substations. While in Vadadora and Manesar this involves
the extension of the current 765/400 kilovolt (kV) GIS substations,
in Malerkotla the substation will be upgraded from air-insulated
switchgear (AIS) to GIS. Commissioning is scheduled for the end of
2016. This GIS solution will help the customer extend substation
capacity, within the limited space, considerably more than a
traditional air insulated switchgear solution, said N Venu, president,
power systems division, ABB India
Tata Power increases consumer base over 2 million
Tata Power Company has increased its consumer base over 2 million
in two Metro cities - achieving 6.18 lakh consumers in Mumbai and
over 14.4 lakh in Delhi. Also, the number of changeover consumers in
Mumbai during 2014-15 was 1.05 lakh. TPC has been providing power
at the lowest tariff to the low end residential consumers. In the past
few years, the consumer strength in Mumbai alone rose by around 2
lakh, an official said. TPC has been providing reliable and uninterrupted
power to its consumers, he said. The increased Mumbai consumer base
of 6.18 lakhs was aided by the addition of 19,000 direct and 1.05 lakh
changeover consumers during 2014-15. In Delhi, Tata Power has a
registered consumer base of 14.4 lakh, spanning across an area of 510
sq. km. in northern and north western Delhi, the official said.
Himachal to refund `280 crore to Adani Power
Himachal Pradesh cabinet decided to refund the upfront premium
of `280 crore in lieu of Jangi-Thopan (480MW) and Thopan-Powari
(480MW) hydel projects to Adani Power Limited. With some ministers
against the idea of returning the premium, heated arguments took
place in the cabinet meeting. According to sources, some ministers
were not in favour of the decision and opposed it. But, at the end, the
agenda was approved with the condition that upfront premium would
be returned only after receiving the money from Reliance Energy.
Following the cabinet decision, the ground has been cleared for the
allotment of 960 MW Jangi-Topan-Powari project. In September
2013, cabinet meeting chaired by chief minister Virbhadra Singh had
given its approval to initiate action for damages-penalty against Brakel
Corporation in the implementation of Jangi-Thopan-Powari (960MW)
hydro project, said the source.
October 2015
www.InfralinePlus.com
GE, Alstom ahead in race for bagging locomotive
projects in Bihar
GE and Alstom are believed to be ahead of other bidders in the
race to bag contracts for the setting up of multi-crore diesel and
electric locomotive factories in Bihar that are among the top eight
infrastructure initiatives which are being monitored by the PMO.
According to railway sources, while the financial bids for a diesel
factory at Marhora was opened today, price bids for the Madhepura
electric locomotive factory were opened recently. Marking the first
major FDI offer for railways, two US multi-nationals -- GE and EMD --
are learnt to have submitted financial bids for the `1,000 crore factory
at Marhora. The project is for a total of 1,000 diesel locomotives --
700 of 4,500 horse power (HP) and 300 locos of 6,000 HP -- over 10
years using state-of-the-art technology. Railway sources said that the
price quoted by GE seems to be lower than that by EMD.
State electricity boards losses widen to `3
lakh cr: Icra
The debt-laden state electricity boards accumulated losses have
widened by 58% to a whopping `3 lakh crore in the two years to
March 31, 2014, Icra said in a report. The government had designed
a financial restructuring plan (FRP) in FY 13 for these entities
when their accumulated losses stood at R1.9 lakh crore. SEBs/
discoms in Uttar Pradesh, Tamil Nadu, Rajasthan, Haryana, Bihar,
Jharkhand, Andhra Pradesh and Telangana that accounted for over
70% of the losses then, signed up for the FRP in September 2012.
The continuing rise in SEBs losses is primarily due to their failure
in implementing timely tariff revisions, although this is mandated
under FRP. For the current fiscal, the state electricity regulatory 5
commissions (SERCs) of 20 states have issued tariff orders but the
states that are part of FRP have suffered delays of 6-11 months in
tariff determination, Icra said.
NTPC Kahalgaon faces threat of closure over
delayed Ash Dyke Lagoon
Kahalgaon Super Thermal Power plant will face closure after 2017
if its fail to build a new lagoon for dumping waste ash slurry because
of encroachment on its land in a nearby village where it has to come
up. If a new Ash Dyke Lagoon-3D does not come on time there is a
danger of closure of the plant after 2017, Group General Manager
of NTPC N N Mishra said. Mishra said the proposed lagoon has to
come at Majdaha village, about 2.5 km from the plant in Kahalgaon
in Bhagalpur district, but due to encroachment on the land the work
could not start. He said the NTPC authorities have approached
Bhagalpur district administration several times on the problem but
so far the issue had not been resolved.
HC sets aside power project awarded to BHEL
The Madras High Court quashed proceedings issued by Tamil Nadu
Generation and Distribution Corporation (Tangedco) on September
27, 2014 for awarding contract for setting up two units of 660 MW
Supercritical Thermal Power Project at Ennore Special Economic
Zone in Chennai to Bharat Heavy Electricals Limited (BHEL).
Allowing a writ appeal filed by CSEPDI-TRISHE Consortium,
an Indo-Chinese private venture, a Division Bench of Justices R.
Sudhakar and K.B.K. Vasuki reversed an order passed by a single
judge on April 7 upholding the grant of the contract to BHEL. The
judgment, reserved in Chennai, was delivered here as Mr. Justice
Sudhakar is at present heading the High Court Bench here.
 October 2015
www.InfralinePlus.com
InDepth
Dabhol power unit all set to
generate electricity yet again
Major lenders, SBI, ICICI Bank, IDBI Bank - stand to gain from project revival
Railways to buy 500 mw from the project under a short-term agreement
Infraline Bureau
The 1967-Mw Dabhol power plant
is set to be revived for a second
time, with the Centre proposing to
demerge Ratnagiri Gas Power Pvt Ltd
(RGPPL) into two entities. Besides,
the plant, closed since December
2013, has got a breather from the
Indian Railways, which has committed
itself to purchasing 500 Mw of power
under a short-term power-purchase
arrangement at `4.75 a unit - half the
rate at which it earlier procured power.
The Dabhol plant in Maharashtras
Ratnagiri district has been facing
tough times since its inception. The
project was set up by the erstwhile
US-based Enron Corporation, which
went bankrupt in 2001. In 2005, the
then government asked NTPC, GAIL
and the Maharashtra government to
form RGPPL to implement the power
project.
The project will start re-generating
power from November 1 this year.
It had earlier been allotted imported
R-LNG and given a subsidy to procure
it from Power System Development
Fund (PSDF).
A joint venture between state-
owned GAIL India and NTPC Ltd,
RGPPL is proposed to be demerged
into Ratnagiri Power Company and
Ratnagiri LNG Company. The LNG
company will re-gasify imported LNG
and pool with domestically available
gas during the low-demand season.
 October 2015
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The two new entities will have the the first conversion since that of
Dabhol Story
same equity structure. `405 crore of debt in December last
Union Power Minister Piyush year. After this, RGPPLs equity Railways to buy 500 mw
Goyal said the companys debt would increased to `3,820 crore from the from the project under a
be converted into equity or quasi level of `3,370 crore. The companys short-term agreement
preferential shares. Bankers would authorised share capital stands at 1,967 mw Dabhol project is
provide fresh loans to the project, and `3,500 crore. closed since December 28,
both NTPC and GAIL would put in The revival plan for the now- 2013 for want of gas
fresh equity. closed Dabhol project is a big positive, RGPPL has secured 1.98
The approach of all stakeholders especially for banks and financial mmscmd gas. The per unit
is in the national interest, where each institutions, said Parag Jariwala, tariff is projected at `4.70
is ready to forgo some part of benefit. vice-president, Institutional Research, Maharashtra has terminated
As there still will be some gap in the Banking and Financial Services, PPA in January this year
total outstanding loan, some lenders Religare Capital. Twice debt (`450 cr and
debt will also be converted into The current gasification capacity `405 cr) was converted
equity, said Goyal. The Maharashtra of the LNG terminal is 3.5 million into equity to avoid project
government will waive transmission tonnes, which is to be increased to turning NPA
and subsidy charges while supplying 5 million tonnes. RGPPL will build Subsequently, the equity
power from this plant to the Indian an additional break-water facility holding now comprises
Railways. to increase its gasification capacity. NTPC 25.51%, GAIL
India 25.51%, Financial
The projects total debt of `8,500- While the power plant will use the
Institutions/Lenders 35.47%
9,000 crore includes `1,750 crore from bulk of the gas, the surplus will be sold & MSEB Holding Company
SBI, `2,000 crore from IDBI Bank, in the market. 13.51%
and `400 crore from Canara Bank. RGPPL will need 8.5 million
Lenders to the Dabhol 7
Among private banks, ICICI Bank standard cubic meters per day of gas project include IDBI Bank
has a `1,200-1,500-crore exposure. At to operate at a 1,967-Mw capacity. Ltd, State Bank of India,
ICICI Bank Ltd and Canara
Bank who were insisting
The Dabhol plant in Maharashtras Ratnagiri debt servicing
district has been facing tough times since
its inception. The project was set up by RGPPL in January this year. RGPPL
the erstwhile US-based Enron Corporation, and MahaVitaran are currently locked
which went bankrupt in 2001. In 2005, the in a regulatory battle. However,
notwithstanding its decision to
then government asked NTPC, GAIL and the terminate the agreement, MahaVitaran
Maharashtra government to form RGPPL to had given its approval to conversion of
implement the power project debt into equity.
The project procured gas from
present, lenders own about 20 per cent The company recently secured 1.98 Reliance Industries KG-D6 gas block,
in the company. million standard cubic feet per day of which went dry in 2013. Not viable to
The revival of the Dabhol power gas in the an auction and proposed a run at costly imported gas, the project
plant will go a long way in boosting sale price of `6.15 a unit. Of this, it has been defunct for more than a year,
the investment climate in the country. will charge `4.70 per unit from the with discoms refusing to purchase
The lenders worked closely with the Railways, and the remaining `1.45 a costly power.
rest of the stakeholders, including unit is proposed to be bridged through
the Maharashtra government, NTPC, support from the Union governments LENDERS DELIGHT
GAIL and the railway ministry, to Power System Development Fund. Lenders to the `12,000-crore Dabhol
restart the project, Chanda Kochhar, Maharashtra State Electricity power project, which is restarting
ICICI Bank Managing Director & Distribution Company (MahaVitaran), operations from November 1, are
Chief Executive Officer said. which was earlier drawing almost heaving a sigh of relief. The Board of
In June this year, RGPPL converted 95 per cent of power, had terminated company has decided to split the gas-
`450 crore worth of debt into equity, its power-purchase agreement with fired plant into two one to manage
 October 2015
www.InfralinePlus.com

InDepth

buy expensive imported fuel. The

arrangement has been worked out in a
manner that the project will be able to
service the debt taken from the lenders,
said the minister.
The first 500 mw of electricity
will be sold to the Railways after the
Maharashtra government decided to
forgo transmission charges to bring
down the cost of power to `4.79 per
unit.
Railways, a new shareholder, will
enter into an agreement for long-term
power purchase from the company (at
`8.5 per unit). NTPC and GAIL are
expected to invest in equity further
for expansion and fulfill the capex
requirement of the LNG unit, said
Jariwala of Religare.
It is a win-win situation for
everyone, not only lenders. This is a
wonderful asset for the whole power
sector. For very high imported gas
8 prices the economics was not working
out. But now, with the split into LNG
terminal and power plant separately,
The projects total debt of `8,500-9,000 crore the LNG terminal capacity can be fully
includes `1,750 crore from SBI, `2,000 crore utilised once its capacity is raised to 5
from IDBI Bank, and `400 crore from Canara million tonnes per annum, said Rajnish
Bank. Among private banks, ICICI Bank has a Kumar, SBI Managing Director.
`1,200-1,500-crore exposure. At present, lenders There is no shortage of coal and
own about 20 per cent in the company gas. The industry has also got some
cushion because of the declining prices
of imported LNG. Even the domestic
the power plant and the other for the GAIL will hold 25.51 percent each, gas prices have been reduced by 18
liquefied natural gas (LNG) facility Maharashtra State Electricity Board percent. The only issue that remains in
in an effort to revive the plant which (MSEB) 13.51 percent and financial question as far as demand is concerned
was built by bankrupt US energy firm institutions the remaining 35.47 is, in many parts of the country there
Enron. The power plant is shut since percent. are still long power cuts of 10-18
January 2014 for want of fuel On the other hand, Ratnagiri Gas hours, said Kumar.
natural gas. Pvt Ltd (RGPL) will be an equal joint So demand is very much there,
Ratnagiri Gas and Power (RGPPL), venture between NTPC and GAIL if generation capacity is very much
the joint venture between state-owned MSEB, which has been offered a small there, fuel supply is there, so the only
power generator NTPC and gas utility stake, does not pick up equity. Of the issue which remains and the most
GAIL which took over the 1,967 `7,800 crore debt of RGPPL, about complicated issue is about discom
mw power plant and adjacent five- `3,000 crore will be transferred to the reforms and their financial health. I
million tonne LNG import terminal new gas company. think if the interest is there and this
in July 2005 will be split into two The generation would be through countrys 21st century dream of 24X 7
firms. use of subsidy on LNG being provided power to all is to be fulfilled, discom
Post split, Ratnagiri Power Pvt Ltd under the Power System Development reforms have to happen, he said.
(RPPL) will have same shareholders Fund (PSDF) set up by the
as its parent RGPPL NTPC and government to help power companies For suggestions email at feedback@infraline.com
 October 2015
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InDepth
Changing bidding norms:
What industry wants?

Government agrees on allowing fuel cost pass-through

Private power developers have urged the govt to broaden the mandate

Infraline Bureau

While the government has accepted
the Suresh Prabhu panels proposal
to revisit the earlier Case-II bidding
criteria for power projects with the
key change of allowing fuel cost
pass-through, it may retain the revised
Case-I norms for plants that entail
relatively higher risk.
The private power developers have
urged the power ministry to broaden
the mandate of the committee and
suggested that similar changes be
incorporated in bidding norms for
Case-1 power plants.
Under Case 1, the developer
chooses the plant location, fuel type
and fuel source along with other
relevant clearances for setting up
a plant. Under Case 2 norms, the
location, type of fuel and its source
are determined and provided by the
government, reducing the project risk
to be borne by the developer.
The rationale behind the different
approaches to the two revised set of
norms both prepared by former
Planning Commission advisor Gajendra
Haldea is that risk mitigation is
embedded in the revised Case-I norms
in the form of unrestricted escalation of
the tariff discovered via auction, based
on an index comprising inflation and
debt reduction.
 October 2015
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InDepth

The revised Case-II norms, on have SHR of 2350 Kcal/kWh can modified under case-1 norms.
the other hand, not only require the bid. This forces more efficient plants As far as the government is
operator to transfer the plant to the to operate at a lower efficiency to be concerned, what gave more credence
state government after the contract eligible for participating in the bid. to Haldeas Case-I norms is the Kerala
life usually 20-25 years but also The developers have argued State Electricity Board (KSEB), which
provide for a cap on fuel cost that can that SHR be made a bidding pioneered a tariff bid that is a quarter
be transmitted. criterion and not a limiting one to less than the (pre-revision) levelised
The bidding norms for both types encourage developers to use more tariffs for such plants found by Tamil
of coal-based power plants were efficient technology. Nadu, Uttar Pradesh and Rajasthan
revised in 2013 but with the failure The committee under Pratyush in the immediate past instances. Of
of ultra mega power plants to attract Sinha reviewing the Case-2 norms course, it needs to be reckoned that the
private developers to participate may recommend removal of these earlier cases were of average levelised
in the bidding, which was blamed clauses. The developers, in their tariff for a 25-year power purchase
squarely on lopsided bid documents-- plea to the government, have agreement whereas KSEBs tariff is
prompted the government to appoint argued that these clauses be also for the first year, which will be used as
a committee mandated to recommend
necessary changes. The private
developers, however, argue that some The rationale behind the different approaches to
of the issues private developers had the two revised set of norms both prepared
with case-2 norms are also a part of by former Planning Commission advisor
Case-1 and hence must be rectified. Gajendra Haldea is that risk mitigation is
As per Case-1 norms, any
developer that enters into a power
embedded in the revised Case-I norms in the
purchase agreement (PPA) with a form of unrestricted escalation of the tariff
10
distribution company must have 20% discovered via auction, based on an index
of the contracted capacity as open comprising inflation and debt reduction. The
capacity that cant be tied up. Further, revised Case-II norms, on the other hand, not
the open capacity can not be operated only require the operator to transfer the plant to
with the coal provided under the
linkage and the developer must source
the state government after the contract life
fuel from other source. usually 20-25 years but also provide for a cap
This clause raises the cost for on fuel cost that can be transmitted
any plant as a developer needs to
have a capacity of 1,000 MW for a
PPA of 8,00 MW so as to maintain
mandated open capacity. Moreover,
given the suppressed power rates in
the merchant market, the developer
would rather not operate this capacity
on expensive fuel and prefer to load
the fixed cost component of the tariff
under PPA, leading to a higher tariffs,
Association of Power Producers
(APP) was quoted writing in a
communication to the power ministry.
The developers also want removal
of pre-specified station heat rate
(SHR) a gauge of plant efficiency
for developers participating in the
bidding process to go as it discourages
more efficient machinery. As per the
Case-1 norms, only those plants that

the base for determining tariff for the
subsequent year as per the escalation
index of the Central Electricity
Regulatory Authority (CERC).
KSEB discovered a first-year
weighted tariff of `4.11 per unit for
865 MW of contracted capacity for
a period of 25 years. Of course, the
fixed cost component of the tariff at
70% is much higher than 30-40% in
case of earlier Case I plants, but a
Kerala government official defended
this, saying the fixed cost in this
instance consisted of transmission
charges and transmission losses.
Private power producers, however,
are slightly wary of revised Case-I
norms despite their evident success in
Kerala, and want it to be revisited.
They feel that even in case of
Kerala, the comparison is being
done between first-year tariff
and levelised tariff over 25 years
discovered by other states. The tariff
for Kerala will see an upward tick for
subsequent years.
October 2015
www.InfralinePlus.com
11
The developers also want removal of pre-
specified station heat rate (SHR) a gauge of
plant efficiency for developers participating
in the bidding process to go as it discourages
more efficient machinery. As per the Case-
1 norms, only those plants that have SHR
of 2350 Kcal/kWh can bid. This forces more
efficient plants to operate at a lower efficiency
to be eligible for participating in the bid.
The developers have argued that SHR be
made a bidding criterion and not a limiting
one to encourage developers to use more
efficient technology
Private developers had petitioned own. The petition urged the ministry
the power ministry that the DBFOT to go back to the earlier build-
(design-build-finance-operate-transfer) operate-own (BOO) norm, which was
model for UMMPs, as per the revised used for bidding out UMPPs before.
case II guidelines, was not ideal This view was also echoed by the
for such projects as lenders found Prabhu panel.
it difficult to provide loans against
projects that the developers did not For suggestions email at feedback@infraline.com
 October 2015
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InConversation
Government need to take steps and fix
the health of distribution companies
Yoshiaki Inayama,
Managing Director, Toshiba
JSW Power Systems Pvt.
Ltd. (TJPS), talks about the
challenges in Indian power
sector and his companys
world-class end-to-end
solutions in thermal power.
Toshiba is a globally-
renowned power generation,
transmission and distribution
equipment supplier
12 As India is focussing on
accelerating its economic
growth, there would be
increased demand for electricity
from all forms possible.
How soon do you think can
India bridge this demand and
supply gap?
We understand that Government
of India has announced to make
available Power for all by 2019.
In view of same there is urgent need
to establish large number of power
generation Projects, enhancing
Transmission and distribution
network including metering all power
generated. To achieve this goal, all
stake holders need to contribute in
concerted efforts covering Regulatory
aspects, financial aspects, long term
fuel allocations, revenue recovery
etc. for making the Power sector
viable and sustainable.
We at our end would continue to
support the initiatives of Government
by contributing in terms of providing
Technologies and services that help in
bridging the supply-demand gap.
Yoshiaki Inayama, Managing Director
Toshiba JSW Power Systems Pvt. Ltd. (TJPS)
What are the major challenges
that you see in building power
infrastructure?
In last couple of months we do
observe the initiatives taken by
government in ease of doing business
in India and especially in Power
sector which requires immediate
attention towards infrastructure
development covering Ports, transport
infrastructure, Land availability,
desired water allocation, development
of Coal mines, Transmission and
distribution network.
We further understand the
Government is putting its effort to
ease the financial stress of distribution
companies. The Regulatory and
planning aspects have matured over
the years, however, the development
of infrastructure, Land acquisition and
Uniform Financing/Tax laws need to be
addressed to meet the targeted installed
capacity for the next 10 years.
Toshiba has been contributing in
the providing power solutions in
India. But with recent the thrust
on power generation sector, do
you feel there is a need to revisit
companys strategy in meeting
the renewed demand of India?
Toshiba JSW made its foot print in
India as a power generation equipment
manufacturer. Subsequently to catch
up with the market requirement and
to make use of our parent company
Toshiba Corporations global
experience in power sector, Toshiba
JSW has already transformed into
an Engineering, Manufacturing,
Procurement, Construction and
Service (EMPCS) organization. Again,
to meet the recent market trend of
Ultra Super Critical technology, we
are equipping ourselves to supply
equipments and systems to execute
1x660 MW Harduaganj STPP on
Turnkey EPC project, which we
recently received from UPRVUNL.
So, we are well equipped to catch the
market trend and requirement at any
point of time.
In the past, India has suffered
a lot on account of delays in
commissioning of projects
be it for any reason. It is very
important to deliver the work in
the given deadlines. What kind
of challenges do you see for
yourself going forward?
Our Parent company Toshiba
Corporation, Japan have in the past
and for our on-going projects, always
endeavoured to in completing power

projects well within targeted schedule.
Toshiba Corporation, Japan could
achieve this because of its 12 decades
of global experience and support from
dependable and quality conscious
suppliers. Now, Toshiba JSW has
huge responsibility of developing such
dependable and quality conscious
India based suppliers. As of now, this
is the biggest challenge we are facing
to fulfil our motto of Japanese quality
supply and services at Indian price.
Recently the activeness of
private players in the power
sector has come down.
What do you think should be
done to bring them back in
power sector?
To maintain the competitiveness and
sustained growth, Indian power sector
requires participation from both public
and private players. In India, about
37% of installed capacity belongs
to private players. Fuel shortages,
lower demand and tremendous
banking exposure have driven them
temporarily out of the market.
To bring them back, on priority
basis the Government need to
take steps and fix the health of
distribution companies. Next
on priority is ordering of UMPP
projects. Government should
continue to encourage the Make in
India initiative by keeping Phased
Manufacturing Program (PMP) as
a mandatory requirement for the
EPC companies and equipment
manufacturers to participate in
the private and public sector
power projects.
Kindly share your current order
book and by when do you think
the projects would be ready for
commissioning?
We are currently executing STG island
projects on EPC basis for 3 x 800 MW
NTPC Kudgi Super Thermal Power
project, 2 x 660 MW MUNPL Meja
October 2015
www.InfralinePlus.com
Thermal Power project, 2 x 800 MW development of technologies for
NTPC Darlipalli Super Thermal Power deployment for generation of power
Project and turnkey EPC contract of must be for better environment.
1 x 660 MW, UPRVUNL Harduaganj For achieving same, we continue to
Ultra-supercritical Thermal Power innovate and deploy technologies that
Project. We have also established our enhance efficiencies for reduction in
service business to cater to Indian carbon emissions. We see over the
power sector. We are committed to years Government of India encouraging
complete the above projects as per the deployment of Super Critical
schedule specified in the contract. technology and now deploying Ultra
Super Critical technology. Toshiba
At a time when the world & India JSW, which is backed by its parent
is shifting its focus on clean company Toshiba Corporation, Japan is
energy generation sources, well equipped to cater to the growing
what kind of opportunity do you needs of Indian power sector in
see for companies operating in application of efficient Technologies to
thermal power segment. What support reduction carbon emissions.
are your long term plans?
We as responsible corporate consider
For full version of the interview, visit www.infraline.com
it our obligation to ensure that For suggestions email at feedback@infraline.com
13
SUPER-CRITICAL MEGA THERMAL
POWER PROJECT FOR SALE
A Super-critical Mega Thermal Power
Project to be located in Sambalpur
district of Odisha for which MoU has
been signed with the State Government
is up for sale. 6 (1) declaration for Land
Acquisition has already been issued and
the Land Acquisition is in progress. Water
already allocated by the Government
with various other statutory clearances.
Interested parties may contact:
Mr. UMA SHANKAR RATH, Director,
Mobile No.- 09437481555/ 09937020940.
 October 2015
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InDepth
Tariff issues continues to
dent NTPC revenues

