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September 2012 Volume 1 | Issue 5 | `100 www.InfralinePlus.

com

The Complete Energy Sector Magazine for Policy and Decision Makers

Dark Ages
Expert panel holds states responsible for the blackout

Govt in a fix over

power pressed
NTPC CMD Arup Roy Choudhury on how coal is hitting the power sector

coal

Gate...

Dr. Sapna Purohit, Head HR, Transmission on various HR issues affecting the power utilities

M Rama Murty, Vice President, GVK says how the coal sector is suffering due to cheap vote bank politics

AK Purwaha, CMD, Engineers India on plans to increase global footprint in hydrocarbon sector

Rakesh Sarin, VP-sales of ME & Asia, Wartsila speaks on hi-tech smart power generation plants

InfralinePlus
The Complete Energy Sector Magazine for Policy and Decision Makers

September 2012 | Volume 1 | Issue 5

Editors Letter
In a growing economy like Indias, the black diamond has assumed insurmountable position. So much so that both the Congress and the BJP are hurling charges against each other for the `1.86 trillion loss to the exchequer. Amidst accusations and counter accusations, the main opposition party BJP continues to paralyse Parliament over coal blocks allocation. Considering the loss of face in the public as parties are preparing for general elections scheduled in 2014, UPA Chairperson Sonia Gandhi adopted a tough stance and asked her MPs to fight the intemperate criticism and negative politics of the BJP. Gandhi accused BJP of holding Parliament to ransom. Interestingly the one who is responsible for the current logjam the Comptroller and Auditor General very conveniently avoided the public debate over the issue. It is not strange for political parties to get into blame game and mudslinging on any issue, which they see a potential vehicle that can affect vote bank, but probably time has now come where politicians should also mature. Over a week of logjam in Parliament means huge money has been wasted for no good. Just before CAG made its reports public, India suffered a major embarrassment when power grids collapsed one after another which led to blackout in half of India thereby affecting 600 million people. Reason - states of Uttar Pradesh, Haryana and Punjab overdrew power from the northern grid despite grid operators sending alerts repeatedly. The northern grid collapsed on July 30, while the eastern and north-eastern grids followed suit on July 31. With power sitting at the centre stage, our team interviewed NTPC Chairman Arup Roy Choudhury, the man in the hot seat as the country is vying for double digit growth in power generation. For the past couple of years, Indias coal production has almost remained the same whereas the power sector has expanded by 10-12 percent. There is an accumulated gap, which is why there is a sudden chaos around coal. We also bring out an inside story as to how Engineers India Ltd fought high attrition rate in the last few years. Its employees are among the most sought after workforce and get better employment opportunities in country and abroad which poses a major challenge for knowledge base companies such as EIL. Our Photo Essay section highlights the rapid strides being taken by Cairn India Asias fastest growing upstream company. The section captures an array of major project activities carried out by Cairn in the country, prominent being the Mangla Processing Terminal in Rajasthan as well as the SalayaBhogat heated insulated pipeline.

Editorial
Shashi Garg, Editor Alok Sharma, Assistant editor Pallavi Chakravorty, Assistant Chief-sub editor Neeraj Dhankher, Principal Correspondent Priyanka Singh, Senior Correspondent Analysts Debjit Das, Deepak Kumar, Isha Gakhar, Telan Raju News Team Pankaj Bhagat Shivangie Shrivastava Design Team Gopal Thakur, Art Director

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September 2012 www.InfralinePlus.com

Contents
Editors Letter

InfralinePlus

1 35
Black Diamond
While the political mud-slinging between the ruling coalition and the opposition continues unabated, it has triggered a larger question on the acceptability of the concept of allocating blocks rather than bidding them...

Cover Story

35
Power
News Brief In Conversation: CMD, NTPC, Arup Roy Choudhury In Conversation: Senior Director in Deloitte India Vedamoorthy Namasivayam In Conversation: Head HR, Transmission Reliance Infrastructure Limited, Dr. Sapna Purohit In Depth: Expert panel holds states responsible for Indias biggest blackout Expert Speak: Vice President India Nuclear, Vice President Russia Nuclear Bertrand Constensoux News Analysis Statistics Topics Covered Islanding HR issues in the power sector Nuclear Power Unmined coal
Cover: photo illustration by Uday Shankar

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p4 p6 p10 p12 p15 p19 p21 p22

Coal
News Brief In Conversation: Vice President, GVK, M Rama Murty In Depth: Using imported coal to push the Cost of Generation up In Depth: Indian Steel Sector suffers from chronic underinvestment despite enormous infra-needs Statistics

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p24 p26 p28 p30 p32

Topics Covered: Imported Coal Finance in steel Coal Mines Coal blocks

September 2012 www.InfralinePlus.com

Oil and Gas


News Brief In Conversation: AK Purwaha, C&MD, EIL In Depth: E-5 petrol: Industry at loggerheads over 5% mandatory blending In Depth: Chasing Equity Oil Overseas - Is India Doing Enough? Expert Speak: K Batra, Distinguished Fellow, TERI Expert Speak: Rahul Prithiani, Director, CRISIL Research Statistics Topics Covered: Oil Reserves Ethanol Oil refineries E&P activities - India & Overseas

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p38 p40 p43 p46 p49 p52 p54

Renewable
News Brief In Conversation: Vice President-sales of Middle East and Asia, Rakesh Sarin, Wartsila In Conversation: In Conversation: DirectorOperations, BCK Mishra, UJVN Limited. In Depth: Wind power promises growth, even if AD benefit is removed Expert Speak: Smita Miglani, Research Associate with ICRIER Offbeat: Rooftop solar power plants increase roof value of buildings Statistics Topics Covered: Roof-top solar power plants Future of Bio-Fuel programme Tax benefits for Wind Power Smart power generation power plants

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p56 p58 p62 p65 p68 p70 p72

Interviews

In Focus Plus - Photo Essay

74

`1.63 lakh crore scam in Delhi airport deal: CAG

78

Arup Roy Choudhury, NTPC CMD

M Rama Murty, Vice President, GVK

78

Cairn Indias E&P activities in India and overseas

BCK Mishra,

Director-Oprs, UJVN

AK Purwaha, C&MD, EIL

September 2012 www.InfralinePlus.com

NewsBriefs | Power
Reliance Power To raise Sasan plant capacity by 50% Reliance Power is planning to increase the capacity of its 4,000-MW Sasan UMPP by 50% to almost 6,000 MW, making it one of the largest power projects in the country. The companys plea for environment clearance for the proposed additional 2,000 MW capacity at Sasan will come up before the designated panel next month. The expansion involves setting up three additional units of 660 MW each. Reliance Power, China Datang Corp Form operation and maintenance JV Reliance Power has entered into a partnership with Chinas state-owned China Datang Corporation for offering operation and maintenance services to power plants in India and overseas, people close to the development said. The joint venture would particularly target coal-based power projects built on Chinese equipment. Power failure panel For smart grids, special protection plan Implementation of smart grids and Special Protection Schemes (SPSs) are the longterm solutions recommended by the panel headed by A.S. Bakshi, Chairman of Central Electricity Authority. The panel was set up to look into the massive grid failure that left the entire North, East and North-East in dark for more than six hours on July 30-31. BGR Energy-Hitachi JV Cuts investment in TN by 20percent BGR Energy Systems Ltd has said that it had downscaled its proposed investment to set up a boiler and turbine plant by around 20 per cent to `3,500 crore. The company had signed memorandum of Understanding (MoUs) in 2010 with Hitachi Ltd, Japan and Hitachi Power Europe GmbH, Germany, a Hitachi subsidiary, to set up boiler and turbine manufacturing facilities in Tamil Nadu. Coal policy tweak To help 6 power plants go on stream In a deviation from the existing policy barring domestic coal linkage for power projects bid out on the basis of fully imported coal use, the government is set to clear domestic coal allocations for six such projects totalling a 4,650 MW capacity. Of these six projects, four have already been commissioned but may not utilise full capacity due to non-availability of indigenous coal. Singareni Collieries and AP Genco Renew FSA for supply of coal The Singareni Collieries Company Ltd and Generation Corporation of Andhra Pradesh Ltd have renewed fuel supply agreement for supply of coal for five power projects. According to the linkages granted by the Ministry of Coal, Government of India, the State-owned Singareni has been supplying coal to thermal power stations of AP Genco. NTPC assured Coal linkage for 11000 MW projects State-owned NTPC said it has been assured by the coal ministry of the States broadly agree on price pooling of coal fuel-linkages for its upcoming projects that are to come up over the next 5-10 years, helping it become a 75,000 MW generating firm by 2017. The company has received assurance from the Coal Ministry about getting the coal linkage, according to a company official. Odisha and Tamil Nadu UMPPs Bidding in three months The much-talked about 4,000-MW each Ultra Mega Power Projects (UMPPs) at Cheyyur, Tamil Nadu, and Bedabahal, Odisha, are likely to see light of the day by the end of this year (calendar 2012). Odisha will come up first and then Tamil Nadu will follow. These two UMPPs will be finalised by the year-end certainly and ready for bidding, a senior Power Ministry official said. Essar Oil Vadinar power plant ready to fire Essar Oil plans to start its 510 mw imported coal-based power plant in Vadinar, Gujarat, by August-end or early September, that would help Indias major oil refiner hike its gross refining margin by $1 per barrel by replacing the costly fuel oil with thermal coal.

Bharat Heavy Electricals Seeks buyout options in US, Europe Bharat Heavy Electricals (BHEL) is actively scouting for acquisition opportunities in Europe and the US. At present, the company is executing about 24 contracts spread across 19 countries, including Afghanistan, Ethiopia, Indonesia, Sudan, Syria and Vietnam. The efforts are aimed at gaining access to technology, global markets and securing global supply sources. REC Proposes `25 bn loan to AP discoms A P power distribution companies will get a loan of `2,500 crore from Rural Electrification Corporation for improving the distribution network. REC, a nodal agency for the Nati onal Electricity Fund scheme, has proposed to sanction the loan for system improvement schemes. The objective of the NEF scheme is to reduce distribution losses.

Petronet LNG Plans foray into power sector Petronet LNG will make its foray into the power sector with a `3,500 crore plant in a JV with Kerala government. Petronet and the state government are close to signing the agreement for setting up the 1,200 mw plant near the companys upcoming gas import terminal at Kochi, sources said. Kerala will purchase three-quarters of the power from the plant under a long-term offtake agreement.

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Roads Knowledge Base


Introducing first ever Knowledge Base on Roads Sector, covering recent developments and exclusive updates on critical information for developers and other organizations involved in the value chain.
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Sector Overview: Detailed overview of the Indian Road Sector, including its present status, recent developments, policy changes, and a glimpse of key statistics related to the sector. Funding Agencies: Detailed profile of funding agencies actively involved in the sector with the projects executed like world Bank, Asian Development Bank, Japan Bank for International Corporation. Finance Mechanism: Financing mix of Debt- Equity with the additional information on various funding option Project Profile: The comprehensive coverage of Proposed, under implementation and Operational Projects. Details comprising of location, length, cost, concessionaire/Client, financial closure etc. Major Players: Company profile of the major players in the road sector with the details of the projects, their financial snapshot, future plans for development, Joint Venture Project Updates, JV Agreements, MoUs , Progress and Plans, Presentations etc. Demand-Supply Analysis: The existing demand-supply gaps, density of roads and increasing number of automobiles. This section consists of data related to density in terms of area and population National Highway Development Programme: The government of India embarked upon the grand policy of National Highway Development Programme (NHDP) for the development of roadways in the country. The Roads Knowledge base covers the NHDP projects from implementation till execution. Acts, Policies, Guidelines & Important Documents and Notifications, Regulations, Orders issued by Central Government, State Government, Central and State Public Works Department and other relevant authorities. Special focus on Public Private Partnership (PPP) as the government has initiated development of roads as a priority there is a huge investment required by the sector. The knowledgebase would provide first hand information on PPP projects plus insight to the sector. Traffic Data related to growth in passenger motor vehicles/ LCVs/ MCVs etc. in states and union territories. Incentives to Private Investors: Focus on the favourable policies and incentives for private players while investing in road projects. Tolling in India Number of Toll plazas in the country and the amount of revenue generated from it. Detailed Regulatory Framework encompassing updated profiles of MoRTH, NHAI, Border Road Organisation ,and the Planning Commission etc with latest details on Regulatory Acts, Performance Reviews, Proposals & Papers, etc. State wise details of Public Works Department with projects, funding through multilateral agencies, land acquisition details, propose state highway projects etc. Industry Connect Column featuring Interviews, Guest articles and excerpts of the key people in Road Sector Important Reports and Presentations on Road Sector Performance, Reports on Specific Reforms, Transport Sector Studies, Special Committee Reports and General Reports, Presentations and Deliberations of Infraline Energys Conferences and Round Table Discussions, Presentations made by MoRTH, NHAI and other industry stalwarts. Minutes of Meeting: crux of the meeting conducted by NHAI/MoRTH/High Level Committee on various issues/ Sectoral Developments. NHAI Manuals: various manuals published by the authority in a easy to download format. Contact addresses of all the all the Key Govt. officials and Private Players

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September 2012 www.InfralinePlus.com

InConversation

Unmined domestic coal is hitting the sector the most


Coal crisis, power shortage, tariff issues, etc the power sector seems to be in the middle of a whirlwind of problems. Though, some of these are probably in the way of getting solved, we wanted to get a few realistic answers. And who better than the man himself -- Arup Roy Choudhury, CMD, National Thermal Power Corporation. In a free-wheeling chat with InfralinePluss Pallavi Chakravorty, he gives important insights into the root cause of the issues and how they can be dealt in the best possible way. Edited excerpts:
NTPC has elaborate plans for the future and also in supercritical plants. But with the current coal crisis, where do you think you are heading to? You must understand that we dont start any project unless coal linkage is there. We are a Maharatna company so we wont get any clearance from our board unless we have the land, water supply, etc. so we cannot be in a situation wherein our project is stranded because of coal. Whatever we commit, for example, if we have committed 14,500 MW in the 12th Plan, we have been able to do that because we have 16,500 MW under construction today, which is why we are 100 per cent sure to achieve the targets. But yes, if we had more coal, if those 3-4 mines that were taken away were given back to us formally, we could do 11,000 MW more. And we were at a stage when we were targeting 25,000 MW for the 12th plan, but now its too late because six months have gone and by the time we get restoration of the coal mines, I dont think we can bring in a project and squeeze it in the 12th plan. We are on track for the 120,000 MW by the end of the 15th plan. For the past couple of years, Indias coal production has almost remained the same whereas the power sector has expanded by 10-12 per cent, so there is an accumulated gap, which is why there is a sudden chaos around coal. Everyone is talking about coal, in fact some private sector companies have put up installations without coal linkage. Plus, global prices of coal have increased, which is why imported coal has become expensive. But we have a lot of domestic coal and our mainstay has to be that. We have been propagating the need for a coal regulator, in the presence of which there would be more people mining coal and there can be uniform pricing. Today, Coal India is the only coal mining agency which is not really regulated. Also, there is pressure on the management of Coal India to increase the bottom lines. If you have to improve your bottom lines whether production happens or not, price has to be increased. As coal accounts for almost 80 per cent of the total cost of production, it would eventually increase the cost of power. If that happens the budgeting of the state electricity boards goes haywire, they will not be able to pay for electricity and when that happens, generation would be affected. Whereas coal shortage is a big issue, it is also very important we get into a situation where the paying capacity of the SEBs and the affordability of power is also looked at. And we can make that possible only if we go by domestic coal, and we have 104-105 million tonnes of minable coal plus 300 reserves so we are in surplus that way. We are not even mining half a billion.

We definitely need coal. If the coal ministry is confident that CIL would drastically improve its production by almost 20 per cent every year, we dont have to get into it. I am not interested in doing mining, thats not my core activity.
What is the whole hoopla surrounding coal allocation? Do you think it is happening the right way? We definitely need coal. If the coal ministry is confident that Coal India would drastically improve its production by almost 20 per cent every year, we dont have to get into it. I am not interested in doing mining, thats not my core activity. I am doing it out of compulsion as CIL is not able to provide me the required amount of

September 2012 www.InfralinePlus.com

coal. Imported coal is costly and I want to keep my power tariff affordable for the SEBs. So, we have the coal but we just have one company mining it, so how much can it do, if we have B and C company also doing it in the private sector, then how it is to be allocated is to be decided and for that we need a regulator. The regulator can decide the tariff and tell me about the coal availability and the pricing. I then take the coal tariff and the coal transportation cost to CERC, which then decides the tariff. Things become simple and transparent. All this confusion is happening because what was perceived as transparent wasnt really transparent; somewhere the expectations were also not correct. Coal mining can be done in 3-4 years, provided the mine is ready to be mined. Here the coal blocks that were allocated to us, there even the geological investigations have not been done. So, we have to first do the geological investigation, get the mine plan approved, get environmental clearances and take land approval, these itself take 7-8 years, this whole thing no one is understanding. That is why nothing really is happening, so we are taking a step forward and two steps backward. What is hitting the sector most is that there is domestic coal available but not being mined.

In an overall situation we have to learn to discipline ourselves, some states overdrew than their specified load and the systems snapped.

We are a thermal-based power country but at some time we were considering pushing for hydro a lot. Dont you think it should be developed more? We often speak about having 160,000 MW of hydro power generating capacity, but we havent been able to achieve that. With time, our population have increased and areas around the hydro power plants have also grown in population. Hydro plants are constructed with dams on rivers, which are basically artificial barriers in the natural path. These days there are disputes regarding how much

water is be released and how much to be left. The whole of Gurgaon was Kikar forest and a run-of of the rain water. Now everything has been filled up, so there is no rainwater. Plus, hydro plants are located in difficult areas and require huge investment, so unless there is a single-point agenda of the Centre and the state, no investor is coming to put in money. As long as the state was pumping in money it was fine, but now if they want an investor to invest, he would require infrastructure, which in most cases is not available. Secondly, we have missed out on time; we should have first developed all the hydro projects and then gone for other sources of generating power. But there was pressure to generate power fast as the demand was increasing, and thermal power plants take 3-4 years to start functioning, hydro might take even 10 years to complete. But still as a nation we should make efforts to develop hydro and see our actually capacity. The recent black outs have once again exposed the dismal condition of our

power sector? And though the blame game seems never-ending what is your answer to the acute power crisis of India? We are basically an indiciplined lot. Though, we are working in totality as a sector, we are also working individually. The states are busy serving their own

September 2012 www.InfralinePlus.com

InConversation
interest and the national interest has sometimes taken a backseat. We have to enhance our transmission capacity, if one line fails the other should be able to take the load as there is more demand. But, in an overall situation we have to learn to discipline ourselves, some states overdrew than their specified load and the systems snapped. NTPC lost 14,000 MW in one go on the 31st of July, but we came back within 8-20 hours, which really is commendable for a thermal power plant. It isnt that we are not aware of such a situation but over time we become complacent. It happened in 2001, we were conscious at that time but in the last 11 years we again became complacent, which is why it happened. I hope we become more conscious as it is a loss of face for us, as we now are one of the fast developing nations in the world.
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What is your take on the islanding system that has been proposed? Would it require huge investments? It would not require huge investments but islanding can be done in a limited way. The ideal islanding is that the generator, distributor and the transmitter are one which means I generate from a particular place and I distribute also in a particular area, but as a nation it is not possible as who would generate where there are no generating stations. However, islanding is a good idea for may be Delhi, as we cant have the capital plunged in darkness. We can also have islanding perhaps for the railways, the metro and other important services. But every power station cannot be islanded. Discoms would require having a power station, so they would not have the flexibility of drawing power as and when they like when they are on the national grid. Are you looking in for investing in railway linkages? Sometimes, the coal that we require has

to be evacuated after mining. We only have railways as a system as we dont encourage trucks, so when they do not have a particular line in their plan we thought of funding the same. We have offered to put in money to create a linkage for us. We do support it, and we have already committed in one line and have plans for others. Is NTPC considering postponing its nuclear power projects which are in a JV with NPCIL? Do you think the entire hoopla around installing nuclear power projects and the protests following Fukushima are justified? No, we are still going strong and we are very much into it and the JV is doing fine. When it comes to the safety of your people it is difficult to compromise. Fukushima did a lot of damage, but

Germany decided to go ahead. But it is in a different situation and geographical position than us, its neighbouring countries have already developed a hydro potential. They are power surplus and we are power deficinet. The only thing in India that goes against nuclear power development is our population. There is hardly any place here, which is not thickly populated, so when it comes to choosing between human safety and economic development, the choice is obvious. But then it is also right that for how many days can we run thermal power stations. What are we ultimately going to do? We have some nuclear fuel available, so we have to see how long we can import petroleum. This debate can continue though I dont know what will happen in future.
For full version of the interview, visit www.infraline.com For suggestions email at feedback@infraline.com

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InConversation

Fuel shortage is the major cause for performance decline


Senior Director in Deloitte India Vedamoorthy Namasivayam leads its Energy & Resources vertical. With over 25 years of consulting experience to clients in India, China, Nepal, Bhutan, Bangladesh, Sri Lanka, Ghana and Nigeria. Here Namasivayam shares his vision of human resource management in utilities in India. His widespread experience with Indian public and private domain and also with Regulatory Commissions and various Governments makes him a very busy man. Despite his busy schedule, he took out time to respond to a volley on questions.
For its vast and unmet energy requirements, India needs to optimally utilize its power generation capacities be it thermal, gas, hydro, nuclear, and solar etc. In order to improve power generation while transforming the sector, one must focus on building organizational capability to implement the changes effectively. Which are the areas where immediate intervention is needed to better utilize the installed capacity. Kindly suggest measures that could be taken to improve power output with minimal extra burden on the utility. The vast and unmet energy demand requires significant additional investments on new capacity on all the three segments (generation, transmission & distribution) of the power sector. To attract investments and minimize the current risk perceptions there is no doubt the current performance levels of our utilities have to improve. The enclosed graph indicates the performance of Indian generation sector over different plan periods. The recent decline is more due to shortages in fuel than due to operational inefficiencies of plants. The fuel related issue is the single largest cause for the declining performance our generating stations. While there is considerable pressure to improve the PLF of the power generation plants, it must be borne in mind that many of the older plants are in phases of expansion and modernization. Many utilities have an ageing workforce. While there has been induction of fresh recruits, it is a challenge to bring them up to speed quickly to man critical positions in the power stations. Strong training and mentoring programmes are a crying need in many of these utilities. Outsourcing has been the only option, often a knee jerk reaction resulting from a manpower and capability vacuum for many generation stations. A decision to outsource needs to be a carefully thought out operational strategy which requires considerable strengthening of the organisations capacity to effectively monitor and control. Strengthening the organizational capability on these fronts with systematic and systemic organizational interventions is extremely important. What I have discussed for generation is equally pertinent in the context of transmission and distribution. At a time where joint ventures, PPP models are being practiced on a large scale, are there challenges that emerge with the new system. What are the

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possible strategies to ensure a smooth functioning? The challenges that are faced today with increased private participation is quite different from the earlier era. The realization that we are living in a different economic context is the first requirement for an appropriate strategy. We need speed, flexibility and adequate understanding of the market economy to evolve an appropriate strategy. Understanding on what is risk and who should own what risk is essential. Earlier a bankrupt and financially weak utility impacted the consumers in terms of quality of service and coverage but today given the level of infrastructure loans to the private sector a financially weak utility sector could also seriously impact our banking sector as well as future investments. I feel that we are often far too short term in our focus. There is a need to convert our longer term integrated energy plans to a more workable strategy with consistent link between policy and regulations. On the organizational front PPP models require a transformation in how the utilities operate. From an earlier system of supervision of work, PPPs demand a far more facilitative approach to management. From owning responsibility of the task to an approach that requires the management and control of performance indicators of the partner. I am not sure how many utilities have strategized this organizational transformation on account of the PPP model of operation. There is a need to go back to the drawing board and develop and articulate clear organizational strategies to effectively manage PPPs. Besides employing the skilled work-force, what are the other areas where little tweaking in the existing process can help companies improve generation or reduce cost of production. Renovation and modernization of our old plants will help not only better

energy conversion but lesser emissions and thus reduce many indirect costs. There is a scope for State level generators to improve their performance by learning from NTPC model plants and process improvements achieved. All this will again make demands on the work force and organizational processes. Up-skilling is important but will clearly not suffice. We need to drive accountability and a performance driven culture. State utilities are competing with the best of the private operators. Performance management, career and succession management, adoption of IT and training related to the same, making training accountable- establishing an RoI on training are all important interventions for the utilities. Tweaking maybe a mild term- some of the organizational processes will certainly require tectonic transformation. What is driving attrition in utilities domain and what are the most common reasons cited by people as they leave organization?. What all strategies companies can employ to retain the talent? Is there a difference in figures in public sector v/s private sector. There are significant differences between public and private in terms compensation, growth and quality of work environment. Given the current state of development the growing private sector operations rely upon public sector experienced professionals. Though in terms attrition rates they may be small, in terms of quality the impact is high and significant. Moreover the recruitment ban on many public utilities has impacted demography of the organization. In many organizations where we are currently working 30-40% of senior professionals are retiring over next 4-5 years resulting in a serious leadership vacuum. The competency requirements have also significantly changed due to new business context. There is a need to focus on improvement

on the quality of manpower through continuous learning programs for people in public sector. Fortunately, the Indian professional youth in recent times who have seen the flash of sectors like IT tarnish over the years are in the process of rediscovering the government utilities and PSUs. With recent pay revisions and the promise of a stable career with a rich learning experience it is time for PSUs and state utilities to refresh their employment brand to attract quality talent. Most of the distribution utilities in the country are making losses except in Gujarat and West Bengal. What needs to be done to improve the situation? There are two root causes for the current situation. 1) In spite of the independent regulatory arrangements, the overall tariffs were not covering costs for several years. In some of the utilities no tariff raise happened over last 8-9 years in spite of the high inflation experienced energy segment. Higher economic growth and consequent tax buoyancy helped many States to continue with their subsidy program. Utilities that were consistent with regulatory requirements and their cost adjustment escaped the current troubles. 2) Significant amount of costs were also disallowed by independent regulatory commissions because of efficiency concerns and continued high T&D losses in the system. This is really due to avoidance of real reforms in the utilities. While we formed the unbundled companies to satisfy the legal requirements, the changes to follow in the functioning of these companies have not happened. In spite of the vast improvements in IT and communication infrastructure we have weak corporate governance, 5-6 tier organization structures with inadequacy in responsiveness as well as diluted accountability.
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InConversation

The dilemma is between buying v/s building talent


Infusing motivation in diverse sectors workforce for over two decades, Dr. Sapna Purohit, has successfully demonstrated her acumen in developing and retaining workforce through exceptional interpersonal relationship management and by striving for seamless integration of HR with business. Currently Head HR, Transmission Reliance Infrastructure Limited, she has earned recognition both within and outside India. She has been a regular invitee on several international forums as an inspirational leader to enlighten students & professionals from the various strata of society. Here Purohit talks about various issues particularly on HR front that needs to be addressed for better functioning of the utilities.
conducts technical training specific to its needs) and to induct and train the talent on technical, behavioural and managerial skills is required. In order to improve power sector, one must focus on building organizational capability to implement the changes effectively. Which are the areas where immediate intervention is needed to better utilize the installed capacity. Kindly suggest measures that could be taken to improve power output with minimal extra burden on the utility. By and large Power Sector has difficulty in attracting the best of the brains in the Country. The along the entire value national training policy for chain, shortage of skilled The power sector calls for manpower plagues national upto 5 percent of the all organizations. training policy for wage bills to be spent Acquisition of power sector calls for upto 5 percent of on training. Most of talent with required the wage bills to be the organizations proficiency levels spent on training. Most have however been of behavioural of the organizations unable to do so. competencies and have however been Theres a dilemma technical skills in unable to do so. between Buying V/S the required volumes Building talent and the is a mammoth task. With high cost of acquiring the private players ramping up skilled manpower makes it obvious CAPEX via Greenfield /JV route, that organizations have failed to talent scarcity is being addressed in the realize the potential of grooming talent interim by hiring from public sector in-house. HR needs to work towards organizations. The potential for tie-ups building talent from within. What with industrial training institutes (ITI), further need to be addressed is at what to undertake focused effort, in building stage of the employee lifecycle should capability in the existing / upcoming training be provided? And whether pool of talent is being explored. training alone is the answer to the woes Investment in training even in grass of the power sector. The boundaries root levels (i.e. each power station

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With increasing focus on setting up large plants and undertaking renovation and modernization of existing plants, is the kind of skill set required readily available. If No, what should the industry do to have people with such skill set. Given the planned capacity expansion

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between the education institutes and the industry need to crumble with each entity playing a proactive role in enhancing focus on the studentemployee transition and lifecycle. For example - Even Premier Electrical Engineering institutions do not have the following as core syllabus but only as optional: Power System Planning Power System Dynamics and Control HVDC Transmission Power System Protection With an increasing demand for skilled talent specializing in specific fields, and increasing technological interface and majority of the educators including retired sector employee lack the capability to train such manpower, the organizations need to proactively counter this known evil as an onus of building talent cannot rest on the shoulders of the educational institutions / industrial training institutes alone? Induction should be compulsory for new joinees across the power sector. Induction format and the field of specialty would be specific to the respective organization. However employee engagement along the employee lifecycle is critical for all organizations. Emphasis on skills and knowledge up gradation coupled with emphasis on attitudinal changes/ behavioural changes. In addition to the technical manpower, number of highly skilled managers will be required in areas such as project management, planning, project finance, monitoring and reviewing. There is need to launch a comprehensive and pragmatic approach to attract, utilize, develop and conserve valuable human resources. What is the attrition level in utilities domain and what are the most common reasons cited by people as they leave organizations. What all

youngsters. Newer incentive schemes strategies companies can and customized packages may be employ to retain the talent. developed that are not necessarily Retention is not a big challenge if linked to vertical promotions alone. best of the brains are not recruited Regular surveys for assessing but retention of the critical talent Current Engagement Levels & is definitely a challenge. The main designing programs accordingly reasons for attritions are : along with Reflection Sessions and The expectations of the present Team Building Activities should be generation are very high. They are done. Institutionalized Performance not interested in initial pay only but Coaching can what matters most enable managers to is their career solve performance growth. This The expectations of sector requires the present generation problems or develop employee working in remote are very high. They by sites, many of are not interested in capabilities providing Technical which do not have initial pay only but Help, Personal Hospitals, Schools, what matters most is Support, and Recreational their career growth. address Individual facilities, This sector requires Challenges. emergency working in remote To ensure transportation, sites, many of which organizational etc. Talent usually aspires for Head do not have Hospitals, sustainability in Quarters or Schools, Recreational the long term, it is Postings near facilities, emergency critical to identify and develop key main Cities. It transportation, etc. talent pool to is difficult to take up future motivate talent to leadership / critical positions within live in small communities with social the organization. A well defined isolation. From a career perspective, Succession Management mechanism O&M work is not perceived as may be introduced. very attractive. Vacation Planning HR is required to undertake is restricted due to unavoidable focused employee engagement emergencies. Moreover, the work interventions along identified (climbing towers and working in live milestones of employee lifecycle switchyard etc) involves high amount such as Career pathing. Personnel of effort, challenges, safety hazards and in the HR department need to age related problems. While there is an unlearn and relearn new behaviours, unpredictable performance of assets, attitudes and skills. Structured R&R employees spend sleepless nights to programs to appreciate / recognize achieve high availability. Also at Site individuals and teams in quarterly / Locations, the working relationship annual forums. Coffee Conversations is largely between the Boss and the Subordinate with a low access to higher are introduced to enable informal ups thus leading to lower motivation / conversations within the organization while achieving some organization engagement at work. wide objectives of sharing common There is a need to move away from concerns / dependencies within the vertical organization structures, functions, having greater interactions where stagnation is inevitable leading with Subject Matter Experts within and to immense frustration amongst

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InConversation
outside the organization and to sense pulse of the organization on a timely basis and resolve issues concerning specific employee segments within the organization. Talk to Head is another forum to enhance free communication by employees with the Business Head. Besides employing the skilled work-force, what are the other areas where little tweaking in the existing process can help companies improve generation or reduce cost of production. There is a need to transform the HR Function to the role of a business partner and arrive at proactive ways to engage employees along their lifecycle. Quantitative elements (i.e. compensation etc) alone are insufficient to promote and incentivize talent. With the need for high social actualization, HR needs to play the role of a mentor to coach and change the mindset via behavioral change management. For example: There is a lack of maintenance people as people prefer to build than to maintain. Training in-house does not necessarily yield the desired results as high performers (already few in numbers) are overworked and unavailable for such skill building sessions. There is a need for increased Business Orientation amongst the talent in Power Sector. The key to success is being Process centric instead of Person Centricity. Adherence to Quality / Safety procedures, compliance to ISO / OSHAS etc enhance the desired process centricity within the organization. The leadership teams with their foresight may attract, retain, develop and manage talent optimally to inculcate multi disciplinary knowledge and skills within the organization as also reduce HR Challenges from growing multi-fold. Therefore, it becomes HRs major responsibility to improve organizational effectiveness to drive Operating Tracker Maintenance Tracker Testing Tracker Line Maintenance Tracker Approval Note Tracker Minutes of the Meeting Tracker Line Maintenance Tracker Approval Note Tracker Online Attendance E-Library Security Management System Online Development Centres IT Helpdesk SCADA / GIS technologies

The Indian power sector is segregated into the following : 1. Public sector utilities (state/ centre) 2. Private sector These may operate in the form of joint ventures/stand alone entities or public private partnerships. The recruitment, training, motivation, retention strategies in each are different but the challenge of getting right people for the right job remains the same. This sector possesses peculiar features such as it is Highly Capital Intensive with Long Gestation Periods. The PublicPrivate Partnership (PPP) framework in the sector is at a relatively early stage in India. Due to the need for rare and niche skills, the HR in the sector faces key challenges of Talent Sourcing, Talent Retention, Motivation, Training and Development, Placement and Promotion and Employee Engagement. value creation, redirect talent towards core high value activities, and enhance access to leading edge technology and processes. Key focus areas could be Performance Coaching, Capability enhancement, Culture Transformation, Knowledge Sharing, fostering Innovation and Meritocracy, Communication platforms and Competency based Development. Kindly share the areas where IT process could be improved to better utilize the power plants capacity. Organizations should move towards ERP enabled systems and automated processes to bring more transparency and efficiency. A few of the IT enabled systems could be :

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At a time where joint ventures, PPP models are being practiced on a large scale, are there challenges that emerge with the new system. What are the possible strategies to ensure a smooth functioning. The Economic Survey (2008-09) notes six key hurdles faced by PPPs: policy and regulatory gaps; inadequate availability of longterm finance; inadequate capacity in public institutions and public officials to manage PPP processes; inadequate capacity in the private sectorboth developer/investor and technical manpower; inadequate shelf of bankable infrastructure projects that can be bid out to the private sector; and inadequate advocacy to create greater acceptance of PPPs by the stakeholders. To overcome the challenges, organizations with an active participation from HR may establish PPP Units mandated with developing the core competencies in their people and creating a work environment where the binding principles of partnership are followed with the spirit of togetherness and trust.

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InDepth

Expert Panel holds states responsible for Indias Biggest Blackout


Grid Indiscipline & Poor Maintenance of Transmission Lines cited as other causes Power minister Veerappa Moily mulls jailing Chief Secretaries of erring states
by Team InfralinePlus

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States of Uttar Pradesh, Haryana and Punjab continued to overdraw power from the northern grid despite grid operators sending repeated cautionary memos and as warnings reached deaf years, what came along was a disaster for the whole nation---the collapse of the northern grid first on July 30 and then again on July 31 along with the collapse of two other grids---the eastern and the north-eastern grids. The consecutive grid collapse led to blackout in half of India thereby affecting 600 million people--half of

Indias population. The only answer that everyone wanted to know was what led to the failure and why did not the grid operators not act when states were seen over drawing? Going by what the three member expert panel had to say, the grid collapse was caused by lack of maintenance and inaction by northern grid operators at a time when states had been overdrawing power for many days. The panels report has categorically stated that the repeated grid failures were due to lack of vigilance and discipline

by grid operators as well as the state electricity boards (SEBs) that overdrew power from the grid. Noting that agricultural load on the system led to its failure, the expert panel report has accused Haryana, Uttar Pradesh and Punjab of overdrawing power from the grid before the first blackout on July 30. The panel has also pulled up the apex bodies managing the northern grid, including the Northern Load Despatch Centre as well as the Power Grid Corporation (the central transmission

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InDepth

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utility), for inaction on days when the frequency of power transmission fluctuated at levels below the accepted 49.5 hertz for 70% of the time. Interestingly, the panels report has also mentioned that even on July 29, 2012, the grid was on verge of collapse - technically termed as a near-miss situation in the transmission sector. The panels report blamed states like Haryana that overdrew from the grid by 25.5%, Uttar Pradesh by 20.8% and Punjab by 5.5%. Similarly, during the second blackout, Haryana drew 22.4% excess power. However, UP had reduced its overdraw to 6.4% and Punjab to 1.2%. Violations of line overloading were permitted on both July 30 and 31, the report said. The load on the grid remained unchecked for long periods, which caused the grid to crash. The report of the committee noted that there was a major grid disturbance in Northern Region at 02.33 hrs on 30-07-2012. Northern Regional Grid load was about 36,000 MW at the time of disturbance. Subsequently, there was another grid disturbance at 13.00 hrs on 31-07-2012 resulting in collapse of Northern, Eastern and North-Eastern regional grids. The total load of about 48,000 MW was affected in this black out. On both the days, few pockets survived from black out. Ministry of Power asked the Enquiry Committee to analyse the causes of these disturbances and to suggest measures to avoid recurrence of such disturbance in future. The panel is headed by A.S. Bakshi, chairman of the Central Electricity Authority (CEA) and comprised of R. N. Nayak, CMD, POWERGRID, S. K. Soonee, CEO, POSOCO and Balvinder Singh, IPS Retired, K. K. Agrawal, Member (GO&D), CEA besides Manjit Singh, Member (Thermal), CEA, P.K. Pahwa, Member Secretary, NRPC, Dr. Anil Kulkarni, IIT-B, Mumbai, Ajit Singh, Ex-Addl. Secretary, Cabinet Secretariat, R.K. Verma, Chief Engineer I/c (DP&D), CEA, Dinesh Chandra,

Chief Engineer (I/C), GM Div., CEA, Ajay Talegaonkar, SE (Operation), NRPC, S. Satyanarayan, SE (Operation), WRPC, D. K. Srivastava, Director, GM Div., CEA

overdrawal by the NR utilities and underdrawal/excess generation by the WR utilities. Loss of 400 kV Bina-Gwalior link: Since the interregional interface was very weak, tripping of 400 kV BinaGwalior line on zone-3 protection of distance relay caused the NR system to separate from the WR. This happened due to load encroachment (high loading of line resulting in high line current and low bus voltage). However, there was no fault observed in the system. Factors that led to the initiation of the Grid Disturbance on 31st July, 2012 Weak Inter-regional Corridors due to multiple outages: The system was weakened by multiple outages of transmission lines in the NR-WR interface and the ER network near the ER-WR interface. On this day also, effectively 400 kV BinaGwalior-Agra (one circuit) was the only main circuit available between WR-NR. High Loading on 400 kV Bina-Gwalior-Agra link: The overdrwal by NR utilities, utilizing Unscheduled Interchange (UI), contributed to high loading on this tie line. Although real power flow in this line was relatively lower than on 30th July, 2012, the reactive power flow in the line was higher, resulting in lower voltage at Bina end. Inadequate Response by SLDCs to RLDCs instructions on this day also to reduce overdrawl by the NR utilities and underdrawal by the WR utilities. Loss of 400 kV Bina-Gwalior link: Similar to the initiation of the disturbance on 30th July, 2012, tripping of 400 kV Bina-Gwalior line on zone-3 protection of distance relay, due to load encroachment, caused the NR system to separate from the WR system. On this day also the DR records do not show occurrence of any fault in the system.

Panels Findings:
The Committee is of the opinion that no single factor was responsible for grid disturbances on 30th and 31st July 2012. After careful analysis of these grid disturbances, the Committee has identified several factors, which led to the collapse of the power systems on both the days, as given below: Factors that led to the initiation of the Grid Disturbance on 30th July, 2012 Weak Inter-regional Corridors due to multiple outages: The system was weakened by multiple outages of transmission lines in the WR-NR interface. Effectively, 400 kV BinaGwalior-Agra (one circuit) was the only main AC circuit available between WR-NR interface prior to the grid disturbance. High Loading on 400 kV BinaGwalior-Agra link: The overdrawal by some of the NR utilities, utilizing Unscheduled Interchange (UI), contributed to high loading on this tie line. Inadequate response by SLDCs to the instructions of RLDCs to reduce

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Brief Sequence of Events leading to the Grid Collapse on 30th and 31st July 2012 On 30th July, 2012, after NR got separated from WR due to tripping of 400 kV Bina-Gwalior line, the NR loads were met through WR-ER-NR route, which caused power swing in the system. Since the center of swing was in the NR-ER interface, the corresponding tie lines tripped, isolating the NR system from the rest of the NEW grid system. The NR grid system collapsed due to under frequency and further power swing within the region. On 31st July, 2012, after NR got separated from the WR due to tripping of 400 kV Bina-Gwalior line, the NR loads were met through WR-ER-NR route, which caused power swing in the system. On this day the center of swing was in the ER, near ER-WR interface, and, hence, after tripping of lines in the ER itself, a small part of ER (Ranchi and Rourkela), along with WR, got isolated from the rest of the NEW grid. This caused power swing in the NR-ER interface and resulted in further separation of the NR from the ER+NER system. Subsequently, all the three grids collapsed due to multiple tripping attributed to the internal power swings, under frequency and overvoltage at different places. The WR system, however, survived due to tripping of few generators in this region on high frequency on both the days. The Southern Region (SR), which was getting power from ER and WR, also survived on 31st July, 2012 with part loads remained fed from the WR and the operation of few defense mechanism, such as AUFLS and HVDC power ramping. On both the days, no evidence of any cyber attack has been found by the Committee.

Measures that could have saved the system from collapse:


In an emergency system operating condition, such as on 30th and 31st July 2012, even some of the corrective measures out of the list given below might have saved the system from the collapse. Better coordinated planning of outages of state and regional networks, specifically under depleted condition of the inter-regional power transfer corridors. Mandatory activation of primary frequency response of Governors i.e. the generators automatic response to adjust its output with variation in the frequency. Under-frequency and df/dt

based load shedding relief in the utilities networks. Dynamic security assessment and faster state estimation of the system at load despatch centers for better visualization and planning of the corrective actions. Adequate reactive power compensation, specifically Dynamic Compensation. Better regulation to limit overdrawal/ underdrawl under UI mechanism, specifically under insecure operation of the system. Measures to avoid mal-operation of protective relays, such as the operation of distance protection under the load encroachment on both the days. Deployment of adequate

Ready to use the whip on states for grid indiscipline The government is planning strict penalties including imprisonment of chief secretaries of states that overdraw power from the grid even after being warned by authorities. Over drawl of power by states has been cited as one of the reasons by the expert panel in its report on the recent northern grid collapse first on July 30 and again on July 31 along with the failure of the eastern and north-eastern grids that affected more than 600 million people or half of Indias population. Power minister said that states were so far getting away with such indiscipline (or power over drawl) by paying fine. We need to enable provisions in the Electricity Act to imprison state authorities that includes officers of the rank of chief secretaries for disobeying orders from grid operators that keep on issuing endless warning to such erring states, he said, while making it very clear that the state secretary is the person responsible for ensuring that states follow orders. As enforcement of such strict penalties is otherwise difficult, I am planning to bring a legislation and if needed amend Electricity Act 2003 to ensure that the enforcement powers of the grid operators are really strengthened, he added. According to Moily, there should be independent regulatory authorities at the state-level to check overdrawing by various states. While provisions already exist in the Electricity Act to cut out those states from the grid who are over drawing power leading to blackout in such states, Moily said, the persons who are responsible should be punished and not the innocent citizens of that particular state that overdraws. Citing the report of the expert panel that probed the failure of grids, Moily said not only over drawl but overloading was also a reason for the collapse. Violations of line overloading was permitted on both 30th and 31st July, a power ministry official said quoting the report. The load on the grid remained unchecked for long periods to ultimately cause the grid to crash, he added.
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InDepth

synchrophasor based Wide Area Monitoring System and System Protection Scheme.

Restoration of the system


The Committee observed that on both the days unduly long time was taken by some of the generating units in starting the units after start up power was made available.

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Recommendations of the Committee


Detailed recommendations of the committee are given in the main report, which are summarized below. An extensive review and audit of the Protection Systems should be carried out to avoid their undesirable operation. Frequency Control through Generation reserves/Ancillary services should be adopted, as presently employed UI mechanism is sometimes endangering the grid security. The present UI mechanism needs a review in view of its impact on recent disturbances. Primary response from generators and operation of defense mechanisms, like Under Frequency & df/dt based load shedding and Special Protection Schemes, should be ensured in accordance with provisions of the grid code so that grid can be saved in case of contingencies.