14

NTPC wants regulators to cap cost-plus tariff at `3.30/unit

With an installed capacity of 45,548 MW NTPC accounts for 16.5% of Indias power generation

Infraline Bureau

Government-owned NTPC, the
largest thermal power producer in the
country, is grappling with declining
profits in a series of quarterly results
over the last two years. The PSU
has sought to lay the blame on the
regulatory uncertainty for denting
its performance and has called for
a less intrusive regulatory regime
citing a fully matured power sector
in the country.
Meanwhile, the power producer has
appointed international consultancy
firm KPMG to device a new strategy
to face the evolving challenges. The
consultant has been given the task to
revise the Corporate Plan 2032.
In the last five quarters, the
company, which provides 25% of
the base load for the country from
a installed capacity of over 45,000
MW, has only had one quarter in
which its profit rose year over year as
well as sequentially.
The slide in the companys profit
began with the new regulations for
defining operative norms and fixing
multi-year tariff brought about
the Central Electricity Regulatory
Commission (CERC) for the control
period of five years from 2014-19.
These regulations are for companies
that have entered into cost-plus tariff
pacts like NTPC.
Two regulations, among several
other changes, which includes those
 October 2015
www.InfralinePlus.com

pertaining to change in incentive
structure from plant availability
factor (PAF) to plant load factor
(PLF) and withdrawal of tax arbitrage
as the most damaging for the
companys profitability.
NTPCs PLF, which is a measure
of average capacity utilization, was
81.5% in 2013-14 against 83.08%
in 2012-13 for coal-fuelled projects.
Also, there are no takers for around
5,000 megawatts (MW) of electricity
offered by the utility.
In additions, State Electricity
Boards or government-owned discoms
with debt of `3.04 trillion and losses
of `2.52 trillion are on the brink of
financial collapse. Lower demand
for power translates to a lower PLF.
NTPCs core business is generation
and sale of power to discoms.
The company has been trying to
keep the tariff of power generated
by its various projects to an average
level of under `3 a unit and to supply
severely in employing innovation to plant due to a tariff of over `5/unit.
improve efficiency. The first change in regulation
This also means that if regulations has rendered the power producer
were only limited to the tariff helpless as PLF is a function of
ceiling then states wouldnt resort to demand of electricity which has
relinquishing their allotted power as been low over the last 2-3 years
was the case with Delhi and Harayana, due to the inability of state-owned
the two states that have stopped buying distribution companies to buy power
power from NTPCs Jhajjar power owing to high level of indebtedness
The slide in the companys profit began with the
new regulations for defining operative norms
and fixing multi-year tariff brought about the
Central Electricity Regulatory Commission
(CERC) for the control period of five years from
2014-19. These regulations are for companies
that have entered into cost-plus tariff pacts
like NTPC. Two regulations, among several
other changes, which includes those pertaining
to change in incentive structure from plant
availability factor (PAF) to plant load factor (PLF)
and withdrawal of tax arbitrage as the most 15

power at a uniform rate across the damaging for the companys profitability.
country. In the last fiscal year, the
average rate of electricity sold
by NTPCs coal-fuelled projects
was `3.25/unit, while the tariff of
power from its other projects ranged
between `2 and `4.50/unit.
Kulamani Biswal, director finance
of NTPC has been recently quoted
by a financial daily saying, The
regulator should just fix a tariff ceiling
based on the average cost of supply
for the country and let the company
decide the operating details of its
plants to be able to adhere to the
ceiling while making profits.
NTPC wants that regulators
should cap cost-plus tariff at `3.30/
unit average cost of supply in the
country and should stay away from
calculations that involve operations
and maintenance cost (O&M) and
other cost involving amount of oil
used in different plants. A tariff
arrived at after an elaborate process
not only consumes time and energy
of the company but restricts it
 Despite this, we believe that NTPCs ROE has bottomed out and will improve.

More2015
October coal + Higher capacity = EPS growth revival + ROE expansion
www.InfralinePlus.com
NTPC currently has an installed capacity of 44.4GW and has another 22.7GW of
InDepth
capacity under construction to be installed by 2020. We estimate that about 13GW
(30% of current installed capacity) of capacity will come on stream by FY18 despite
assuming one year delay to companys targets. In addition, the company is
committed to add about 10GW of solar power generation capacity by FY20.

NTPC generation capacity that is available.

Exhibit
1: Capacity addition
NTPC Capacity trend
addition trend
Similarly, under old regulation,
(GW) Capacity Addtion (GW) - Actual Capacity Addtion (GW) - BNPPe New companies were allowed to retain
9.0 tax benefits by recovering higher
7.7
8.0 tax from the consumer even if they
7.0 actually pay lower tax. This has been
6.0
5.7 withdrawn and companies like NTPC
5.0 can avail benefit of only what they
4.3
4.0
3.8 have paid. This second change has
3.3
further ensured that NTPC takes a hit
3.0
2.1 1.9 2.2 on profitability.
2.0 1.4
1.2 1.2 Effectively, CERC linked future
1.0 financial incentives with the purchase
0.0 of power by distribution companies.
FY10 FY11 FY12 FY13 FY14 FY15 FY16E FY17E FY18E FY19E FY20E
Since these utilities are strapped for
Sources: NTPC; CEA, BNP Paribas estimates
funds, they are buying less power
As coal production from Coal India has improved, we assume that new capacities will from distribution companies and PLF
have sufficient coal to be available for generation 83% of the time in a year the is often lower than PAF, which means
NTPC wants that regulators should cap cost-
minimum required to earn the base ROE of 15.5%. NTPC would be entitled to fewer
plus tariff at `3.30/unit average cost of financial incentives.
We estimate that a significant rise in capacity addition will drive 17% CAGR in
supply in the country and should stay away
NTPCs regulated equity which is the portion of equity that will generate regulated
Meanwhile, NTPC has also
from
ROE of 15.5%. calculations that involve operations voiced its apprehensions about the
and maintenance cost (O&M) and other cost lapsing of a tripartite agreement
between the Reserve Bank of India,
16 involving amount of oil used in different plants. the Union government and the state
A tariff arrived at after an elaborate process not governmentswhich provided
only consumes time and energy of the company comfort to power producers against
but
3 restricts it severely in employing innovation
BNP PARIBAS payment defaults 31by SEBs.
AUGUST 2015
to improve efficiency The agreement lapses in October
2016, with no certainty that a
replacement will be ready in time.
and shortage of working capital. not plant availability factor (PAF), Under the existing agreement, any
An earlier CERC order had said as before. PLF is based on the state defaulting on dues owed to
incentives would be based on the actual power that is generated by a power companies risks a deduction
plant load NTPC
NTPC factorIN(PLF) metric and plant, whereas PAF measures the from its annual transfers. SoGirish
far, this
Nair
clause has not been invoked as the
Growth in NTPCs regulated equity threat of a deduction has ensured
Exhibit 2: Growth in NTPCs regulated equity
timely payment by SEBs.
(INR b) Regulated Equity (Consol.) (LHS) Growth rate (RHS) (y-y %)
NTPC has an installed capacity
900
802
25 of 45,548 MW and a 16.5% share in
22.4
800 Indias power generation capacity of
703
700
612
20 275,912 MW. It plans to set up 10,000
600 14.9
14.0
MW of solar power projects on its
500 15
500 445 own. It is also procuring 15,000 MW
410
400 8.6
on behalf of the government. The
12.3 10
300 utilitys green power plans involve
200 4.0 renewable energy contributing
5
100
28% of its planned capacity of
128,000 MW by 2032.
0 0
FY15 FY16E FY17E FY18E FY19E FY20E
Sources: Company; BNP Paribas estimates
For suggestions email at feedback@infraline.com
High capacity addition will also meaningfully reduce the portion of NTPCs equity that
is stuck in projects under construction and earning no returns. Consequently, overall
company level ROE will go up even though profitability of the operating power plants

InDepth
NTPC, IIFCL, and IRFC to raise
cheaper funds from overseas
Financial institutions are preparing to raise money through this route
NTPC plans to raise $500 million through rupee bonds
Infraline Bureau
National Thermal Power Corp.
(NTPC), India Infrastructure Finance
Co. Ltd (IIFCL), and Indian Railway
Finance Corp. Ltd (IRFC) are
planning to raise funds from overseas
and are laying the groundwork to issue
rupee-denominated bonds sometime
early next year.
With the Reserve Bank of India
(RBI) issuing the final guidelines
allowing domestic companies to raise
rupee-denominated overseas bonds,
at least three financial institutions
are preparing to raise money through
this route.
Rupee-denominated bonds
will help these institutions raise
cheaper funds from overseas
markets, simultaneously shifting the
burden of hedging against foreign
currency fluctuations to the investors
buying these bonds, according to
October 2015
www.InfralinePlus.com
17
officials at these institutions.
To be sure, these domestic
institutions are counting on the
National Democratic Alliance
government to remove existing tax
hurdles at the earliest for these issues
to be a success. These tax issues
were discussed at a meeting between
foreign portfolio investors and finance
ministry officials recently.
The government has given an
 October 2015
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InDepth
assurance that it will look into these
issues and address them in the next
few months either through legislative
changes or through official circulars to
encourage foreign investors to invest
in these issuances, said officials.
The government is expected to
soon clarify that a lower withholding
tax of 5% will be applicable on
interest payments on these bonds, on
par with the tax treatment on foreign
currency borrowings.
Investors are also seeking an
exemption from the levy of capital
gains tax on income from these bonds.
We are planning to raise funds
through rupee-denominated bonds for
an equivalent of $500 million, said
18
Sanjeev Kaushik, deputy managing
director of IIFCL.
We are looking to do the issuance
early next year. We are awaiting
clarity from the government on some
of the tax issues.
The timing of the issues will also be
key to raising the bonds at attractive
interest rates as an increase in interest
rates by the US Federal Reserve
may result in higher costs for these
institutions.
The financial institutions are
hoping that the changes are done over
the next couple of months and that the
government does not wait until the
budget session to bring in the changes.
An IRFC official said, We are also
The government has
given an assurance
that it will look into
these issues and
address them in the
next few months either
through legislative
changes or through
official circulars to
encourage foreign
investors to invest
in these issuances,
said officials. The
government is
expected to soon
clarify that a lower
withholding tax of 5%
will be applicable on
interest payments on
these bonds, on par
with the tax treatment
on foreign currency
borrowings
exploring the option. We are targeting
December-January for issuing the
rupee bonds. However, he did not
divulge the size of the issue.
NTPC Ltd also plans to raise $500
million through rupee bonds this
fiscal. Economic Laws Practice, a law
firm, said, Rupee bonds will not only
provide an additional route for Indian
entities to access foreign funds, but will
also help in avoiding currency risk in
a highly volatile market as the rupee
bonds are denominated in rupees.
Additionally, some markets may
require bonds to be rated. Considering
that the rupee bonds may be secured
and/or supported by guarantee, there
will be a high chance of such rupee
bonds receiving a good rating and
thereby would be cheaper for the
issuer, it added.
For suggestions email at feedback@infraline.com
 October 2015
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StatisticsPower
NTPC Station Tariff 2014
Name of the Generating Station Installed Capacity Fixed charges (INR/ Energy Charges (INR/ Total Tariff (INR/kWh)
(MW) as on March, kWh) kWh)
2015
Pit head Generating Stations
Rihand STPS (St-III) 1000 1.36 1.7 3.06
Singrauli STPS 2000 0.57 1.23 1.8
Vindhyachal STPS (St-I) 1260 0.87 1.68 2.54
Vindhyachal STPS (St- II) 1000 0.83 1.58 2.42
Vindhyachal STPS (St- III) 1000 1.3 1.57 2.88
Vindhyachal STPS (St- IV) 1000 1.59 1.58 3.17
Korba STPS (St-I & II) 2100 0.58 1.05 1.63
Korba STPS (St-III) 500 1.66 1.04 2.7
Ramagundam STPS (St- I&II) 2100 0.61 2.44 3.05
Ramagundam STPS (St- III) 500 0.93 2.54 3.47
Talcher TPS 460 1.89 1.25 3.14
Talcher STPS (St-I) 1000 0.88 1.46 2.34
Talcher STPS (St-II) 2000 0.79 1.46 2.25
Sipat STPS (St-I) 1980 1.51 1.41 2.93
Sipat STPS (St-II) 1000 1.44 1.41 2.85
Sub-Total (A) 20900
Non-Pit head Generating Stations
FGUTPP TPS (St-I) 420 0.92 2.82 3.73
FGUTPP (St-II) 420 0.95 2.75 3.7
FGUTPP (St-III) 210 1.39 2.75 4.14
NCTP Dadri (St-I) 840 0.9 3.88 4.78
NCTP Dadri (St-II) 980 1.82 3.63 5.46
Farrakka STPS (St-I&II) 1600 0.98 2.95 3.93
Farrakka STPS (St-III) 500 1.88 2.92 4.8
Tanda TPS 440 1.13 3.37 4.5 19
Badarpur TPS 705 1.32 4.58 5.89
Kahalgaon STPS (St-I) 840 1.02 2.58 3.6
Kahalgaon STPS (St-II) 1500 1.42 2.42 3.84
Simhadri (St-I) 1000 1.06 2.61 3.66
Simhadri (St-II) 1000 1.69 2.59 4.28
Mauda STPS (St-I) 1000 4.47 3.77 8.24
Barh STPS (St-II) 660 2.52 3.7 6.21
Sub-Total (B) 12115
Total Coal (A+B) 33015
II: Natural Gas (APM & Non-APM)/LNG/Liquid Fuel based generating stations of NTPC
A: Using Natural Gas(APM) as Fuel
Anta CCGT 419.33 1.3 3.01 4.31
Auraiya GPS 663.36 1.62 3.68 5.31
Dadri CCGT 829.78 1.38 3.64 5.02
Faridabad GPS 431.59 1.59 2.77 4.36
Gandhar GPS 657.39 3.24 2.55 5.79
Kawas GPS 656.2 2.52 2.77 5.29
Total APM Gas 3658
B: Using Natural Gas(Non-APM) as Fuel
Gandhar GPS 657.39 3.24 3.33 6.57
Kawas Gas 656.2 2.52 3.38 5.9
Total Non-APM Gas 1314
C: Using LNG as Fuel
Anta CCGT 419.33 1.3 9.1 10.4
Auraiya GPS 663.36 1.62 11.1 12.73
Dadri CCGT 829.78 1.38 10.92 12.3
Faridabad GPS 431.59 1.59 10.41 12
Gandhar GPS 657.39 3.24 9.09 12.33
Kawas GPS 656.2 2.52 9.29 11.82
Total Naphtha/HSD 3658
D: Using Liquid Fuel (Naphtha/HSD) as Fuel
Auraiya GPS 663.36 1.62 9.95 11.57
Dadri CCGT 829.78 1.38 6.55 7.93
Kayamkulam CCGT 359.58 2.78 12.22 15
Total Liquid Fuel 1853
 October 2015
www.InfralinePlus.com

StatisticsPower

Central Power Stations Tariff 2014

Utility Name of the Generating Type Installed Capacity Annual Fixed Charges Composite Tariff (INR/
Station (MW) (INR/Lakhs) kWh)
NHPC Baira siul Pondage 180 11917.15 1.75
Loktak Storage 105 10695.13 2.73
Salal ROR 690 27094.44 1.01
Tanakpur ROR 123 8837.69 2.24
Chamera-I Pondage 540 29071.90 2.01
Uri-I ROR 480 33853.30 1.50
Rangit Pondage 60 8134.24 2.76
Chamera-II Pondage 300 34313.96 2.63
Dhauliganga-I Pondage 280 27569.10 2.79
Dulhasti ROR 390 95214.01 5.74
Teesta-V Pondage 510 49709.79 2.22
Sewa-II Pondage 120 18790.14 4.05
Chamera-III* Pondage 231 39043.13 4.13
Chutak* ROR 44 11985.34 6.47
Uri-II* ROR 240 74740.16 7.65
Nimoo Bazgo* Pondage 45 12326.06 5.91
Teesta-LDP Pondage 132 78426.37 15.15
Parbati-III* ROR 520 474.56 0.08
Total 4990
NHDC Indira Sagar Storage 1000 50756.03 2.59
Omkareshwar Storage 520 39699.92 4.76
Total 1520
THDC Tehri Stage-I Storage 1000 145823.62 6.05
Koteshwar* Pondage 400 38316.27 3.81
1400
20 SJVNL Naptha Jhakri RoR 1500 155755.70 2.59
Rampur HP RoR 412 37938.56 2.32
NEEPCO Khandong Storage 50 3251.75 1.34
Kopili Stage-I Storage 200 8170.63 0.79
Doyang Storage 75 8041.32 4.06
Ranganadi Pondage 420 29535.47 1.81
Kopili Stage-II Storage 25 1322.83 1.76
Total 770