A review of Total Transfer Capability (TTC) procedure should be carried out , so that it can also be revised under any significant change in system conditions, such as forced outage. This will also allow congestion charges to be applied to relieve the real time congestion. Coordinated outage planning of transmission elements need to be carried out so that depletion of transmission system due to simultaneous outages of several transmission elements could be avoided. In order to avoid frequent outages/ opening of lines under over voltages and also providing voltage support under steady state and dynamic conditions, installation of adequate static and dynamic reactive power compensators should be planned. Penal provisions of the Electricity Act, 2003 need to be reviewed to ensure better compliance of instructions of Load Desptach Centres and directions of Central Commission. Available assets, providing system security support such as HVDC, TCSC, SVC controls, should be optimally utilized, so that they provide necessary support in case of contingencies. Synchrophasor based WAMS should be widely employed across the

network to improve the visibility, real time monitoring, protection and control of the system. Load Desptach Centres should be equipped with Dynamic Security Assessment and faster State Estimation tools. There is need to plan islanding schemes to ensure supply to essential services and faster recovery in case of grid disruptions. There is need to grant more autonomy to all the Load Despatch Centres so that they can take and implement decisions relating to operation and security of the grid To avoid congestion in intra-State transmission system, planning and investment at State level need to be improved. Proper telemetry and communication should be ensured to Load Despatch Centres from various transmission elements and generating stations. No new transmission element/generation should be commissioned without the requisite telemetry facilities. Start up time of generating stations need to be shortened to facilitate faster recovery in case of grid disruptions. There is a need to review transmission planning criteria in view of the growing complexity of the system. System study groups must be strengthened in various power sector organizations. It was also felt that a separate task force may be formed, involving experts from academics, power utilities and system operators, to carry out a detailed analysis of the present grid conditions and anticipated scenarios which might lead to any such disturbances in future. The committee may identify medium and long term corrective measures as well as technological solutions to improve the health of the grid.

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ExpertSpeak

Indias nuclear power potential: The road ahead


By Bertrand Constensoux, Vice President India Nuclear, Vice President Russia Nuclear Bertrand Constensoux, who has been associated with the Alstom Group for the past 15 years, discusses the growth of nuclear power in India. He delves at length about the future of nuclear power in the country, its current status and Alstoms role in the power sector.
Nuclear power remains central component of energy security plan of many countries to meet the increasing power demand. Similarly, for India as well a market that will be one of the worlds most important for nuclear new builds in the coming decades. In October 2010, India drew up an ambitious plan to reach a nuclear power capacity of 63,000 MW in 2032. The planned target of 63 GW of Indias electricity coming from nuclear power plants by 2032, there will be huge opportunities for the global nuclear industry to take part in Indias nuclear expansion programme. Currently, India has 20 nuclear reactors in operation in six nuclear power plants, generating 4,780 MW of power. By 2017, Indias installed nuclear power generation capacity will increase to 10,080 MW. The Indian nuclear power industry is expected to undergo a significant expansion in the coming years thanks in part to the passing of the US-India Civil Nuclear Agreement. This agreement will allow India to carry out trade of nuclear fuel and technologies with other countries and significantly enhance its power generation capacity. supplying the steam turbines and balance-of-plant conceptual design. The contract is the first order in India for steam turbine generators for the new rating 700 MW nuclear sets based on an indigenous Pressurised Heavy Water Reactor (PHWR) design.

Beginnings
Indias nuclear programme is divided into two parts domestically built reactors and reactors built using international technology.So far, Indias domestically produced reactors have been small in size by international standards. Accordingly, its convenWhen the agreement goes through, tional power islands have also been India is expected to generate an historically quite small. additional 25,000 MW of Alstoms first power blocks nuclear power by Alstoms for nuclear units in India 2020, bringing the total first power were for the units at estimated nuclear blocks for nuclear Rajasthan 1 (100 MW, power generation to units in India were for now retired) and 45,000 MW. the units at Rajasthan Rajasthan 2 (200 MW, As the country 1 (100 MW, now retired) still under operation), embarks on its and Rajasthan 2 (200 commissioned in 1973 nuclear expansion, MW, under operation), and 1981, respectively. Alstom is looking commissioned in There was then a forward to play 1973 and 1981, transfer of technology an important role in respectively. to BHEL, who carried out supplying the turbine the subsequent installations at islands for Indias nuclear Rajasthan 3 and 4 (200 MW each). programme. At the end of March last For the next 25 years, the output year, it began work on constructing of Indias reactor units were around Units 3 and 4 of the Kakrapar project, 200 MW until around 2006 when it which with a combined capacity of commissioned two reactors with an 1,400 MW, are an important part output of about 500 MW capacity each of the countrys nuclear new build at Tarapur 3&4. The new 700 MW programme. units at Kakrapar are the next steps Under a 120 million contract, in the evolution to higher capacity representing about 45 per cent of reactors and Alstom is providing its full the overall contract for the turbine speed steam turbine solution (3000 r/ generator package of the two min for 50 Hz) called STN-700 to conventional islands, Alstom is

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ExpertSpeak

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meet the new, larger, domestically produced reactors. The Kakrapar plant currently has two 220 MW units (Units 1 and 2) that have been in operation for more than 15 years.The projects owner, Nuclear Power Corporation of India Ltd (NPCIL), awarded a Turbo-Generator contract in April 2011 to a consortium formed by BHEL and Alstom for the 2x700 MWunits. These steam turbines have mono-bloc rotors directly coupled to the generator. These are multistage impulse turbines that feature one double-flow high pressure (HP) turbine section and three double-flow low pressure (LP) turbine sections to produce large output and take full advantage of the heat sink conditions. This technology is well suited to the PHWR 700 MW units, since the HP is designed for large inlet steam volume flows of wet steam.Steam turbines in nuclear plants usually handle steam inlet pressures of 60 bars or more, but the PHWR reactor produces steam with low pressure, around 40 bars. Another characteristic of the Indian power market is the instability of the transmission network demonstrated by wide frequency variations. Plant operators are concerned about damaging machines as a result of operation under varying Grid frequencies. Alstom turbine blades are designed with integral banding, ensuring a very secure separation with the harmonics of the rotating frequency in the specified range of frequency variation. Erosion is a key issue for a power plant, with a direct impact on its reliability. This is particularly important in nuclear plants since the steam coming from the nuclear island is, in general, wet. As it is expanded, it becomes wetter and can cause erosion damages. Over the years, Alstom has developed a comprehensive methodology to address this issue for all critical locations within the

machine. The design rules govern the acceptable steam velocities, the material resistance to Flow Accelerated Corrosion (FAC), the protection of the sealing surfaces, etc., according to years of operational feedback. These proven solutions allow the turbine to be operated for the lifetime of the plant with minimum maintenance.

The ARABELLE design provides proven reliability and performance for the new generation of reactors. Today, the largest turbines in operation worldwide are four ARABELLE machines, each with a 1550 MW power output and extremely high reliability.
Another feather in the cap
Seven nuclear power reactors with 5,300 MW capacity are expected to be operational by 2016-end, adding to the 20 reactors currently operating with a capacity of 4,780 MW. Meanwhile, new reactor projects are envisaged, in collaboration with Areva of France, Russia, Westinghouse and GE from USA. Eight more reactors would be put under the safeguards of the International Atomic Energy Agency by 2014, in addition to six already under the plan for civil-strategic separation. The units are designed for easy maintenance since the modules are lightweight with a limited number of stages. Specific design improves the maintainability of the unit, such as the bottom steam entry for the HP module, permitting its opening without dismantling the main steam pipes.

Alstoms bigger role


NPCIL is coming up with a project in Jaitapur (2x1750 MW based on EPR reactors) and Alstom is currently in

discussions with NPCIL to supply ARABELLE steam turbines for the Jaitapur project. Alstoms ARABELLE steam turbine technology is designed for reactor units with power outputs in excess of 1000 MW. The ARABELLE steam turbine is widely acknowledged as the best half-speed turbine in the market. It offers outstanding power output from 900 to 1900 MW, efficiency and reliability, using a specific architecture and welded-rotor technology developed by Alstom. The ARABELLE design provides proven reliability and performance for the new generation of reactors. Today, the largest turbines in operation worldwide are four ARABELLE machines, each with a 1550 MW power output and extremely high reliability.The most distinctive feature of ARABELLE technology is an architecture that makes the best use of the high efficiency single-flow steam expansion. The single-flow arrangement ensures higher efficiency due to the reduction of secondary losses that develop at the root and at the tip of the steam path. The collaboration between Alstom and BHEL in nuclear steam turbines has a long history: out of the 18 nuclear units in operation today in India, 10 have been delivered in collaboration between Alstom and BHEL. The Kakrapar project will represent a new step in this long-standing collaboration followed by 2x700 MW at Rawatbhata in Rajasthan. The first units will be executed under a consortium then through a joint venture. This is driven by the desire to have the largest degree of local manufacture for the project, which not only benefits the local economy but also helps the projects economics.

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September 2012 www.InfralinePlus.com

NewsAnalysis

Change of guard: Can Moily light up the power ministry?


Veerappa Moily assumes charge as the new power minister as Shinde moves to Home Ministry Moily got into a damage control mode as soon as taking charge
by Team InfralinePlus

After spending almost six years as the union power minister (from 2006-2012), Sushil Kumar Shinde was promoted as the Home Minister on August 1. However, just two days before leaving the Shram Shakti Bhawan that houses the power ministry, the country faced two major consecutive grid collapse on July 30th and July 31st. The grid collapse came as a big embarrassment for the Congress-led ruling UPA government as it left nearly 600 million or half of Indias current population powerless for several hours. Shinde deflected criticism stating that India was not the only country that has suffered such major power outages and even the United States and Brazil had both experienced similar blackouts within the previous few years. He also blamed the states for over drawing power from the grid that caused the massive blackout by tripping of the northern, eastern and north-eastern grids. Amidst the volley of explanations flowing from Shinde, it was the new power minister--Veerappa Moily who took charge as the new power minister on August 1, 2012 and started his first day in the ministry doing the real damage control. Moily also holds the charge of corporate affairs ministry. Faced with the daunting task of handling the countrys worst power crisis, a confident Moily immediately swung into action and announced a high level expert committee that will bring out the cause of this collapse.

Moreover, unlike Shinde, Moily did not believe in starting a blame game with the states and rather opted for discussions to avoid a repeat of such a situation again. Immediately after taking charge, Moily announced holding a meeting with state chief ministers and Veerappa Moily (inset) Sushil Kumar Shinde energy secretaries to deliberate on the Challenges before Moily: While suspected cause of the grid failure -dealing with issues that led to the present the over drawl of power by states from grid collapse, Moily has to push for the grids. A reformist, as he is known for, Moily grid discipline to avert a repeat of such incidents. Empowering the national and hails from the state of Karnataka and regional load dispatch centres is a must joined politics in 1974. After handling to ensure grid discipline. various state level roles, Moily assumed He also needs to quickly take up charge of the Karnataka chief minister distribution reforms to improve the in 1992 and continued till 1994. He is deteriorating health of state power also credited with the establishment of companies. As per power ministry the National school of Law in the states officials, he will soon take to cabinet capital of Bangalore. a financial bailout package for turning A lawyer by profession, Moily was around the state distribution companies. also holding the charge of the union law Providing adequate fuel including minister (took over as the law minister coal and gas to power projects lying idle in 2009) until after a recent cabinet for want of fuel is another daunting task reshuffle, he got the dual charge of before Moily. Reducing the demand corporate affairs and the power ministry. supply gap by pushing up generation and Having always been employed by achieve the 80,000 mw plus generation the government for his intellectual and target for the current fiscal will also reformist inputs, Moily was also on the require Moilys personal intervention. panel that drafted the anti-corruption bill or Lokpal.
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StatisticsPower
Region-wise and State-wise Detail of Power Generation During April- July 2012
Region State NR BBMB BBMB Total Delhi Sector Central Central Private State Central Private State Central Private Private Utility State Central State Generation (MU) 4040.96 4040.96 1527.66 80.91 2119.64 3728.21 2832.34 459.83 4991.21 8283.38 5807.47 3368.9 68.19 549.07 9793.63 4164.91 1693.01 5857.92 7843.96 7843.96 3920.22 1061.04 8121.47 13102.73 22583.09 4609.81 7004.66 34197.56 1738.63 886.44 1878.24 4503.31 91351.66 13980.04 4514.13 4344.34 22838.51 84.14 84.14 3783.09 12735.68 1191.66 9939.78 27650.21 9404.89 6628.93 16033.82 6510.83 4919 5404.1 16180.39 33014.32 99621 10915.52 5006.98 14345.16 30267.66 Region State Karnataka Generation (MU) Central 1848.15 Private 3923.77 State 8200.02 13971.94 Central 139.51 State 2206.65 2346.16 State 87.77 87.77 Central 7282 Private 2026.33 State 8201.96 17510.29 64183.82 State 31.93 31.93 Central 4998.79 State 0 4998.79 Central 7974.06 7974.06 Private 1781.62 State 1133.17 2914.79 Central 9048.4 Private 3064.38 State 1928.97 14041.75 Central 1237.39 1237.39 Central 4118.84 Private 13.02 Private Utility 3254.64 State 9236.22 16622.72 47821.43 IMP 1866.65 1866.65 1866.65 Central 554.93 State 554.93 Central 786.22 State 545.93 1332.15 Central 109.17 109.17 Central 60.69 State 148.01 208.7 Central 50.89 50.89 Central 221.6 State 210.77 432.37 2688.21 307532.77 Sector

Karnataka Total Kerala Kerala Total Pondicherry Pondicherry Total Tamil Nadu

Delhi Total Haryana

Haryana Total Himachal Pradesh

Himachal Pradesh Total Jammu And Kashmir Jammu And Kashmir Total Punjab Punjab Total Rajasthan

Tamil Nadu Total SR Total Andaman Nicobar ER Andaman Nicobar Total Bihar Bihar Total DVC DVC Total Jharkhand Jharkhand Total Orissa

State Central Private State Central Private State Central Private State

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Rajasthan Total Uttar Pradesh

Uttar Pradesh Total Uttrakhand

Orissa Total Sikkim Sikkim Total West Bengal

Uttrakhand Total NR Total Chhattisgarh WR

Central Private State Private Central Private Private Utility State Central State Central Private Private Utility State

Chhattisgarh Total Goa Goa Total Gujarat

West Bengal Total ER Total Import Bhutan (Imp) Bhutan (Imp) Total IMPORT Total Arunachal Pradesh NER Arunachal Pradesh Total Assam Assam Total Manipur Manipur Total Meghalaya Meghalaya Total Nagaland Nagaland Total Tripura Tripura Total NER Total All India Total

Gujarat Total Madhya Pradesh Madhya Pradesh Total Maharashtra

Maharashtra Total WR Total Andhra Pradesh SR

Central Private State

Andhra Pradesh Total

September 2012 www.InfralinePlus.com

State-wise details of electrification of un/de-electrified villages, intensive electrification of partially electrified villages and release of BPL connections under RGGVY as on July 31, 2012
Sr. No. State Electrification of Un/deelectrified villages Coverage Achievement 0 0 2106 1433 8326 7937 22512 22372 1468 925 0 0 0 0 95 78 239 162 19071 18029 61 61 0 0 660 534 0 0 882 616 1866 1322 137 94 105 82 14715 14254 0 0 4339 4033 25 25 0 0 148 128 28194 27762 1512 1511 4425 4169 110886 105527 Intensive electrification of Partially Electrified villages Coverage Achievement 27477 26324 1760 864 12984 11937 6454 4688 16214 11251.15018 17667 16291 5908 4687 10650 1059 4442 2533 7106 5664 27917 24620 629 67 33902 20579 40600 36713 1378 472 3239 1801 570 346 1140 963 29324 22519 11840 0 34830 31098 418 381 10009 9673 658 527 2989 2982 9160 9028 24020 20794 343285 267861 Release of BPL connections Coverage 2484665 40726 1150597 2761010 903500 742094 236351 13196 81217 1803377 954673 55732 1320184 1183603 107369 109696 27417 69899 3045979 148860 1220321 11458 502865 107506 964199 238522 2655566 22940582 Achievement 2702906 23312 838891 2230927 935781 814121 194442 13862 48806 1280960 846109 49092 848445 1170645 28814 70046 15113 33822 2768977 56325 1087620 9692 501202 86037 1042969 230558 2025581 19955055

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1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27

Andhra Pradesh* Arunachal Pradesh Assam Bihar Chhattisgarh Gujarat* Haryana* Himachal Pradesh Jammu & Kashmir Jharkhand Karnataka Kerala* Madhya Pradesh Maharashtra* Manipur Meghalaya Mizoram Nagaland Odisha Punjab* Rajasthan Sikkim Tamil Nadu* Tripura Uttar Pradesh Uttrakhand West Bengal Total

* In the States of Andhra Pradesh, Gujarat, Haryana, Kerala, Maharashtra, Punjab and Tamil Nadu, no un-electrified village was proposed in the DPRs by these States. However, intensive electrification of already electrified villages are being undertaken in these States.

September 2012 www.InfralinePlus.com

NewsBriefs | Coal
Lanco Infratech To hike output from Griffin Lanco Infratech Limited is planning to increase the output from the Griffin coal mines located in Western Australia. The company has finalised plan for increasing the output - both from a short term perspective and long term. Steps are underway to up the output to 5.5 mtpa by March 2014, according to T. Adi Babu, COO, Finance, Lanco Infratech. The coal mines are estimated to hold total reserves of over 1.1 billion tonnes. CAG pulls up Chhattisgarh for coal block allocation BJPs Government in Chhattisgarh has come under attack from CAG for allocating coal blocks at abnormally low rates that led to a loss of over `1,052 crore. The CAG, in its audit report (Civil & Commercial) for 2010-11, had in April pulled up CMDC for accepting a single bid for commercial mining of coal from a block allocated by the Centre. Abhijeet Group In $7-billion deal with FJS Energy LLC The Nagpurbased Abhijeet Group signed a $7-billion (`39,069 crore) deal with US-based FJS Energy LLC for coal supply to fire its steel and power units in India. The New Jerseybased company said it would supply coal from its affiliates, FJSE Marshall Inc and FJSE River Coal, for 25 years. Jindal Steel and Power hikes Stake in Gujarat NREs Australian arm Jindal Steel and Power has increased its holding in Gujarat NRE Coking Coal by 2.67 per cent to 12.74 per cent with an investment of `43 crore. GNCC is the Australian subsidiary of Kolkata-based Gujarat NRE Coke. The Naveen Jindal-owned firm Jindal Steel acquired 10.07 per cent in the Australian company for `135 crore in May. Coal scam PM slams CAG report A good 10 days after the Comptroller and AuditorGenerals report on allocation of coal blocks was tabled in Parliament, Prime Minister Manmohan Singh, who has been under direct attack from the Opposition, finally broke his silence. The observations of the CAG are clearly disputable, the Prime Minister said. Undue benefit to RPower CAG report on UMPPs The CAG report on Ultra Mega Power Projects (UMPP) under Special Purpose Vehicles for the year-ended March 31, 2012 has found that the permission for use of excess coal by Reliance Power from the three blocks allocated to Sasan UMPP after its award, not only vitiated the bidding process but also resulted in undue benefit to Reliance Power. GMR Infrastructure Set for Canada coal mining venture exit GMR Infrastructure will exit its 55 per cent stake in Canada-based publicly held Homeland Energy Group, for $100 mn. GMR had acquired majority stake in Homeland Energy during 2008. The company has coal reserves of 350 mn tns in South Africa and is a significant shareholder in Homeland Uranium Inc, a Canadian exploration and development entity for the mineral, focused on projects in Niger and US. GVK Power secures Green nod for $10 b Australian projects GVK Power & Infrastructure Ltd has secured environmental clearance for the $10-billion Alpha coal mine project and rail line from the Australian Federal Government. The approval is a major boost for the GVK group and will enable them to go ahead and close finances for the ambitious project located in the Galilee basin. CMM mining Not possible under current laws: CIL CIL has told Coal Ministry that it cannot extract coal mine methane (CMM) under prevailing regulatory norms. It is difficult to implement two different Acts simultaneously in the same mine, a senior official said. This is even after the Petroleum Ministry agreeing to the proposal of allowing Coal India to explore CMM.

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Coal Ministry appeals CIL To reconsider quitting ICVL

Following an appeal by the steel ministry, the coal ministry has asked Coal India Limited (CIL) to re-consider its decision to pull out of the Special Purpose Vehicle (SPV) set up by maharatna and navratna PSUs for acquiring coal properties abroad for their firing blast furnaces and power turbines back home. Coal price pooling CEA favours 15-20 pc blending For pooled pricing of coal, the CEA has proposed blending up to 20 per cent of the committed coal quantity with imports. The CEA has proposed this in a strategy paper. The modus operandi has been planned keeping in mind that Coal India would supply up to 80 per cent of Letter of Assurances (LOA) and power producers will have to accept imported coal.

Coal India Invites EoI for consultants in SA CIL invited expression of interest for appointing consultants to help the coal PSU form a subsidiary in South Africa to acquire mines as it continues to face acute shortage of the fossil fuel. Coal India Ltd (CIL) has signed pact with the government of Limpopo, South Africa, for jointly identifying, exploring and developi ng coal mines.

September 2012 www.InfralinePlus.com

InConversation

Industry suffering due to cheap vote bank politics: Murty


A Post Graduate in civil engineering from IIT Madras M Rama Murty has been involved with GVK Gautami Power Limited Construction in-charge since 2004. As Vice President, GVK, he is currently the plant head for GVK Power (Goindwal Sahib) Limited a 2x270 MW coal based thermal power project, besides that looking after the urban infrastructure works at Hyderabad and SEZ at Perambaluru, Tamilnadu. Having 25 years of experience in Power and Infrastructure sectors, he shares in views with InfralinePlus on the coal availability of power plants in future.
Given so much focus on thermal power generation capacities in the Twelfth Five Year Plan. Do you feel required amount of coal could be made available to power utilities via domestic supplies. What are the challenges do you see on supply side. No it is not possible. It is very difficult even to sustain present domestic supplies. I am afraid that coal based power project will be destined to take the route of Gas based projects. The projects scheduled for the 12th Five Year plan will face sever short supply of coal. The projects which have captive coal mines will survive in the long run and the projects that have 74% fuel linkage with CCL will be doomed. The new projects are taking much longer time than expected to start the production. Land acquisition is very difficult and even transfer of afforestation land is taking years and contributing to the delay. With ageing of mines the production will come down. Environmental clearances and forest clearances are taking enormous time. Governments are not proactive at state as well as country level. Lack of firm policies creating more confusion. Geographical location and conditions of the mine sites are not conducive for creating good work environment. These sites are infested with anti-social elements and they are controlling the work indirectly and badly affecting the progress. During last year, about 20,000 MW capacity was lying idle due to shortage of coal supplies. How do you see the situation forward. What kind of output growth are you targeting for short term. Is there any investment in technology to improve output. What is your current output and what are the plans for the current financial year. Position is not going to improve. Idle capacity will further increase, if we depend solely on indigenous coal. In the entire scenario of power outage, unfortunately the entire blame is transferred on the coal suppliers. In a situation where industry waits (for long) to get forest and environment clearance, how would you defend the coal suppliers. Coal producer is operating in very difficult environment and no support from Government, especially in clearances, delaying the mine development as well as production. There is so much talk of having super critical power plants based on coal. But, given the supply side constraints essentially at Coal India side, would it be feasible for boilers to accommodate higher mix of imported coal. Besides issues at handling side, there is a cost implication as well. In the absence of pass on clause in power tariff policy, how feasible do you see for thermal power companies to go for higher mix of imported coal. Higher mix of imported coal is not an issue. Coal parameters shall be available to the Power project developer at design stage, so that he can incorporate them in steam generator design. That is why existing plant cannot go for higher

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September 2012 www.InfralinePlus.com

mix of imported coal. Power Tariff is another constraint to use imported coal. Power tariff shall also be linked with WPI or some other commodity index so that there will be a revision at least year on year. For cheap vote bank politics power industry is directly facing the burnt and the Nation as a whole is suffering. Are there technologies in the market, which can help companies blend a higher mix. How cost effective are those technologies. How do you see the import duty hike on power equipments that the Cabinet is likely to deliberate upon? There are reports that import duty on power equipments may be increased to 19%. Your comments? Yes they are available and there will not be much difference on cost because

it will reduce steam generator sizing as well as quantum of coal consumption. On the long run it may turn into cost effective. Detailed analysis is needed to prove this. Imported duty hike one way it better to control inflow of cheap supplies and good power equipment

Geographical location and conditions of the mine sites are not conducive for creating good work environment. These sites are infested with anti-social elements and they are controlling the work indirectly and badly affecting the progress.

manufacturers to come and start their manufacturing units in the country. But it may give undue advantage to BHEL who is struggling to supply material even for the existing projects. BHEL shall need to upgrade themselves to meet project supply demands. At this moment BHEL is not having the required capability to manufacture higher capacity units, i.e., beyond 600 MW. How do you see supply side constraints both on coal and gas supplies affecting power industry. With such constraints how feasible is the idea of installing 1,00,000 MW power generation capacity in the 12th Five Year Plan? Where do you see the thermal power industry going in next five years. It is a serious crisis. Due to nonavailability of gas developers are not able to service the debt and they cannot run the plants on continuous basis with allocated diminished supplies. If the Governments continue their inactiveness like this coal projects will also face the same problems, which results in pulling down the growth rate of the economy. What is the support, Industry seeks from government side. How do you view the current import duty affecting the domestic industry (on supply side). The industry needs a fair competition. For example in one ongoing projects BHEL could not compete with Toshiba MW turbine supplies. In such cases the project cost will go up. Government should adopt different method to control cheap supplies rather than imposing additional import duty.
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InDepth

Using imported coal to push the cost of generation up


As per CEA estimates price pooling swell input cost by 7-8 percent Coastal plants may be supplied 20 percent of imported coal in the mix

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by Deepak Kumar

Coal production in India has not been able to match strides with the aggressive capacity addition in the power sector during the last few years. It has resulted into a yawning gap between coal demand and availability. One on hand, the economy is looking at further improving the rate of capacity addition to feed its burgeoning economy, and on the other, the growth in coal production is likely to stay modest, to say the least. With an eye on the importance of capacity addition for a developing nation like ours and the unlikelihood CIL being able to meet the consequent demand through indigenous production, CEA had, in June 2012, proposed pooling of coal prices. It advised that the demand-production gap be met by importing the balance quantity with provision of the higher price of the imported coal to be shared by all. Indias total coal production in 2011-12 was 540 MT, against the demand of 650 MT. We imported about

90 MT last year. As per CILs own estimates it would attempt to reach a production level of 615 MT by 2016-17. Assuming the LOA/FSA quantity for other than power utilities remains unchanged from the current levels, the total availability for the power utilities in 2016-17 would be 489 MT only. Keeping in mind the FSAs being singed now with projects to be commissioned by March 2015, the total requirement would be 560 MT against the availability of 489 MT. (See diagram on the next page). Cost of fuel is a major factor in the economics of coal-base thermal power plants as it constitutes more than 80

percent of its working capital. Using imported coal in the fuel-mix would definitely push the cost of generation up and affect developers profitability. But costlier power is still better than the low PLFs being witnessed by many power plants today. Consider this, as on August 13, 2012, there were as many as 49 thermal power plants with critical levels of coal stocks. 31 of them had stocks worth less than 7 days consumption, while 18 had a stock worth only 4 days requirement. The situation will aggravate further as there are thousands of megawatts under different phases of commissioning, many other being planned. The scenario paints a grim
2016-17 615 126 489

Year-wise Coal Production and Availability to utilities (figures in MT) Particulars 2012-13 2013-14 2014-15 2015-16 Production 484 487 530 574 FSA/LOA requirement from other 126 126 126 126 sectors # Availability for power utility sector 338 361 404 448 # FSA/LOA requirement considered at trigger level

September 2012 www.InfralinePlus.com

picture for the energy-starved India. There is an urgent need to improve the stagnant supply lest the coal-based power projects meet the same fate as the gasbased power plants in India. Uncertainty in fuel availability/ supply doesnt affect the operational and under-construction projects only. Private developers, banks, financial institutions all turn wary of the return on their investments. It manifests, already has to some extent, into dampened investment scenario in the sector, failures in meeting the Plan targets, slowed down growth of the economy and many such cascading effects. Juxtaposed with such a situation, generating at a higher cost looks far more favorable for India. The impact on cost of generation will not be as bad either. Since the prices would be pooled and the higher cost will be shared by many players, the marginal increment per unit of coal quantity would be minimal. A study conducted by CEA has estimated that the increment in prices would be of around 7 percent to 8 percent. This rise in fuel prices can be easily offset by higher generation which better fuel availability will make possible. Higher PLF would also mean that the share of capacity cost in the total cost of generation is pushed back to normal, resulting in to power utilities making better profits. According to the proposal made by CEA, coal would be imported and dispatched to power utilities by

In India, the mining contracting services are not yet matured in comparison to other countries like, Australia and the US, where risk and responsibilities are defined based on who is best suited to undertake particular responsibility.
CIL. In order to rationalise the mix of indigenous and imported coal, the coastal power plants and those within 300 km of the coast would be supplied 20 percent of imported coal in the mix. Non-coastal and non-pithead plants would be supplied 15 percent imported coal in the total blend, so on and so forth. In simple words, the greater the distance of generating station from the coast, the lower the share of imported coal in the supply-mix. The underlying objective is to keep the total distance of transportation required for each kg of coal as low as possible and save on transportation cost as well as minimise the marginal load on logistics infrastructure. Price pooling would be done by making adjustments for two factors; 1) higher GCV of imported coal and, 2) cost of transportation. So the landed price per kcal would be normalised for and among all utilities.

CILs board has given in-principle approval to amending the Model FSA and supplying coal with 80 percent of the contracted capacity as the trigger quantity, failing which it would be liable to pay a penalty ranging from 1.5 percent to 40 percent of the value of the deficit. The contracted quantity would be supplied mixing indigenous coal and imported coal in the ratio of 65:15. It plans to initially source these imports via state agencies like MMTC and STC as they have the necessary expertise and infrastructure in place. As yet, it is not clear as to what price pooling strategy CIL is going to adopt in this regard. We should, however, be clear about imports being only a short-term solution and not the best solution. There are at least two reasons to think so. One, by relying on imports beyond a point we essentially compromise on Indias Energy Security, the effect of which are too obvious to state. The second reason is that the more dependent you are on the market, the less favorable the market conditions will be for you. Normally a big buyer, as India is going to be, gets a betterthan-the-normal deal in the market. By such logic India should get a steal in the world market of coal. But the above logic holds true only as long as the buyer has alternatives. Once the news is out that the buyer has no option but to buy, it turns into a sellers market in no time. With our indigenous production being nowhere near our requirements, we will be left vulnerable to the whims and fancies of the exporting nations and to their tenuous pricing policies. Importing coal to meet the current demand and price pooling will surely help us get over the current fuel crisis. It will ensure maximum generation and also keep the investment sentiments afloat while CIL tries to get its act together. But, only if we dont grow excessively reliant on it.
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InDepth

Chronic underinvestment plaguing Indian Steel Sector

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Exports should be gradually phased out and conserved: MOS Setting up greenfield steel projects is the need of the hour
by Telan Raju

Infrastructure investments for the Twelfth Five Year Plan were pegged at a sacrosanct figure of $1 trillion. This figure was evolved two years ago factoring the economy to grow at an ambitious 9 percent while the rupee was hovering around 44 against the dollar. With GDP growth at 6.5 percent in FY 12 and these ambitious targets being scaled down, the investments figures are likely to get revised downward. But any downward revision of investment figures is unlikely to have an impact on the imminent demand for steel in the medium term as it continues to play a pivotal role in infrastructural development of the country. Growing urbanization and increasing usage of

steel in rural India are other drivers of steel growth. The automobile industry another major consumer of steel is likely to register strong growth in the range of 12-15 percent as estimated by the Society of Indian Automobile Manufacturers. Ministry of Steel targets achieving capacities of 200 MT by 2020 to meet the rising demand. The growth of the Chinese steel industry which caters to a similar population figure is a far cry from the Indian growth story. As per the World Steel Association, production level in China has reached a record high of 695.5 MT in FY 11 against Indias 72.3 MT. The Chinese demand for steel has been fuelled by the accelerating pace of infrastructure development coupled

with immense construction activities in the country. Meanwhile the Indian Steel industry growth is struggling with headwinds like slow off-take of green field projects, inordinate delays in grant of mineral concession, land acquisition, and mineral lease litigations. Setting aside these unwarranted issues, India provides an environment conducive for setting up of Steel plants. The factors in favor include: High quality Iron Ore reserves Cheap labor Favorable Logistics Expanding construction and Infrastructure sector Growing automobile sector Increasing rural steel consumption

September 2012 www.InfralinePlus.com

Iron Ore, which forms a crucial raw material in steel manufacturing, has proven to be a lucrative commodity world over. Time and again the Chinese steel industry has continued to influence the dynamics of the Iron Ore market. Capitalisation of the voracious demand from the Chinese steel producers led to unbridled export of Iron Ore from the country. Iron Ore reserves in India are finite and NMI has estimated it at 28.5 BT in 2010. The Iron Ore requirement to meet the MoSs steel capacity target of 200 MT by 2020 and 500 MT by 2050 would be 350 MT and 900 MT respectively. At the current rate of Iron Ore exports and domestic consumption our resources are estimated to last for another 50 years. Exports reached a high of 117 MT in 2010 as Chinese demand continued

to rise. The revelation of illegal mining activities and indiscriminate exports brought many mining companies under the scanner. Such rampant practices have been held responsible for environmental degradation and overexploitation of reserves for raking in huge profit margins, rather than practicing optimum and sustainable mining of resources. A temporary mining ban imposed in the states of Karnataka and Goa along with an export duty of 30 percent was put in place to curtail the unrestrained export of Iron Ore. The blanket ban on Iron Ore mining in these states has resulted in those Indian steel companies with no access to captive mines, grappling with raw material crunch leading even up to stoppage in plant operations. While expansion projects have been stalled,

slow off take of Greenfield projects also does not augur well for a rapidly growing economy like ours. The Chinese strategy has however been different. They have been constantly striving to attain raw material security for their ever coveted steel industry. The Chinese government has been encouraging outward FDI investments through its investment friendly policies and access to cheap loans. In 2001, the term going global was made official leading to a series of out flowing FDI. Mofcom figures indicate an increase in outward FDI stock in the mining industry from $5.95 bn to $44.66 bn in 2010. In a bid to conserve its natural resource china imported 686 MT of Iron Ore from its global counterparts and other mining behemoths like Rio, BHP etc. The ministry of steel has been voicing concerns over callousness shown with regard to exports and has been suggesting following the Chinese methodology. This has led to frequent locking of horns between MoS and MoM regarding export of Iron Ore. MoS, citing a huge prospect for Iron Ore shortage in the future, is of the opinion that exports should be gradually phased out and conserved to meet the huge expansion plans envisaged in the steel sector. While, MoM argues that fines, which are not extensively used in India and whose storage is an environment hazard, should be exported. Indias mid-to-long term demand for Iron Ore remains strong. It has become the need of the hour and not a matter of choice to fast track setting up of greenfield steel projects in order to be able to satiate the demand on the cards and meet the ambitious target of 200 MT by 2020. Striking the right balance between the Iron Ore export industry and the steel production industry would ultimately be the Governments call.
Ms Raju recently co-authored an Infraline report titled Iron Ore Outlook 2050. She can be contacted on telan.raju@infraline.com in case of any queries. For suggestions email at feedback@infraline.com

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StatisticsCoal
Proposals of CMPDIL for Forest Clearance Awaiting at Different State Governments for Grant of Permission to Take up Exploration in the Forest Area
Exploration Block 1 2 3 4 5 6 7 8 9 10 11 12 13 Chimtapani Chimtapani East Sayang East-A Sayang East-B Sayang Central-A Chirra North East-A Chirra North East-B Sayang North West Sayang South Morga South Malachua Panwari Dongri Tal Area (ha) 150 300 600 700 600 500 600 1290 1330 1500 1360 1085 1600 Present Status Chhattisgarh Application submitted to Forest Office, Raigarh on 22.02.2007. Proposal submitted on 05.03.2011 to Forest Office, Dharamjoygarh, subsequently forwarded to Forest Office, Korba Proposal submitted on 05.03.11 to Forest Office, Dharamjoygarh and was forwarded to CF, Bilaspur on 10.03.2011 CF, Bilaspur forwarded the proposal to CCF (LM) on 05.03.2011. Forest Office, Dharamjoygarh forwarded the proposal to CF, Bilaspur on 10.03.2011 Forest Office, Dharamjoygarh forwarded the proposal to CF, Bilaspur on 10.03.2011 CF, Bilaspur circle forwarded the proposal to CCF (LM) on 05.03.2011 CF, Bilaspur forwarded the proposal to CCF (LM) on 05.03.2011 Permission for limited boreholes have been obtained on 21.07.2010. Madhya Pradesh Proposal submitted to CF, Sohagpur on 15.11.2010 Application, submitted to Forest Office, Singrauli on 19.08.2009, re-submitted on 31.08.2010. Inspection by Forest Office completed in last week of April. Likely to be forwarded soon. Application submitted to Forest Office, Singrauli-on 11.09.2009. Re-submitted on 31.08.2010. Inspection by Forest Office completed in last week of April. Likely to be forwarded soon. Application submitted to Forest Office, Singrauli on 28.10,2009, re-submitted on 31.08.2010. Inspection by Forest Office completed in last week of April. Likely to be forwarded soon. Proposal has been again sent to MoEF on 29.09.2010 Application resubmitted to Forest Office, Singrauli in new format on 21.5.2010 Odisha Application submitted on 25.09:2008 to CCF, Bhubaneswar Application submitted on 25.09.2008 to CCF, Bhubaneswar Maharashtra Application submitted on 27.05.2008 to Forest Office, Nagpur 15 30 37 42 39 29 22 68 93 135 40 36 70 Minimum No. of Boreholes

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14 15 16 17 18 19 20 21

Patpaharia Marki-Barka East Marki-Barka West Ruhela Chandela BaghelaTipajharia Subhadra West Konark Mandwa

700 1000 800 764 224 373 508 1900

30 45 24 43 40 63 62 69

Proposals Pending for Environmental Clearance at MoEF


SI. Name of the ProjNo. ect and Company 1. Mohanpur OC (1 MTPA to 1.5 MTPA), ECL 2. Belpahar OC (4.5 to 6 MTPA), ECL 3. Samleshwari OC (5 to 11 MTPA), MCL Remarks

Proposals Considered by MoEF but Referred to State Governments for Further Clarifications
SI. No. 1. 2. 3. 4. 5. 6. Name of the Project and Company Remarks Chitra East OCP (2.5 MTPA), ECL Jharkhand OCP (1 MTPA), CCL Dipka OCP (25 MTPA), SECL Gevra OCP (35 MTPA), SECL 3 different proposals Rajnagar OCP (1.7 MTPA) SECL Saraipalli OCP (1.4 MTPA), SECL

4. 5.

Karo OC, (3.5 MTPA) CCL Manikpur OC (2 to 3.5 MTPA), SECL

Formal letter awaited for 6 MTPA EC Formal letter awaited for 11 MTPA EC; further Form-1 for 13.75 MTPA submitted on 2703-2012 EAC recommended EC for 3.5 MTPA. Awaiting Stage-I FC. Pending consideration due to CEPI embargo

Proposals Awaiting Stage-ll Clearance at MoEF Level


S. No. 1. 2. 3. Name of the Project and Company Piparwar Railway Siding, CCL Konar OCP (3.5 MTPA), CCL Kurja Sitaldhara UGP (0.88 MTPA), SECL

September 2012 www.InfralinePlus.com

Production of coal from captive blocks during 2007-08 to 2012-13 (Upto June, 2012)
SI Company No. Name Block name PRC of GO VT/ Mine in PVT PSU MTPA EUP Production in Mill Tonnes 2012-13 (Upto 2007-08 2008-09 2009-10 2010-11 2011-12 June, 2012) 4.229 4.134 3.303 2.876 2.68 0.78 5.994 2.754 1.47 0.329 0.835 3.797 0.279 0.9 0.079 0.578 0.001 5.998 2.978 2.066 0.236 0.989 6.175 0.396 0.919 0.137 4.893 0.051 0.991 0.013 0.013 0.008 0 5.999 3.214 2.33 0.299 1 8.476 0.56 1 0.25 6.045 0.14 2.252 0.062 0.055 0.297 0.115 0.063 5.999 2.929 2.285 0.297 0.951 8.41 0.406 1 0.299 5.688 0.114 2.275 0.304 0.034 0.432 0.252 0.014 0.021 0.014 0 5.997 3.763 2.356 0.298 0.85 8.308 0.478 1.00 0.222 5.25 0.161 2.189 0.351 0.105 0.774 0.213 0.04 1.13 0.003 0.065 1.465 1.228 0.578 0.095 0.176 2.08 0.166 0.257 0.069 1.624 0.055 0.682 0.162 0.003 0.207 0.157 0.036 0.394 0 0.088 0.064 16 Total 21.245 29.997 35.46 34.60 36.24 10.366

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23

WBSEB WBPDCL JSPL RPG/CE SC HIL BLA MIL PSEB JNL PIL ANPMDL JPL SIL KPCL UML ESCL RAPL

Tara (East) Tara (West) Gare Palma IV/1 Sarshatali Talabira-I Gotitoria (E&W) Gare Palma IV/5 Panchwara Central Gare Palma IV/4 Chotia Namchik Namphuk Gare Palma IV/2&3 Belgaon Baranj I-IV, Kiloni and Manora Deep Kathautia Parbatpur Gare Palma IV/7 Barjore Tasra Barjora North Marki Mangli-I

2 6 3.5 1.5 0.33 1.1 7 0.48 1 0.2 5.25 0.27 2.5 0.8 1.24 1.2 0.5 4 3 0.33 0.21 1

1 1 0 0 0 0 0 1 0 0 1 0 0 6 0 0 0 1 1 1

0 0 1 1 1 2 1 0 1 1 0 2 1 0 1 1 1 0 0 0 1 1

Power Power Iron & Steel Power Power Pvt Commercial Iron & Steel Power Iron & Steel lron & Steel Govt Commercial Power Iron & Steel Power Iron & Steel Iron & Steel Iron & Steel Power lron& Steel Power Iron & Steel Iron & Steel

33

WBPDCL SAIL DVC B.S. Ispat Virangana Iron & Marki Mangli-lll Steel Ltd. WBMT Trans Damodar DCL

1 14

Competitive Bidding of Coal Blocks


"All men can see these tactics whereby I conquer, but what none can see is the strategy out of which victory is evolved." - Sun Tzu
In a ruthless market driven competitive environment, securing a strategic position over the competitor can only be worked out if corporations plan ahead and devise strategies to avail the emerging market opportunity before their competitors. Fuel sourcing and security strategies can be considered as the most vital of the strategies for Indian industries (Cement, Steel and Sponge Iron) as fuel cost constitute 40-45 percent of their end use product cost. Unable to secure long-term coal linkage from Coal India Ltd. and its subsidiaries, industries have been forced to import coal from the global market at a much higher price than the domestic coal prices, leading to increase in their input cost and loss in half of their battle in the competitive market space. But these sectors (Cement, Steel, and Sponge Iron) are the constructible pillars of Indian economy and there is an emerging latent demand from varied sectors, hence, so far consumers were able to absorb this additional cost but in the long run this would have a significant impact on the countrys forex reserves and inflation. Therefore, it was thought to allocate captive coal mines to the EUPs, but due to irrational allocation of mines and subjective procedure of allocation, only 30 mines became operational out of 216 allocations till date from 1994. Amidst various speculation and allegations, the ministry of coal further decided to allocate coal block based on competitive bidding to bring objectivity and transparency in the process. The detailed process is still under preparation but The ministry of coal issued four possible options for bidding based on the reserve price of respective coal blocks. There would be huge sectoral competition to secure captive coal mine, as blocks are earmarked sectorally, but rational bids and appropriate selection with detailed due diligence of all the block is utmost required. The bidder would have to utilise various statistical models to evolve judicious bid to avoid For more details on this report, sample coal block profile and for any customized research and consulting assignment, contact: isha.gakhar@infraline.com Tel: +91 8800922772 Winners Curse. Keeping this in backdrop the InfralineEnergy is coming with its latest Business Series Report, Competitive Coal Block Allocation: First Perspective. This report would act as a base document for stakeholders, providing them with required information regarding current regulatory environment, proposed bidding mechanism, international bidding methodology, grey areas of proposed regulations, bid evaluation parameters, key pre bidding strategies and most important detailed profiles of 54 earmarked coal bocks which includes key parameters such as location, geological reserves, minable reserves, depth of seams available, grade of coal, land type, population, water table, connectivity (nearest highway, port, railway station and airport) and probable issues associated in developing coal mines. This report would be a complete strategic document providing insights into captive coal mining opportunities for backward integration.