NewsBriefs | Coal
Coal India Ltd finds few takers for coal in special
e-auction
The coal ministrys special e-auction scheme for 2015 had few
bidders as companies found that the floor price fixed was too high,
much above the current global prices. While there were eight
companies participating in the bid, the auction nearly failed to get any
premium above the floor price. The ministry, under a special e-auction
scheme for power producers, offered 5 million tonne for sales. But
MSTC could auction less than half the quantity that CIL offered, an
MSTC official said. For power plants having long-term and medium-
term power purchase agreements (PPAs) the reserve price was set
at 20% (of the CIL notified price) plusthe CIL notified price for the
power sector. For power plants having short-term PPAs or no PPAs at
all, the price was set at 40% plus the CIL notified price.
Coal Ministry asks state governments to hasten
transfer of coal blocks
The coal ministry has requested state governments to expedite
transfer of coal blocks and grant necessary clearances to new
operators so that mining can start soon, according to a senior official.
The Centre has said states cannot consider such transfers as fresh
applications, a clarification that will help cut delays. Last year the
Supreme Court had cancelled all coal blocks allotted to private
companies saying they were illegal. Since then, the government
has auctioned 34 blocks of which 11 are operational. Of these, only
seven blocks have been able to start mining operations. Industry
associations have complained that state governments are delaying
transfer of land in these blocks. Various departments have also
declined to pass on the clearances from their previous operators to
new ones, they have alleged. The coal ministry, in a recent letter to
states, clarified that the Coal Mines (Special Provisions) Act of 2015
overrides all other laws that are inconsistent with it and will prevail
on any other Acts that provides for revaluation of land.
Indias coal import drop 27 percent
Helped by increase in domestic production of the fuel, coal imports in
India dropped for the third successive month in September by 27 per
cent to 12.6 million tonnes as compared to the year-ago period. Coal
Secretary Anil Swarup tweeted, With unprecedented increase in coal
production by Coal India, import of coal comes down for third successive
month. Coal India which accounts for over 80 per cent of the domestic
coal production is targeting one billion tonnes of coal production by
financial year 2020. Coal secretary further added that the coal imports
declined to 12.6 million tonnes last month as against 17.3 million tonnes
of import in September 2014. In value terms, he added, it declined by 30
per cent from `598 crore to `6,027 crore last month.
Central Coalfields gets green nod for Pichri open
cast mine
Central Coalfields Ltd (CCL), a Coal India subsidiary, has got
environment clearance for its `228 crore Pichri open cast mine to
produce up to 1.5 million tonnes per annum coal in Bokaro district in
Jharkhand. Pichri OCP is a new mine envisaged to produce washery
grade-IV coal to meet the demand of medium coking coal. Based
on the recommendations of the Expert Appraisal Committee, the
Environment Ministry has given the environment clearance to
Pichri open cast mine project of the Central Coalfields Ltd, a senior
Environment Ministry official said. The life of mine is only three years.
And the environment clearance to the project has been given with
some conditions, the official added.
October 2015
www.InfralinePlus.com
Govt allows captive power plants to take part in Coal
India e-auctions
The Coal Ministry has made a one-time
exception to allow captive power plants to
participate in the e-auction for coal by Coal
India. In a letter to Coal India recently, the
Ministry said that 8.5 million tonnes may
be offered under the traditional forward
e-auction for power producer up to March
31, 2016. Captive power plants can provide
49 per cent of their power generated to
the grid. Further, captive power plants shall not draw power from
the grid to the extent of their own generated power, that is 51 per
cent of the capacity, the Ministry said. It added that since captive
power plants are treated under the non-power sector, such plants
will need to pay 20 per cent more than the price applicable for the
power sector.
Captive coal mines production rises 34% to 53 MT
in FY15
Coal production from captive mines last fiscal witnessed a
significant rise of 33.64 per cent at 52.769 million tonnes (MT) over
the previous year. Coal production in FY 2013-14 stood at 39.484
MT, according to provisional data from the last fiscal, according to
provisional coal production data of the last fiscal. The government
is eyeing to achieve 1.5 billion tonnes of coal production by 2020.
During the year 2014-15, captive coal blocks contributed 52.769
MT of coal to all India coal production of 612.435 MT, it said. As
per the government document, out of total allocated 218 mines 21
80 blocks were de-allocated by the end of fiscal 2013-14. Thus at
the end of 2013-14, 138 coal blocks remained allocated under the
category of captive coal blocks. However, by virtue of the Supreme
Court order in September last year out of 218 captive coal mines,
allocation of 204 blocks was cancelled for fresh allocation. Around
42 producing coal blocks were allowed to produce coal up to March
31, 2015 and allocation of 14 mines was not cancelled, it said. The
government had earlier expressed confidence that the country will
produce 1.5 billion tonnes of coal by 2020, including one billion
tonnes by Coal India.
Mega Tree Plantation Drive by Tata Power Delhi
Distribution
Tata Power Delhi Distribution
(TPDDL) recently organized a mega
tree plantation drive to contribute
to a greener and sustainable
planet, in association with CRPF,
ITBP, RWAs, IWAs and various
schools & colleges. TPDDL has
been recognized as one of the Greening Agencies by Department
of Forest & Wildlife, GoNCTD. With mega tree plantation drive,
TPDDL aims at spreading message of ecological restoration by tree
plantation. The tree plantation drive is a continuation of TPDDLs
mega plantation campaign Harit Ek Pahal, which was launched
4 years back. Under the mega plantation drive Harit Ek Pahal,
TPDDL has planted over 95,000 saplings till now out which 16,000
have been planted this year. Besides this, Company has always set a
standard in adopting sustainable practices in its business model by
providing customers access to energy-efficient processes and using
innovative technology.
 October 2015
www.InfralinePlus.com
NewsBriefs | Coal
CPPs oppose Coal ministry move to scrap fuel
linkages
Captive power producers (CPPs) have opposed the proposal of Coal
ministry to do away with coal linkages for such units. The Indian
Captive Power Producers Association (ICCPA) feels this retrograde
step will blunt the competitive edge of CPP based industries that have
grounded huge investments in the last two decades. Coal based CPPs
with capacity of 41,000 Mw that have invested more than `two lakh
crore are set to be jeopardised if the proposal takes effect. Besides,
the move is also seen to affect investments of the order of `65 lakh
crore in related industries.
No green nod for Coal India to expand output in
existing units
State-owned Coal India, which is targeting 908 million tonnes
of output by 2020, has been denied environment clearance for
expansion of one-time production capacity by 50 per cent in
existing operations without public hearing. With future coal mining
projects stuck in delay over acquisition of land and rehabilitation
and resettlement (R&R) issues, among others, CIL had applied for
environment clearance for one-time production capacity expansion
by 50 per cent in existing operations without public hearing. Blanket
permission for 50 per cent expansion without public hearing under
7(ii) of EIA Notification, 2015, and without capping for sustainable
mining cannot be given, an Expert Appraisal Committee (EAC) of
the Environment Ministry said after assessing the proposal at a
recent meeting.
22
Govt tells coal power plants to subsidize 15GW of
solar power
Prime Minister Narendra Modis government has ordered some of
Indias oldest coal-fired power plants to help make solar farms more
competitive by bundling together electricity from both technologies
for sale to the grid. The decision requires state-controlled NTPC Ltd
to sell cheaper coal power along with more expensive solar as a
single unit. The effect of the order is to reduce the price distribution
companies pay for solar power and force them to take more of the
cleaner form of energy. The mechanism is unique to India, where
the state-run distribution companies have been losing money
because theyre unable to charge customers enough to cover the
costs of electricity they buy in the market. The programme will help
persuade distributors to buy solar power and support Modis goal of
having 100 gigawatts of solar capacity by 2022, up from less than
4 gigawatts now.
Mumbai Port Trust to stop handling coal
Mumbai Port Trust has decided to put an end to its coal handling
operations in Sewri. There was a campaign against the port trusts
handling of coal highlighting the extent to which the coal has
devastated the environment and severely affected the health of
those living around it. About 1.5 lakh metric tonnes of coal form
toxic mountains on the eastern sea front today. Fisherfolk, residents
and students at a nearby maritime institution suffer respiratory
problems because of it. The phlegm they cough up each day is black
with coal. Warehouses in the area have lost business as coal dust
accumulates in them. Much of the imported coal, which arrives by
ship and is stored on port lands, is then transported by rail wagons
to Mahagenco plants in Nashik and Bhusaval. A portion of the coal
is used by local steel plants.
Centre may cut down number of coal blocks linked
to UMPPs in Odisha, Jharkhand
The government is likely to trim the coal blocks attached to the
proposed ultra mega power projects (UMPPs) in Odisha and
Jharkhand to ensure that the winning companies do not get excess
coal with the projects. The coal ministry has asked its technical team
to split two coal blocks which were attached to the Tilaiya UMPP
in Jharkhand that had been surrendered by Reliance Power. The
company last week dragged the government to Delhi High Court for
cancelling a surplus mine attached to the Sasan UMPP in Madhya
Pradesh. The coal ministry has written to the Central Mine Plan and
Design Institute (CMPDI) to review the coal block allocation to the
Tilaiya UMPP, a government official said.
NTPC commissions Unit 1 of 500 MW of Vindhyachal
Super Thermal Power Station
NTPC has commissioned Unit - 1 of 500 MW of Vindhyachal Super
Thermal Power Station. With this, the total installed capacity of
Vindhyachal Super Thermal Power Station has become 4,760 MW
and the total installed capacity of NTPC group has become 45,548
MW. NTPC is the largest power generating company in the country. It
has also diversified into hydro power, coal mining, power equipment
manufacturing, oil & gas exploration, power trading & distribution.
One-third of coal blocks up for auction in wildlife
habitats
The latest survey conducted using Global Information System (GIS)
by Greenpeace India shows that of the 101 coal blocks that are up for
auction this year, 35 are in the habitats of tigers, leopards or elephants.
Twenty of these blocks are within 10 km of a protected forest area
or within 15 km of an identified wildlife corridor. An order issued by
the Ministry of Coal on December 18, 2014, had identified these 101
coal blocks for auction/allotment. The blocks are spread across
eight States - Madhya Pradesh, Jharkhand, Orissa, Chhattisgarh,
Maharashtra, Andhra Pradesh, Arunachal Pradesh and West Bengal. Of
the blocks up for auction, 39 critical blocks cover a total forest area of
more than 10,500 hectares. Greenpeace India collected GIS data from
five States for 46 coal blocks spread over 10 coal fields. Data for the
remaining 55 blocks of 101 was not available. In addition, many village
boundaries overlap with the areas of the listed blocks, which call for
approvals from grama sabhas under the Forests Rights Act, 2006, and
prior to forest diversion under the Forest Conservation Act 1980.
Environment panel refuses expansion of coal mine in
Chhattisgarh
An environment ministry committee has declined the expansion of
a major mine run by a Coal India subsidiary in Chhattisgarh citing
serious violation of environmental laws, including not being able
to maintain air quality in its area of operation. The Kasmunda coal
mine expansion proposal of South Eastern Coalfields, a Coal India
subsidiary, had sought environment approval for a 10-time expansion
of its existing mining capacity from six million tonnes per annum. The
request was, however, opposed by local environment groups and the
EIA Resource Centre, saying the mining in the area has resulted in
high air and water pollution in Korba district of Chhattisgarh, home
to a large number of tribals. The ministry expert appraisal committee
on coal mining, in its last meeting, found value in the contention of
the NGOs as the project proponent failed to give satisfactory replies
to the allegations.

InDepth
Power project developers reluctant
to mine coal from bid-out blocks
Reluctance stems from the governments decision to cap the fixed charges
Developers had bid aggressively to secure coal mines in recent auctions
Infraline News Service
Power project developers who had
bid aggressively to secure coal mines
in the auctions conducted by the
government this year are reluctant
to mine them. According to a report
titled, Coal block Auctions: A
Win or a Winners Curse?, by the
consultancy PricewaterhouseCoopers
(PwC) and the lobby group Indian
Chamber of Commerce, the reluctance
stems from the governments
decision to cap the fixed charges.
On account of the uncertainty of
coal cost recovery, firms are reluctant to
proceed with the coal block takeover and
subsequent operations, said the report.
Electricity tariff have two parts.
One, fixed cost, the investment
incurred towards power generation
equipment, and variable cost or the cost
of fuel, in this case coal. Analysts have
maintained that the rationale behind
October 2015
www.InfralinePlus.com
23
the aggressive bidding was to recover
the costs by transferring them to the
fixed-cost component.
The government has termed the
coal block allocation process as a
successful template for the allocation
of natural resources in India. It plans
to mine 1.5 billion tonnes of coal by
2020. Of this, one billion tonnes is from
Coal India Ltd and 500 million tonnes
from non-Coal India sources in line
 October 2015
www.InfralinePlus.com

InDepth

with the governments push to raise though achievable, is now a challenge. fixed capacity charge in the upcoming
natural resources production to kickstart A total of `3.35 trillion will accrue competitively bid PPAs (power purchase
economic growth. to the states from 66 blocks, which agreements) for the capacity which is
On account of the uncertainty of are being awarded through a mix of yet to be tied-up.
coal cost recovery, firms are reluctant to auctions and allotments to state-owned Further, ability of the bidder (who is
proceed with the coal block takeover and public sector firms. Additionally, yet to tie-up capacity) to quote a higher
subsequent operations, said the report. electricity tariff benefits totalling fixed capacity charge so as to recover
In the power sector, all the block `69,311 crore will accrue to state the under-recovery in fuel cost in a
auctions till date have gone into forward distribution companies. competitive bidding process remains to
bidding, i.e. the cost of coal will not Ratings agency Icra Ltd in a report be seen, the Icra report added.
be passed through to customers, while wrote, The winning bidders may However, the governments decision
owners have committed an additional however look at options to bridge the to cap fixed charges has put a spanner in
premium to the government, which is under-recoveries in fuel cost using the the works.
likely to reduce tariff, the PwC report additional gains generated from sale of Further, in order to capture the
said, adding, With the inputs negatively 15% of the generation capacity in the amount of fixed charge that can be
priced or priced at a high cost, the merchant/short-term trading market as passed through in the power tariff, GoI
sustainability of their pricing strategy, well as possibility of quoting higher (Government of India) proposed to
cap the fixed charge, which will inhibit
the companies from recovering their
The government has termed the coal block entire costs. GoI recently published
allocation process as a successful template the new standard bidding documents
for the allocation of natural resources in which prescribe that the fixed cost will
India. It plans to mine 1.5 billion tonnes of be capped based on the inputs from the
24 coal by 2020. Of this, one billion tonnes is state regulators. This might have some
from Coal India Ltd and 500 million tonnes effect on the firms, especially those
which bid aggressively.
from non-Coal India sources in line with Recently, Monnet Ispat proposed to
the governments push to raise natural surrender its Utkal C coal block owing
resources production to kickstart economic to the proposed cap on fixed charge in
growth. On account of the uncertainty of the judiciary, the PwC report said. The
coal cost recovery, firms are reluctant to government has clearly stated that it
proceed with the coal block takeover and would not allow miners to smuggle
costs as it would defeat the purpose of
subsequent operations, said the PwC report reverse auctioning of coal blocks.
The whole idea of coal auctions
was to bring the tariffs down. That
we have been saying time and again.
Having said that, if some people still
want to understand that they will be
able to smuggle this as fixed price,
its their problem, Anil Swarup, coal
secretary had said.
This comes in the backdrop of
several private project developers
dressing up their accounts while
approaching banks for funding and
inflated capital expenditure to increase
debt value, thereby reducing their equity
contribution. Also, these developers
placed equipment orders with
manufacturers that quoted inflated order
values and later transferred the balance
 October 2015
www.InfralinePlus.com

back to the developers.

By which stretch of imagination can
you have a variable cost smuggled in
as fixed cost. By definition, fixed cost
means something. The price of coal by
definition cant be a part of the fixed
cost, Swarup added.
Coal-field allocations have been
controversial since the Comptroller
and Auditor General of India (CAG)
said in a report in August 2012 that the
national exchequer had suffered a loss
of `1.86 trillion because of a flawed
allocation process. The CBI is probing
the allotments. In September last year,
the Supreme Court cancelled 204
coal mining permits awarded to firms,
terming their allotment arbitrary and
illegal after the CAG report.
In response to a query on the fate
of such aggressive bidders who realise A total of `3.35 trillion will accrue to the
their folly, Swarup said, He will have states from 66 blocks, which are being
to forgo his bank guarantees and then awarded through a mix of auctions and
we will auction it again. allotments to state-owned public sector 25

Number Game
Of 26 blocks allocated to the power
sector, nine were auctioned. Icra notes
that the bidding by power generating
companies in the auction has been quite
aggressive with the bidding happening
on a forward basis on the reserve
price payable as bid quoted is zero in
reverse bidding. Thus, bids quoted by
the successful bidders range from `302
per mt to `1,110 per mt, which are
negative price bids for the bidders
which essentially means that a winning
bidder would have a zero fuel charge
recovery in PPA and in addition would
bear the cost of both i.e. cost of coal
mining and quoted reserve price payable
to State Government. As a result,
winning bidders remain exposed to a
significant under-recovery in fuel cost
which is estimated to range from `0.39/
kwh to `1.02/kwh on a levelized basis
over a 25-year period. Aggregate under-
recovery for the bidders is estimated at
`8 billion in FY2015-16, which is likely
to increase to about `18 billion by FY
2017-18, the Icra report added.
firms. Additionally, electricity tariff benefits
totalling `69,311 crore will accrue to state
distribution companies. The winning
bidders may however look at options to
bridge the under-recoveries in fuel cost
using the additional gains generated from
sale of 15% of the generation capacity in
the merchant/short-term trading market
as well as possibility of quoting higher
fixed capacity charge in the upcoming
competitively bid PPAs (power purchase
agreements) for the capacity which is yet
to be tied-up, ratings agency Icra Ltd in a
report wrote
This also comes in the backdrop of The plan to auction linkages follows
the government planning to auction reports of irregularities in granting
coal linkages, or assured supply of coal linkages. To take advantage of
coal, much the same way it puts the discounted price offered by CIL,
telecom spectrum on the block. Assured developers of power plants had made
supplies, or linkages, are awarded false claims regarding the order of
to projects that do not have captive equipment, financial status, land
coal mines and need to source coal acquisition and water supply.
commercially from state-owned Coal
India Ltd (CIL). For suggestions email at feedback@infraline.com
 October 2015
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InDepth
Panel gives go ahead for imports
of coal with high ash content

26

Coal imports rose 2 per cent to 18.6 million tonnes in August from a year ago
Move will help domestic thermal power plants which source the fuel from abroad

Infraline News Service

In a move to comfort domestic thermal
power plants which source the fuel from
abroad to run their operations, the union
environment ministrys expert appraisal
committee has recommended that the
restriction on maximum ash content of
imported coal may be increased upto 25
per cent and environment impact assess-
ment be carried out accordingly.
The EAC has recommended
doubling the ash content on imported
coal to 25 per cent against 12 per cent
currently to help domestic thermal
power plants which source the fuel from
abroad to run their operations.
The recommendation by the EAC
comes in the backdrop of recent demand
by the coal-fired electricity producers
that the environment ministrys decision
in February 2013 to restrain the ash
content in imported coal to 12 per cent
has triggered problems for the coastal-
based projects as they are unable to
utilise high grade bituminous steam coal
available from Australia, South Africa,
Russia, Columbia.
Instead, these thermal power plants

are forced to use Indonesian coal which
is characterised by very low heat value
(GCV of 3400-4000 Kcal/Kg) and
high moisture content (34-40 per cent)
which results in reduced efficiency and
increased coal consumption, the Asso-
ciation of Power Producers (APP) had
contended in a recent representation to
the environment ministry.
The ash generation by Indonesian
coal and Australian, South African,
Russian and Columbian coal would be
0.56-0.66 million metric tonne and 0.74
million metric tonne respectively. So, it
is imperative to revise the ash content
per centage to 25 per cent to help thermal
power plants perform efficiently and
lower their generation cost.
The EAC in its meeting endorsed the
contention of the APP that by restricting
The recommendation by the EAC comes
in the backdrop of recent demand by the
coal-fired electricity producers that the
environment ministrys decision in February
2013 to restrain the ash content in imported
coal to 12 per cent has triggered problems
for the coastal-based projects as they are
unable to utilise high grade bituminous
steam coal available from Australia, South
Africa, Russia, Columbia
the ash content up to 12 per cent, the
source of coal gets restricted to a par-
ticular origin, which may impact its price
competitiveness . Besides, this restriction
may also run contrary to the objectives of
the competitive bidding guidelines and
the Electricity Act, 2003, it observed.
Moreover, bulk of the imported coal
having ash content lower than 12 per cent
are typically of Indonesian origin but
they have high moisture content of about
30-40 per cent. Contrary Against this, the
other major sources of imported coal like
Australia, Russia, USA, have ash content
of about 25 per cent but moisture content
of upto 15 per cent.
After detailed deliberations, the
Committee recommended that the
restriction on maximum ash content of
imported coal may be increased upto
USA and Columbia have ash content of
October 2015
www.InfralinePlus.com
25 per cent and environment impact
assessment be carried out accordingly,
the EAC recommended.
In a representation to the ministry,
the Association of Power Producers
(APP) had sought review of the ash
content restriction so that high grade, low
moisture imported coal from Australia,
South Africa and Russia can be utilised
for better efficiencies, and lower the cost
of generation with actual ash generation
remaining the same.
After detailed deliberations, the EAC
recommended that the restriction on
maximum ash content of imported coal
may be increased upto 25 per cent and
Environment Impact Assessment (EIA)
be carried out accordingly, a senior
Environment Ministry official said.
The committee observed that bulk
of the imported coal having ash content
lower than 12 per cent are typically of
Indonesian origin having high moisture
content of about 30-40 per cent, while 27
imported coal from Australia, Russia, the
about 25 per cent with moisture content
up to 15 per cent.
EAC felt that when high moisture
coals are fired in boilers, a substantial
amount of the heat input is used to
evaporate and superheat the moisture in
the fuel, thus pay a substantial price in
efficiency, the official added.
The Committee further noted that
lesser the ash generation, the lesser
would be its environmental impact.
However, by restricting the ash
content up to 12 per cent, the source of
coal gets restricted to a particular origin
and thus the price competitiveness may
have to be compromised.
This may also be contrary to the
objectives of the Competitive Bidding
Guidelines and the Electricity Act,
2003, the official added. Coal imports
rose 2 per cent to 18.6 million tonnes in
August from a year ago, according to
SAIL-Tata Steel promoted Mjunction
Services Ltd.
For suggestions email at feedback@infraline.com
 October 2015
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InDepth
Coal India Ltds offer for
sale may be trimmed

28

The stock is down nearly 25% from a 52-week-high price

Bankers suggest that the issue may be spaced out to early 2016

Infraline News Service

Perceived low appetite among foreign
investors and a beaten-down stock
could force the government to trim the
Coal India (CIL) offer for sale to 5%
from 10% planned earlier and push the
big-ticket disinvestment to the January-
March quarter.
At the current price of of `337.05
a share, CIL, one of the highest
dividend-paying companies, could
fetch the exchequer `21,200 crore with
a 10% stake sale or `10,600 crore on a
5% disinvestment. Caught in a volatile
market, the CIL stock is down nearly
25% from a 52-week-high price of
`447 seen on August 5.
With intra-government consultations
stretched longer than usual on whether
to downsize the offer, the department
of disinvestment (DoD) in the
meantime has extended the deadline
three times for bankers to submit their
application for managing the CIL issue.
The deadline was last extended
till November 10 as global merchant
bankers have sat tight, under pressure
from green activist groups as the
worlds largest coal miner allegedly
could not allegedly meet its committed
environmental sustainability targets.
In January 2015, the government
had sold 10% in CIL to raise the
highest ever amount of `22,557 crore
 October 2015
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from any single PSU stake sale at a offer, the mood now is in favour of They added that six to seven merchant
price of `358 a share while its IPO a 5% divestment. The OFS of the bankers including foreign ones had
in October 2010, when the UPA monolithic coal miner is crucial given expressed interest before the date was
government was in power, was the the ambitious disinvestment target of extended earlier this month. The CIL
largest PSU IPO ever, raising `15,199 `69,500 crore for FY16, which, the OFS in January was managed by seven
crore for governments 10% stake at a government has tacitly admitted, is an bankers including Goldman Sachs,
price of `245 per share. While the OFS impossible task, even as efforts are on DSP Merrill Lynch, Credit Suisse and
was oversubscribed by only 5%, the to maximise the proceeds from stake Deutche Equities.
IPO was oversubscribed by about 14 sales in companies. Since the last stake sale in CIL was
times, indicating the robustness of the On the ecological issue of promoting in January, a view has emerged among
stock then. investments in a fossil fuel producer, officials that the market may not have
Officials sources said though the sources said the CIL management an appetite for such a large issue in
DoD will take some more time to held discussions with global merchant such a short interval and, therefore,
take a final call on the size of the CIL bankers in the first week of October. the issue should be spaced out to early
2016. Sources said CIL is in favour of
getting the entire 10% stake sale done
Officials sources said though the DoD will in one tranche, so that it wont have to
take some more time to take a final call on hit the market again next year.
the size of the CIL offer, the mood now is in Despite the DoD reaching out to
favour of a 5% divestment. The OFS of the long-term foreign investors, they
may not have much appetite for
monolithic coal miner is crucial given the energy sector stocks like CIL due to
ambitious disinvestment target of `69,500 a slump in global commodity prices
crore for FY16, which, the government has (although the CILs coal price is 29
tacitly admitted, is an impossible task, even somewhat insulated from global prices
as efforts are on to maximise the proceeds and is holding relatively firm). Also
from stake sales in companies weighing on the departments mind is
the dismal experience with the latest
10% disinvestment in Indian Oil
CIL Divestmentsaga Corporation, a stake sale that had to be
Stake sold/likely on offer Proceeds (`crore) bailed out by state-run Life Insurance
Corporation, as foreign investors
IPO (Oct 2010) 10% 15,199 largely stayed away due to excess
OFS (Jan 2015) 10% 22,557 volatility in the equities market.
The state-run coal miner recorded
OFS, FY16 5% 10,600*
a 9% production growth for April-
* What the current price would fetch
September this year but fell short of the
Stock movement (`) target by 3%. In the first quarter of the
500 current fiscal, the company had achieved
442.85 99% of the target with a production
450 growth of 12%. In the last fiscal, the
PSUs production had grown by more
400 374.30 than 7% to 494 million tonnes (mt), the
highest growth in four decades.
337.05 Against the disinvestment target of
350
`69,500 crore, the government has so
far raised only `12,700 crore by selling
300 states in four PSUs. Other PSUs in the
disinvestment pipeline include NTPC,
250 ONGC, Nalco and BHEL.
April 21, 2015 Aug 4, 2015 Oct 21, 2015
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 October 2015
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InDepth
States ready to auction 71 non-
coal blocks leases this fiscal

30

Mines ministry has circulated an advisory for grant of concessions in case of minor minerals
Maharashtra, Odisha plan to auctioning iron ore leases

Infraline News Service

Ten states including Gujarat,
Maharashtra, Chhattisgarh and Odisha
are all set to auction 71 non-coal blocks
this fiscal. Of these states, Gujarat
is likely to put six limestone mines
under the hammer within a fortnight
followed by the rest of the states.
The governments of these states have
together furnished their respective
list of mines to be auctioned during
a meeting convened by Union mines
secretary Balvinder Kumar.
Gujarat has set a target of auctioning
up six leases of limestone mines.
Barring Tamil Nadu and Telangana,
most states seem to be prepared to
auction leases. While Karnataka,
Maharashtra and Odisha have
accorded priority to auctioning iron ore
leases, states like Rajasthan, Gujarat,
List furnished
* Karnataka, Maharashtra and
Odisha have accorded priority to
auctioning iron ore leases
* Barring Tamil Nadu and
Telangana, most states seem to
be prepared to auction leases.
* Maharashtra and Odisha have
accorded priority to auctioning
iron ore leases