Competitive coal block allocation:


Strategies for bidding and detailed profiling of 54 earmarked coal blocks

First Perspective
August 2012

Included:
Monthly update on development on Competitive Coal Block Allocation for next 3 Months Post launch session with the author

InfralineEnergy Business Report Series

For sales related queries, please contact ankur.seth@infraline.com Tel: +91 11 46250027

September 2012 www.InfralinePlus.com

CoverStory

Politics over coal leaves power generating turbines gaping for fuel

35

Govt mulls commencement of competitive bidding by December 2012 Loss is notional till the time coal remains buried in the mother earth
by Team InfralinePlus

Every day that passes without Parliament meeting and transacting business is a day that adds a black spot for democracy. Not discussing in Parliament is a slap on the face of people who elect us.
- Union finance minister P. Chidambaram on the logjam in Parliament. The Comptroller and Auditor Generals bombshell report indicting the government saying that private firms are likely to gain `1.86 lakh crore from coal blocks that were allocated to them on nomination basis instead of competitive bidding has unleashed the wrath of the opposition parties on the UPA government, which are now demanding the resignation of the Prime Minister. The CAG in its report tabled in Parliament has named big companies including Essar Power, Hindalco, Tata Steel, Tata Power and Jindal Steel and Power as purported beneficiaries of the coal blocks allocated to them in

various states. While the political mudslinging between the ruling coalition and the opposition continues unabated, it has triggered a larger question on the acceptability of the concept of allocating blocks rather than bidding them. Those championing the cause of allocating blocks through the Screening Committee find nothing wrong in doing so arguing that the system was a fairly transparent one and it comprised of the top brass of concerned ministries and chief secretaries of the concerned states. Since the NDA regime, when the

September 2012 www.InfralinePlus.com

CoverStory

36

government began distributing the coal blocks, the objective was to meet the growing demand energy to promote industrialisation by helping the coalhungry power generating turbines to generate adequate electricity. Giving the blocks to the companies to ensure raw material security was perhaps the best way of securitising their ambitions. There is no doubt that auctioning the blocks would have been the best way of ensuring transparency, but then the government perhaps in those days had possibly reasoned that offering blocks through the screening committee route also ensured the same. Despite the vociferous allegation of the opposition that the lack of transparency in allocation of blocks because of distributing them without auctioning, the fact remains that the UPA government did de-allocate 25 blocks after reasonable conviction that the owners have not been sincere in developing them. Insiders in the coal ministry say that more de-allocations are in the offing and preparations are on to commence the competitive bidding

before the end of 2012. The CAG in its report has observed Delay in introduction of the process of competitive bidding has rendered the existing process beneficial to the private companies. Audit has estimated financial gains to the tune of `1.86 lakh crore likely to accrue to private coal block allottees. The audit watchdog has arrived at the estimates based on the average cost of production and average sale price of opencast mines of Coal India in the year 2010-11. But are the two prices really comparable? It is a known fact that Maharatna CIL has retained the best and easily operable mines within its fold and all the blocks in difficult areas and dense forests have been given to its private counterparts. One needs to appreciate the guts of these companies in accepting these blocks. Of course, no company with a malafide intention should be spared, which is why the CBI is probing into the alleged irregularities and reports say that the agency is gradually zeroing on the errant companies which either have furnished wrong information or have concealed

facts to secure a block. Let us analyse another observation of the CAG, which says A part of this financial gain could have accrued to the national exchequer by operationalising the decision taken years earlier to introduce competitive bidding for allocation of coal blocks. Agreed, but the national auditor should know that it was the mineral-rich states in unison which have been opposing tooth and nail the introduction of competitive bidding of blocks saying it would hurt at the very basics of the federal structure of the Centre-state relationship. Coal minister Sriprakash Jaiswal has openly told a press conference that the states like Chhattisgarh, Odisha, Jharkhand, Rajasthan and West Bengal were finally on board after they were assured that all the money to be gathered from the competitive bidding process would accrue to them. It took substantial time to convince them. Then the Law Ministry also took enormous time in advising that the Mines and Minerals (Development & Regulation) Act 1957 to legitimize the

September 2012 www.InfralinePlus.com

bidding process rather than introducing it through an administrative order. The auditing bodys contention that there is a need for strict regulatory and monitoring mechanism to ensure that benefit of cheaper coal is passed on consumers, was ensured by organising meetings of the inter-ministerial group, chaired by the coal ministrys additional secretary, or else how did 25 de-allocations take place? Prime Minister Manmohan Singh is not wrong in disputing the auditors estimate of undue gains to private players saying its criticism of the government for not speedily switching to auctions for allocation of mines failed to account for a federal polity like India. Rebutting the CAGs censure for delaying auctions, the PM recently said, ...I would readily agree that in a world where things can be done by fiat, we could have done it faster. But given the complexities of the process of consensus building in our parliamentary system, this is easier said than done. The PM was in fact pointing out to overzealous criticism of government decision-making in the past as well and he was only responding to the CAG reports conclusions and assumptions. The auditor pointed out that although the UPA government drafted legislation in 2006 saying that allocation of coal

deposits be done through auctions, but it went on allotting mines - altogether 56 between 2005 and 2009 -- without inviting bids. It cited that the law ministry had held in 2006 that the government could have switched to the auction route by an administrative measure. The Prime Minister promptly dismissed the argument saying that in a democracy, it is difficult to accept the notion that a decision to seek legislative amendment to implement a change in policy should come for adverse audit scrutiny. Actually the entire process of coal block allocation was not as arbitrary as has been made out to be because applications were assessed on strict parameters ranging from technoeconomic feasibility to commitment to set up end-use project along with recommendations of state governments.

The auditor pointed out that although the UPA government drafted legislation in 2006 saying that allocation of coal deposits be done through auctions, but it went on allotting mines - altogether 56 between 2005 and 2009 -- without inviting bids.

Stoutly defending the government, Jaiswal argues that it was the UPA which mooted the idea of making allocations through the competitive bidding route in June 2004, but could not execute it owing to stiff resistance also from the ministry of power and a note of caution from the Parliamentary standing committee. Echoing similar sentiments finance minister P Chidambaram has also said that of the 57 blocks mentioned by the CAG, only one is operational, and then there cannot be any loss as the remaining coal is buried in mother earth. Now all eyes would be glued towards the Public Accounts Committee which is preparing to bring the three latest CAG reports on coal allocations, GMR-run Delhi airport and Reliance Power, onto its agenda for the year. Since the contentious coal block allocation report has attracted most notice, it is likely to be taken up for discussion after a month. Till then questions on the report are to be dispatched to the concerned ministry and a framework for discussions is to be made. Even as the BJP and Congress harden their respective positions, the Parliaments functioning has gone for a toss as the opposition seems to be determined to press ahead with their demand for the Prime Ministers resignation. The opposition has argued that even without actual mining, the Centre appears to have ceased control over those mines at a throw-away price. Even in situations where no mining was done the allottee gained as his worth in the market went up due to the blocks. Giving an example to drive home his point, BJP spokesperson Ravi Shankar Prasad said if a person was allotted a piece of prime land, his financial standing in the market would go up even if he did not put the property to any use. This would help the person financially in any other venture that he undertakes, he added.

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NewsBriefs | Oil & Gas


CCEA Clears 5 blocks under NELP-IX Cabinet Committee on Economic Affairs approved award of five oil and gas blocks to the successful bidder under ninth round of New Exploration Licensing Policy. CCEA cancelled allotment of two blocks (CB-ONN-2010/8 and CBONN-2010/9) to Sankalp Oil and Natural Resources Ltd. Sankalp Oil were awarded three blocks then. However, the company signed PSC for only one. BP To invest $4-5 billion in KG-D6 block Reliance Industries and partner BP have scaled up the estimate of recoverable gas reserves from the KG-D6 block to 5 trillion cubic feet, following the resolution of most of the contentious issues associated with the block early this month. BP is preparing to invest $4-5 bn in the block over the next few years. The new estimate is an improvement from the lowered estimate of 3.1TCF for the D1 and D3 fields. GAIL India Cuts stake in OPaL to 15.5% GAIL India has cut its stake in ONGCs Dahej mega petrochemical project to 15.5 % after project cost further escalated by 9.5 per cent. GAIL had in 2008-09 picked up 19 per cent stake in ONGC Petro-additions, which is building a mega petrochemical complex at Dahej in Gujarat. The 1.1 mn tns plant was at that time estimated to cost `12,440 cr but the project cost was in 2010 revised to `19,535 cr. India implementing 14000 km natural gas pipelines India is currently implementing about 14,000 km of natural gas pipelines projects, which is in addition to over 11,000 km of existing cross-country pipelines, Minister of State for Petroleum & Natural Gas RPN Singh said. The development of pipeline infrastructure is an ongoing process which will progress with increase in demand of natural gas, Singh told. ONGC Enters into pact with Mitsui Oil and Natural Gas Corporation said that it has signed an agreement with Mitsui & Company of Japan for a wide-ranging cooperation in the gas and LNG businesses. Both the companies signed an MoU on August 14. The MoU is expected to pave the way for the setting up a re-gasification terminal in the country besides marketing of re-gassified LNG. Videocon, BPCL JV Finds oil off Brazilian coast A consortium in which the wholly owned subsidiaries of Videocon Industries and Bharat Petroleum are members have completed the drilling of a second well in a block off Brazilian coast. The drilling confirmed the existence of oil and helped determine the extent of the reservoir. The discovery of hydrocarbons has been made in a block named BM-SEAL-11 in the sea where the water depth is close to 2.5 km. Centres approval For petrochem investment region in TN The Centre has approved the proposal of the Tamil Nadu government for setting up a petroleum, chemical and petrochemical investment region in Cuddalore and Nagapattinam districts. The region is expected to attract an investment of around `92,160 crore. Minister of State for Chemicals and Fertilisers, Srikant Kumar Jena said the PCPIR envisages the Centres support of `2,643 crore. Punj Lloyd wins Crude oil storage contract in Karnataka Ministry of Petroleum and Natural Gas has awarded Punj Lloyd `330 crore contract for the construction of a planned oil storage cavern in Mangalore. The Mangalorebased underground facility, which will be located close to Mangalore Refinery and Petrochemicals, will feature two 900m-long caverns with a total storage capacity of 1.5 million tonnes of crude oil. RIL-BP To supply gas to Andhra power projects Reliance Industries Ltd and BP India are in talks with gas-starved power projects of Andhra Pradesh to supply long-term LNG. India Gas Solutions, the equal joint venture between the two companies, is looking to sell LNG to five power producers in Andhra Pradesh - GMR, GVK, Lanco Infratech, Sravanthi Energy and Konaseema Gas - and would give them term sheets in the next few days. ONGC Videsh keen on Stake in Russias Arctic ONG fields ONGC Videsh is eyeing stake in Russias ambitious Arctic Ocean oil and gas projects with US supermajor ExxonMobil and Italian energy giant ENI. OVL on May 4 wrote to Russian State oil company Rosneft expressing interest in taking stake in one of the three joint ventures announced to explore for oil and gas beneath Arctic Ocean, sources privy to the development said. Petroleum products Consumption up 9.4percent in July Domestic public and private oil refiners processed 3.6 per cent more crude oil into products in July year-onyear. This was to meet demand which grew 9.4 per cent from a year before. Demand/consumption of petroleum products in July was pushed up by LPG, diesel and petrol sales. Diesel consumption was up at 5.735 million tonnes from 5.073 million tonne in the same month last year. Continental shift Indian refiners look West for crude India is ready to cross over 12,000 km to buy scarce energy resources from the far off Canada and the US. Senior petroleum ministry officials disclosed that following a proposal from the Planning Commission, state-owned companies including Indian Oil are keen to source crude oil from Canada and LNG from both Canada and the US, for which discussions are underway.

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Annual Conference on
October 2012, New Delhi

Coal Mining in India


Key Focus:
Identifying key growth and investment opportunities in the countrys coal mining industry Insight into Policy and regulatory framework governing the Coal mining industry Study of coal mining equipment imports and export dynamics Understanding of mining equipment market size, production trend analysis and forecast Focus on upcoming technologies associated with coal and coal mining Understanding the scope of private mining in India for sectors like power, cement, steel, fertilizers, etc Better understanding of changing dynamics of coal mining in India Strong understanding of the countrys coal mining industry Knowledge of key legal and fiscal issues associated with coal mining in India

Agenda
The conference will be divided into various sessions like: Coal Mining Market in India: Opportunities and Impediments Equipments for Cleaner Coal Mining Coal Mining Policies: Sectors vulnerability vis-a-vis strengthening law and fiscal regime Valedictory: Striking balance between development and environment Integrating updated mining technologies

A must attend for


The conference is targeted at Coal Miners Coal Consumers (Power/Steel/ Cement and others) Mine Development Operators State Electricity Boards Coal Traders / Producers Equipment and Technology Providers Policy and Regulatory Bodies Consultants and Investment Advisors

Registration
Registration fee 10% discount for 15% discount for 20% discount for INR 20,000 per delegate (+12.36% service tax) Group of 3 executives from the same company Group of 5 or more Group of 7 or more

For Registration contact

Komal Sharma, Senior Manager - Business Development


Ph.: 011-6625 0003 (D), 4625 0000 (B), Mobile: 9953587302, 8527211053, Fax: +91-11-46250099 Email: komal.sharma@infraline.com, conferences@infraline.com

September 2012 www.InfralinePlus.com

InConversation

Leveraging gas infrastructure in India will be the key


Engineers India Limited (EIL) today is Asias leading design and engineering company. The company, which has clients spanning the hydrocarbon sector, is now looking to branch out into the infrastructure segment. In an interview with Infraline Plus Neeraj Dhankher, EILs C&MD, A.K. Purwaha talks about the companys priorities and unique role in the face of stiff competition from private players, investment areas as well as plans to increase international presence. The following are the excerpts:
How much of a priority is the oil and gas sector for EIL today considering that the company has branched out to sectors like airports and infrastructure? EIL has a core focus on hydrocarbons across the whole value chain. In the upstream segment, EIL started in the 1970s partnering with ONGC, building the required infrastructure for Bombay High. Before that, we had already taken our position in the downstream by building the countrys refineries, starting with the Madras Refinery in 1967, now run by Chennai Petroleum. EIL as it stands today began its journey in 1965 with Bechtel. The Government of India decided that this was the right time for India to begin building its capability in the hydrocarbon sector, and identified the downstream sector as the place to start, particularly the refining sector. Within two years, EIL was able to build its competencies to an appropriate level, and transformed into a Government of India undertaking. The company took on its first refining project in 1967, and in 1969 we started working on petrochemical projects. Today, to EILs credit, there are 20 of 24 refineries in the country, 9 of which were grassroots refineries built by us and another grass root refinery at Bhatinda is close to completion. In this sense, Engineers India is unique, being probably the only company in the design engineering and project management consultancy segment who have more than 50 large refinery projects to its name. In the petrochemical segment, there are 8 completed plants, 7 of which were built by EIL, with two more grass root plants with dual fuel capabilities are in the construction phase. EIL repeated its success with refineries in the gas-processing sector. All the C2+ recovery facilities in the country today passed through the offices of our company, and today we are putting those facilities in place. We have also had admirable success working on LPG recovery facilities. The KG basin, off Indias east coast, is a gas find comparable to those found in the North Sea. EIL is now working with GSPC, one of the major operators

40

September 2012 www.InfralinePlus.com

in the basin after Reliance Industries, in order to build up their facilities there. EIL is involved in the project as project management consultants, providing jackets, well platforms, a process-cumresidential platform, offshore pipelines, and onshore processing facilities. Apart from the drilling aspect of the project, EIL is handling everything. What opportunities in the gas business are you currently looking at? I have been associated with many different aspects of the hydrocarbon sector during my 35-year career. In the initial stages of my career I worked at ONGC for 9 years, before serving for over 24 years with GAIL. With GAIL, I saw the evolution of the entire gas sector. EIL has its core strength in the hydrocarbon sector, from upstream to midstream and downstream. We will continue to look towards that space. The development of gas infrastructure in India will play a key role for EIL in the future, because today natural gas is only available in small pockets of the country, and in the future we fully expect it to reach across the whole of India. In order to achieve this, there is a vast need for more cross-country pipelines, connecting different communities across the country and bringing gas to the endusers. City gas distribution is another aspect of gas infrastructure that is currently only happening in a few places around the country, but in the years to come will play a much more important role in the Indian energy basket. EIL has stated the importance of moving more into Lumpsum Turnkey (LSTK) projects. It has been seen that in general, the PSUs are more open to this type of project than private sector players in India. How have you found the market so far in this regard? Every client today wants their

projects, all the gas processing projects projects to be completed as quickly as in the country and built up over 60% of possible, as every day wasted between the countrys oil and gas pipelines. This commissioning and completion costs is an impressive achievement for a single the company an incredible amount company. As a result, our company has a of money. Engineers India has huge pool of knowledge and experience evolved based on this principle, and available in-house, and we have evolved has developed a number of different and continuously improved our systems, solutions for every possible situation. processes and databanks, and most It is not a matter of one solution being importantly our delivery of quality better than another; just a matter of engineering services. Out of all the tailoring a solution to each individual projects on which EIL has ever worked, client, their organizational structure we have always met every single and their expectations. With its long deliverable that was required of us. association with Indian hydrocarbon In 2009, EIL was appointed against industry, EIL has always been aspiring to global competition by the Oman Oil provide value added services to clients Company, for suggested solutions for for enhancing their experience into value maximization of their existing customer delight. Sohar refinery, which was originally In the future, we expect rather than built by a Japanese consortium. one solution becoming dominant in From day one of its commissioning, the industry, that it will remain as a this project has not achieved stable, mix of different project management un-interrupted operation nor the design styles. Those clients without initial product yields. infrastructure or an After trying for existing resource pool will inevitably The development of gas couple of years to infrastructure in India address specific prefer a project will play a key role issues in the plant, with one point for EIL in the future, in 2009 they of responsibility, because today natural invited different leading them to engineering LSTK projects. gas is only available consultancies to the However, others in small pockets of with reasonable the country, and in the plant. EIL was also resource pools and future we fully expect qualified for the their own project it to reach across the work and eventually we were selected. management whole of India We completed the capabilities will strategy for the look to control plant in about 4 months, presented it costs and source their engineering and to their government and the cabinet, construction work from a variety of who accepted it. Government of Oman different offerings. & Oman Oil Company are proceeding with the implementation of the EIL is known as Asias leading refinery modification plan as per EIL design and engineering company recommendation. In 2010, EIL was and you have successfully appointed detail engineering consultant internationalized the business. against global competition by National What has been the companys Petroleum Construction Corporation, experience so far? Abu Dhabi for EPC installation of their With 46 years of experience, EIL has Qushawira Field Development Project built more than 50 major refinery for Abu Dhabi Company for On-Shore projects, seven grassroots petrochemical

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September 2012 www.InfralinePlus.com

InConversation
Operation (ADCO). Construction activities for the project at site are in progress now. However, EIL does not yet have a major presence in many countries, because we have been very busy in our home country, developing the hydrocarbon sector. Going forward, we are looking to these countries much more closely. Today we are working in Abu Dhabi, Oman, Qatar, Venezuela, Algeria, and Ghana, and you can expect to see our presence in many more places in the years to come. Financially, EIL is a debt free company and sitting on a large amount of internal resources. Which are the key areas in which the company will look to invest internally in the years to come? We will be looking to invest in areas where there is a synergy with our existing business. Our prime role will continue to be design, engineering and project management, because those are the companys core strengths. We will also be doing a lot of activities on LSTK basis, but as I previously stated, we do not expect LSTK to completely overtake EPCM contracts in India. Other investments will be in related projects on the fertilizer and power side, city gas distribution and pipelines. We will be looking towards these investments as the opportunities present themselves. In many places we may look to be the operating partner on projects, but otherwise we may take a smaller stake if the size of the project is too large for us to handle. EIL is looking to reach a turnover of $1.1 billion USD by 2014. What are the biggest challenges that you will need to confront in the next few years in order to make this a reality? Our strategy is based around reaching this target, and perhaps even higher, by continuing to focus on the hydrocarbon sector within the country, to look very closely and more vigorously at the overseas market in the hydrocarbon and non-ferrous sectors. We are also exploring opportunities to diversify into the areas of wastewater management, nuclear power, thermal and solar power, city gas distribution and fertilizers. Internationally, our aim is to find more work in relatively untouched markets like Venezuela, which we have already started to do. We are also studying how we can start working in countries like Brazil, which is another region with a lot of hydrocarbon activity. As our experience is predominantly in onshore projects, we see a lot of opportunity in countries like Brazil once the product comes back onshore. The PSUs have been largely responsible for building the oil and gas industry into what it is today, but in recent years there have been a lot of changes in India, from the liberalization of the industry to the diversifying roles of the PSUs. Given this situation, how would you define the unique role of EIL today? Our company is unique in its partnering relationship with all of its esteemed clients, whether public or private sector. This has developed well since the company began. Initially, the companys only interactions were with the Indian public sector, as these were the only companies involved in the oil and gas industry in the country. Today, we have seen that the market has been liberalized and the world has entered India, and EIL has learnt to deal with its new clients just as well as it did with its old ones, who are still very valued clients. Our recall value and return business rate are proof that we have managed these relationships very well, even in this brand new industrial and economic environment that we are facing today. As the years progress, we hope that the confidence our clients have in us will continue to be our greatest strength. What are the major challenges faced by EIL in the past ? How did the company address them and how do you see them change during the next ten years? EIL on its part has played a significant role in shaping the hydrocarbon industry of India by developing significant indigenous technology and expertise for offshore platforms, oil and gas processing, oil refining, petrochemicals and pipeline projects. Over the years, EIL has developed database of around 2000 suppliers. We have also helped developing manufacturing capabilities of indigenous suppliers resulting in by reducing the imports from 60% to about 10% in hydrocarbon sector High attrition rate due to better employment opportunities in country and abroad was the major challenge that knowledge base companies like EIL had to encounter during last decade. Improved remunerations, structured incentive programs and amicable HR policies facilitated EIL to retain its best talent pool. Attrition rate at our company during last year was less than 2%. On operational front, business dynamics in hydrocarbon sector has changed immensely during last decade. For example, the cycle time of completion of a grass root refinery has reduced from 5 years to three and a half years posing immense challenges in all facades of project management. These challenges requires us to leverage the knowledge base in Project implementation through standardization, smoother data management, creating dedicated cross functional teams, close monitoring and system improvements, envisaging bottlenecks at the time of project formulation and improved supplier and contractor management.

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September 2012 www.InfralinePlus.com

InDepth

E-5 petrol: Industry at loggerheads over 5% mandatory blending


Where is the ethanol, ask experts Lack of roadmap also a major concern

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by Neeraj Dhankher

The recent proposal of the Ministry of New and Renewable Energy to revive the Ethanol Blended Petrol (EBP) Programme by making 5% blending mandatory has been strongly contested by the industry. Blending of petrol to the extent of 5% is already being carried out in many states and UTs across the country, but the same is optional given the unsustained supply of ethanol. In such a scenario, the proposal to make the process mandatory is causing lot of flutters among key players in the ethanol industry. The proposal for mandatory EBP overrides the recommendation of PMs

Economic Advisory Council (PMEAC) that blending be kept optional to deal with erratic supply of the bio-fuel. As per this recommendation, the oil marketing companies were provided flexibility to align their targets based on the actual supply of ethanol during a year. Even the Planning Commission Expert Committee under the Chairmanship of Saumitra Chaudhuri had recommended that based on its availability, ethanol quantity should be allowed for blending purpose on year-to-year basis. The mandatory blending is proposed as one of the solutions for reducing countrys soaring fuel import bill, apart from being seen as a long-term measure

to reduce dependence on fossil fuel. However, voices of dissent are already being heard over making 5% EBP mandatory. The biggest opposition has been raised by the Chemical Industry which feels that mandatory EBP would turn out to be ominous as substantial quantities of ethanol would be diverted to oil companies thereby depriving chemical users of the feedstock. According to Director General, Indian Chemical Council (ICC), H.S. Karangle, since ethanol availability in the country is two-third of total ethanol requirement, making 5% ethanol blending mandatory will result in its huge deficit leading to constrained

September 2012 www.InfralinePlus.com

InDepth

44

and very less supply of ethanol for the ethanol based chemical industry. Current ethanol requirement for potable industry is 140 crore litres, chemical industry requirement is 77 crore litres (based on current utilization basis) and 5% fuel blending has a requirement of 105 crore litres. Thus, there exist a requirement of more than 300 crore litres against the total availability of ethanol in the country, which varies from 130 crore litres per year to 230 crore litres per year with an average of 200 crore litres a year, claims Karangle. The ICC has further argued that the National Policy on Biofuels released by Ministry of New and Renewable Energy has also prioritized alcohol use to Chemical Industries before diverting it for blending purposes. Clause 5.6 of the Policy states, The sugar and distillery industry will be further encouraged to augment production of Ethanol to meet the blending requirements prescribed from time to time, while ensuring that this does not in any way create supply constraints in production of sugar or availability of Ethanol for industrial use. It may be noted that even the Saumitra Chaudhuri Committee had also called for conducting a mid-year review of ethanol availability so that chemical industry is not starved of its primary feedstock. Experts have also suggested that if 5% EBP is made mandatory, it would be difficult for the domestic Chemical Industry to remain competitive on the global platform. Ethanol in the country is produced from molasses, which is a by-product of sugar. Hence, its availability is limited and varies with the sugar production. Presently, demand of ethanol is pegged at 300 crore litres, which is in far more excess compared to average ethanol production of about `200 crore litres in the country, which is more than 50%. Thus, any preference or control on ethanol use will definitely have an impact on the established ethanol-based chemical industry.

Even oil marketing companies (OMCs) have expressed their displeasure at making 5% EBP mandatory. According to Indian Oil Corporations Director (Marketing), M. Nene, Mandatory blending of petrol is next to impossible as there is no surety over smooth availability of ethanol. According to Nene, the biggest challenge is to make available land for setting up storage facilities for EBP, besides seeking a host of clearances from the environment authorities. Then, there are problems associated with managing import and export permits in certain states.

According to IOC, the biggest challenge is to make available land for setting up storage facilities for EBP, besides seeking a host of clearances from the environment authorities.
Another major protagonist voicing its protest over the move is the Automobile industry represented by the Society of Indian Automobile Manufacturers (SIAM). According to SIAMs Director General, Vishnu Mathur, Up to 5% EBP there are no issues with the automobile industry. Beyond that, we have concerns in case of in-use vehicles, primarily two-wheelers. The main issue is that of material compatibility as rubber parts used in vehicles tend to corrode faster in case of petrol blended with ethanol. Furthermore, in case of two-wheelers, EBP can lead to drop in power and fuel efficiency due to presence of fixed jet carburetors. However, Mathur has questioned that if there is no adequate ethanol and5% blending is made mandatory then how will it happen? Even today, the reason why 5% EBP is not being done uniformly is

because of availability issues. According to Mathur, blending involves changing the calorific value of the fuel. If there is a uniform blend of 5%, then vehicle manufacturers will be able to fine tune their engines based on that particular calorific value. Another critical issue to be borne in mind while going for mandatory blending of petrol with ethanol, as per Mathur, is presence of a clear roadmap. To cite an example, some states today like Tamil Nadu does not allow for EBP as a policy. Such anomalies will have to be removed if the government plans to seriously implement 5% mandatory EBP, feels Mathur of SIAM. With the proposal of mandatory EBP reaching the Cabinet, the next important step is to resolve the intricate issue of pricing of the bio-fuel. On the one hand, the Saumitra Chaudhuri committee has proposed that ethanol be pegged at `27 per litre with a floor price of `23 and a ceiling price of `31, while the PMEAC, on the other hand, wants that price should be dictated by market forces. According to Karangle of Indian Chemical Council, increasing the ethanol price shall be unreasonable and in fact, fixing up the ethanol price is not justified. In free market mechanism, price of ethanol should be market driven and left to the market forces of demand and supply and should not be fixed. In a scenario, where the country is moving towards decontrol of bigger commodities like petrol and sugar, fixation of ethanol price for the purpose of blending into petrol will distort the market situation, Karangle has claimed. It is now up to the Union Cabinet to decide on the matter. The right way to go about it is to seek participation of all concerned parties and resolve key issues of assured supply as well as pricing of ethanol before arriving at a decision. But that will involve a lot of brainstorming.

For suggestions email at feedback@infraline.com

Summit on

HR in Power Utilities
September 27, 2012, New Delhi
Objectives of the Program

Theprimarypurposeofthe programistoprovideaforumfor sharingbestpractices,knowledge andexperiencesthatwouldaid unbundledstateutilitiesandSEBs tobuildorganisationalcapability andHRpracticesinlinewiththe changingbusinessenvironmentand itschallenges. Webelievethatwhilethereare numerousindustryforumsand HRrelatedforums(ledbyNHRD, NIPM,PowerHRforum)which discusstheseissuesinthecontext ofCentralPSUsandfortheprivate sector,thereisverylimitedfocus tospecificallyaddressHRissues inunbundledstateutilitiesand SEBsinIndiaandotherdeveloping countriesinAsiaandAfricaThis programisexpectedtomeetthis requirement. Thisprogramisexpecttobringout theseissuesanddiscusssolutions basedonprevalentpractices throughstructuredknowledge sharing&experiencesharing sessions.
A must attend for

Program Highlights

FirsteverConferenceonHRforStatePowerUtilities. SupportedbyMinistryofPower,GovernmentofIndiaandWorldBank Aplatformfornetworking,sharingexperiencesandbestHRpractices

StateElectricityBoards State-ownedGencos,Transcosand Discoms Regulatoryauthorities PrivateSectorUtilities AcademicInstitutions


To Register Contact Komal Sharma, Sr Manager-Business Development Ph.: +91 11 66250003, +91 9953587302 Email: komal.sharma@infraline.com
Organiser Knowledge Partner Knowledge Sponsor Supported by

World Bank

Ministry of Power
Government of India

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September 2012 www.InfralinePlus.com

InDepth

Chasing Equity Oil Overseas Is India Doing Enough?

46

India falling way behind China Need to create a Sovereign Wealth Fund to promote overeas projects
by Debjit Das

Amidst growing concern for Indias energy security and its over-dependence on Middle East Countries to meet the crude oil demand, the focus area has shifted from just diversifying the crude import portfolio to acquiring equity oil and gas overseas. The intention is to have greater control over volatile market conditions that have a colossal impact on the fairly vulnerable domestic energy market. India is counted among the biggest economies in the world and currently is the fourth largest consumer

of crude oil. With minimal control over international market conditions and energy commodities, it is rather difficult to keep the countrys GDP wheeling at the desired pace of 8-9 percent. Over the past decade, both public and private companies in the Indian oil sector have ventured overseas to vouch for attractive upstream assets. While there have been some successes, a lot needs to be done in order to capitalize on the opportunities available in the global oil and gas market. The trend of investing

in future oil and gas assets in energy rich countries have been substantiated by notable efforts made by ONGCs subsidiary for foreign oil and gas equity acquisitions OVL, as well as other public and private companies, namely OIL, IOC, BPRL (E&P subsidiary of BPCL), GAIL, Reliance and Videocon. OVL is the mast bearer of the efforts made by the country to find value adding assets abroad and is currently engaged in 34 assets of which 9 assets have commenced production. OIL

September 2012 www.InfralinePlus.com

and IOC have through joint operations acquired 11 assets of which none are into production yet, however 2 of the assets are in the development phase. India currently produces barely about 25 percent of the total crude requirement of the country through the domestic oil assets despite several efforts made by the Government to accelerate domestic E&P activities either through encouraging foreign investments into the sector via NELP (New Exploration Licensing Policy) or by encouraging domestic companies to drive incremental production through new technology adoption. The crude import in India has gone up significantly from 163.60 million tonnes in 2010-11 to 171.7 million tonnes 2011-12. What is even more worrying is the enormous amount of foreign exchange drain out due to rising crude prices and depreciating rupee. With the Iran crisis hovering over international crude supplies and political unrest surrounding other oil rich countries in the Middle East, India has had to look for newer sources of crude oil which is evidenced by the slide in crude import volumes from the Middle East. The recent trend shows increasing imports from Latin American as well as African countries. In the short-term, import of oil through commercial transactions is

imminent with most of the assets acquired abroad not in a position to directly translate into available production volumes due to the long gestation period of upstream projects. However, acquiring such overseas assets is key to reducing Indias dependence on oil producing countries in the years to come.

India currently produces barely about 25 percent of the total crude requirement of the country through the domestic oil assets...Acquiring overseas assets is key to reducing Indias dependence on oil producing countries in the years to come.
Why Acquire Equity Oil Abroad?
Acquiring equity oil assets overseas can help in streamlining incremental production volumes in the future and offer a strategic geopolitical position to India in the global energy market. Presently, almost the entire volume of oil sourced from imports into India

is through commercial transactions. The exposure to volatility is highest when there is minimal control over upstream sources as commercial terms are dictated mostly by the producers and suppliers due to increased cartelization among the oil producing community as a result of which price of crude oil has moved out of the control of predominantly consuming countries. The annual term contracts are priced through benchmarking against internationally traded crude oil blends while the spot purchase prices are dictated by the prevailing market sentiments. In order to minimize the exposure to direct commercial transactions with the oil producing countries, greater control on upstream assets need to be exercised. This is possible by investing and acquiring oil & gas assets available in the oil rich countries thereby having a greater control over the commercial terms.

47

Indias Equity Oil Investment Landscape


The Government has encouraged National Oil Companies (NOCs) to aggressively pursue equity oil & gas opportunities overseas. As per a recent statement released by the Ministry of Petroleum and Natural Gas (MoPNG), Today, Indias oil companies are present in around 24 countries (Vietnam, Russia, Sudan, Myanmar, Iraq, Iran, Egypt, Syria, Cuba, Brazil, Kazakhstan, Gabon, Colombia, Nigeria Sao Tome Principe, Trinidad & Tobago, Nigeria, Venezuela, Oman, Yemen, Australia, Mozambique, Libya, Republic of Congo and TimorLeste), with a total investment by oil PSUs (OVL, OIL, IOCL, HPCL, GAIL & BPRL) alone of `64,832 crore. Former Union Finance Minister, Shri Pranab Mukherjee while speaking at the India-Africa Hydrocarbons Conference in December last year stressed on the growing importance of African countries in Indias energy market. Mr. Mukherjee pointing at the volume of overseas investments by Indian public sector

September 2012 www.InfralinePlus.com

InDepth

48

companies stated, The total overseas investment by our public sector oil undertakings is about $13 billion which includes two pipeline projects in Sudan and Myanmar. Indian public sector companies are presently engaged in 54 overseas projects diversified over 4 different geographies in about 24 countries. Out of the total projects, 29 projects are in the exploration phase while 9 have entered the production phase. Five projects are currently in the development phase and 10 projects have either been relinquished or are in the process of being relinquished. Out of the 29 projects in the exploration phase, a significant number of projects have had successful hydrocarbon discoveries including the recent ones in Mozambique and Brazil. All of the 9 projects which are in the production phase are being managed by OVL with cumulative production of 9.44 MMToE during 2010-11. The entire portfolio of equity oil overseas is at a very premature stage to realize significant production benefits in the short term. A majority of these investments made are in the exploration phase which translates into a time lag of 7-10 years from commercial production. This essentially means that any investments made to acquire exploration acreages in the last couple of years will essentially translate into producing assets

in a span of another 6-7 years. One might wonder as to why the companies do not acquire equity in producing assets. While it might be an interesting proposition, it is equally difficult to find such opportunities and secondly, investing directly into production assets is much more capital intensive as the assets are priced at the highest when production commences. Farming into such opportunities entails a lot of capital expenditure which neither India Inc. nor the Government could possibly fund with ease. Moreover, the present policy on allowing public sector companies in India to acquire equity oil assets overseas hinders the progress due to a lot of procedural delays as a result of which attractive investment opportunities are lost.

Government Should Act as Enabler


The Government needs to act and it needs to do so at a quick pace. While countries like China are role models in helping their state companies acquire energy assets abroad, India needs to take a long stride in order to come close such competition. At present the maximum investment limit that any state-run company can commit without any government intervention is `300 crore while any investments above this threshold level

needs a nod from the ECS (Empowered Committee of Secretaries) as well as the CCEA (Cabinet Committee on Economic Affairs). Since most of the energy assets need big ticket investments, the companies have to compulsorily get Government intervention before moving ahead with the deal. Quite often, the bureaucratic processes take up a lot of time and the opportunities are missed. To enable state-run companies to take advantage of global opportunities, greater financial autonomy should be acceded. Secondly, the state-run companies are often cash strapped and thus are not able to competitively bid for internationally available assets. The Government needs to take a proactive approach towards creating a Sovereign Wealth Fund (SWF) which would help fund such projects. The Finance Ministry and the Planning Commission have mooted for such a fund. The source of such funding mechanism will be through proceeds from the disinvestments that the Government makes in state-owned companies. Presently, such proceeds are directed to the National Investment Fund which helps fund several social schemes. However, utilizing this fund to acquire energy assets abroad will certainly reap better economic rewards. Thirdly, the Government through the International Cooperation Division of the External Affairs Ministry will have to proactively engage with the oil rich countries to renew the energy dialogue process so as to reinforce G2G interactions to facilitate domestic companies in acquiring assets overseas. While the Government has been engaged in all possible ways to help domestic companies get an edge over their competitors in acquiring overseas assets, the efforts need a lot of reinforcements so as to gain momentum in global equity oil acquisitions.
For suggestions email at feedback@infraline.com

September 2012 www.InfralinePlus.com

ExpertSpeak
Tinkering with the profit sharing mechanism may do more harm than good
The government on May 30, 2012 announced the constitution of a committee under the chairmanship of C. Rangarajan, Chairman, Prime Ministers Economic Advisory Councils (PMEAC), to review the existing production sharing contracts (PSCs). In this backdrop, R.K. Batra, Distinguished Fellow, The Energy and Resources Institute (TERI) throws light on various issues, which need to be taken into account while reviewing the PSCs so as to preserve investor confidence.
India currently refines 200 million tonne of crude oil, of which the indigenous contribution is around 33 million tonne. It is estimated that by the year 2025, Indias crude oil demand could be in excess of 400 million tonne per annum and the import component as high as 90 per cent. A similar situation exists for gas imports. It is therefore imperative that India increases its production of these two fuels. Unfortunately, there have been some issues over the last couple of years, which have ruffled the feathers of both, the government and the producers resulting in appointment is welcome. But there are delays and loss in investor confidence. a few issues that the committee would I write with specific regard to the tiff do well to bear in mind. between the Petroleum Ministry and First, and most important, of all Reliance on the drop in production the sectors in the oil and gas industry, of gas from the KG Basin and the exploration and production are arm twisting of Cairn Energy when the most risky ones. For it wanted to exit the country. The example, putting up a The Prime Minister had operator refinery is a pretty said very recently must get the safe bet, with that one of his main market price for its inputs and outputs tasks is to restore gas, which could be pegged at market investor confidence the weighted average prices. Almost all and bring about of imported LNG and Indian refineries greater transparency transnational gas by operate at 100% in decision making. pipeline, whenever the latter happens. capacity and the He has appointed a newer ones have committee headed by Mr been given financial C Rangarajan, Chairman incentives by the state of PMEAC, to review various and Central government. Under aspects of the current production the production sharing contracts as sharing contracts, with regard presently structured, the exploration to their management and company bears all the risk and has to implementation. The committee will write off its entire expenditure if no oil also look into the basis for pricing or gas is found. Therefore, the first call domestic gas, minimising on the revenues generated, if drilling the monitoring of the is successful, is reimbursement to the contractor and more contractor of all expenses incurred. importantly, review After that, there is a mechanism for the profit sharing sharing of either profits or production, mechanism. The between the contractor and the committee is to government, with the contractors submit its report by share gradually reducing and that of the 31 August, 2012. government increasing. It is therefore Had it not been for of the utmost importance that the the Reliance issue, government acts as a facilitator and a probably the need for mentor, particularly to this segment of this committee would the industry. Any action that is seen to not have been found dampen investor confidence and the necessary and to expectation of a reasonable return on that extent its investment or the lack of a level its playing field will discourage existing players and deter new players with

49

September 2012 www.InfralinePlus.com

ExpertSpeak

50

grave consequences to our foreign exchange outgo, capacity to import deficit products and overall energy security. The committee must bear this aspect uppermost in its mind with regard to whatever recommendations it may make. Second, in the case of Reliance, there have been long standing issues of pricing and freedom to market the gas, which have been compromised by setting a very low price and dictating to whom Reliance should sell the gas. Also, the significant drop in gas production from what was originally envisaged, has come as a deep disappointment to the government, the contractor, pipeline builders and consumers. This has resulted in government wanting to deduct $1 billion from Reliances reimbursable costs, which has led to the company seeking arbitration on the issue. If costs have been inflated, by all means take strict action against any contractor who does so, but do not throw out the baby along with the bath water. Reliance has given reasons for the drop in production due to sand and water ingress into the wells. These are technical issues that can be examined and resolved. Such instances happen to even the best operator internationally, because of the very nature of drilling thousands of metres below the surface of the earth where the geology, despite the best scientific studies, can have unforeseen problems. The government needs to look no further than OVLs investment

in 2009 of $2.1 billion to purchase the UK based Imperial Energy in the Tomsk region of Russias Siberia. At that time expectations were that oil would be produced at 45,000 barrels per day by 2015 and 80,000 barrels per day at its peak. However, production is stagnant at 16,000 barrels per day and despite a further investment of around $0.5 billion, OVL has now called for a review. The reasons for the inability to meet the target have been problems with the oil reservoirs (as in the case of Reliance) apart from harsh climatic conditions, etc.

Any action that is seen to dampen investor confidence and the expectation of a reasonable return on its investment or the lack of a level playing field will discourage existing players and deter new players with grave consequences to our foreign exchange outgo
Third, the operator must get the market price for its gas, which could be the weighted average of imported LNG and transnational gas by pipeline, whenever the latter happens. There is no justification for the step-motherly treatment to domestic gas when international prices prevail in the case of domestic crude oil. Compared to crude oil, gas is more difficult to store and transport and is the fuel of the future taking into account its lower impact on the environment. Let the government give subsidies directly to

the fertiliser and power sectors, if it so wishes, which will be far easier to implement than (say) in the case of kerosene through the PDS system, but it must not hobble the contractor and by so doing score a self-goal. At market prices of gas the contractor will recoup his investment faster and governments share of profit petroleum will kick in earlier, which can contribute to subsidies, though at a later stage. Fourth, the office of the Director General of Hydrocarbons cannot wear two hats; that of being a regulator and also a wing of the government. Further, it needs to have permanent staff of its own and not have to take on deputationists from the same organisations which it is meant to regulate. Fifth, government representatives on the managing committee for a particular production sharing contract must have a good working knowledge of the industry, to be able to take quick and informed decisions. Sixth, tinkering with the profit sharing mechanism may do more harm than good. This has worked well in several countries and any problems that arise will have more to do with a lack of trust, poor economics and absence of a level playing field, rather than any intrinsic shortcomings. Finally, BP has invested $7 billion to buy into the KG Basin gasfield and the faith that they have reposed in government doing what is best for the industry, should not be dented or dissipated. The underground risks that exploration companies face should be balanced by a risk free climate above ground. Investor confidence will be restored, not by promises for the future, but by specific time bound action. Otherwise the road shows that we hold every time there is a new NELP round will become no shows and we will be left to rue at leisure.
Views expressed in this article are personal. For suggestions email at feedback@infraline.com

ERP Solutions for Power Utilities


September 28, 2012, The Lalit, New Delhi
IndianPowersectorisinarapidgrowthphaseandinaphase ofundergoingrapidchange-changeinawaytheyusedto operate.Aspecialemphasisislaidbythegovernmentonthe utilitysegmenttoimprovetheiroperationalandbusiness efficiency.OnanaveragetheSEBssufferfromanATCloss intheupwardsof30-35%andinsomeareasevenmore. TheR-APDRPprogramhaslaidemphasisonthereformand implementationofIT.ERP(EnterpriseResourcePlanning) isoneofthemostimportantenablersinprovidingan environmentforintegrationofutilityapplications. Latestmanagementresearchhasprovedthatsharingof informationandcollaborationamongemployeessignificantly improvestheproductivityandbottomline.AnERPsolution helpsyoushareinformationbetweenvariousdepartments/ functionsandletthemcollaboratebetterandhelpallofthem movetowardsthecommonorganizationalgoals AstandardUtilityManagementSystemencompasses integratedlineandmeterinformationwithanassociated recordofmeterreading,billingandpaymenthistoryforan account.RobustERPsoftwaresolutionsofferadditional enterpriselevelfunctionalitysuchascustomerrelationship management,servicemanagement,warrantyandrepair,and completebusinessintelligenceandreporting. Inanutsheel,theconferencewilltrytounderstandthe requirementofanERPsolutionfromthepowerutility perspectiveandspreadlightonthevariousapplications/ advancementofanERPsolutionforapowerutilitysuchas: UpdateonlatestERPSolutionforPowerUtilities Automation&IntegrationwithmultipleLegacySystem ConvergenceofGIS,AMR,SCADANetworkstoasingle network CustomizationforUniqueBusinessrequirementsin Utilities IncorporationofBestOperationalMaintenancethrough RCM(ReliabilityCenteredMaintenance) GreenERP GENCOs-AdoptingModernMonitoring&Diagnostics toolsforPlantAutomation&AssetLifeCycle Management
To Register Contact Komal Sharma, Sr Manager-Business Development Ph.: +91 11 66250003, +91 9953587302 Email: komal.sharma@infraline.com

Conference on

TRANSCOs-ImprovedSystemOperations DISCOMs-LoadForecastingandAnalysis HugeLossesduetoanomaliesinbilling&Collection Practicescoupledwithuncheckedpowertheft ProjectMonitoring-Controllingtime&Costoverrunsof Projects StrongerintegrationinexistingERPmodulesforplant managementandmaterialmanagement UpgradationinProcessautomationandOMSsystems LoanmanagementofCorporationsaswellasindividuals. Monitoringandcontrolofexpendituresoffieldoffices intermsofCash/Fundflow DecentralizedPayrollSystemandCentralizedPension managementsystem TA/DA,LTC,andmedicaletc.reimbursementaccounting MeterManagementandmeterinformation Workmanagementandfieldservicemanagement RepairandmaintenanceofEquipmentsandmeters ATClossesanalysisincludingsettlements

Key Highlights:
FirsteverConferenceonIT& ERPIssuesinPowerUtilities Platformforsharing experiencesandbestpractices inhandlingthetransitioninthe sector Aforumtoconnectutilities:A firststeptowardsenhancing organistionalcapability
A must attend for

StateElectricityBoards State-ownedGencos,TranscosandDiscoms Regulatoryauthorities PrivateSectorUtilities IT&ERPSolutionProviders

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September 2012 www.InfralinePlus.com

Do we need more refineries?