Jharkhand and Chhattisgarh have lined
up limestone mines for inviting bids.
For iron ore, Karnataka alone has
identified leases of 15 blocks, while
Maharashtra and Odisha have also
lined up at least three such mines each
for the same.
Firms like KPMG, Crisil, SBI
Caps and metallurgical consultant
Mecon have emerged as preferred
transaction advisers for these 10 states
in the impending auctions, while
state-run MSTC Limited would be
the auction platform for them, their
representatives according to a senior
mines ministry official.
However, proceedings of the meet
as recorded in the minutes indicate that
the states still need certain degree of
hand holding in terms of survey and
de-lineation of the mines, preparation
of geological reports and expediting
transaction advisory.
The mines secretary sought
to allay the apprehensions of the
representatives saying PSUs like
Geological Survey of India (GSI),
Indian Bureau of Mines, MSTC,
Mecon, SBI Caps and Mineral
Exploration Corporation Limited
(MECL) have been assigned to
handhold the state governments for
various essential activities for auction,
October 2015
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Gujarat has set a target of auctioning up
six leases of limestone mines. Barring
Tamil Nadu and Telangana, most states
seem to be prepared to auction leases. 31
While Karnataka, Maharashtra and Odisha
have accorded priority to auctioning iron
ore leases, states like Rajasthan, Gujarat,
Jharkhand and Chhattisgarh have lined up
limestone mines for inviting bids. For iron
ore, Karnataka alone has identified leases
of 15 blocks, while Maharashtra and Odisha
have also lined up at least three such mines
each for the same
according to official sources. concessions in case of minor minerals
A senior ministry official said that also through the auction route. The
to help the states identify additional representatives were told to keep the
mineral blocks which can be same in mind while framing the rules
auctioned in the near future, both GSI for minor mineral concessions. Gujarat
and MECL have furnished 245 and is learnt to have appointed SBI Caps
58 geological reports to various state for drafting concession rules for such
governments. But the states need to minerals for inviting bids.
urgently reconcile these reports with The ministry has tried to sweeten
their leasehold areas and revenue the bid criteria by proposing that
or forest maps and pave the way for preferred bidders would not be required
their auctions on urgent basis, he to pay upfront payment or royalties at
pointed out. the prospecting licence stage.
The mines ministry has recently
circulated an advisory for the grant of For suggestions email at feedback@infraline.com
 October 2015
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InDepth
India shows interest in buying
South African coking coal mines
32
Hopes to stop imports of coal used to generate power in 3 years
India aims at 1.5 billion tonnes of coal output by end of this decade
Infraline News Service
After years of poor production crippling
power supply, state-run Coal India is
boosting output at a record pace to meet
Prime Minister Narendra Modis goal of
connecting to the grid millions of Indians
who still make do with kerosene lamps.
India is talking to South Africa
to buy coal mines there to feed its
expanding steel industry, coal secretary
Anil Swarup said, adding that that
country also hopes to stop imports of
coal used to generate power in three
years as domestic output jumps.
But India, which wants to triple its
steel capacity to 300 million tonnes by
2025, does not have enough reserves of
coking or steelmaking coal, prompting
Coal India to look at assets abroad,
Swarup said.
They are presently in negotiations
with people in South Africa, he said.
We imported around 80-90 million
tonnes of coking coal last (fiscal) year
and if that is the amount that can come
through a mine owned by Coal India, it
would consider it.
Swarup, however, did not give any
investment figure but said money was not
an issue for Coal India, which had cash
and bank balance of more than $8 billion
for the year ended 31 March.
Overall coal imports into India, the
worlds third-largest buyer, fell for the
third straight month in September in a
country used to seeing shiploads coming
in as new power plants started. Coal
Indias output grew 32 million tonnes to
494.2 million tonnes in the fiscal year
2014/15, the biggest volume rise in its
four-decade history.
In three years we should be able to
mine (all the power-generating) coal
 October 2015
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we require, Swarup said. The quality Global investment banks are under The company acquired three mines
of coal that is not available will still be pressure from environmental groups in Indonesia in 2008 with total reserves
imported. to steer clear of Indias plan to raise as of 2 billion tonnes to use the coal for its
India is looking to more than double much as $3.3 billion from selling a 10% ultra-mega power projects (UMPP) in
its total coal output to 1.5 billion stake in Coal India. India, mainly the Krishnapatnam project
tonnes by the end of this decade, with Swarup said the environment was in Andhra Pradesh.
500 million coming from the private a non-negotiable issue. He said India The three mines, Sriwijaya
sector. Swarup said India is working was planning to plant more trees than Bintangtiga Energy, Bryayan Bintangtiga
out details to open up the nationalized it cuts during coal mining operations, Energy and Sugico Pendragon Energy
sector and allow private companies to wash coal to improve its quality, push in the South Sumatra area of Indonesia,
mine and sell coal. renewable energy and promote other were bought through Reliance Powers
The turnaround in Indias coal clean-coal technologies. unit Reliance Coal Resources Pvt. Ltd.
industry has been a highlight of Modis Reliance Power will be participating
tenure in office since May last year, and RPower may sell three coal in various bids for setting up solar power
the prime minister is keen that output mines in Indonesia projects to expand in Indias lucrative
grows further. Reliance Power Ltd is evaluating selling renewable energy market, Ambani said.
We are reasonably satisfied (with the its coal mine concessions in Indonesia The company had signed a
coal resurgence), though there is still a and focus on its business in India, memorandum of understanding (MoU)
long way to go, Swarup said. group chairman Anil Ambani said at with Rajasthan for setting up 6,000
But environmentalists are worried the the companys annual meeting. The megawatts (MW) of solar capacity and
worlds third-largest polluter is leading a firm acquired the 3 mines in Indonesia solar parks. The central government
pan-Asian dash to burn more of the dirty in 2008 with total reserves of 2 billion is aiming to shift Indias energy mix
fossil fuel amid international efforts to tonnes to use the coal for its ultra-mega towards renewables. It aims to install
contain global warming. power projects in India. 100 gigawatt (GW) of solar power and 33
60 GW of wind power by 2022, which
may entail an investment of as much as
Overall coal imports into India, the worlds $200 billion.
third-largest buyer, fell for the third straight Earlier this year, the company
month in September in a country used to signed an accord with the government
seeing shiploads coming in as new power of Bangladesh for setting up a 3,000
plants started. Coal Indias output grew 32 megawatt (MW) gas-based power project
and proposed to relocate equipment to
million tonnes to 494.2 million tonnes in the Bangladesh from its 2,250 MW Samalkot
fiscal year 2014/15, the biggest volume rise project in Andhra Pradesh.
in its four-decade history. In three years Reliance Power has completed
we should be able to mine (all the power- phase I of its `50,000 crore capital
generating) coal we require, Swarup said. expenditure and the companys board
The quality of coal that is not available will will consider paying dividend for the
first time this year.
still be imported Reliance Power operates 5,945
MW of power capacity across its
projects based on coal, gas, hydro and
renewable energy. Ambani said all of
the companys power plants, including
the 3,960 MW Sasan and 1,200 MW
Rosa plants are operating at plant load
factors (PLFs) of nearly 90-100%. The
company has more than 6,000 MW of
hydropower project in the pipeline.

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 October 2015
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StatisticsCoal
Coal Sector Performance Summary - Financial Year 16 (*Till September 2015)
Coal Production by CIL (Million Tonnes)
Month Monthly Cumulative
Target Actual Growth (MoM) Achievement Target Actual Achievement
Apr-15 40.928 41.519 - 101% 40.928 41.519 101%
May-15 41.782 40.979 -1% 98% 82.71 82.498 100%
Jun-15 40.727 38.828 -5% 95% 123.037 121.327 99%
Jul-15 36.037 34.827 -10% 97% 159.074 156.154 98%
Aug-15 37.652 36.214 4% 96% 196.726 192.368 98%

Coal Production by SCCL (Million Tonnes)

Month Monthly Cumulative
Target Actual Growth (MoM) Achievement Target Actual Achievement
Apr-15 4.521 4.324 - 96% 4.521 4.324 96%
May-15 5.5 4.863 12% 88% 10.021 9.187 92%
Jun-15 4.483 4.464 -8% 100% 14.504 13.651 94%
Jul-15 3.913 4.56 2% 117% 18.417 18.211 99%
Aug-15 3.763 4.555 0% 121% 22.18 22.766 103%

34

Coal Dispatch by CIL (Million Tonnes)

Month Monthly Cumulative
Current Year Previous Year Growth (YoY) Current Year Previous Year Growth (YoY)
Apr-15 43.55 40.697 7% 43.55 40.697 7%
May-15 43.745 40.576 8% 87.295 81.273 7%
Jun-15 42.182 38.329 10% 129.477 119.602 8%
Jul-15 40.883 37.993 8% 170.36 157.595 8%
Aug-15 40.618 37.282 9% 210.978 194.877 8%
 October 2015
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Coal Dispatch by SCCL (Million Tonnes)

Month Monthly Cumulative
Current Year Previous Year Growth (YoY) Current Year Previous Year Growth (YoY)
Apr-15 4.603 4.274 8% 4.603 4.274 8%
May-15 4.897 4.281 14% 9.5 8.555 11%
Jun-15 4.423 4.031 10% 13.923 12.586 11%
Jul-15 5.069 4.106 23% 18.992 16.692 14%
Aug-15 4.866 4.072 19% 23.858 20.764 15%

Coal Dispatch by CIL to Power Sector (Million Tonnes)

Month Monthly Cumulative
Current Year Previous Year Growth (YoY) Current Year Previous Year Growth (YoY)
Apr-15 32.367 29.669 9% 32.367 29.669 9%
May-15 32.798 30.148 9% 65.165 59.817 9%
Jun-15 31.47 29.058 8% 96.635 88.875 9%
Jul-15 30.767 28.957 6% 129.119 118.196 9%
Aug-15 29.95 28.532 5% 159.069 146.728 8%

Coal Dispatch by SCCL to Power Sector (Million Tonnes)

Month Monthly Cumulative
35
Current Year Previous Year Growth (YoY) Current Year Previous Year Growth (YoY)
Apr-15 3.66 3.121 17% 3.66 3.121 17%
May-15 3.981 3.025 32% 7.641 6.146 24%
Jun-15 3.583 2.9 24% 11.224 9.046 24%
Jul-15 3.35 2.542 32% 14.574 11.588 26%
Aug-15 3.215 2.969 8% 17.789 14.557 22%

Overburden Removal by NLC (Lakh Cubic Meters)

Month Current Year Previous Year Achievement Growth YoY
Target Actual
Apr-15 139.95 152.46 133.8 109% 13.95%
May-15 139.7 151.76 118.79 109% 27.75%
Jun-15 137.05 149.85 127.05 109% 17.95%
Jul-15 140.65 142.73 137.2 101% 4.03%
Aug-15 140.05 130.32 127.69 93% 2.06%

Lignite Productiion by NLC (Lakh Tonnes)

Month Current Year Previous Year Achievement Growth YoY
Target Actual
Apr-15 15.24 12.74 16.45 84% -22.55%
May-15 17.52 17.67 22.01 101% -19.72%
Jun-15 20.57 20.47 22.18 100% -7.71%
Jul-15 22.02 19.23 16.8 87% 14.46%
Aug-15 22.15 21.51 22.16 97% -2.93%
 October 2015
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CoverStory
Govt prepares to deliver LPG at
the doorstep of rural consumers

36

India has about 19 crore LPG consumers but penetration in rural areas is poor
Only 15 % rural households use LPG as primary source of energy for cooking

Infraline Bureau

The government launched Give
It Up campaign urging well-off
citizens to give up subsidy so that the
funds can be utilised to offer clean
fuel to poor households. Heeding to
the appeal made by Prime Minister
Narendra Modi, over 30 lakh people
have surrendered their LPG subsidy.
While the drop in oil prices has
sharply brought down the subsidy
consumers receive these days, making
it psychologically easier for them to
give up.
India has about 19 crore LPG
consumers but the penetration in rural
areas is still poor, forcing households
to depend on firewood and other
cheaper fuels which are hazardous to
health. However, rural households may
get cooking gas cylinders delivered
at their doorsteps soon as part of the
governments push to take cleaner
fuels to more homes. The Centre is
looking for ways to make it viable for
rural dealers to home deliver cylinders,
the lack of which makes consumption
of cleaner fuel slow, expensive and
quite inconvenient in the hinterland.
Since assuming charge as prime
minister last year, Modi has pushed
his government to connect more
consumers and cities with piped gas,
increase penetration of liquefied
 October 2015
www.InfralinePlus.com

petroleum gas (LPG) in rural areas access and consumer inconvenience officials and oil companies executives
and urge well-off citizens to give up has restricted demand. are discussing ways that can make it
subsidy on cooking gas so that funds For a rural consumer, a refill comes viable for rural dealers to undertake
can be used for the needy subscribers, at a huge cost: long hours spent in home delivery.
mainly in rural areas. The government visiting the dealers warehouse several Lower consumer concentration in
hopes to use the LPG infrastructure kilometers awayrepeated visits due villages and lesser demand rural
freed up by citizens opting for to stock-outs on many occasions and consumers typically consume less
piped gas to reach out to more the wages lost in that, and the hassle cooking gas due to easy access to
rural consumers. of arranging transport to and from cheaper substitutes work against
India has about 7 crore rural LPG warehouse, which can at times be as the viability of a rural dealership,
consumers and 12 crore in cities. costly as the refill price. which usually caters to a cluster of
About 4,900 distributors cater to rural Delivering LPG (liquefied 5-6 villages. If this can be doubled
consumers while 11,800 dealers serve petroleum gas) cylinders at the to 8-10 villages, the demand would be
cities. The potential to grow LPG consumers doorstep is a huge enough to turn it viable, according to
consumption in rural areas is naturally challenge. We are searching for the an official in one on the oil PSUs.
huge but a combination of ineffective best ideas to deal with it, said an oil A dealer needs about 2,500
policies, lower affordability, poor ministry official. The government cylinders a month for viability and the
government should define delivery
charges for rural areas as it does for
India has about 7 crore rural LPG consumers urban areas, he added.
and 12 crore in cities. About 4,900 distributors In 2009, the government launched
cater to rural consumers while 11,800 dealers Rajiv Gandhi Gramin LPG Vitrak
scheme to increase LPG penetration
serve cities. The penetration in rural areas is
in rural areas. The scheme did help
still poor, forcing households to depend on boost rural consumer base but also
37
firewood and other cheaper fuels which are brought in several complaints of poor
hazardous to health. The potential to grow implementation by oil companies,
LPG consumption in rural areas is naturally following which the government
huge but a combination of ineffective policies, suspended the scheme a few
months back.
lower affordability, poor access and consumer
The government has now launched
inconvenience has restricted demand. a comprehensive survey to understand
the LPG consumption map of India
LPG Firewood Dung Cake Coke/Coal Kerosene and identify regions poorly covered
Andhra Pradesh 28.9 67.5 0.2 0.2 0.2 by LPG distributors. The findings of
Assam 17.2 81 0 0.1 0.3 survey and a follow-up direction will
Bihar 5.9 56.4 20.8 0.6 0.5 be shared with state oil companies for
Chhattisgarh 1.5 93.2 3.1 0.9 0.2 better identification of locations for
Gujarat 13.9 79.7 0.9 0 3.5
dealerships and deeper penetration of
Haryana 26.7 41.7 24.4 0 1.2
LPG in rural and hilly areas.
Jharkhand 2.9 77.7 2.9 14.3 0.3
The government, meanwhile, is also
Karnataka 14.7 80.5 0 0 2
working on preparing a master plan
Kerala 30.8 66.3 0 01 0.1
Madhya Pardesh 6.2 80.8 10.6 0.2 0.5 to scale up LPG consumption in the
Maharashtra 23.1 62.1 0.2 0 1 country in three years.
Odisha 3.9 87 1.8 0.9 0.2
Punjab 30.5 30.5 30.3 0 2.7 What Surveys Say:
Rajasthan 8.9 89.3 0.6 0 0.7 As per a study by the Global Alliance
Tamil Nadu 37.2 58.3 0 0 2.5 for Clean Cookstoves, a development
Uttar Pardesh 6.7 56.1 33.4 0.2 0.1 advisory, only 12 percent Indian rural
West Bangal 6.6 62.9 5.3 6.5 1.5 households use LPG. According to
All-India 15 67.3 9.6 1.1 0.9 another survey by the Council of
Note: Other sources like gobar gas, electricity and charcoal are not shown Energy, Environment and Water, a
 October 2015
www.InfralinePlus.com
CoverStory
non-profit policy research institute,
only 14 percent rural households
across six most energy deprived
states use LPG, electricity or biogas
for cooking.
The survey, titled Access to Clean
Cooking Energy and Electricity:
Survey of States Report and released
on 1 October, covered 714 villages
in 51 districts of Bihar, Jharkhand,
Madhya Pradesh, Uttar Pradesh,
Odisha and West Bengal.
The findings dwarfs the claims
made by oil marketing companies
such as HPCL, IOC and BPCL that 26
percent households in Jharkhand and
Odisha and 50 percent in Uttar Pradesh
have LPG connections.
When asked about this huge
discrepancy, oil ministry officials
said they will share the findings
with oil companies to ensure they
better identify households with
38 access to LPG.
Given this, the governments latest
move may mitigate the clean energy
crisis in rural India to some extent,
experts believe. As per the survey, 74
percent of rural households dont use
LPG due to a lack of distributors in
their areas.
But it isnt only a paucity of dealers
that keeps rural consumers from using
LPG. For one, the cost of securing an
LPG connection is high. Indeed, 95
percent of the households surveyed
cited this as a key reason for not using
LPG, while 88 percent also mentioned
high refilling cost. About 0.74 percent
rural households use smokeless stoves
and just 0.21 percent use biogas
for cooking
The other factor is lack of
awareness. Nearly 45 percent
households were unaware of the
health benefits of using LPG over a
traditional Chulha.
Another interesting insight revealed
by the survey is that people generally
see LPG as a costlier fuel though
that may not always be the case. For
instance, the households that use
traditional fuel and pay for some
or all of it 33 percent in UP, 38
percent in MP and over 60 percent in
Bengal, Jharkhand and Odisha - end
up spending more than those who use
only LPG.
This is also a major reason why
efforts to popularise smokeless
cookstoves in rural areas through
various schemes havent met much
success. As the government works
out ways to scale up LPG use in rural
India, it has its task cut out.
NSSO Report
The National Sample Survey Office
(NSSO), in a recent report based on its
68th survey round undertaken during
July 2011 to June 2012, has shown that
only 15 percent of rural households in
India use LPG as their primary source
of energy for cooking, as against 68.4
percent in urban areas.
The predominant cooking fuel in
rural India is firewood / chips, with as
many as 67.3 percent of households
relying on this source in 2011-12. The
proportion, moreover, hasnt fallen
significantly from 78.2 percent in
1993-94 and 75 percent in 2004-05.
Urban India, on the other hand,
has seen substantial change. In
1993-94, the percentage of households
depending on LPG (29.6) was below
those using firewood and chips (29.9).
But in 2011-12, only 14 per cent of
urban households used firewood/chips,
while 68.4 percent had LPG access.
In rural areas, LPG penetration was
very low, at 1.9 percent in 1993-94
and 8.6 percent in 2004-05, and
remains low. Even within rural areas,
there is a deep divide between the
southern states of Tamil Nadu, Kerala
and Andhra Pradesh, which have a
third or so households mainly using
LPG, and the likes of Chhattisgarh,
Jharkhand and Odisha with below
5 percent penetration. Punjab and
Haryana are interesting cases of
states having significant proportion of
households relying equally on LPG
and dung cakes.
No less revealing is the data on
lighting sources. 72.7 percent of
rural households use electricity as
the primary source for lighting,
while it is 96.1 percent for urban
India. In 1993-94, only 37.1 percent
of households in rural India were
using electricity, while as many
as 62.1 percent were kerosene-
 October 2015
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dependent. There has, thus, been a Primary Source of lighting in rural India (% of Households)
significant replacement of kerosene Electricity Kerosene Others*
with electricity for lighting up rural Andhra Pradesh 97.6 2.1 0.3
homes. But even here, huge inter-state Assam 55.3 43.3 0.4
differences exist. On the one side are Bihar 25.8 73.5 0.3
the four southern states, plus Punjab, Chhattisgarh 85.0 13.8 0.7
Haryana and Gujarat, where over Gujarat 93.2 6.4 0
90 percent of rural households have Haryana 95.1 1.5 2.8
access to electricity. At the other end Jharkhand 62.1 36.8 1.0
is Bihar, which has just over a quarter Karnataka 95.2 4.5 0.3
Kerala 96.2 3.3 0.4
of rural households using electricity
Madhya Pardesh 84.5 15.2 0.2
in rural areas and a correspondingly
Maharashtra 88.8 9.9 0.5
high proportion relying on
Odisha 67.6 32.3 0.1
kerosene lanterns. Punjab 97.4 1.5 1.1
The same holds true for Uttar Rajasthan 77.7 21.6 0.7
Pradesh, but not for Madhya Tamil Nadu 96.9 3.1 0
Pradesh, Chhattisgarh or Rajasthan. Uttar Pardesh 40.4 58.5 1.0
Interestingly, in urban areas of Bihar West Bangal 70.2 29.3 0.4
and Uttar Pradesh, the proportion All-India 72.7 26.5 0.5
of households using electricity for *Includes other iol gas and candles
lighting is not disturbingly below
national average, at 81.2 and 88.1
percent respectively. That only The government has now launched a
highlights the extent of the rural- comprehensive survey to understand the 39
urban divide. LPG consumption map of India and identify
regions poorly covered by LPG distributors.
Sustainable Development
Goals The findings of survey and a follow-up direction
India has the largest population will be shared with state oil companies for
without access to modern energy: 400 better identification of locations for dealerships
million people dont have electricity and deeper penetration of LPG in rural
and twice that number use traditional and hilly areas
biomass to cook
The United Nations and its
member states, including India, met National discourse on energy access for cooking results in 5 lakh to 9 lakh
in September in New York to adopt in India mainly focusses on electricity. deaths per year. It also causes many
the 2030 Agenda for Sustainable Prime Minister Narendra Modi said respiratory and cardiac diseases.
Development and its 17 Sustainable that one of Digital Indias aspirations As cooking is done by women with
Development Goals (SDGs). There is is to provide 24x7 electricity supply children in 90 percent of Indian
recognition now that access to modern by 2022 to every household in the households, they are most exposed to
energy clean cooking and electricity country. For this purpose, there are Indoor Air Pollution.
has a critical impact on the quality plans for new power plants, increased In India, attempts to deploy clean
of life. Thus, access to affordable, coal production, large renewable cooking interventions improving
reliable, sustainable and modern energy energy investments, and strengthening the efficiency of biomass stoves or
is Goal 7 under the SDG framework. of transmission and distribution replacing biomass with cleaner fuels
Today, India has the worlds largest infrastructure. However, there is have mostly failed. Between 2001
population without modern energy relative silence on the issue of clean and 2011, the use of traditional cook
access 400 million people dont cooking fuels. stoves has decreased by only 11 per
have electricity and twice that number Cooking has proven to cause one cent. National programmes distributed
use traditional biomass to cook. With of the biggest health hazards in India: 35 million Improved Cook Stoves
these staggering figures, can India meet Indoor Air Pollution (IAP) caused by (ICS) in the 1980s; about 1 million
SDG 7 in the next 15 years? combustion of traditional biomass are in use today. The national biogas
 October 2015
www.InfralinePlus.com

CoverStory

action plan, believe industry experts.