Surplus capacity, weak margins and high capital costs will restrict refinery capacity additions in India, writes Rahul Prithiani, Director, CRISIL Research.
Global refiners recorded a very strong performance during 2003-07 due to robust demand and high capacity utilisation rates. As a result, refiners globally announced significant capacity expansion plans during the same period. Many of these refining capacities got commissioned post 2008. In India too, the refining capacity rose to 213 million tonnes per annum (mtpa), increasing by nearly 40 per cent in the Eleventh Five-Year Plan (2007-08 to 2011-12). The capacity additions were led by the private sector, which contributed nearly 70 per cent of the incremental capacity. The expansion of the Public Sector Units (PSUs) was relatively slower as compared to the private sector. Major Indian private refiners like RIL and Essar Oil added large capacities to cater to the growing domestic demand and attractive export markets.As a result of these expansions, Indias refining surplus increased to 56 mtpaby March 31, 2012, from around 19 mtpa on March 31, 2007. However, post 2008, the growth in global demand for petroleum products has fallen substantially, leading to erosion in refining margins. While domestic refiners are still tapping export markets to sell their excess production, demand growth in key export markets of the US and Europehas slowed down considerably.Moreover, the capital costs have doubled over the last 4-5 years. Given the weak demand and petroleum products grew faster (CAGR of 1.9 per cent) than the supply (CAGR of 1 per cent). Global capacity utilisation rates increased to ~86 per cent in 2007 from 81 per cent in 2002, thereby resulting in stronger GRMs. In order to cater to the rising demand (both domestic and global), companies, mostly from the countries like India, China and Saudi Arabia, laid out refinery expansion plans. Most of these capacities got commissioned between 2008 and 2011. Following the global economic downturn in 2008, the demand growth for petroleum products declined considerably. Weak demand, coupled with increasing supply, has forced global capacity utilisation rates back to 81-82 per cent. With slowing demand, the GRMs have dropped sharply and the returns from these new refineries have deteriorated significantly. Going forward too, we expect global refinery utilisation rates to remain at low levels of 81-82 per cent over the next 4-5 years, given the weak operating environment. Apart from low demand, returns have also declined due to high capital cost

ExpertSpeak

52

soaring capital cost, it is no longer feasible for these refiners to put up a new refinery or undertake any further capacity expansions in the present scenario. Hence, after a spate of capacity expansions in the Eleventh Five-Year Plan, the need for more refineries in India has dried up.

Refining margins narrow as capacity utilisation rates fall


During 2002-07, the demand for

September 2012 www.InfralinePlus.com

New refinery projects weighed down by high cost structure


Refinery Bharat Petroleum Corporation Ltd, Bina Hindustan Petroleum Corporation Ltd, Bhatinda Indian Oil Corporation, Paradip
Source: Company Reports

Cost of major refineries in India Year of commissioning Capacity (mtpa) 2010-11 6 2011-12 9 2013-14 15

Cost (` billion) 120 189 300

Cost per tonne (`) 20,000 21,000 20.000

for the newly commissioned refineries. Over the last 4-5 years, the capital cost of setting up a new refinery has risen sharply, doubling from `10,000 per tonne to around `20,000 per tonne of annual capacity.The capital costs have risen sharply due to higher steel prices and increased technology licensing cost especially for the more complex refineries. To fund their capital costs alone, these new refineries will need GRMs of at least $8-10 per barrel. Assuming $1-2 per barrel for operational costs, the new refineries will need GRMs of at least $10-11 per barrel in order to break even. As per our outlook on GRMs, the new refineries will find it tough to break even in the current environment and will fall short by $1-2 per barrel.

around 2 mbpd of refining capacities have already been shut down in the past 2 years, primarily in Europe and the US, due to very weak GRMs and changing environmental norms.

No need for capacity addition as refiners grapple with excess capacities, thin margins
Given the already existing surplus refining capacity and pressure on GRMs globally,we expect the pace of capacity addition in India to slow down considerably. The surplus capacity was built in the past as the export markets offered attractive opportunities for refiners. Going forward, the refinery capacity additions are expected to grow at a meagre rate of 2.5 per cent compounded annually to 245 mtpa in the Twelfth Five-Year Plan from a CAGR of 7.4 per cent during the Eleventh FiveYear Plan. This capacity addition would be supported by additions from PSU companies which conceptualised projects

Refinery expansion plans of global oil and gas majors are

during the pre-2007 period, primarily focused towards feeding their marketing network. Going forward, PSU refiners adding capacity are likely to cater to the incremental domestic demand resulting in increased dependence of the private sector refiners on the export markets. But, the demand growth in the export markets is expected to be tepid due to the weak economic environment and improving efficiencies in fuel consumption over the next 4-5 years.Given the weak operating scenario, private refiners will find it unviable to set up new refineries and sell their surplus in the export markets. This is evident in the fact that private players are no longer looking to expand their refining capacities. Even PSU refiners, who are expanding their capacities in order to feed their marketing network, are expected to go slow on their expansion plans.
Views expressed in this article are personal. For suggestions email at feedback@infraline.com

53

slowing down
Majority of the global oil and gas majors such as Exxon, BP, Shell, Chevron, etc, are reducing their focus on the refining business and are, in fact, scaling down their refining capacities either through sale of assets or mothballing an indication of the worsening profitability in the refining business. Moreover,

September 2012 www.InfralinePlus.com

StatisticsOil & Gas


Crude Oil Production
Name of the Undertaking / Unit

Review of Crude Oil Production during the month of July, 2012 (Qty: 000 Tonnes)
Planned Prodn. during the month 2005.40 596.40 454.00 23.00 18.00 101.00 0.40 1409.00 1209.00 200.00 333.50 331.50 2.00 1032.47 765.93 10.49 0.00 12.18 743.25 266.54 3371.37 Month under review* 1910.10 596.10 446.00 25.00 21.00 104.00 0.10 1314.00 1137.00 177.00 325.50 323.70 1.80 1020.83 763.53 7.46 0.00 12.79 743.28 257.30 3256.43 Production during the Corresponding month last year 2046.00 635.00 488.00 26.00 21.00 100.00 0.00 1411.00 1254.00 157.00 329.31 326.68 2.63 902.06 560.99 7.85 0.14 11.22 541.78 341.07 3277.37 Preceding month of current year 1854.10 574.10 431.00 24.00 21.00 98.00 0.10 1280.00 1111.00 169.00 307.50 305.72 1.78 980.22 735.36 7.93 0.00 12.86 714.56 244.86 3141.82

Oil & Natural Gas Corp. Ltd. Onshore Gujarat Andhra Pradesh $ Tamil Nadu Assam Tripura Mumbai High Offshore Oil Condensates Oil India Ltd. (OIL) Assam Arunachal Pradesh DGH (Private / JVC) Onshore Arunachal Pradesh Assam Gujarat Rajasthan Offshore Grand Total

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*Provisional. $: Includes production from offshore east coast.

Natural Gas Production


Name of the Undertaking / Unit

Review of Natural Gas Production during the month of July, 2012 (Qty: Million Cubic Metres)
Planned Prodn. during the month 2038.45 443.83 118.28 1.26 88.51 118.87 38.63 78.28 1594.62 244.80 223.60 1.50 19.70 1237.29 12.24 1.74 0.00 10.36 0.00 0.00 0.14 0.00 1225.05 3520.54 Month under review * 1976.66 439.70 155.51 1.44 109.24 83.51 41.51 48.49 1536.96 226.93 204.95 1.24 20.74 1373.49 67.48 1.76 0.00 17.97 38.62 8.66 0.20 0.27 1306.01 3577.07 Production during the Corresponding month last year 1942.48 477.78 162.84 1.48 112.55 109.36 40.02 51.54 1464.70 225.51 203.38 1.64 20.49 1973.28 63.41 2.30 1.39 23.36 29.16 6.73 0.07 0.39 1909.87 4141.27 Preceding month of current year 1926.88 452.47 157.56 1.34 107.50 97.96 40.61 47.51 1474.41 218.59 199.13 1.40 18.06 1387.20 65.92 2.73 0.00 18.15 36.40 8.22 0.15 0.27 1321.29 3532.67

Oil & Natural Gas Corp. Ltd. Onshore Gujarat Rajasthan Andhra Pradesh Tamil Nadu Assam Tripura Offshore Oil India Ltd. (OIL) Assam Arunachal Pradesh Rajasthan DGH (Private / JVC) Onshore Arunachal Pradesh Assam Gujarat Rajasthan West Bengal $ (CBM) Madhya Pradesh (CBM) Jharkhand (CBM) Offshore Grand Total
*Provisional. $: Coal Bed Methane production.

September 2012 www.InfralinePlus.com

Refinery Production (In terms of crude throughput)


Name of the PSU / Private Co. Planned Prodn. during the month $ 10598.30 82.00 532.40 1050.00 650.00 640.70 58.00 1364.00 205.00 4582.10 1140.70 865.00 400.00 2405.70 651.70 822.00 1473.70 630.30 61.40 691.70 265.00 1175.00 5.10 4299.90 2639.00 1660.90 14898.20

Review of Refinery Production (in terms of Crude Throughput) during the month of July, 2012 (Qty: 000 Tonnes)
Month under review * 10205.12 68.04 540.44 1055.39 577.47 700.06 59.62 1196.93 211.46 4409.40 1137.49 941.93 339.40 2418.83 709.71 470.48 1180.19 707.23 48.10 755.33 244.11 1193.59 3.68 4778.48 3040.00 1738.48 14983.60 Production during the Corresponding month last year 10371.18 67.29 419.04 1222.61 652.80 756.30 59.01 1299.90 184.73 4661.68 1144.74 796.59 0.00 1941.33 599.95 837.30 1437.25 917.04 42.67 959.71 248.94 1117.37 4.91 4086.70 3015.00 1071.70 14457.88 Preceding month of current year 10452.88 90.89 488.45 1149.48 456.34 683.34 59.44 1262.74 210.59 4401.26 1105.34 901.06 553.30 2559.70 606.52 655.13 1261.65 843.90 66.32 910.22 224.63 1090.62 4.81 4529.97 2921.00 1608.97 14982.85

Public Sector IOC, Guwahati IOC, Barauni IOC, Koyali IOC, Haldia IOC, Mathura IOC, Digboi IOC, Panipat IOC, Bongaigaon Total IOC BPCL, Mumbai BPCL, Kochi BORL, Bina Total BPCL HPCL, Mumbai HPCL, Visakh Total HPCL CPCL, Manali CPCL, Narimanam(CBR) Total CPCL NRL, Numaligarh MRPL, Mangalore ONGC, Tatipaka Private Sector $ RIL, Jamnagar Essar Oil Ltd.(EOL), Vadinar Total $

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*Provisional. Reasons for shortfall as indicated in the note. $: RPL(SEZ) Planned targets & production (in terms of crude throughput) not reported by the refinery

Refinery-wise Capacity Utilisation


Name of the PSU / Private Co. Public Sector IOC, Guwahati IOC, Barauni IOC, Koyali IOC, Haldia IOC, Mathura IOC, Digboi IOC, Panipat IOC, Bongaigaon Total IOC BPCL, Mumbai BPCL, Kochi BORL, Bina Total BPCL HPCL, Mumbai HPCL, Visakh Total HPCL CPCL, Manali CPCL, Narimanam Total CPCL NRL, Numaligarh MRPL, Mangalore ONGC, Tatipaka Private Sector $ RPL, Jamnagar Essar Oil Ltd.(EOL), Vadinar Total $ Prorated Installed Capacity $ 9930.00 85.00 510.00 1164.00 637.00 679.00 55.00 1274.00 200.00 4604.00 1019.00 807.00 0.00 1826.00 552.00 705.00 1257.00 892.00 85.00 977.00 255.00 1004.00 7.00 3695.00 2803.00 892.00 13625.00

Refinery-wise Capacity Utilisation during the month of July, 2012 (Qty: 000 Tonnes)
July, 2012 Actual Crude Tput * 10205.12 68.04 540.44 1055.39 577.47 700.06 59.62 1196.93 211.46 4409.40 1137.49 941.93 339.40 2418.83 709.71 470.48 1180.19 707.23 48.10 755.33 244.11 1193.59 3.68 4778.48 3040.00 1738.48 14983.60 % Utilisation of I/C 102.8 80.0 106.0 90.7 90.7 103.1 108.4 94.0 105.7 95.8 111.6 116.7 0.0 132.5 128.6 66.7 93.9 79.3 56.6 77.3 95.7 118.9 52.5 129.3 108.5 194.9 110.0

*Provisional. I/C: Installed Capacity. $: RPL(SEZ) refining capacity 27 MMT but crude throughput not reported by the refinery and not included in total prorated installed capacity.

September 2012 www.InfralinePlus.com

NewsBriefs | Renewable
ONGC Plans offshore wind project ONGC is planning the development of wind farms in the countrys western offshore area. ONGC hopes to tap offshore wind power for use in its oil and gas processing operations, as well as exporting electricity to the onshore grid for sale. The Indian group plans to build and operate a 10MW pilot offshore plant and decide if a large-scale development is viable. Gamesa Wins order from ReNew Wind Energy Gamesa Wind Turbines Pvt Ltd has bagged an order from ReNew Wind Energy to commission 74.65 MW of wind turbines in Maharashtra. The wind turbine manufacturer, an Indian subsidiary of Gamesa of Spain, will supply 50 MW of G97- 2.0 MW machines and 24.65 MW of G58 - 850 kW machines, said. MNRE Generation of power under JNNSM The Union Minister of New and Renewable Energy, Dr. Farooq Abdulla, said that under Jawaharlal Nehru National Solar Mission, India is to create a capacity for generation of 1100 MW of grid connected solar power by 2013 and 20,000 MW by 2022. The overall investment may be approximately $ 40 billion for 20,000 MW of solar power projects. Uttar Pradesh Aims for 1,000-Mw solar power by 2017 Uttar Pradesh government is aiming for 1,000-Mw solar power generation by the year 2017. This would be in addition to the generation of hydro and biomass energy under the public -private partnership model. At present, UP is facing almost 3,000 Mw of power deficit. This segment would be tapped in both grid and non-grid connected projects. TNERC Hikes wind tariff to `3.51 per unit Tamil Nadu Electricity Regulatory Commission has passed its tariff order hiking the tariff for wind power producers in the State to `3.51 a unit. Windmills installed between August 1, 2012, and July 31, 2014, will be able to sell the power they generate to the State electricity distribution company, TANGEDCO, at this tariff. First Solar In talks for joint ventures in India US thin film photovoltaic cell and module manufacturer First Solar is keen on forming joint ventures in India for putting up solar plants, the companys Chief Executive Jim Hughes said. This marks a shift in the India strategy of First Solar, which has hitherto only sold PV panels. Now, the company is donning a new role as a project developer as well. Andhra Pradesh Set to add 200 MW wind power shortly Andhra Pradesh is poised to add 200 MW of wind power farms shortly and has accorded clearance for 2,636 MW of wind power generation capacity, according to Minnie Mathew, Chief Secretary, Andhra Pradesh. She said the State Government is working on a tariff mechanism for renewable energy which will make it lot more attractive for wind and solar power generation companies. Waaree Energies Bags EPC order for for Avatar Solar Waaree Energies Pvt Ltd. has secured a turnkey project order for a 5 MW Solar PV Power Plant for Avatar Solar, based in the US state of California. The power plant will be set up in Gujarat Solar Park at Charanka, Patan Gujarat. The electricity generated by this plant would be supplied to Gujarat Urja Vikas Limited and shall catalyse growth and sustainability in the region, said Falgun Dave, Director of Avatar Solar. Shree Ganesh Jewellery House To set up solar plants in UP , Bihar Shree Ganesh Jewellery House Ltd is likely to commission its proposed solar power plants in Uttar Pradesh and Bihar by the end of October. These two solar power projects 50 MW in U.P . and 75 MW in Bihar will be set up in power purchase agreement with the respective State governments. The projects would be executed by Alex Group of Companies, in which SGJHL holds a majority stake. Solarcon India meet To help evolve plans for solar industry Solarcon India 2012, the fourth edition of solar-focused technology and business event will be held in Bangalore on September 3-5. Solarcon India has been providing platform for industry, government, NGOs and other eco-system partners to come together to discuss and evolve plans to help the growth of the local solar industry.

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Gujarat in talks with IFC To set up 1,000 MW solar power project The government of the state of Gujarat in India has confirmed it is exploring the possibility of setting up a 1,000MW solar power project in conjunction with the International Finance Corporation (IFC). Gujarat estimates that the project could cost around `8 to 9 crore per MW, therefore, the 1,000MW project could cost anywhere between `8,000 to 9,000 crore. Bharti Infratel, OMC Power To power towers using renewable energy Bharti Infratel has striked a ten year contract with OMC Power, a new renewable energy service company. This alliance will power off-grid and poor grid telecom tower sites in rural areas using renewable energy sources. OMC will set up Micropower plants in offgrid and low grid locations. These power plants will generate electricity primarily using renewable energy.

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InConversation

Smart power generation plants can help bring affordable power


Finnish multinational, Wartsila Corps Indian arm has over 25 years of experience in providing complete lifecycle power solutions for the Indian energy market. Wartsila India has extensive plans for their new technology-smart power generation and the company assures that these are cutting edge, hi-tech power plants that are highly efficient, possess a high degree of fuel and operational flexibility. Companys Vice President-sales of Middle East and Asia, Rakesh Sarin spoke to Priyanka Singh on how peaker plants would bring economy to the table by producing reliable power which when synchronized with other technologies can produce cost-effective 24*7 power supply. He also shared his vision on how his company sees future growth coming from the utility companies and how India is becoming a global delivery centre for his company.
Take us through the journey of Wartsila in India. You started with manufacturing of high power diesel generating sets and marine engines. Where does the company stand now and what is the future growth y see from here? Wartsila is a real high tech and cutting edge technology company. We have essentially two lines of business. One is ship power, which means whatever makes a ship move forward, we are manufacturing that. For instance-the main engines (both 2 stroke and 4 stroke), transmission systems, gear boxes, propellers and all sorts of large machinery. Every third ship what you see in the waters of this world is having our system. We also say that every second ship in the world is serviced by us. So we are pretty much present in the shipping sector. Second is the power plant business that I will explain more in detail as we go through the discussions. And our third business is the lifecycle service support which holds together both these businesses that is ship power and power plant. So we have a very strong backup which is a lifeline of all the products. All our products are 25-35 year lifecycle products. So services play a very important role in taking these products through the lifecycle. Wartsila started its business in India in mid 80s. So we are quarter century present in this country. We started at a time when HFO (Heavy Fuel Price) was cheap, power prices were same as they are today and the engines are very robust that we manufacture. So it was good way of producing power and that is when we started. Today, if you look at the growth, we are about three and a half thousand megawatts installed in this country. This is amongst about 250 customers. Most of these customers are industrial big corporate houses. You take any big corporate name, we would be there, be it Tatas, Birlas or Reliance, various cement plants and textile mills. Also, now we are looking seriously on the grid side, the utilities and all. Because we find that the features that we have and the benefits what our products have are quite useful to todays situation. Which are the sectors that have traditionally been using your gen sets? Do you see more sectors / segments using your sets, considering the power situation in the country? Wartsila has been present for last 25 years in the country. We started off with the industrial sector, so all the large industrial houses-you name any of them in the country, are using our power plants today. These are cement industries, textile units, fertilizer and chemicals, steel and alloys, process and engineering,