This action plan must include a
nationwide awareness programme to
promote clean cooking with rigour.
Existing networks of local institutions
and self-help groups should help in
clean cooking deployment. The scope
of ICS and biogas missions should be
more ambitious. Local communities
should be engaged to operate and
sell ICS and biogas plants. This will
result in the formation of good product
supply chains. While capital subsidies
are necessary to make clean cooking
technologies affordable, mechanisms
like Direct Benefit Transfer can be
used to disseminate clean cooking
technologies.
LPG will be a key component in
providing Indian households with
clean cooking fuel. The Give It
LPG will be a key component in providing Indian Up campaign is a step in the right
direction. Thirteen percent of eligible
households with clean cooking fuel. The Give households have already surrendered
40 It Up campaign is a step in the right direction. their subsidies, which is 1-2 per cent
Thirteen percent of eligible households have (`1,400 million) of the governments
already surrendered their subsidies, which is total LPG subsidy burden.
1-2 per cent (`1,400 million) of the governments There is, however, a need for
total LPG subsidy burden. There is, however, a further efforts, such as differentiated
LPG subsidies depending on income
need for further efforts, such as differentiated levels. Distribution networks in rural
LPG subsidies depending on income levels areas must also be strengthened.
CSTEPs report shows that through
scheme saw limited success with of the population will be biomass a sustainable approach, which
0.4 percent of the current population dependent. Of these, only 25 percent prioritises SDG 7, 95 per cent of India
using biogas. will have access to efficient cook would have access to clean cooking
Although efforts to promote stoves. This implies that it is unlikely technologies in 2030. Compared to
Liquefied Petroleum Gas (LPG) that India will meet the SDG target of policy-as-usual, under the sustainable
through subsidy schemes and universal clean cooking. To encourage approach, negative health impacts of
increased distribution centres have wide scale clean cooking, inter- IAP are reduced by half, drudgery
resulted in 70 percent of urban houses departmental coordination is vital. of fuel collection is cut down by two
adopting LPG as their primary cooking Currently, ICS and biogas uptake thirds, and black carbon emissions are
fuel, only 15 percent of rural houses schemes are implemented by the decreased by 80 percent.
have done the same. Ministry for New and Renewable By focussing on clean cooking
At the current pace of deployment Energy, while LPG and Piped Natural access and taking concrete efforts to
of clean cooking interventions, a Gas are distributed by oil marketing deploy clean cooking technologies, it
recent study by the Center for Study companies under the Ministry of would be possible for India to be free
of Science, Technology and Policy Petroleum and Natural Gas. The from smoky kitchens by 2030 and
(CSTEP) titled Quality of Life for Ministry of Health has its own targets fulfil the SDG 7 target.
All: A Sustainable Development to reduce IAP by 50 percent in 2025.
Framework for Indias Climate Policy There is a need for these Ministries
shows that even in 2030, 40 percent and others should form an integrated For suggestions email at feedback@infraline.com
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 October 2015
www.InfralinePlus.com
NewsBriefs | Oil & Gas
ONGC to buy into Adani-Welspuns oil block off
Mumbai coast
State-owned oil and natural gas explorer Oil and Natural Gas Corp. Ltd
(ONGC) is in talks with Adani-Welspun Exploration Ltd (Adani-Welspun)
to buy a stake in the latters oil block in the western offshore region off
the coast of Mumbai. ONGC is in advanced talks to either partner with
or completely buyout block MB-OSN-2005/2 held by Adani-Welspun
since 2005, said two officials from the company. A deal could be signed
before the end of the current fiscal, the officials said. A pact between
the two firms will help ONGC establish continuity among three of its
other blocks located in the same region and develop these blocks using
common infrastructure. It will also help Adani-Welspun monetize
reserves in the block, which they have held for almost a decade now.
Indian Oil Corporation purchases 30% of its crude
from spot market
Indian Oil Corporation, the nations largest refiner and fuel retailer,
now purchases 30% of its crude requirements in the spot market,
compared to 20% last year, helping it lower procurement cost
and gain flexibility in responding to the consumer demand. IOCs
move is part of the larger shift among refiners towards the spot
market as longterm price contracts put them at a disadvantage in
a sharply falling crude oil environment. In 2014-15, most refiners
were saddled with huge inventory losses due to falling prices that
hurt their profits. The volatility in crude prices, which have halved
in a year, is a headache for refiners, which aim to counter this by
enhanced spot purchases. It (spot purchases) is saving us money,
A K Sharma, director (finance), said. This also gives us flexibility in
42 terms of the types of crude we want to purchase, depending on the
demand of the products. Otherwise, you have to buy and process
and sell the kind of things there is no demand for.
ONGC Videsh likely to bid for blocks in Uganda
ONGC Videsh, which last month picked up 15% stake in Rosnefts
Vankor oil field in East Siberia for $1.25 billion, is considering bidding
for six blocks on offer in Uganda. The development comes at a
time when PM Narendra Modi is targeting to expand economic ties
with energy-rich African nations. OVL is studying the data of the
blocks (in Uganda). We would decide on the number of blocks to
bid for, a senior official privy to the development said. The blocks
on offer are Ngaji, Taitai, Karuka, Ngassa, Mvule and Kanywantaba,
covering about 2,983 sq km together. Successful bidders for these
blocks would be announced by January 15, 2016. The official said
discoveries have already been made in Uganda and exploration
activities are being carried out. This indicates less of hurdles to start
working in the country.
GAIL to deploy drones to guard gas pipelines to
raise safety standards
GAIL, Indias largest natural gas pipeline operator, will deploy
drones to guard its pipelines, as part of a host of initiatives to
raise safety standards that includes replacing old pipelines and
integrating advanced technologies. The move follows one of the
worst accidents involving the firm in June last year when its pipeline
carrying natural gas exploded in Andhra Pradesh, killing about two
dozen people and bringing it harsh public criticism. A government
probe into the accident had highlighted safety lapses at the firm
and prompted the regulator, Petroleum and Natural Gas Regulatory
Board (PNGRB), to slap a penalty.
Essar Oil restarts 20 MTPA Vadinar refinery
Essar Oil has restarted its 20
million tonnes a year Vadinar
refinery in Gujarat after a month-
long maintenance shutdown. The
company had taken a 30-day
shutdown from September 18 to October 17 at the refinery. The
shutdown related activities have been successfully completed and
the refinery has commenced operations on October 17, 2015, it
said. The company, in this period, undertook major maintenance
and inspection jobs of all its refinery units. The previous such major
planned shutdown was taken in September/October, 2011. Being a
continuous process industry, refinery shutdown is a meticulously
planned operation which refineries need to undertake once every 3-4
years in order to maintain their operational reliability since all major
units typically operate under high temperature and pressure and are
subject to wear and tear as well as corrosion.
GAIL launches tenders for up to 17 LNG cargoes
State-run GAIL (India) Ltd has launched two tenders for up to 17
cargoes of liquefied natural gas (LNG) for delivery in western India,
sources said. The company is seeking five cargoes for deliveries in
October to December at its 5 million tonne per annum (mtpa) LNG
terminal at Dabhol in Maharashtra, the source said. In a second
tender GAIL is seeking delivery of one LNG cargo a month in 2016
at either Dabhol or Dahej LNG terminal in Gujarat state, the sources
said. Petronet LNG operates the 10 mtpa Dahej plant. The last date
for submitting bids for the two tenders is Aug. 26. GAIL had also
purchased two cargoes for September delivery from BP and BG
Group, the sources said.
MRPL, NMPT ink pact for LNG terminal
Mangalore Refinery and Petrochemicals Ltd (MRPL) and New
Mangalore Port Trust (NMPT) have signed a memorandum of
understanding (MoU) to study the feasibility of setting up an LNG
re-gassification terminal in Mangaluru. Company said that the
MoU facilitates to initiate feasibility and other associated studies to
identify the most suitable location for the facility, and to consider the
option of setting up LNG terminal/Floating Storage Regasification
Unit (FSRU). Once set up, LNG terminal will bring cleaner and
greener energy as a fuel option to the entire region, it said, adding
that it will be advantageous to industries using naphtha as fuel. H
Kumar, Managing Director of MRPL, and PC Parida, Chairman of
NMPT, had signed the MoU recently.
HPCL seeks Mozambique gas for Gujarat
LNG terminal
Hindustan Petroleum Corp. Ltd (HPCL), the countrys third biggest
oil refiner, is negotiating with its partners in the Mozambique gas
field, operated by Anadarko Petroleum Corp., to bring natural gas
to India for its upcoming liquefied natural gas (LNG) terminal in
Gujarat. The deal will not only give HPCL access to gas, which is
logistically cheaper to source, it will also give the company a cost
advantage in its natural gas trading business, which it started last
financial year. Natural gas extracted from oil and gas fields have
to be first converted into liquid before they can be exported. Once
exported, it has to be regasified before supplying to consumers.
Therefore, both the source and destination countries have to set up
LNG terminals.

NewsBriefs | Oil & Gas
RIL successfully tests presence of natural gas in
contentious discoveries
Reliance Industries has successfully tested presence of natural
gas in one of the two KG-D6 block natural gas discoveries which
the sector regulator DGH had previously refused to recognise. RIL
had completed Drill Stem Test (DST) on the Dhirubhai-29 (D-29)
gas discovery that established presence of hydrocarbon, sources
said. A rig used to conduct the DST will now be moved to the
other find, D-30 in the Bay of Bengal for conducting similar test,
they said. The Directorate General of Hydrocarbons (DGH) had
refused to recognise the 2007 gas discoveries of D-29, 30 and 31
in the eastern offshore KG-D6 block in absence of its prescribed
conformity test, DST. RIL had done its own conformity tests but in
absence of surface flow that could be established through DST, the
DGH refused to recognise them and the company could not bring
them to production.
Indraprastha Gas unleashes intense marketing
campaign to add 3 lakh households in FY16
Indraprastha
Gas Limited has
unleashed an
intensive marketing
campaign to chase
a government-
set target of
adding three
lakh households
in the current fiscal, more than half of what it has achieved in 16
years of existence, but it is up against a messy urban planning
and a sluggish property market. Prime Minister Narendra Modi
wants one crore households across India to have access to piped
natural gas (PNG), a safer and more convenient fuel for cooking, in
four years. This means almost quadrupling from the current level,
leading the government to set targets for city gas distributors such
as IGL. In the first five months of the current fiscal, the company
added another 50,000 or so households. That leaves a staggering
250,000 households for the next seven months. Narendra Kumar,
the managing director of IGL, is using a combination of demand-
generation and capacity-enhancing measures to meet the target he
admits is quite steep.
Petronet LNG pays `400 crore demurrage as PSUs
refuse costly gas import
Petronet LNG Ltd, Indias biggest liquefied natural gas importer,
is shelling out `400 crore every quarter in demurrage charges
for ships idling because of its public sector undertaking (PSU)
buyers refusing to buy expensive imported gas. The company is
taking only 68% of the volumes it agreed to in 25-year contracts
with RasGas of Qatar after a slump in global energy prices led to
gas being available in spot or current market a roughly half that
rate. State-owned GAIL India Ltd, Indian Oil Corp. Ltd (IOC) and
Bharat Petroleum Corp. Ltd (BPCL) have committed to buy all
of the 7.5 million tonne a year of LNG Petronet is to import from
Qatar. But with slump in global prices, they have opted to buy
gas from spot market rather than use the long-term LNG, senior
officials said. The reduced offtake by the buyers forced Petronet
to cut its purchase from RasGas. This resulted in idling of three
cryogenic ships it had chartered hired for ferrying gas in its liquid
form at sub-zero temperatures from Qatar to its import terminal at
Dahej in Gujarat.
October 2015
www.InfralinePlus.com
Essar Oil to more than triple petrol pump
count to 5,000
Essar Oil, Indias second largest private oil firm, plans to more than
triple its petrol pumps to 5,000 by the end of next year, Chairman
Prashant Ruia said. Essar currently has 1,550 petrol pumps, the
highest owned by any private company, and another 1,600 are in
various stages of implementation. Going forward, our expanding
retail network will be a great value creator... Our network is expected
to reach 5,000 operational outlets by the end of next year, he said.
The gradual increase of `0.50 per litre per month in diesel prices
initiated by the previous UPA government in January 2013 and
reduction in crude oil prices during the NDA regime in 2014-15 led to
full de-regulation of diesel prices. These factors enabled (Essar Oil)
to enter the market, hitherto unavailable to private players due to
the subsidy regime, he said.
ONGC takes PMs Swachh Bharat drive to Himalayas
Oil producers usually prefer to bake the Earth for profit. But
ONGC is bucking that trend by using some of its profit to nurse the
ground and clean up key sources of water in the Himalayas. The
flagship explorer has joined four expeditions launched by the Indian
Mountaineering Foundation, the apex mountaineering body, to take
PM Narendra Modis Swatchh Bharat campaign to Himalayan
heights - literally. The expeditions will bring back mountains of
garbage, left behind by scores of climbers and thousands of trekkers,
from four regions in the Himalaya that are popular destinations
among adventure seekers.
43
ONGC will have multiple gains from Russian oil deal
Oil and Natural Gas Corporations (ONGC) buyout of 15% stake in
Vankorneft Oil project in Russia has received a thumbs up from most
analysts as there are clear benefits. For one, the deal will enable
ONGC Videsh (OVL), ONGCs overseas subsidiary, to source 66,000
barrels of oil from Vankorneft daily or about 3 million tonnes of oil
annually, from the word go. Vankorneft is a subsidiary of Russian oil
giant Rosneft. Analysts believe output from this project could provide
about one-third of OVLs production and say, the deal valuations at
an estimated $1.27 billion and $1.35 billion are also inexpensive. The
deal value of 15% stake is $2.46/barrels of oil equivalent (boe) which
is lower than OVL & Oil deal with Videocons 10% stake at $2.97/boe
and CNPC (China National Petroleum Corp)-ENI deal at $2.8/boe in
Mozambique, said an analyst India Nivesh Research. This buyout will
take OVL closer to achieving its medium-term production target.
HPCL launches bio-diesel in three cities
Hindustan Petroleum Corporation Limited has launched eco-friendly
Bio-Diesel Blended Diesel B5 HSD New Delhi, Visakhapatnam and
Hyderabad. On the occasion of World Bio-Fuels Day, Minister of State
(Independent Charge) for Petroleum and Natural Gas Dharmendra
Pradhan launched sale of product in New Delhi. In Hyderabad, V. V.
Srinivasa Rao, Inspector General of Police, TSSP Battallions, Telangana
has launched sale of Bio-Diesel Blended Diesel (B5 HSD) from HPCLs
Happy Service Station, Lakdikapool in the presence of Ch Srinivas,
Chief Regional Manager and State Level Co-ordinator for Oil Industry
in Telangana and K.A. Devan, Terminal In-charge, Ghatkesar Terminal,
HPCL, according to a statement. This HPCL initiative is a step towards
promotion of greener fuels and finding alternate fuels to reduce our
carbon foot print. It is an environment friendly fuel which has almost no
sulphur or aromatics and has about 10 per cent built in oxygen.
 October 2015
www.InfralinePlus.com

InDepth
Lower gas price may hurt
Indias exploration projects

44

Price of natural gas from domestic fields has dropped by over 18%
Gas prices in India are lower than in its regional peers like Thailand, Indonesia

Infraline Bureau

On September 15, at a post AGM
press conference, Indias largest oil
and gas explorer ONGC revealed it is
a challenge to develop deepwater
gas projects at current prices. Though,
Dinesh K Sarraf, chairman and
managing director of the government-
owned firm, also made the point that
oil and gas prices are cyclical and the
lower price scenario would not stay
forover, it is no small challenge for
the explorer. On August 13, ONGC
had said that it would spent about
$6-7 billion to take out hydrocarbon
from one of its much-touted block
KG-DWN-98/2 in the east coast.
The first gas production from the
offshore deepwater block is expected
in 2018, while crude oil output is
envisaged in 2019.
The price of natural gas from
domestic fields has dropped by 18.14%
to $4.24/mBtu from October 1 on net
calorific value (NCV). Till September
30, the price was $5.18/mBtu. The
revised price on gross calorific value
(GCV) is $3.82/mBtu.
The formula for pricing domestic
gas considers prices in gas-surplus
geographies such as the US and
Canada, which have developed gas
transportation infrastructure. Given
Indias gas production deficit and
 October 2015
www.InfralinePlus.com

emerging gas transport infrastructure, expectation. But the companys

comparing prices in similar
geographies will be more relevant, feel
industry experts. Gas prices in India
are lower than in its regional peers as
well. For example, natural gas prices
in Thailand and Indonesia average
$8-$10 per mmBtu.
For this second half of FY16,
there is going to be a negative impact
with revenues dropping by `2,046
crore on our revenue generation level
and another `1,620 crore on PBT
(post before tax) level. It will have an
impact on my PAT (profit after tax) by
`1,059 crore, A K Srinivasan, director
(finance) of ONGC said.
Analysts say for ONGC, the lower
gas prices will reduce EBITDA by
4-5% for the fiscal year ending March
2016, compared with our earlier
financial ratios have headroom to
absorb the impact. In the case of
RIL, there is no impact because the
government does not allow it to collect
gas prices above $4.2 per mmBtu.
Moreover, gas is now an insignificant
portion of the companys business.
A recent report in a business daily
said that ONGC is planning to seek
government support for its $6-billion
deep water project in the KG basin,
without which, the project may
not be viable.
Sarraf said, Things are challenging
as far as deepwater gas exploration is
concerned. We have 98/2 and we have
been working on cluster-II (a part of
the block). We are getting more and
more crude oil (reserves). Oil would
put more lifeline. To approve the field
Gas price drops 18.14% to
$4.24/mBtu from October
1 against $5.18/mBtu in
previous month
The pricing formula considers
prices in gas-surplus
geographies such as the US and
Canada, which have developed
gas transportation infrastructure
Given Indias gas production
deficit and emerging gas
transport infrastructure,
comparing prices in
similar geographies will be
more relevant
Natural gas prices in Thailand
and Indonesia average $8-$10
per mmBtu.
Analysts say for ONGC, the
lower gas prices will reduce
EBITDA by 4-5% for the fiscal
year ending March 2016
Global oil and gas giants such
as Shell, Total and BP have cut
capital spending by at nearly $14
billion this year in response to 45
lower crude oil price that have
touched six-year low
The lower prices will reduce
the governments earning from
royalty by about `600 crore
Fast-track clarity on premiums
for producing from difficult
areas could encourage greater
participation from various players

development plan (FDP) at current

price is a challenge.
Global oil and gas giants such
as Shell, Total and BP, according to
reports, have cut capital spending by at
nearly $14 billion this year in response
The formula for pricing domestic gas considers to lower crude oil price that have
prices in gas-surplus geographies such as the touched six-year low.
US and Canada, which have developed gas Standard & Poors Ratings
transportation infrastructure. Given Indias gas Services on a recent note said that the
production deficit and emerging gas transport Indian governments decision to cut
natural gas prices will discourage oil
infrastructure, comparing prices in similar
exploration and production (E&P)
geographies will be more relevant, feel industry companies from committing new
experts. Gas prices in India are lower than in capital expenditure (capex). It will
its regional peers as well. For example, natural also add economic uncertainty to their
gas prices in Thailand and Indonesia average ongoing investments.
$8-$10 per mmBtu We believe the governments plan
to stimulate private sector participation
 October 2015
www.InfralinePlus.com

InDepth

and bring in transparency in gas

pricing by introducing formula-driven
gas pricing is well intended. However
falling hydrocarbon prices over the past
one year have brought in uncertainty
over the viability of exploration
projects, said Standard & Poors.
The lower prices will reduce the
governments earning from royalty by
about `600 crore. The price reduction
will benefit the retail gas consumers
and fertilizer sector because of lower
feedstock cost.
The gas price reduction will likely
discourage capex in exploration and
development of gas reserves in India,
where most large finds are in deep
water zones. Globally, several E&P
companies have scaled back spending Global oil and gas giants such as Shell, Total
and put new exploration projects on and BP, according to reports, have cut capital
hold amid low hydrocarbon prices.
ONGC has material gas reserves
spending by at nearly $14 billion this year in
to be developed in its offshore fields. response to lower crude oil price that have
46 However, given ONGCs mandate to touched six-year low. Standard & Poors Ratings
secure the energy needs of the country, Services on a recent note said that the Indian
Standard & Poors expect the company governments decision to cut natural gas prices
to continue with its planned capex. will discourage oil exploration and production
The profitability of such investments
could reduce materially because of
(E&P) companies from committing new capital
the lower gas prices. Investment by expenditure (capex). It will also add economic
private sector oil and gas companies in uncertainty to their ongoing investments
India has been small and their capex
commitments are likely to be uncertain of 50% either upwards or downwards. than what it could have been a year
because of the price revision. The Board has asked us to optimise back, Sarraf explained.
Industry watchers believe clear and the cost and narrow it down to a The $6-7 billion of investment
premium pricing will be crucial to variation of 30%. We will have to wait would be spent to exploit only a part
incentivise production from logistically for couple of weeks to get the final of the block KG-DWN-98/2. The
or operationally challenging fields, such cost, Sarraf added. entire block is divided into two areas
as deep or ultra-deep water zones. Fast- When asked what makes ONGC northern and southern discovery areas.
track clarity on premiums for producing unique that it continues to spend at The Northern area is further
from difficult areas could encourage low price environment, Sarraf said that bifurcated into cluster I and II. The
greater participation from various strategy of different exploration and mentioned investment would be made
players and facilitate the introduction of production (E&P) operators differ on for monetising cluster II of the northern
advanced technologies in the sector. how they respond to market scenarios. discovery area. The northern area is
ONGCs KG basin bock at its peak We believe in ONGC and OVL that we spread over 3,800 sq km, while the
production would produce 77,000 (should) continue to create a bigger asset southern area covers 3,494 sq km. The
barrels per day (bpd) of crude oil and base during this time. For us, this is an Cluster II area has both oil and gas and
nearly 16-17 million metric standard opportunity. We have a challenging phase includes oil fields (Cluster 2A) A2, P1,
cubic meter per day (mmscmd). where there are ways for cost optimising M3, M1 and G-2-2. The gas fields (in
The chairman said that the current and improve our efficiency. We would Cluster 2B) are R1, U3, U1, and A1.
FDP underway for the KG basin block optimise the cost of our projects. The
has estimated costed with a variation costs of overseas acquisition is lower For suggestions email at feedback@infraline.com

InDepth
Auction of marginal oil & gas
fields: Whats the road ahead?
Govt expects these fields could be brought into production soon
Experts feel, marginal discoveries are unlikely to attract any significant private investment
Infraline Bureau
In a major reform initiative by the
Prime Minister Narendra Modi gov-
ernment to revive investments in the
hydrocarbon sector, the Cabinet Com-
mittee on Economic Affairs (CCEA)
recently decided to shift to revenue
sharing model for contracts instead
of cost-recovery while auctioning 69
marginal oil and gas fileds in the next
three months.
To add to the flavour, Petroleum
minister Dharmendra Pradhan in
the latest newsletter released by his
Ministry said, With appropriate
changes in policy, it is expected that
these fields could be brought into
production promptly.
The successful bidders of these
fields would have the freedom to sell
crude oil or natural gas at market-
determined prices, without any
government interference. Moreover,
October 2015
www.InfralinePlus.com
47
unlike the current regime, the
companies would be given the right
to sell gas to any customer and not
as per government-allocation policy.
Other than crude oil and gas, the firms
would be free to commercially exploit
unconventional resources such as
shale oil and gas, if they find any, in
these fields.
We have made a paradigm shift
from cost-recovery model to revenue
 October 2015
www.InfralinePlus.com

InDepth

sharing. At the same time, we have in governments reform measures and profit margins. At the present moment,
decided to implement unified licensing come forward to develop the 69 fields, it is not clear if the provisions of
regime. This is a primary step towards which are already once given up by the Draft Revenue Sharing Contract
ease of doing business, Pradhan had two PSU firms ONGC and Oil India. (DRSC), which were circulated last
said after the CCEA announcement. But, Ramani offers a bleak outlook. year for comments, are going to
On the contrary, V Ramani, a According to the former bureaucrat, apply to the present offer in toto. If
former bureaucrat, who has worked on the revenue sharing model militates they do, the entire bidding process
exploration and production contracts against private risk-taking in that it may well prove to be a non-starter.
in the ministry of petroleum and transfers the entire risk burden to the Penalising companies for failure
natural gas, in an article published in investor. With royalty and a share of to reach committed production
a financial daily has said, At a time gross revenue (net of royalty) having levels goes against the very grain
when oil prices are on a downward to be paid upfront to the government, of best petroleum industry practice,
path, marginal discoveries are unlikely private companies will find the risk- given the uncertain behaviour of
to attract any significant private weighted returns skewed against petroleum reservoirs.
investment, all the more so if the them, especially in an era of low oil However, government seems to
contractual terms offered are less prices. The government offer notice have taken a long-term view. It wants
than appetising. also requires successful companies to bring in reforms on a stage-wise
The success of auctioning of small to compensate ONGC/OIL for past manner. It is evident from what
oil and gas fields holds the future for costs incurred on book value basis, Pradhan has said on his Ministrys
exploration in India. It is to be seen if adding another upfront payment by October newsletter, I would like
companies would entrust confidence companies which will eat into their to accentuate that this is just the
beginning. In order to stimulate
investment as well as maneuver
The government would auction 69 fields towards higher domestic oil and gas
48
given up by PSU explorers ONGC (63) and Oil production, the government would
India (6), which has trapped resources to the bring in more reforms in the oil and
tune of `77,000 crore. At the current crude gas sector. The investors would be
oil price of around $45/barrel, the production offered commodious environment
of hydrocarbon from this fields would help to bet their funds here. We would
walk together on our path of
India cut down imports to the tune of `3,500 nation building.
crore. The currently proved reserves in If the marginal auction policy
these fields stand at 88 million tonnes of oil achieves the desired success,
and oil equivalent government may extend similar terms
to bigger oil and gas blocks and
perhaps those in difficult terrain such
Exploring anew as deep and ultra-deep water blocks.
D K Saraf, chairman and managing
Shift to revenue-sharing model, as opposed
to cost-recovery
director of ONGC was quoted
saying, The economics for us
69 small oil & gas fields given up by ONGC would be different as compared to
and Oil India to be auctioned the nomination regime, so we would
consider a case-by-case whether it
Hydrocarbon reserves of 89 mtoe, pegged at

works for us or not...In addition,
`77,000 cr at current rates
the prices of crude oil and hence of
Once these fields are on stream, Indias oil
natural gas are expected to rise maybe
import bill to reduce by `3,500 cr annually couple of quarters or after a year or
two and when that happens, these
Bidding to be based on revenue-share matrix; market-determined pricing for
fields will become even more viable,
crude oil and gas
The government would auction
Policy for priority allocations of gas wont apply to these fields 69 fields given up by PSU explorers
ONGC (63) and Oil India (6), which
 October 2015
www.InfralinePlus.com

has trapped resources to the tune of

`77,000 crore. At the current crude
oil price of around $45/barrel, the
production of hydrocarbon from this
fields would help India cut down
imports to the tune of `3,500 crore.
The currently proved reserves in these
fields stand at 88 million tonnes of oil
and oil equivalent.
Given the current low oil price
regime, a round of NELP auction
might not attract lot of investor
interest. It is prudent on part of
government to first carry out bid
process for marginal fields, which
will provide an opportunity to try
out the revenue sharing model with
market pricing mechanism, said
Debasish Mishra, senior director,
Deloitte in India.
The bidding would take place on
two parameters 80% of revenue
sharing and 20% on appraisal and The bidding would take place on two parameters
development wells. For the revenue
80% of revenue sharing and 20% on appraisal 49
sharing, the bidders would have to
quote two rates lower revenue
and development wells. For the revenue
point and higher revenue point, sharing, the bidders would have to quote two
which would be determined based rates lower revenue point and higher revenue
on production and price of the point, which would be determined based on
hydrocarbon. In simple terms, there production and price of the hydrocarbon. In
would a revenue sharing matrix over
simple terms, there would a revenue sharing
the life cycle of the field, which would
be directly proportionate to output
matrix over the life cycle of the field, which
levels and price. The government has would be directly proportionate to output
not kept a fixed revenue share because levels and price. The government has not kept
it would not have protected Centres a fixed revenue share because it would not
interest in case of any wind fall gains. have protected Centres interest in case of
While there would be no Cess
any wind fall gains
charged from these fields, for crude oil
production, royalty has been marked
at 12.5% for onshore, 10% for shallow throughout the life cycle of the field. in Arunachal Pradesh, Assam, Tamil
water and 5% for first seven years In the present regime, explorers Nadu, Rajasthan and Nagaland.
for deep and ultra-deep water fields. cannot extend exploration after the The government has determined
For gas fields, the royalty rates have development stage is achieved. fixed timelines to commence
been decided at 10% for onshore and The contract would be for 20 years, production from these fields
shallow water, while it would be 5% which could be extended by another three years for onland, four years
for deep and ultra-deep water. 10 years based on the life cycle of for shallow water and six years
Meanwhile, unlike the current the fields. Of the 69 fields, 36 are for deepwater fields. In case, any
production sharing contract, the offshore and another 33 are on shore explorers fails to meet these deadlines,
explorers of these 69 marginal oil and fields. PSU explorers ONGC and Oil the fields would be taken back.
gas fields would have the freedom India would also be allowed to bid
to carry out exploration activities for these fields. The fields are located For suggestions email at feedback@infraline.com
 October 2015
www.InfralinePlus.com

InDepth
Would CBM players get a
higher price for gas?

50

Private explorers of CBM want freedom to sell gas from these blocks at market rates
Absence of infrastructure and gas markets makes the CBM projects more challenging

Infraline Bureau

Private explorers of coal bed methane
(CBM) Reliance Industries, Essar Oil
and Great Eastern Energy Corporation
Ltd. (GEECL) are seeking freedom to
sell gas from these blocks at market rates.
The firms want the pricing mechanism
adopted by Prime Minister Narendra
Modi-led government for auctioning
of 69 small and marginal fields to be
extended for CBM blocks.
Recently, industry body FICCI, on
behalf of the industry players, wrote
to K D Tripathi, secretary, ministry of
petroleum and natural gas suggesting
that the price discovery mechanism,
proposed under the marginal field policy,
should be made applicable to CBM
contracts as well, since they are based on
similar revenue sharing contract model.
According to industry watchers, a
price of $8-8.5/mBtu is viable at the
current scenario. The industry wants a
fair and equitable index, for pricing
of the gas, which could be linked to
alternate fuels also. The CBM projects
are capital intensive, and different from
conventional ones where a large numbers
of wells are required to be drilled at a
faster pace. The explorers have brought
to limelight that without a economically-
viable pricing for CBM, the investments
may not see light of the day. For
example, in China CBM players claim
a premium of $2/mBtu, in addition to
prevalent gas price of $11.9/mBtu.
The private players say that gas

pricing becomes a key factor in
incentivising the contractors to make
the continuous investments required
to commence commercial production
and maintain it throughout the life of
the project. Though CBM contracts
offer selling gas at arms-length price,
but the UPA-government took away the
marketing freedom by bringing CBM
gas under the purview of Gas Utilisation
Policy, where government decides the
price and allocation of gas.
The implementation of marginal
field policy for CBM development
will send a very strong signal to the
potential bidders for the proposed
six CBM blocks announced last
month for bidding under CBM-V
and for the 69 marginal fields with
clear message that policy proposed
for marginal field is already
implemented in CBM contracts
with similar attributes and will go a
long way in instilling confidence in
Indian E&P sector, A Didar Singh,
secretary general of FICCI, wrote in his
communication to Tripathi.
In September, Modi-headed CCEA
decided for the 69 marginal fields, the
successful bidders for them would have
the freedom to sell crude oil or natural
gas at market-determined prices sans
any government interference. Moreover,
the bidders would be given the right to
sell gas to customers of their choice,
unencumbered by the governments
allocation policy.
RIL, Essar Oil and GEECL on a
September 15 review taken by the
petroleum ministry apprised their plans to
invest to the tune of $2 billion in the next
three to five years in their CBM projects.
However, the investments, that may lead
to increase in output to about 6 million
metric standard cubic meter per day
(mmscmd) from 1.1 mmscmd now, are
subject to a remunerative pricing regime
in addition to timely regulatory approvals
including land acquisition, forest and
environment clearances, among others.
Since October 1, the price of natural
gas from domestic fields has dropped
by 18.14% to $4.24/mBtu from October
1 on net calorific value (NCV). Till
September 30, the price was $5.18/mBtu.
The revised price on gross calorific value
(GCV) would be $3.82/mBtu.
The industry wants
a fair and equitable
index, for pricing
of the gas, which
could be linked to
alternate fuels also.
The CBM projects
are capital intensive,
and different from
conventional ones
where a large numbers
of wells are required
to be drilled at a faster
pace. The explorers
have brought to
limelight that without
a economically-viable
pricing for CBM, the
investments may not
see light of the day.
For example, in China
CBM players claim
a premium of $2/
mBtu, in addition to
prevalent gas price of
$11.9/mBtu
The explorers are of the view that
absence of gas infrastructure and gas
markets make the CBM projects more
challenging. The blocks are situated in
West Bengal, Jharkhand and Madhya
Pradesh. Other factors such as delay in
forest and environment clearances, local
issues such as theft and vandalism are
resulting in cost overruns making the
viability of the blocks more challenging.
Government-owned ONGC targets
to commence production from two
CBM blocks Bokaro and North
Karanpura by as early as first half of
October 2015
www.InfralinePlus.com
next financial year. This would expand
the explorers portfolio, which is now
restricted to conventional oil and
gas. In three years from now, ONGC
plans to spend `2,000-2,500 crore to
monetise its CBM assets and envisage
a peak output of 1.58 mmscmd.
ONGC board is likely to give
go-ahead to its final field development
plan for the Bokaro block in its next
meeting. Post the approval, it would
require two-three months to hire rigs and
services to put on ground. The output
from the block is likely to hover at
0.5-0.6 mmscmd, while the peak output
is envisaged at 0.74 mmscmd, which
could be achieved in three years.
ONGC would spent about `1,100
crore to bring the Bokaro block into
production. Nearly, 70-80 wells are to
be drilled in three years in the block.
Of this, 25-30 wells would be drilled
in the first year. The PSU explorer has
planned the projects with 14% return 51
on investment, which is viable at a gas
price of $4.6/million British thermal
units (mBtu). However, the domestic
natural gas in the country would be
$4.24/mBtu starting October 1.
For the North Karanpura block,
ONGC is awaiting governments nod
to transfer 25% stake to Prabha Energy.
The block was initially held by ONGC
(80%) and Coal India (20%). ONGC
decided to hive off 25% to the private
firm, which would be the operator
of the block. The block is likely to
produce 0.3 mmscmd of gas.
Meanwhile, ONGC is carrying out
exploration at another CBM block
Jharia, while it has encountered a
deadlock at Raniganj block. The Jharia
block would also be put into production
shortly with an output of 0.5-0.6
mmscmd. An airport has been developed
in the vicinity of Raniganj block,
preventing to carrying CBM exploration
activity. The company is contemplating if
the block needs to be relinquished.
For suggestions email at feedback@infraline.com
 October 2015
www.InfralinePlus.com

StatisticsOil & Gas

Crude Oil Processed by Refineries 2015-16
(000 Metric Tonnes)
Oil Companies Apr May Jun July Aug Sept
Indian Oil Corporation Ltd. (IOCL)
IOCL-Koyali, Gujarat 604 1204 1176 1256 1191 1066
IOCL-Mathura, Uttar Pradesh 675 699 733 757 703 696
IOCL-Panipat, Haryana 1293 1366 1212 1191 1087 1269
IOCL-Haldia, West Bengal 647 663 667 663 667 491
IOCL-Barauni, Bihar 474 527 541 534 566 527
IOCL-Guwahati, Assam 94 95 93 85 79 72
IOCL-Digboi, Assam 29 55 51 49 53 45
IOCL-Bongaigaon, Assam 236 231 200 213 212 210
IOCL Total 4052 4841 4675 4749 4558 4375
Hindustan Petroleum Corporation Ltd. (HPCL)
HPCL-Mumbai, Maharashtra 551 420 654 690 693 697
HPCL-Visakh, Andhra Pradesh 739 807 588 466 858 802
HMEL-Ggsr, Bathinda, Punjab 896 925 897 922 937 907
HPCL-Total 2186 2153 2139 2078 2489 2406
Bharat Petroleum Corporation Ltd (BPCL)
BPCL-Mumbai, Maharashtra 1137 1164 1056 1099 1095 997
BPCL-Kochi, Kerala 894 928 903 928 938 901
NRL-Numaligarh, Assam 1 151 261 253 252.9 248
BORL-Bina 2 571 601 631 620.2 620
BPCL-Total 2033 2814 2821 2911 2906 2766
Chennai Petroleum Corporation Ltd (CPCL)
CPCL-Manali, Tamilnadu 901 907 904 705 508 691
CPCL-Narimanam, Tamilnadu 39 43 48 49 48 46
CPCL-Total 940 950 952 754 557 737
Oil & Natural Gas Corporation Ltd.(ONGC)
ONGC-Tatipaka, Andhra Pradesh 4 4 5 5 3 5
52 MRPL-Mangalore, Karnataka 1111 1336 1463 1107 1349 976
ONGC Total 1115 1340 1469 1112 1352 981
Reliance Industries Ltd. (RIL)
RIL, Jamnagar, Gujarat 2024 2740 2714 2816 2788 2731
RIL-(Sez), Jamnagar, Gujarat 3020 3104 3023 2490 3211 3098
RIL Total 5044 5844 5737 5306 5999 5829
Essar Oil Ltd., Vadinar, Gujarat 1719 1764 1690 1755 1759 954
Grand Total 17090 19706 19483 18666 19619 18049

Production of Petroleum Products by Refineries & Fractionators

(000 Metric Tonnes)
PRODUCTS APRIL MAY JUNE JULY AUGUST SEPTEMBER
LPG 778 842 810 814 932 823
NAPHTHA 1390 1542 1422 1369 1498 1397
MS-III 881 935 970 947 1013 979
MS-IV 395 446 496 547 531 485
MS Others 973 1464 1422 1468 1512 1369
ATF 618 789 924 950 1103 1045
SKO 539 562 648 690 621 675
HSD-III 3383 4237 3977 3466 3619 3355
HSD-IV 1153 1411 1591 1476 1425 1306
HSD Others 2561 3020 2824 2970 3322 2748
LDO 36 27 42 35 37 31
LUBES 83 89 82 82 85 82
FO 744 916 690 1014 932 922
LSHS 43 73 47 52 44 3
BITUMEN 490 514 434 298 230 247
RPC/Petcoke 825 1044 1070 1037 1085 905
Others 1535 1570 1686 1964 1557 1581
TOTAL 16426 19483 19136 19179 19548 17952
REFINERIES 16150 19198 18873 18947 19243 17652
FRACTIONATORS 276 286 263 233 304 300
16426 19483 19136 19179 19548 17952
 October 2015
www.InfralinePlus.com

Import/Export of Crude oil and Petroleum Products

(000 Metric Tonnes)
Import/Export April May June July August September
Import*
Crude Oil 15535 17454 15619 17732 17235 15646
Products
LPG 683 809 645 708 992 657
MS/ Petrol 120 163 174 138 40 53
Naphtha 80 364 212 233 275 240
SKO/ Kerosene 35 0 6 0 0 0
HSD/ Diesel 10 0 5 5 6 6
LOBS/ Lube oil 132 149 141 141 160 160
Fuel Oil/LSHS 21 135 263 76 65 108
Bitumen 64 77 70 70 65 65
Others 755 944 881 883 850 849
Product Import 1902 2643 2397 2254 2453 2139
Total Import 17437 20097 18017 19986 19687 17784
Product Export
LPG 24 19 20 22 19 13
MS/ Petrol 935 1341 1286 1357 1537 1331
Naphtha 576 492 614 683 657 552
Aviation Turbine Fuel 153 260 377 501 589 669
HSD/ Diesel 1366 1495 1809 2181 2432 2129
SKO/ Kerosene 1 1 1 1 1 1
LDO 0 0 0 0 0 0
LOBS/ Lube Oil 4 1 3 1 1 0
Fuel Oil/LSHS 363 498 130 162 285 288
Bitumen 8 10 8 4 14 9
Others 313 424 274 319 388 247
Total Product Export 3743 4542 4524 5229 5922 5239
Net Import 13693 15555 13493 14756 13765 12545
Note:
Source: Oil Companies. All figures are Provisional.
POL imports by private parties taken from raw data of DGCI&S which is with a 2 month lag period. 53
IOCL: Nepal sales taken in exports of IOCL. For Nepal exports , average US$ exchange rate considered
BPCL:For Nepal and Bhutan exports , average US$ exchange rate considered
*LNG import not included

Consumption of Petroleum Products : April-September 2015

(000 Metric Tonne)
PRODUCT Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15
(A) Sensitive Products
LPG 1480 1497 1484 1576 1546 1614
SKO 568 577 567 576 573 563
Sub total 2048 2074 2051 2152 2118 2177
(B) Major Decontrolled Products
MS 1784 1834 1769 1672 1768 1879
HSD 6487 6440 6299 5705 5442 5886
Naptha 942 1240 1026 1174 1134 1151
ATF 494 501 488 500 494 494
LDO 26 25 41 35 31 37
Lubricants & Greases 272 235 288 261 254 263
FO & LSHS 485 535 508 535 549 590
Bitumen 548 574 451 280 269 331
Sub total 11037 11383 10870 10161 9941 10631
(C ) Other Minor Decontrolled Products
Petroleum coke 1126 1554 1263 1554 1410 1371
Others 504 521 558 485 574 520
Sub total 1630 2076 1821 2039 1984 1891
All Products total 14715 15532 14741 14351 14044 14699
NOTE:
i) All figures are provisional
ii) The source of information includes Oil Companies, DGCIS & Major consumers.
iii) The consumption estimates represent market demand and is aggregate of :
(a) sales by oil Companies in domestic market, and
(b) consumption through direct imports by private parties.
While data for company sales are actual, that of private direct import are estimated, which may undergo change on receipt of actual data.
 October 2015
www.InfralinePlus.com
NewsBriefs | Renewable
India solar power equipment market to surpass $4
bn by 2020
According to India Solar Power Equipment Market Forecast &
Opportunities, 2020, the solar power equipment market in India
is projected to surpass USD4 billion by 2020. India consumes a
large amount of fossil fuels such as coal and crude oil to meet its
domestic energy requirements. Power and transportation sectors
are the leading consumers of coal and crude oil in the country. Over
the past couple of decades, consumption of fossil fuels for power
generation in India has increased significantly due to increasing
urbanization and industrialization. However, considering future
energy requirements and concerns associated with fossil fuels,
India has taken huge strides over the past three years in developing
its solar potential by implementing green growth agenda along with
commissioning of solar power plants in the country.
Tax Incentives For Wind Turbine Equipment
Of late the solar power sector in India has enjoyed bulk of the
attention from Indian policymakers looking to make the 100 GW
by 2022 installed capacity target a reality. However, the wind
energy sector also now has something to cheer about. The central
government has announced that wind turbine equipment will not
attract central excise duty. This tax is to be paid for the manufacture
and sales of products. The equipment exempt from excise duty
include towers, nacelles, rotors, blades, and wind turbine controllers.
The exemption will benefit a large number of wind turbine
manufacturers active in India. Some of the leading manufacturers
include Gamesa India, Suzlon Energy, Inox Wind, and Vestas. India
54 plans to have an installed wind energy capacity of 60 GW by March
2022. At the end of August 2015, just over 24 GW of wind energy
capacity was operational in India.
Scheme to allow youth to set up solar plants
Aiming at providing jobs to unemployed youth and make them
entrepreneurs, the Centre is working on over `1 lakh crore scheme
to set up 20,000 MW solar power projects across the country. As
per the plan, the Ministry of New and Renewable Energy (MNRE) will
asks the states to invite application from the unemployed youth to
set up solar power plants, from 0.5 MW to 2. 5 MW capacity, either by
themselves or through joint venture with companies and societies. The
MNRE has sent the proposal to Ministry of Finance for its comments
and it is expected to come before the Union Cabinet for approval soon,
an official from the ministry said. The government will select the
successful candidates through lottery system and provide maximum
subsidy of `50 lakh to set up each solar plant. With the cost to set up
1 MW capacity solar plant around `5 to `5.5 crore, remaining capital,
the promoters will have to arrange through loan from banks.
Non-hydro renewables to reach 126 GW by 2025
Indias installed non-hydro renewable energy capacity is expected
to more than triple to an estimated 125.9 GW by 2025 from 33.1
GW in 2014, shows a new report from research and consulting firm
GlobalData. India has significant solar power potential, due to its
geographical location near the equator, and the country has outlined
clear plans for future energy production from this source, said
Chiradeep Chatterjee, GlobalDatas senior analyst covering power.
Together with nuclear energy, renewables will drive the countrys
cumulative installed capacity to about 609 GW by that year from
272.8 GW in 2014. This represents a Compound Annual Growth Rate
(CAGR) of 7.3%, the research firm said.
MNRE sees need for cost-effective storage
The Ministry of New and Renewable Energy (MNRE)has called for
Expression of Interest (EOI) for energy storage demonstration
projects to support renewable energy generation. MNRE has set
up a capacity addition target of 175MW by 2022. With the huge
spurt in decentralized and distributed electricity generation in
India, the MNRE is expecting many consumers to become so-called
prosumers. Prosumers, according to the ministry, are likely to
generate energy locally for their own need and thereafter export
surplus to the local grids or to suited storage units.
Domestic sourcing rule helps solar panel-makers
boost order books
Domestic content rules for solar power projects have already
begun to provide a boost to domestic manufacturers, according
to Upendra Tripathy, Secretary, Ministry for New & Renewable
Energy. Out of the 100,000 MW target, even if we give 8,000
MW to the domestic manufacturers then it hardly affects global
manufacturers, but greatly helps our local industry, he said.
In Kolkatas Special Economic Zone (SEZ), two manufacturers
are working in three shifts and their inventory is full, he added.
Currently, domestic manufacturing capacity for solar photovoltaic
modules is around 3,000 MW annually. With India adding 2,000
MW solar power in the current fiscal and targeting a further
12,000 MW in the 2016-17 fiscal, demand for modules is rising
sharply. Apart from Kolkata where Vikram Solar manufactures
modules, Lanco Solar is based in Vishakhapatnams Special
Economic Zone, Moser Baer in Greater Noida are amongst some of
the manufacturers using SEZs as a manufacturing base for solar
power equipment.
Himachal allocates hydro plant to Reliance Energy
The Himachal Pradesh cabinet reallocated a multi-million dollar
hydropower project, that was under litigation, to Reliance Energy
Ltd, an official said here. The cabinet agreed to allot 960 MW
Jhangi-Thopan-Powari Hydel Project in Kinnaur district to Reliance
Energy Ltd, a government official said. He said that if Reliance
Energy does not accept the offer, the project may be re-advertised
for fresh bidding. The Thopan-Powari-Jangi hydropower project, one
of the most viable ones, requires an investment of over `7,000 crore
and aims to generate 4,000 million units per year.
Suzlon Energy seeks shareholders nod to raise
`5,000 cr
Wind turbine
manufacturer Suzlon
Energys board has
sought shareholders approval to raise up to `5,000 crore through
the issue of securities. (It is proposed) to issue securities to
the extent of `5,000 crore, the company said in a notice to its
shareholders for Annual General Meeting scheduled on September
28. The decision to raise `5,000 crore by offering securities was
taken in the board meeting of the company recently. According
to the proposed resolution, these securities can be offered in
international as well as domestic markets. The company plans to
raise up to `5,000 crore by allotting equity shares, ADRs (American
Depository Receipts), GDRs (Global Depository Receipts), FCCBs
( Foreign Currency Convertible Bonds) or NCDs ( Non Convertible
Debentures) with warrants and such other securities.

NewsBriefs | Renewable
11 hydropower projects can be executed in Tawang
basin: Government
As many as 11 hydropower projects with a total capacity of
about 2,700 MW can be implemented out of the 13 planned in
the Tawang river basin in Arunachal Pradesh, subject to strict
environmental safeguards and mitigation measures, says a
government study. However, the other two hydropower projects
Tsa chu-I and Thingbu chu with a combined capacity of over 100 emerging market private equity firm with USD 7.6 billion of funds
MW should not be implemented due to their possible impact on
biodiversity-rich forests and mountain ecosystems, it added. The
study Perspective plan for development of Tawang river basin was
commissioned by Arunachal Pradesh government to assess the
impact of 13 hydropower projects planned in the basin following
the direction from the Centres Forest Advisory Committee.
MNRE to distribute solar devices in rural, tribal areas
The Ministry of New and Renewable Energy has announced
a programme for intensive distribution of renewable energy
devices to the rural and tribal people in the country. Under
the programme, devices like Unnat Chulhas, Solar Cookers,
Solar Lamps, Solar Home Lighting Systems and others will
be distributed using funds of the Compensatory Afforestation
Fund Management and Planning Authority (CAMPA), an official
statement said. According to the statement, CAMPA has
already issued circular providing the guidelines for utilisation of
funds to the state governments and union territories regarding
the programme.
Alstom to supply turbine generator for 700MW
Zungeru hydropower plant in Nigeria
China National Electric Engineering (CNEEC) has awarded a contract
to Alstom to supply electro-mechanical equipment and technical
services for the under construction 700MW Zungeru hydropower
project in Nigeria. Under the 50m contract, Alstom will provide
four 175MW Francis turbine-generator sets and related equipment
for installation at the $1.3bn hydropower plant. Alstom Hydro
China will be responsible for the equipment design, manufacturing,
supervision to the installation, commissioning, testing as well as
site services, as part of the contract. Expected to be the countrys
largest hydropower project upon completion, the Zungeru power
plant is being developed by China National Electric Engineering in
partnership with Sinohydro.
India, US invest $8 mn for off-grid clean energy fund
Aiming at
accelerating the
commercialisation
of innovative off-
grid clean energy solutions, India and US on Friday announced an
investment of $8 million in the PACEsetter Fund. The PACEsetter
Fund is the principal funding arm of Promoting Energy Access
through Clean Energy - an initiative of the Indian and US
governments to harness commercial enterprise and bring clean
energy access to unserved and underserved individuals and
communities. The announcement was made by US Ambassador
Richard Verma and New and Renewable Energy Secretary Upendra
Tripathy on the sidelines of an event hosted by The Climate Group
(TCG) - an international non-profit organisation working towards
achieving a low carbon future.
October 2015
www.InfralinePlus.com
Inox Wind bags 100 MW power project from
Ostro Energy
Inox Wind said it has bagged an order for a 100 MW wind power
project at Lahori in Madhya Pradesh from Ostro Energy. Inox Wind
Limited has bagged an order for a 100 MW wind power project at
Lahori, in the state of Madhya Pradesh from Ostro Energy, the
company said. Ostro Energy is backed by Actis, a global pan-
under management, it said. Inox will supply and install 50 units
of its advanced 2MW DFIG 100 rotor dia Wind Turbine Generators
(WTGs) for Ostro Energy on a turnkey basis. The rotor has one of the
highest swept areas that makes it ideally suited to maximise returns,
especially in low wind areas, it said.
Lanco Infratech in talks with investors to infuse
equity in Teesta plant
Lanco Infratech has
said it has started
discussions with
strategic investors
to infuse equity in
Teesta hydro power project for its speedy completion. Lanco,
along with the lead lender for Teesta Hydro Electric project, has
initiated discussions with strategic investors to infuse equity for
the (cost) overrun portion, which will enable speedy completion
of the project, Lanco Infratech sai. According to the statement,
as part of a process to consolidate its businesses and to reduce
debt, Lanco Group has undertaken sale of some of its assets and
bringing in strategic investors in others. The process of bringing the 55
strategic partner on board is taking time. To avoid further delay in
the process, the lenders of the project have proposed Strategic Debt
Restructuring (SDR), which is in the process of approval.
UP to announce Biomass Energy Policy 2015
Uttar Pradesh is targetting 1,000 megawatt (mw) of biomass energy
under the new UP Biomass Energy Policy 2015, which is being
finalised. The government is mulling providing 100 percent stamp
duty on acquiring private land for setting up biomass power plant. If
such plant is set up under a joint venture with state nodal agency UP
New and Renewable Energy Development Agency (NEDA), the latter
would provide land as its equity share. The draft policy is ready and
now NEDA is soliciting suggestions from experts and general public
before the government implements it. The policy would be effective
for the next 10 years and be subject to amendments.
Indias clean energy policy is crucial for
climate change
India has many economic targets to achieve for which free
and cheap energy is vital. India has the worlds second largest
population and fourth largest economy, with a per capita annual
GDP of $1,630. While the Indian economy has been among the
fastest growing in the world in the last two decades, the major part
of this growth is due to the service sectors, including information
technology, bio-technology, as well as media and entertainment.
The nation aims to reduce the poverty rate to 15 per cent, provide
full employment, ensure food, energy and economic security and
double per capita income. The ambition to achieve this target
has increased Indias emissions more than 65 per cent in the
last 10 years.
 October 2015
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InDepth
Solar power industry demands anti-
dumping duty to insulate domestic industry

56

Demands investigation into imports from EU, US, China, Taiwan & Malaysia
Imports in first four months of the current financial year stands at $381 million

Infraline News Service

The Indian Solar Manufacturers
Association has filed an application
with the Directorate General of
Safeguards for investigating the
import of solar cells and panels.
Their representation comes a year
after the commerce departments
proposal for an anti-dumping duty
on solar cells shipments from China,
the US and Malaysia was turned
down by finance ministry, to favour
solar power producers.
Recently, India lost a case filed by
the US at the WTO on favouring the
domestic industry for the Jawaharlal
Nehru National Solar Mission. The
Association has revived its demand
for safeguard and anti-dumping duties
on imported solar cells and modules.
The association, a body of companies
that produce cells and modules, have
sent a formal petition to the Ministry
of New and Renewable Energy.
The association has demanded
investigation into imports from EU,
US, China, Taiwan and Malaysia,
sources said.
The petition comes against the
backdrop of surge in imports of solar
cells and modules (cells made into
modules). In 2014-15, India imported
$820.95 million worth of cells and
modules, but imports in the first four
 October 2015
www.InfralinePlus.com

months of the current financial year imports. Anti-dumping duties are It fell upon the new government
(that is, April-July) were $381 million, imposed when the exporters are at the Centre to take a call on it,
or 46 per cent of last full year. established to be selling their products in May 2014. But the government
Most imports are from China. below fair market value. decided against imposing the duties,
Of last years total imports, 73 per This is the second time that the but told the domestic manufacturers
cent (or $603 million) came from Indian domestic solar cell manufacturers not to worry, they would get enough
China. The trend is holding up. In the are taking up the issue of dumping with business from the government-
current year, the Chinese have sold the government. On an earlier occasion, owned companies who would put
$283 million worth of solar cells and upon the industrys petition, the up solar projects.
modules to India, or 74 per cent of Directorate General of Anti-dumping of Indian solar cell manufacturers have
total imports. the Ministry of Commerce, investigated alleged that cheap solar cells have
The association has asked for both imports from the US, China, Taiwan and captured close to 90 per cent market,
safeguard and anti-dumping duties. Malaysia and determined that there was and demanded action against the US,
Safeguard duties are temporary actually dumping. It recommended anti- European Union, China, Malaysia and
measures to protect a domestic dumping duties ranging from $ 0.11 to $ Taiwan for dumping products in India.
industry against sudden surges in 0.81 per watt. Unlike the first case in 2012, the
manufacturers application is filed
The Indian domestic solar cell manufacturers with both the Directorate General of
Anti-Dumping (DGAD) under the
are taking up the issue of dumping with the
commerce ministry and Directorate
government. On an earlier occasion, upon the General of Safeguards (DGS) under
industrys petition, the Directorate General of the ministry of finance.
Anti-dumping of the Ministry of Commerce, The last case ran for two years at
investigated imports from the US, China, Taiwan DGAD, which saw solar cell makers, 57
and Malaysia and determined that there was allied electronics industry and even
glass makers asking for protection
actually dumping. It recommended anti-dumping
against the import of solar panels.
duties ranging from $ 0.11 to $ 0.81 per watt Then, the domestic industry alleged
 October 2015
www.InfralinePlus.com
InDepth
58 of 60 per cent market being eaten
by imports.
While DGAD finalised duties to
the tune of $0.48 a unit to $0.81 a unit
on the solar cells imported from the
above-mentioned countries, the finance
ministry did not impose the same and
let the duty lapse in May last year.
Last year, minister for new and
renewable energy Piyush Goyal
assured the domestic industry
of enough business opportunity
requesting them to drop the case. The
National Democratic Alliance (NDA)
government has revised the National
Solar Mission targets five-fold to
100,000 Mw by 2022.
Demanding investigation, Indian
Solar Manufacturers Associations
letter to the DGS and DGAD said
the aggravated situation of imports
and consequent injury to the domestic
industry. The letter cites the earlier
judgment by DGAD identifying injury
on Indian solar cells and recommended
anti-dumping duty on all such imports
from subject countries except EU.
In 2014, the commerce ministry
identified a dumping margin range
Recently, India lost
a case filed by the
US at the WTO on
favouring the domestic
industry for the
Jawaharlal Nehru
National Solar Mission.
The Association has
revived its demand
for safeguard and
anti-dumping duties
on imported solar
cells and modules.
The association, a
body of companies
that produce cells and
modules, have sent a
formal petition to the
Ministry of New and
Renewable Energy
of 50-60 per cent from the US and
100-110 per cent by China, the largest
exporter of solar cells worldwide.
In their application, the Association
said, It is very apparent that exporters
from these countries are taking benefit
of this non-imposition and have once
again intensified the dumping and
if it is not curbed the same can lead
to a complete annihilation of Indian
production of solar cells.
The installed solar cell
manufacturing capacity in the country
is 1,250 Mw, out of which only 250
Mw is operational. Most of the units
have either shut down or running at
less than half capacity due to tepid
demand and slow pace of award
of the projects, said a member of
the Association.
The annual demand of the solar
power generation sector is 4,000 Mw,
which is likely to shoot up with the
targets being revised upwards.
For FY16, projects of 950 Mw are
in pipeline for the domestic solar cells
makers. The government has kept
a certain amount of projects under
the Solar Mission to be built only on
domestic content. The US has filed
case in the World Trade Organization
contesting the same.
The ministry of new and renewable
energy (MNRE), however, said this
would not have any major impact on
the governments drive to tender out
solar power projects.
The projects earmarked for
domestic players are more than their
capacity. The case though would take
its own course and close to a year and
half to reach finality, said a senior
MNRE official.
Around 80 per cent of the Indian
solar power production capacity is
built on imported solar cells, half of
which is from China alone. Chinese
panels are the cheapest worldwide,
according to industry estimates.
Imported panels, especially from
China and the US, are 30-40 per cent
cheaper than domestic ones. The price
of imported cells has declined to $0.45
a unit due to increased demand in the
country in the past three years.
 October 2015
www.InfralinePlus.com

Others too the director-general of safeguards

Producers of tyres, rubber, aluminum
foil and metallurgical coke have made
representations to the government for
safeguard duties against imports.
There has been a surge in
applications after the imposition of the
safeguard duty on steel imports this
month. Representations were made
in the last two weeks from diverse
sectors. We will examine these cases,
said a finance ministry official.
Safeguard duties are measures
to protect the local industry from a
sudden surge in imports. The World
Trade Organization does not allow such
duties to be imposed for more than four
years at a stretch.
Finance Minister Arun Jaitley
announced a 20 per cent safeguard
duty on imported hot-rolled steel to
protect domestic producers struggling
against cheap imports from China and
countries with which India has free
trade agreements. The duty has been
imposed for 200 days, after which
will issue a report on whether the tax
should continue.
India has rarely used trade
safeguards, mainly because the
domestic industry was unaware of
them. Unlike the anti-dumping duty,
which the government can initiate on
its own, a safeguards investigation can
only be initiated on complaints from
local producers.
A mere investigation can
create ripples. Before we start an
investigation, we have to be sure
there is an injury. We cannot act
unless there is serious injury. There
are conflicting interests of producers
and the users in many cases, another
official pointed out.
So far Directorate General of
Safeguards has investigated 25
cases. Safeguard duties have been
imposed on seamless pipes and tubes,
sodium citrate and fatty alcohols
at the rate of 10, 20 per cent and
18 per cent, respectively.
Chronology
2012: First case filed by a group of
indigenous solar cell makers
May 2014: DGAD identifies injury
to the tune of 60-110 per cent by
US and China, finalises anti-
dumping duty
Jun 2014: Finance ministry does
not impose the duty, let it lapse
Jul 2014: Piyush Goyal urges
domestic industry to drop case,
assures enough demand pipeline
950 Mw projects for domestic
industry this financial year
Sep 2015: Domestic solar
manufacturers approach both DGS
and DGAD seeking relief
Reality
1,250 Mw Indian solar cell
manufacturing capacity
250 Mw Operational capacity
4,000 Mw Annual demand by
solar power industry 59
$0.65-0.68 per unit Price of
Indian solar cells
$0.45-$0.50 per unit Price of
imported cells
80% of Indian solar capacity
built on imported content, more
than half sourced from China

We want the domestic industry to

look beyond anti-dumping measures.
The anti-dumping duty can be imposed
only if goods are imported at dumping
prices. The safeguard duty can be
imposed if goods enter in increased
quantities, a government official said.
Even though the government hiked
the import duty on rubber from 20 to
25 per cent in the budget in February,
it has not helped contain imports.
Rubber growers associations have
sought safeguard duties.
The Automotive Tyre Manufacturers
Association, too, has sought safeguard
tariffs on car tyre imports from China
and South Korea.

For suggestions email at feedback@infraline.com

 October 2015
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InDepth
Can India deliver on renewable
energy installation targets?

60

Biggest financial challenge is on the front of access to low-cost finance

Country is adding 1,000 Mw of solar power annually

Infraline News Service

With India committing 40 per cent of
installed capacity by 2030 to come from
renewable energy sources, experts in
the industry are not sure if this is an
achievable target. The current statistics
of having 37,000 Mw renewable
energy installation, which accounts
for close to 15 per cent of the total
power capacity in the country, sounds
impressive though.
Experts within the government
calculate that 300,000 to 350,000 Mw
of renewable energy would have to
be set up to meet this target. To put it
in perspective, India is aiming to add
175,000 Mw of capacity from clean
energy sources by 2022: 60 per cent
from solar energy, 30 per cent from
wind and the balance from biomass
and small hydro.
Considering where India started
from in 2010 (when the Jawaharlal
Nehru National Solar Mission became
active), the growth of solar power in
India has been phenomenal - from 2
Mw in 2010 to 4,200 Mw at present. In
wind energy, India is the worlds fifth
largest producer at 24,000 Mw.
The Roadblocks
In wind power, growth has decelerated
in the past three years. Seen as a tax
haven, the investment in wind dropped
 October 2015
www.InfralinePlus.com

once the government pulled the Companies in the business

plug on the accelerated depreciation
tax benefit for the sector in 2011. SUNEDISON INDIA
It was later brought back and then Target: 10,000 Mw (solar); 5,200 Mw (wind)
another generation-based incentive Investment: Not disclosed
was also introduced. The NYSE-listed firm is the worlds largest renewable energy company. The
This, however, has not excited the company has committed to 15,200 Mw of renewable power, of which 10,000 Mw
power producers so far. From annual is solar and 5,200 Mw is wind energy. It currently has installed capacity of 100 Mw
addition of 3,000 Mw till 2011, it has solar power in India and has signed a memorandum of understanding with Adani
dropped to 1,500-2,000 Mw every Power to set up a solar cell manufacturing facility of 6,000 Mw. SunEdison plans to
make India one if its top three markets, given the strong demand for energy and
year. In the current fiscal, against a
the developing market.
target of 2,400 Mw, only 644 Mw has Solar is going to get big in this country. There is definitely huge demand for
come up so far. power and the next major step is growth in this sector. We have to see who has the
Solar power may have got greater long-term vision to cater to this demand. If incentivised, solar stands to benefit the
policy impetus after the National most from governments Make in India programme
Democratic Alliance came to power Pashupathy Gopalan, president, SunEdison Asia Pacific
but ratcheting up capacity at rates no
country has done before is a tough ACME CLEANTECH SOLUTIONS
task when seen from where India Target: 7,500 Mw (solar)
sits at present. Investment: `35,000 crore
Currently, on an average, the A silent player in the solar power sector, ACME was founded in 2003 by Manoj
country is adding 1,000 Mw of solar Upadhyay. It currently has projects across the country totalling 880 Mw, in various
power annually. At this rate, 100,000 stages of development. The company has a record of completing projects on
Mw in six years looks farfetched even time, sometimes even ahead of schedule. ACME is committed to developing
61
if one was to assume that India can 7,500 Mw of renewable energy through solar power projects by 2019. It enjoys
match China which has added solar the financial backing of lenders such as International Finance Corporation, Asian
Development Bank, US-EXIM and State Bank of India.
capacity at an ever increasing rate. The
Besides generating 12,000 million units of green power, these projects will
Union ministry of new & renewable generate jobs for 37,500 persons and prevent carbon emissions to the tune of
energy pegs the annual growth of solar 9,750 million tonnes per annum
power at 15,000 Mw. However, senior Manoj Kumar Upadhyay, founder and chairman, ACME
officers say the country would touch
6,000 Mw by the end of this fiscal and
close to 10,000 Mw by next. Comparing India and China
Upendra Tripathy, secretary, Figures in Mw INDIA CHINA
ministry of new & renewable energy, Year Wind power Solar power
is confident, We are on track to
Mar 11 14,155.00 300.00
achieve 175,000 Mw. We are inviting 62,700.00 3,300.00
investment in both generation and grid
capacity addition. I cant comment on Mar 12 17,352.00 700.00
75,000.00 8,300.00
the climate change targets but as for
renewable energy, we will achieve the Mar 13 19,050.00 1,200.90
91,424.00 17,800.00
targets we have set for the country.
The target trajectory for Mar 14 22,465.00 2,208.00
renewables is stunning and could lead 114,763.00 28,199.00
to a complete transformation of the Mar 15 23,444.00 3,752.00
energy sector in the country. Clearly, 124,800.00 33,120.00
in the near term, we need to focus
Road ahead
on the financials of the distribution Solar projects to be Total Solar energy Wind energy capacity
companies, transmission constraints, commissioned in FY16 capacity by FY17 to be added in FY16
the ability to pass on the true cost, and 4,335 Mw 10,859 Mw 2,400 Mw
consumer affordability, says Rupesh
Source: Ministry of new and renewable energy (MNRE) & industry reports
Agarwal, advisory partner and leader
 October 2015
www.InfralinePlus.com
InDepth
(energy), BDO India LLP.
The target would have looked
more plausible if only the evacuation
infrastructure was in place. The
southern region which is surplus in
wind power has a transmission deficit.
So is the case with Rajasthan, Jammu
& Kashmir, Telangana, Madhya
Pradesh and others. The ambitious
Green Energy Corridors project
envisaged in 2011 as an alternative
transmission network has been a non-
starter with no major lines being built
or tendered out. Its only now that the
The biggest financial
challenge faced
by developers has
been access to low-
cost finance. While
developers using
imported components
62
and cheaper EXIM
Bank loans (10 per cent
interest for 18 years)
have thrived, those
using indigenously
manufactured
equipment have had to
avail costlier loans
government has decided to nominate
state-owned Power Grid Corporation to
build it with assistance from the states.
Power Grid, which designed the
plan five years ago, calculated the total
expenditure at `40,000 crore. The cost is
five-fold now with targets being revised
in the same quantum.
Tripathy says his ministry is trying to
avoid any mismatch between generation
and transmission capacities. We have
said that the investment in generation
and grid should be 1:1. Currently it is
1:0.4. We want that by the time this
renewable energy capacity comes up,
there is enough grid capacity.
Amid all this, the point being
ignored is that renewable energy is an
Companies in the business
WELSPUN ENERGY
Target: 8,660 Mw (solar); 2341 Mw (wind)
Investment: Not disclosed
The energy arm of the Welspun Group stands out for getting institutional funding
from across the globe for its key projects. General Electric made its first Indian
solar investment in the company by funding $24 million in the Neemuch, Madhya
Pradesh-based 151 Mw solar project. Asian Development Bank also made its first
equity infusion ever in India as part of a $50-million commitment into the company.
Welspun has 308 Mw of solar power capacity and is in the process of building its
wind portfolio.
To meet the 11 Gw commitment, we will be setting up 5 Gw capacities in the
next few years. of this, 1 Gw will be commissioned well within this financial year
Vineet Mittal, vice-president, Welspun Energy
SUZLON ENERGY
Target: 11,000 Mw (wind energy turbine manufacturing)
Investment: Not disclosed
Among all the companies operating in renewable energy, Suzlon, Indias first wind
turbine manufacturer, is a household name. In about two decades, Suzlon has built
presence in about 30 countries and built 26,000 Mw of wind power installations
globally. It has the largest power evacuation facility in India, with 74 wind farm
substations of 7,125 Mw connected capacity. Known as a pioneer for introducing
indigenous technology in the wind sector, Suzlon is looking to improve its efficiency
and re-power its old sites in the coming five years. It will also foray into solar energy
Suzlons R&D efforts will continue to focus on bringing down cost of energy
(COE) and developing high yield next - generation products suitable for wind
energy sites which were earlier unviable. For every one of the next 5 years, we
have planned 3 per cent reduction of COE per year
Tulsi Tanti, founder and chairman, Suzlon Energy
RENEW POWER
Target: 6,500 Mw (solar); 5,000 Mw (wind)
Investment: Not disclosed
Sumant Sinha, seven years ago, was best known for turning around the finances
of Suzlon Energy as its chief financial officer. Now, hes known as a trendsetter
for getting foreign investment in the Indian renewable energy sector. In 2011, he
floated his own RE company, with $350 million of funding from leading global
lender Goldman Sachs. Currently, it has raised $390 million of equity from marquee
investors such as Asian Development Bank and Global Environment Fund.
ReNew Power has 750 Mw of projects in its kitty - both solar and wind. The
company is an aggressive participant in state- and central-level projects and is
touted by market observers as the one which will lead the pack soon. It has also
been the fastest growing company in the past three years.
ReNew currently operates across 14 sites in Maharashtra, Rajasthan, Gujarat,
Karnataka and Madhya Pradesh. The projects currently under construction will
increase the number of sites to beyond 20 and additionally cover Andhra and
Telangana. The company also has a presence in the solar rooftop space.
The man at the helm is looking to stay ahead when the market matures. He has
committed 11,500 Mw in RE-Invest and promises his investors higher returns.
We are eyeing a market share of three-four per cent for coming three years. We
would be doubling our capacity this year and would be the first company to do so
Sumant Sinha, founder and CEO, ReNew Power

intermittent power source and grid-
connected renewable energy would
need the same amount of conventional
energy as balancing power. Thus,
there is equivalent coal- or gas-based
capacity that needs to be built or fired
along with renewable energy.
NTPC, for instance, can bundle
thermal power and renewable energy
and sell at an average rate. The bundling
and the sale would also face tariff
challenges. Solar power is priced at
`6-8 a unit and wind power at `4 a unit.
Bundled power would be `3.5-4 a unit.
There are no buyers for expensive
power. The financially stressed state
utilities are not willing to buy even
conventional power even at `3 a unit.
The historic drop of price for solar
power to around `5 is actually scaring
away investors. Solar energy at that
price is not viable in the country
currently. Moreover, there is the
absence of financing options.
The biggest financial challenge
faced by developers has been access
to low-cost finance. While developers
using imported components and cheaper
EXIM Bank loans (10 per cent interest
for 18 years) have thrived, those using
indigenously manufactured equipment
have had to avail costlier loans (13 per
cent for 10 years). This has diminished
the confidence among the investor
community, says Amit Kumar, partner
(energy & utilities), PwC India.
October 2015
www.InfralinePlus.com
Companies in the business
GAMESA CORP
Target: 7,500 Mw (wind turbine manufacturing)
Investment: euro 100 million in 5 years
Gamesa, a Spanish major in wind energy turbine manufacturing, entered the Indian
market in 2010 when it was ruled by domestic majors, the sector was battling
policy hurdles and independent power production in wind was at a nascent stage.
Now, the company has wind energy farms spanning seven states, with 1,400 Mw
covered under operation and maintenance agreements. It has also set up an
assembly unit in Chennai with a manufacturing capacity base of 1,500 Mw and
a blade & tower manufacturing facility at Halol in Gujarat. As on December 2014,
the India operations contributed 26 per cent towards the total Mwe sold out of the
reported global sale of 2,623 Mw and is looking at a target of 1,000 Mwe in 2015.
Having commissioned 650 Mw wind projects in FY14-15 and backed
by strong manufacturing and local wind farm development expertise, we are
positive of achieving the committed target over the next seven years, in line with
governments ambitious plan of harnessing 266 Gw of renewable power by 2022
Ramesh Kymal, chairman and managing director, Gamesa India
HINDUSTAN POWER PROJECTS
Target: 7,000 Mw (solar); 3,000 Mw (wind)
Investment: Not disclosed
Decade-old Moser Baer, a leading solar panel manufacturer, transformed into a
project developer and became Hindustan Power Projects Limited (HPPL). Over
63
three years, the company has invested `17,000 crore from a planned `35,000
crore. Its portfolio includes 4,000 Mw from thermal, 2 Gw of solar (by 2017), and
500 Mw from hydro and the balance from other renewable sources.
The company has wide presence across India and abroad. It has power
projects in Gujarat, Tamil Nadu, Odisha, West Bengal, Madhya Pradesh, Punjab,
Uttar Pradesh, Bihar and Assam. And, in Germany, Italy, the US, the UK and Japan
A spokesperson said complementing its solar strategy, the company will also
tap wind projects and plans to set up 3 Gw of wind energy by 2020.
Hindustan Power is already the largest solar developer in India and has a
visibility to commission 2 Gw capacity by 2017. The clean energy arm is already
helping to reduce approximately 0.4 million tonnes (400,000) of greenhouse gas
emissions annually
Ratul Puri, chairman, HPPL
As another officer involved in setting
the climate targets puts it, If we can
do the 175,000 Mw target by 2022,
reaching the 2030 target is not going to
be tough. But the 2022 target was not
really a bottoms up assessment - it was
an ambitious round number.
Experts and investment trackers are
still maintaining their stand that there
are big investors betting on Indias
renewable energy sector but are
sitting on the fence awaiting clarity
on policy.
For suggestions email at feedback@infraline.com
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InDepth
States may get solar power at
new low of `4.75 per unit

64

Move is aimed at supporting SEBs, which are already in financial mess

India may include yen along with dollar, euro in basket of currencies

Infraline News Service

The plan to reduce tariffs comes in
the backdrop of SEBs increasingly
showing reluctance to buy power on
account of poor financial health
In India, which is the biggest
greenhouse gas emitter after the US
and China, renewable energy currently
accounts for only 13%, or 36,471 MW
of Indias total installed power capacity
of 2,75,912MW.
Indias strategy of a foreign
currency-denominated tariff plan for
solar energy is aimed at providing solar
power at a new low of `4.75 per unit to
the states.
This would work like this. Firms
such as state-owned NTPC Ltd will call
for bids from solar project developers
for buying 15,000 megawatts (MW)
on behalf of the ministry of new and
renewable energy (MNRE) that will
then be sold to the states. NTPC will
run a reverse bidding process for
procuring solar-powered electricity
in foreign currency-denominated
tariff to reduce risk. It will provide
a purchase guarantee, making such
projects bankable and help solar
power eventually cost the same as that
purchased from the grid (this is called
grid parity).
With the developers expected
to quote bids in the region of `3.50
 October 2015
www.InfralinePlus.com

per unit, NTPC will sell the power to attracting foreign investors to Indias electricity boards (SEBs) increasingly
the states at `4.75 per unit, with the solar energy sector by reducing the showing reluctance to buy power on
balance going to a hedge fund. This foreign exchange risk involved. account of poor financial health. With
hedge fund will be used for payment India may include yen along with a debt of `3.04 trillion and losses of
to cover the foreign exchange risk, dollar, euro in the basket of currencies `2.52 trillion, SEBs are on the brink of
said an official aware of the strategy, it is considering for a foreign financial collapse.
requesting anonymity. currency-denominated tariff plan The National Democratic Alliance
It was earlier that solar power tariffs for solar energy. government has pushed renewable
in India are set to hit a new low with `5 Both state-owned NTPC and energy to the top of its energy security
per kWh tariff becoming the new norm. Power Trading Corp. Ltd (PTC) plan agenda and is looking to provide green
This foreign currency denominated to implement the scheme for foreign power at less than `4.50 per unit. India
tariff plan may involve bundling currency equivalent tariff on a pilot is fit for solar power generation given
with unallocated thermal power as a basis for 1,000MW each. PTC is partly that the country receives solar radiation
backstop arrangement, in the event owned by the government. of 5 to 7 (kWh) per sq. m for 300-330
of the rupee depreciating beyond a The plan to reduce solar power days in a year.
particular level. The move is aimed at tariffs comes in the backdrop of state India launched the Jawaharlal Nehru
National Solar Mission in 2010 with
the aim of adding 20,000MW of grid-
Firms such as state-owned NTPC Ltd will call for connected solar power to thecountrys
bids from solar project developers for buying energy mix by 2022 in three phases.
15,000 megawatts (MW) on behalf of the ministry While India has a solar generation
of new and renewable energy (MNRE) that will capacity of 2,900MW, the Bharatiya
then be sold to the states. NTPC will run a reverse Janata Party-led government has
substantially revised an earlier target of
bidding process for procuring solar-powered 65
achieving 20,000MW capacity by 2022
electricity in foreign currency-denominated to 100,000MW, unveiling the worlds
tariff to reduce risk. It will provide a purchase most ambitious solar power generation
guarantee, making such projects bankable and programme. This would require an
help solar power eventually cost the same as that investment of around `6.5 trillion over
purchased from the grid (this is called grid parity). five years.
In India, which is the biggest
 October 2015
www.InfralinePlus.com
InDepth
66 greenhouse gas emitter after the US
and China, renewable energy currently
accounts for only 13%, or 36,471 MW
of Indias total installed power capacity
of 2,75,912MW.
Germany announces 1 billion
Euro solar power fund
India, Germany greed to enhance
ties in key areas of defence, security,
intelligence, railways, trade and
investment, clean energy
A deal to fast track approvals for
German companies in India and 1
billion solar power fund by Germany
were among major takeaways of the
high level meeting.
Co-chairing the third summit-level
Inter-Governmental Consultations,
Prime Minister Narendra Modi and
Chancellor Angela Merkel agreed to
enhance ties in key areas of defence,
security, intelligence, railways, trade
and investment, clean energy, besides
deciding to work closely to combat
threat of terrorism.
We see Germany as a natural
partner in achieving our vision of
Indias economic transformation.
German strengths and Indias priorities
are aligned. Our focus tends to be on
economic ties. But, I believe that in
a world of seamless challenges and
opportunities, India and Germany can
also be strong partners in advancing
a more human, peaceful, just and
sustainable future for the world, Modi
said at a joint media event with Merkel
after over three-hour-long talks, both
at delegation-level and one-on-one
format.
The deal on fast-track approvals
process for German firms envisages
single point clearance for various
projects which is aimed at encouraging
more and more German companies to
complement Modis Make in India
initiative and invest significantly.
The Prime Minister noted that the
partnership will grow in areas like
defence manufacturing, trade in
advanced technology, intelligence, and
countering terrorism and radicalism.
These are important security dimensions
Both state-owned NTPC of our expanding relationship. In the
and Power Trading talks, Germany announced to provide
Corp. Ltd (PTC) plan assistance of over one billion euros for
to implement the Indias solar projects.
scheme for foreign The 18 pacts signed included a
currency equivalent Joint Declaration of Intent between
HRD ministry and the Federal Foreign
tariff on a pilot basis Office of Germany on promotion of
for 1,000MW each. German as a foreign language in India
PTC is partly owned by and the promotion of Modern Indian
the government. The Languages in Germany.
plan to reduce solar The pact is seen as resolution of the
power tariffs comes sticky German language row. Both the
leaders also discussed ways to move
in the backdrop of forward the stalled negotiations on the
state electricity boards India-EU free trade agreement. Modi
(SEBs) increasingly and Merkel shared their concerns
showing reluctance to about growing threat and global
buy power on account reach of terrorism and extremism and
of poor financial health. agreed to build closer collaboration
to counter these challenges and
With a debt of `3.04 decided to have meetings of the Joint
trillion and losses of Working Group on Counter Terrorism
`2.52 trillion, SEBs are between the two sides.
on the brink of financial
collapse
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 October 2015
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StatisticsRenewableEnergy
Programme / Scheme wise Physical Progress in 2015-16 (as on August, 2015)
Sector FY- 2015-16 Cumulative
Achievements
Target Achievement (as on 31.08.2015)
I. GRID-INTERACTIVE POWER (CAPACITIES IN MW)
Wind Power 2400.00 644.75 24088.36
Solar Power 1400.00 477.34 4229.36
Small Hydro Power 250.00 91.55 4146.90
Bio-Power (Biomass & Gasification and Bagasse 400.00 0.00 4418.55
Cogeneration)
Waste to Power 10.00 12.00 127.08
Total 4460.00 1225.64 37010.25
II. OFF-GRID / CAPTIVE POWER (CAPACITIES IN MWEQ)
Waste to Energy 10.00 0.50 146.51
Biomass (non-bagasse) Cogeneration 60.00 10.50 602.37
Biomass Gasifiers 2.00 0.00 17.95
-Rural 6.00 0.00 152.05
-Industrial
Aero-Genrators/Hybrid systems 0.50 0.13 2.67
SPV Systems 50.00 45.39 279.74
Water mills/micro hydel 2.00 0.00 17.21
Total 130.50 56.52 1218.50
III. OTHER RENEWABLE ENERGY SYSTEMS
Family Biogas Plants (numbers in lakh) 1.10 0.05 48.23
Solar Water Heating Coll. Areas (million m2) - 0.00 8.90
Source: MNRE

68

Commissioning Status of Grid Connected Solar Power Projects (as on 24.09.2015)

Sr No. State/UT Total MNRE Projects State Policy MW REC Scheme MW Total commissioned
MW capacity (MW)
1 Andhra Pradesh 94.75 145.99 38.7 279.44
2 Arunachal Pradesh 0.265 0 0 0.265
3 Chhattisgarh 4 34.58 4.6 43.18
4 Gujarat 20 974.05 6 1000.05
5 Haryana 7.8 5 0 12.8
6 Jharkhand 16 0 0 16
7 Karnataka 15 89.22 0 104.22
8 Kerala 0.025 12 0 12.025
9 Madhya Pradesh 225.25 342.55 80.78 648.58
10 Maharashtra 72 185.38 121.32 378.7
11 Orissa 12 40.42 4.5 56.92
12 Punjab 10.5 182.3 7.52 200.32
13 Rajasthan 889.1 75 210.6 1174.7
14 Tamil Nadu 26 33.82 98.16 157.98
15 Telangana 0 43.85 23.4 67.25
16 Tripura 0 0 5 5
17 Uttar Pradesh 12 59.26 0 71.26
18 Uttarakhand 5 0 0 5
19 West Bengal 2.05 5.16 0 7.21
20 Andaman & Nicobar 0.1 5 0 5.1
21 Delhi 0.335 4.237 2.14 6.712
22 Lakshadweep 0.75 0 0 0.75
23 Puducherry 0.025 0 0 0.025
24 Chandigarh 5.041 0 0 5.041
25 Daman & Diu 0 2.5 0 2.5
26 Others 0.79 0 0 0.79
Total 1418.781 2240.317 602.72 4261.818
Source: MNRE
 October 2015
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Status of Grid Connected SPV Rooftop Projects Sanctioned to States/UTs/SECI/PSUsand other

Government Agencies (as on 31.08.2015)
Sl.No. State/UTs Projects Sanctioned under NCEF BY In Total Sanctioned Total
MNRE Scheme to SNAs/ MNRE Principle and approved in Achievements
State Deptts. (MWp) approval principle (MWp)
1 Andhra Pradesh 5.5 4 9.5 1.99
2 Bihar 0 0 0 0.00
3 Chhattisgarh 0 5 5 16.28
4 Chandigarh 6.06 2 10 18.06 5.30
5 Delhi 0 8 8 3.78
6 Gujarat 5.75 0 5.75 19.00
7 Goa 0 2 2 0.00
8 Jharkhand 0 0 0 0.00
9 J&K 0 0 0 1.00
10 Haryana 0 5 5 0.00
11 Himachal Pradesh 0
12 Kerala 1.28 5 6.28 0.10
13 Karnataka 0 0 0 0.15
14 Madhya Pradesh 5 0 5 0.00
15 Maharashtra 0 0 0 0.13
16 Manipur 0
17 Odisha 0 4 4 0.00
18 Punjab 5 0 5 7.52
19 Rajasthan 6 0 6 2.98
20 Tamil Nadu 6.74 5 300 311.74 4.52
21 Tripura 0 0 0 0.00
22 Telangana 0 4 4 5.78
23 Uttarakhand 5 2 7 3.41
24 Uttar Pradesh 2 5 7 0.05 69
25 West Bengal 2.38 3 5.38 0.50
Sub Total 50.71 54 310 414.71 72.48
26 Solar Energy Corporation of India 0 149.6 750 899.6 21.48
27 Ministry of Railways 0 52.5 0 52.5 0
28 Allocated to PSUs 0 59.541 0 59.541 4.796
Sub Total 50.71 315.641 1060 1426.351 98.755
Source: MNRE

REC Trading Volume and Price for September 2015

Though IEX
REC Type Buy Bid Sell Bid Cleared Volume Cleared Price No. of Participants Month of Auction
(REC) (REC) (REC) (INR/REC)
Solar 8,630 1,903,512 8,630 3,500 330 September15
Non Solar 147,805 8,792,164 147,805 1,500 703
Source : IEX

Though PXIL
REC Type Buy Bid Sell Bid MCP MCV Month of Auction
(No. of certificates) (No. of certificates) (INR/Certificate) (No. of certificate) Qty (MWH)
Solar 35794 4649030 1500 35794 September15
Non Solar 1390 777122 3500 1390
Source : PXIL
 October 2015
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InfraWatch
Smooth road for smaller firms,
bigger ones reeling under debt

70

Govt plans to spend `1.2 trillion on national highways in FY16

NHAI awarded 30 projects at an estimated worth of `28,000 crore in 6 months

Infraline Bureau

As bigger firms kept themselves busy
in cutting debt and completing existing
projects rather than take up fresh
projects, their smaller rivals exploited
the opportunity and grabbed a number
of highway contracts awarded this year.
Between January and July, National
Highways Authority of India (NHAI)
awarded a total of 30 road projects
spanning about 2,660km, with a
total estimated project cost of nearly
`28,000 crore. Over two-third of the 30
projects were awarded under the EPC
or NHAI-funded route. Of these, nine
projects with an estimated project cost
of `6,287.43 crore have been bagged
by three firms with three projects each:
G.R. Infraprojects Ltd, Dilip Buildcon
Ltd and Sadbhav Engineering Ltd.
The government plans to spend
as much as `1.2 trillion on national
highways in the current financial
year, with a target of awarding a total
of 273 road projects. Most projects
awarded, however, have been through
the EPC (engineering, procurement,
construction) route, where the
financial commitment needed from
developers is lower.
Under the EPC model, the
 October 2015
www.InfralinePlus.com

government pays a contractor a sum
to build a project awarded through
competitive bidding, meaning limited
financial commitment from developers.
In build-operate-transfer (BOT)
projects, a private operator builds the
project from its own funds, operates
it for a period and then transfers it
to the government.
A UBS report said given the balance
sheet issues for a large swathe of the
sector and the reluctance of some large
companies to bid for BOT projects, it
was unsurprising that smaller operators
such as Ircon, TRIL and Uniquest
Infra had gained market share in EPC.
Smaller contractors like GR Infra
and Dilip Buildcon have gained a
larger share, too, and this could keep
competition fierce.
While EPC contracts have picked
up as expected, the pace will need to
increase further. Larger players have
still not come back in a big way, partly
due to continued financial stress and
and Toubro (L&T), the countrys
largest engineering and construction
company, has won seven projects but
has restricted itself to largely bidding for
EPC projects.
The government has been
encouraging private road developers
to bid for projects via the EPC route as
private sector investments have waned.
The absence of any large BOT
bidders for road projects in recent
months have meant that a number of
smaller or local developers are winning
new projects, largely EPC, but also
on the BOT front, said Anubhav
Gupta, Maybank Kim Eng Securities
India analyst.
Bidding has become less aggressive
since the last one year whether it is BOT
or EPC because of reduced competition
and increased order flow. Earlier, there
used to be 20-30 bidders for BOT
National Highways Authority of India (NHAI)
projects, which has now come down
to three-five bidders. Whereas in EPC
projects, there used to be 15-17 bidders
which has now come down to five-eight
bidders, said a Dilip Buildcon official.
Sadbhav Engineering, which
was awarded three projects in the
first six months of the calendar year,
will continue to bid for both BOT
and EPC projects, said executive
director Vasistha Patel. Patel agrees
competition is aggressive in the EPC
segment, which does not require a huge
financial commitment.
Sadbhav, whose BOT projects arm
Sadbhav Infrastructure Project Ltd
started trading as a public company,
plans to use the funds raised to bid for
new projects.
Udaipur-registered GR Infraprojects
has won three of the EPC projects
awarded since January. GR
71

partly to concerns on project readiness awarded a total of 30 road projects spanning

and dispute resolution mechanisms about 2,660km, with a total estimated project
continuing to persist. Many large cost of nearly `28,000 crore. Over two-third of
players had shifted focus abroad during the 30 projects were awarded under the EPC
the slowdown. Five to six bidders each or NHAI-funded route. Of these, nine projects
for BOT projects is a good number and
any more would be worrying. However,
with an estimated project cost of `6,287.43
the financiability of toll roads, given the crore have been bagged by three firms with
current financial stress in the banking three projects each: G.R. Infraprojects Ltd, Dilip
system, remains to be seen. The hybrid Buildcon Ltd and Sadbhav Engineering Ltd
annuity contract could bring back
investors in a big way, PwC partner
Manish Agarwal said.
IL&FS Transportation Networks
executive director Mukund Sapre
said many of these EPC-turned-
concessionaires were finding it hard
to raise the requisite equity for BOT
projects as well, let alone tie up debt.
Not only will EPC projects contribute
to better cash flow but the reduced
responsibilities on them (as compared
to BOT) will help improve their
performance on ground. This was a
prime reason the government decided to
push EPC projects as well.
Among the conglomerates, Larsen
 October 2015
www.InfralinePlus.com

InfraWatch

Infraprojects so far has completed 10 to bid for new BOT road projects. IRB Infrastructure Developers, which
EPC and NHAI-funded projects and The company, however, continues has won one BOT project, says that
has another 15 under development, to bid for EPC projects and has won competition for EPC projects is intense
according to its website. seven of these projects since the start and this has prompted the company to
According to its Draft Red Herring of this year. stay away.
Prospectus filed with Securities and L&T had a total debt of `82,267.2 EPCwe have seen the
Exchange Board of India, as of 30 crore in the year ended 31 March. competition to be quite hot and as a
September 2014, Dilip Buildcons order We have taken a conscious decision, strategy, we have kept away from this
book was `5,665.87 crore. Sadbhav irrespective of whether we have the segment, said Virendra Mhaiskar,
Engineering so far has completed 19 money (to invest) or not, until we make chairman and managing director, IRB
road projects with three projects under all our existing projects profitable, we Infrastructure Developers, which
construction, as per available data. will not invest anymore, said L&Ts has an order book of `10,770 crore
The reluctance of larger group executive chairman A.M. Naik as on July 2015.
infrastructure firms to bid, particularly recently. Naik said L&T will review its Mhaiskar said companies with a
for BOT projects, stems from their business every three months and will long-term vision continue to bid for
accumulated debt. The total debt of bid for road projects very selectively. BOT projects, where the number of bids
15 listed companies with presence in IL&FS Transportation Networks have fallen to five to six companies per
the road sector was at `2.59 trillion as Ltd (ITNL), another large BOT road project compared with the 15-20 seen in
on 31 March. developer with high debt on its books, the earlier years.
L&T, which is often referred to won two BOT highway projects The competition for EPC projects
as a corporate proxy for the broader during the January-July period. ITNL works out in favour of the government,
economy and has 17 road projects in its had a debt of `23,513.48 crore as say analysts.
BOT portfolio of assets, has decided not of March 2015. EPC projects for about 1,800km
72 roads worth `193 billion are to be bid
out by the second half of the current
The government plans to spend as much financial year, brokerage Equirus
as `1.2 trillion on national highways in the Securities said in a presentation this
current financial year, with a target of awarding month. Recent bids indicate aggression
a total of 273 road projects. Most projects by EPC players and low interest among
awarded, however, have been through the EPC BOT developers Expect BOT
(engineering, procurement, construction) route, developers to refrain from aggression in
where the financial commitment needed from the coming 12 months at least, it said.
developers is lower NHAI, which invites bids from
developers and awards them to the
lowest bidder, is the sole agency
responsible for the development of
national highways in India.
The autonomous body was
constituted by an Act of Parliament
NHAI Act, 1988to develop, maintain
and manage the national highways
entrusted to it.
Recently, NHAI removed a clause
which required companies to invest
the money received from monetization
of their operational assets into new
NHAI projects, offering relief to these
companies. The body has also offered to
fund projects that are stuck in advanced
stages of completion.

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RNI No: DELENG/2012/45441