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September 2012 www.InfralinePlus.com

nuclear, also some of the utilities-all of them have been using our power plants. In todays situation, we find that the grid, meaning the utilities can benefit a lot with the smart power generation concept and our technology has certain distinct benefits by virtue of which our kind of power plants can be of great help in the grid system of the country. How they can help and support is that they can work on our concept of smart power generation. Essentially our power plants are highly efficient. They have a very high degree of fuel flexibility and a very high degree of operational flexibility. This is a very unique combination. Normally all three dont come together. Once these features synchronize with other technologies operating in the country for example- coal, wind, solar etc so these features of smart power generation enable a system which at the country level or at the state level brings affordability, meaning it brings economy on the table, it brings reliability, meaning it helps in keeping the grid reliable and lastly but very important is that they lead to sustainability, meaning it helps in curbing the carbon emission and all in the environment. Are your products in line with the governments initiatives for green energy? What are the measures that your company is taking to provide clean/green energy to various sectors? The whole concept of smart power generation leads to reduction in emissions. Also it leads to operation of green energy. For example-wind and solar in a better way because wind is very good, its clean but you get power when the wind is there. When the wind goes, power goes and therefore it is seen in many countries as where the wind generation capacity or the wind density is very high that it causes a lot of uncertainties and disturbance in the grid. So there has to be some balancing power and our smart power generation

are gas based power plants. In fact these power plants can start off and get parallel gas based power plants when integrated to the grid and start giving 100% power properly, the amount of carbon what within a period of 5-7 minutes. So when you saved in the process is equivalent to the wind goes, these plants can kick off almost 80,000 MW of solar power plants. within 5-7 minutes, so they balance that. The solar is put for two perspectives: one And when the wind comes, these plants for energy security because you dont can be stopped within two minutes. So need to import oil for that and the second that way certain other technologies like is for sustainability that is your carbon coal and nuclear when you need to start generation reduces. these plants, you When these smart take days to do that. The whole concept of power generation By that time the wind comes and smart power generation plants are integrated into our system, it goes and hence the leads to reduction in fluctuations will emissions. Also it leads will help in reducing carbon and the be there. The other to operation of green extent of carbon point is that our energy. what it reduces country has a big by using these solar mission and gas based power plants is equivalent some good progress is taking place in to the carbon what you will save with that. But we need electricity during night 80,000 MW of solar plants. So from the hours the most but you cannot find Sun at environment angle, these plants have nights. So when the peak demand is there, three corners of the triangle- one is that time the Sun is down. So in those efficiency-these are very high efficient situations, you still need a plant that can plants that is they consume less fuel so work for couple of hours. So here what we are saying is when the Sun or the wind generate less emissions, second they are highly flexible on the fuel side, so certain goes off, you can start this plant quickly areas you may use HFO but for other and when they come, you can shut this certain areas like for instance Taj side off. So instead of operating it 24*7, these and all, you use gas. Where you are using plants can be operated for couple of gas, there is no sulphur. hours. This is the utility of such plants and thereby they directly enable the green What is your manufacturing energy and successful operation. capacity in India? We manufacture these plants in Finland What are your views on court and Italy- at a place called Trieste. In directives such as not to use India, we have our manufacturing facility generators in the Taj trapezium, to in Khopoli, near Navi Mumbai en route safeguard the heritage structure even during long hour power cuts? near Lonavala. We manufacture different things over there. We manufacture It all depends on in which context you balance of the plants over there. Our are operating those generators. For plants are very modular in nature, so the instance there are both efficient and balance of the plants we manufacture inefficient generators. You can use high and from Khopoli, we are also exporting sulphur fuel or low sulphur fuel like to the neighbouring countries like we gas. When we talk about Taj trapezium export right from eastern Africa to the where if we use high sulphur fuel, it whole of Asia- eastern Africa, Middle produces high sulphur oxides and acids. East, Asia like Indonesia, Bangladesh etc. So this is in that limited extent. But gas In Finland and Italy, we make the main doesnt have any sulphur. What we are engines but in India, we are making the saying is that these larger power plants

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September 2012 www.InfralinePlus.com

InConversation
ancillary part of the main engines. India is our global delivery centre. What about imports? How much is the current import duty on such items? Have you asked for any revision in import duty? If you look at the merit of these smart power generation sets, it is bringing fuel economy and it will bring emissions under control too. So ideally it should have priority given on the import duty. But we are paying the import duty as on the same capital goods now. The high import duties eventually hit the consumers. Naturally we have to pass it on to the consumers. If you see UMPP (Ultra Mega Power Plants), the import duties have zeroed down because the country wanted to develop infrastructure in a quick fashion, incentivize the developers and all. So likewise it is in the same merit.
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What are your expansion plans for the Indian market and where do you see the growth coming from? Do you see any industrial segment driving companys growth? The growth which we see coming into Indian market is from the utility companies (grid) because the country needs peaking power. Its need of the hour and we are doing a lot of work in terms of showcasing that what benefits can be brought in by this kind of technology. What are the challenges that the industry is facing and what kind of policy reforms can contribute to its growth? I would talk of one mother policy- its a high time when the people of country need reliable and sustainable power. Now if we have to get 24*7 power, then whatever goes along with that to reform the sector is essential. What is needed is one, whatever is the cost of generation, a consumer must pay for its service. In todays power situation, we

all know what is under recovery. Tell me any way how can a producer keep on producing and keep on selling at a price which is less than his production cost. So the biggest reform needed is that if I am producing electricity at one rupee, I should be able to get that one rupee back so that I can produce the next unit. And I should be allowed a reasonable margin on that because I am a businessman which a regulator should allow. Second reform is we think that if we increase the price of power, then the people will suffer. But the fact remains that because we are not doing that, the people are suffering. One, there is no 24*7 power, secondly while there is no 24*7 power, still people are spending money to get that. For commercial and industrial consumers, if you show them 24*7 power supply, they would be willing to pay more. If you charge extra from agricultural and below the poverty line customers, there would be resistance, therefore we should not touch them. Third category is customers like you and me. Normally we are paying so much extra to cope up with the black outs and interruptions through our inverters and gen sets. But we are resistant to pay that little extra premium to get 24*7 supply, so the customers need to be educated on that. One reform is making up a strong will that yes, we want to avail 24*7 power. So for that you have to look at the tariffs. Tariffs might look a little higher, but in practice it is going to reduce the cost of the customer. How do you see the market for gen sets growing and your position (in terms of market share and in terms of revenues)? We need participation from media and politicians to educate benefits of these gen sets to the consumers that by paying little extra, we would actually be able to save money for ourselves. And that is what the politicians need to understand that they can help us by giving proper infrastructure. So if in an area, 24*7

reliable power is given to the people and they are willing to pay more, they would be satisfied with the government as these peaker plants would help them curb the biggest nuisance in their lives. So it is gain for the politician, good for the district administration, great for the people and good for the power generator because he is getting his money back. What are the advantages of exporting from India? India is an emerging market sourcing hub. So in exporting from India, its definitely a cost benefit for us. Besides saving on transportation cost, labour cost in India versus labour cost in Europe is an advantage. If we compare with China, the per capita labour cost is almost 3000$ there as compared to India where it is just 700-800 dollars. So we see India as quite a cost efficient country. How would you respond to Fitch ratings which recently migrated Wartsila India Ltds longterm rating to non monitored category citing lack of adequate information from the company? As you are aware that we were listed company in India earlier but later we got delisted. That is Wartsilas philosophy. We have 68 network companies in the world and we all are governed from our global headquarters. Why we were listed earlier because that was the need of the country at that time. Then the country came out with the policy that you can be totally holding a company in India. So about a year back, we consolidated everything. And may be in the interim period, we might have missed on giving that information but we have no issues pertaining to that. We got delisted before (about 2-3 years back) and last year we consolidated 100 percent shares. But all our data pertaining to the group is present on the website and very much available everywhere.
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September 2012 www.InfralinePlus.com

InConversation

Thrust has to be on development of hydro power


UJVN Limited, a wholly owned corporation of the government of Uttarakhand is constantly working on its vision to become a significant player in the national power sector and best corporate in Uttarakhand. Its DirectorOperations, BCK Mishra who is also In Charge of Energy Cell- Government of Uttarakhand speaks to Priyanka Singh on why hydro power should be given more emphasis in the country than coal-fired plants. In spite of its inherent capability of providing grid stability and many green benefits over other plants, the sector has not been able to grow at the desired pace. Its share in the grid which is about 40 percent is steadily declining. He says that in a situation where there is acute shortage of coal and gas for power generation and solar being too expensive, there is no option but to go for development of hydro power. Presently, UJVN Ltd. operates hydro power plants ranging in capacity from 0.2 MW to 304 MW, totaling around 1310.25 MW.
Considering the growing demand of power in the country, how do you see hydro sector contributing in Indias growth story? Hydro Power has inherent capability of providing grid stability due to the fact that the plant can be started and stopped almost instantly. As such it is considered that the share of hydro power in the grid should be 40 percent. However the share of hydro power in the grid is declining steadily. The development of hydro power had not been able to grow at the desired pace due to various reasons and more emphasis is being given to development of Coal fired power plants. There has to be thrust on development of hydro power for meeting the growing demand of power and at the same time development of far flung areas along with green benefits. What is the current share and where do you see it by the end of current five-year plan? The current share of hydro power in the total installed capacity is approximately 19.13 percent as on 30th June 2011 and it will continue to be of the order of about 19.50 percent by the end of current five-year plan. In the renewable energy contribution mix, wind energy has taken a huge leap over other segments. Do you see this gap reducing or widening in the times to come. Please share the reasons as well?

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The gap of wind energy over the other segments of RE contribution will be further widening. The two recent studiesone conducted by experts from Harward University and Technical Research Center of Finland and other by experts from the Energy Resources Institute (India)-estimate on-shore wind potential in India to be greater than 1000GW. However, the official wind energy potential estimate used by GOI in its policy making process is only 103GW. Recent reassessments conducted in various countries such as U.S and China have found much higher wind energy potential due to better technology in the form of higher efficiency, hub heights, and sizes of the wind turbines. The official wind potential estimates used by China have recently increased by 800% and that of U.S, the wind energy potential has increased by 400%.

September 2012 www.InfralinePlus.com

As such use of better technology and increased wind potential will increase the gap of wind energy over the other segments of RE contribution.

Hydro Power can provide grid stability due to the fact that the plant can be started and stopped almost instantly. The share of hydro power in the grid should be 40 percent.
Recently the Planning Commission suggested that small hydro projects could also be given clearances on priority basis. What are your views on this? As per prevailing laws, rules and regulations, the authority for according various clearances for implementation of small hydro power projects lie with the State Government except forest land diversion above 5ha which MoEF does. The situation will improve positively if the suggestions of Planning Commission are implemented. Please name the units that are undergoing renovation and modernization and what is the estimated cost. Kindly also share the advantage post renovation?
S. No. Power Station Capacity (MW)

What are the benefits of installing up small projects as against installing sizeable projects? In comparison with large hydro power plants here are some of the advantages of Small Hydro Power Plants: No negative impact on surrounding ecosystems. Cheap and easy on operations & maintenance. Short planning horizons and construction periods with the use of local and readily available materials and skills. Harnessing power benefit from the available low/small potential. No situation of displacement of people or property.

Given the uncertainty over monsoon and subsequent impact on water levels in the river, how prudent is it to invest in capacity expansion of Hydro projects? No such significant uncertainty exists over monsoon and subsequent impact on water levels in the river as the hydro power potential is calculated on hydrology based on the last 20-25 years data of river discharges and 90 percent dependable year with 95 percent machine availability is calculated. The factors of monsoon discharges and its impacts on power are taken care of in the power potential study while framing various parameters of HEPs.

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Expected Cost (Without IDC) 180.61 165.85 113.18 113.71 115.44 122.73 300 80.82 53.67 351.26 215.83 11.07 1824.17

1 2 3 4 5 6 7 8 9 10 11 12 Total

CHIBRO KHODRI DHAKRANI DHALIPUR KULHAL TILOTH CHILLA PATHRI MOHD. PUR RAMGANGA KHATIMA GALOGI

4x60=240 4x30=120 3x11.25=33.75 3x17=51 3x10=30 3x30=90 4x36=144 3x6.8=20.4 3x3.1=9.3 3x66=198 3x13.8=41.4 2x1+2x0.5=3 980.85

Expected Present Expected Expected Investment (` Average Annual Generation Increase in Crores) With Generation (MU) after RMU Generation IDC (MU) (MU) after RMU 185 865 942 77 170 406 444 38 117 161 184 23 117 240 276 36 119 145 183 38 127 446 484 38 337 684 1074 390 93 95 155 60 65 35 65 30 260 283 450 167 256 163 235 72 12 3 8 5 1858.0 3526 4500 974

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InConversation

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There were reports suggesting that firms that undertake renovation and modernization operations for old projects quote much higher prices for the job thereby reducing the incentive a company may have? Actually, Contract for Renovation, Modernisation & Up-rating (RMU) work is awarded through a process of open competitive bidding and to get the work awarded every company minimizes their cost. Also the firms who compete for the work of RMU are archrivals and competitors of each other and I do not think they are able to quote high rates and thereby they reduce the potential benefits. Does India have required technology for renovation and modernization so as to increase the life of the plant without having a need to continuously repair the plant? Yes BHEL has got requisite capability, have undertaken many such RMU works and completed them successfully. As far as repair

is concerned routine repair and maintenance is required even after the RMU as in case of a new plant. The benefit of RMU is the reduction in the number of breakdowns, enhancement in reliability in operation and enhancement in life of the plant. Kindly analyze the cost burden on renovation and modernization v/s installing green field project? Cost of construction of any new hydro electric project may range from `6 to 8 Crore per MW, whereas, depending on the scope of RMU, the cost of RMU of old HEPs may range from `1.5 6 Crore per MW. Is there local resistance for renovation and modernization process as well? If yes, how do you deal with it? No, there is no local resistance in RMU process as it does not involve contentious issues such as land acquisition and clearances from MoEF. Kindly compare benefits of RMU v/s green field projects?

In present context, RMU is an option of adding generation to the grid for reducing the gap of demand and supply due to the following reasons: No / Minimum clearances required Less Gestation Period (3-4 years) for the complete plant Less, almost no Risk Less cost as against equivalent new green site project Easy Financing Utilization of technological advancement Use of safety margins and overload margins in the old design Life Extension of existing facilities There acute shortage of coal in the country, there is no nuclear fuel, there is acute shortage of gas for power generation, and solar is very expensive. In such a scenario, there is no option but to go for development of hydro power and other renewable energy sources.

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InDepth

Wind power promises growth, even if AD benefit is removed


Will keep non-commited players out of business Indian market for wind power expected to grow further

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by Priyanka Singh

The Indian wind market is set to maintain its strong upward growth curve in future, despite the fact that the government has decided to remove Accelerated Depreciation (AD) benefit from April 2012 onwards. The trend shows that the industry is more of investor driven than solely reliant on government tax benefits. A welcome move for serious players, this will certainly improve the quality of installation in terms of actual generation. A knee jerk reaction to the governments decision of terminating

AD scheme from April 2012 onwards may have received flak among wind power developers, but most of the Independent Power Producers (IPPs) with serious plans and good experience in the sector have welcomed the move. The industry experts are of the opinion that discontinuance of AD may have a short-term impact on the installation of wind turbines across India, but in the longer run it may turn out to be a good thing for the sector. A senior employee working with PFC said, It might help in keeping non-committed players out of the

business and will encourage serious players with knowledge of the sector and willingness to do business to enter the market. India is already a key market for wind power investment and is expected to grow in future too. Among all sources of renewable energy, wind energy is the undisputed market leader in India, contributing about 70 percent of the total gridinteractive renewable capacity in the country. India has more than 17000 MW of installed capacity, making it the fifth-largest wind power producer in the world after the US, Germany, Spain

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InDepth

and China. The wind energy sector is growing rapidly with around yearly capacity addition of about 3000 MW. Initially, growth in wind energy generation was largely attributed to the provision of AD. The facility of AD allowed a higher depreciation while calculating taxable profits in the first year of buying the wind turbine, hence promoting small players to grow in the sector. In December 2009, the MNRE launched the generation-based incentive (GBI) scheme to provide

The wind market is set to maintain its strong upward growth curve. In the context of our business, we see removal of accelerated depreciation as an evolution of the marketplace Tulsi Tanti

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a level playing field for entities such as IPPs who may not be able to fully absorb the benefits of such a provision. The scheme offers a GBI of `0.50 per kWh of electricity generated, for a period of 10 years for grid-connected wind farms that do not avail the benefits of accelerated depreciation. This scheme has brought about a shift in the mechanism of payment from installation based to generation based methods of rewarding wind farms. P.C. Ramachandran, Vice President Operations-RRB Energy said, We believe that the situation is temporary and manufacturers should find ways and means of tackling the situation by innovative mechanism, diversification, taking cost cutting measures, improving efficiencies etc. He suggests that financial institutions may also do due-diligence in order to find out the credibility of the manufacturer before financing the wind power projects. While the Indian Wind Power Association has taken up the matter with the MNRE officials and the industry is hopeful to get the AD scheme extended, there is still a lack of clarity on continuation and amount of GBI benefit applicable in absence of any official response from the ministry. Rajiv B Samant, Head - Wind Business Development, Tata Power comments, Apart from AD benefit, GBI was the second most biggest driver for investment in wind sector. As per industry sources it is going to continue. However for more than a period of four months now, there is no clarification from MNRE. Discontinuing of AD scheme is seen as a downer for small investors, who were until now buying small quantity of Wind Electric Generator (WEGs) to avail AD benefits. It seems difficult for them to sustain in the market now. Samant adds, Every year, almost more than twenty new names were investing in wind with a base of `6 to `7 crore per MW. These investors will definitely

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vanish from the wind sector. Experts say that the capacity addition in wind sector may be affected in short-term due to lack of clarity on policies, but the quality of installation in terms of actual generation is expected to improve in long run. Tulsi Tanti, Chairman- Suzlon Group says, Recent policy changes, strong pricing and the growth of the IPP sector have provided the Indian wind market with adequate momentum, making the industry more investor driven than solely reliant on government tax benefits. Looking ahead, there is no doubt that the wind market is set to maintain its strong upward growth curve. In the context of our business, we see removal of accelerated depreciation as an evolution of the marketplace. Looking at FY13 we see nearly 70 percent of our business in India taking this route. The latent market demand for wind in India is projected to be between 4,000 MW and 5,000 MW per year. Rising fossil fuel prices, a widening power demand-supply gap and the global momentum to develop technologies for mitigating climate change, is leading to a strong foundation for sustainable growth. Companies insist that the government should release the payment to power producers in time and provide better infrastructure for evacuation for the

power generated, in order to boost capacity addition in the sector. While we are planning to add 15 GW in the 12th five year plan, China is adding twice the capacity in a single year. Samant comments, Already demand for wind turbines from small / HNWI has reduced significantly. Many India wind turbine manufacturers are hoping that the foreign investors like CLP, Mytrah Energy (formerly Caparo Energy) may replace the small investors. This may work in short term however in long run Indian investors should be there. Industry believes that the government should allow both the incentives (GBI and AD) to continue to achieve the proposed 15 GW of wind power capacity addition during the XII five year plan. Also in the current scenario, REC mechanism may also appear to be more attractive. It is expected that the REC market may mark a new beginning of entry of large IPPs into the renewable energy sector. The PFC official said, EA 2003 does not have any specific mention of REC, thereby difficulties are experienced in sale of RECs. This has necessitated for legislative changes for long term RPO trajectory in accordance with NEP and Tariff Policy. The government should strengthen REC mechanism too.
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ExpertSpeak

Indias Bio-fuel programme faces an uncertain future


Smita Miglani, Research Associate with the Indian Council for Research on International Economic Relations (ICRIER) speaks on how our bio-fuel programme has suffered because of natural and infrastructural impediments in their production and supply. Despite being given a significant role as a renewable source, the actual production of these bio-fuels has lagged behind the projections made by the Planning Commission because of the policy level constraints. She explains that how the biodiesel industry is still in its infancy because of non-availability of vegetable oil and government policies. The article discusses various market forces impeding its growth and why states should rationalize VAT on blended bio-diesels.
India has lately been focusing on enhancing the share of renewable sources in its energy consumption basket. Biofuels have been accorded a significant role in this regard as substitutes for fuel oil. In the year 2003, the Report of the Committee on Development of Biofuel, under auspices of the Planning Commission, recommended a phase-wise implementation programme to blend biofuels with petrol and diesel. In September 2008, the Government of India came up with its National Biofuel Policy setting an indicative target of 20 percent blending of bio-fuels (bio-ethanol and bio-diesel) in petrol and requirements set forth until 2016-17 were set as shown in the Table 1 below. The actual production of these biofuels has lagged behind the projections made by the Planning Commission. Data on ethanol production and consumption in India is published by many sources and varies considerably but none of them show that the Planning Commission production projections have been achieved. The case for bio-diesel is more striking than bio-ethanol. In fact, the bio-diesel policy has remained virtually a non-starter with the current installed capacity being just around 1.2 million tonne as against the requirement of around 3.35 million tonnes in India. Many experts today feel that the countrys biofuel programme has reached a plateau. There are many reasons for these. On one hand are the natural and infrastructural impediments to their production and supply and; on the other hand, there are policy level constraints. For ethanol, industry sources reveal that ethanol production in India has been taking place primarily through the final C grade molasses (of which approximately 10 litres of ethanol can be extracted, while as much as 70 litres of ethanol can be produced directly from sugarcane juice). Moreover, oil marketing companies increasingly have

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diesel in phase-wise manner by the year 2017. This included recommendation of a mechanism for networking various activities such as plantation, research and development (R&D), technology and marketing with appropriate institutions to achieve the desired goals. The benefits and prospects of biofuels in the country were well examined. It was believed that promotion of bio-fuels could meet Indias energy needs in an environmentally-sustainable manner, while also reducing its import dependence on fossil fuels. The bio-fuel

Table 1: Projected demand for petrol and diesel and biofuel requirements (in million tonnes) Year Petrol Ethanol blending Diesel Biodiesel blending Demand requirement Demand requirement @5% @10% @20% @5% @10% @20% 2006-07 10.07 0.50 1.01 2.01 52.32 2.62 5.23 10.46 2011-12 12.85 0.64 1.29 2.57 66.91 3.35 6.69 13.38 2016-17 16.40 0.82 1.64 3.28 83.58 4.18 8.36 16.72
Source: Planning Commission, Government of India, 2003

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to compete with alcohol-based chemical industry and potable alcohol industry for availability of molasses every year. Since the feedstock requirements of all these industries as well as sugar consumption requirement of the country are increasing every year, it is difficult to alter the proportion of sugarcane that is crushed by sugar factories in relation to total sugarcane produced in the country every year. In this scenario, the main challenge lies in increasing production of sugarcane itself domestically. Three options are available to meet the increased demand for ethanol at an affordable price in future. First, increase the area under sugarcane production; second, increase the yield of sugarcane production; and third, use alternative feedstock such as sweet sorghum, sugar beet or cellulosic raw materials for ethanol production. Achieving an

increase in area under sugarcane cultivation is difficult because it is highly waterintensive and largely an irrigated crop in India. This means that efforts towards realizing the other two options need to be enhanced in the future. Yearly fluctuations in sugarcane

for producing bio-diesel. In face of output, along with varying market estimates of demand for sugar, also make shortage of edible oils, consumption of non-edible oils for non-diesel purposes the scenario for policy and business such as lighting and soap manufacturing planning uncertain. When sugar prices is also increasing. The collection and are low, millers margins are squeezed processing mechanism for oil bearing and they are unable to earn enough to seeds is still recover the costs underdeveloped of converting Increased demand and manual in the cane to sugar. country posing a When factories for ethanol can be are financially met by increasing the logistical challenge. constrained, they area under sugarcane For 100 ton oil per take delivery of production; increasing day plant, around cane but postpone the yield of sugarcane 15,000 people are needed to collect payments to production; and by the seeds. Nonfarmers, forcing using alternative edible oils are them into a debt feedstock such as also more prone trap. Uncertainties sweet sorghum, sugar to decomposition about payments beet or cellulosic raw than edible oils, from millers and materials and hence need a high investment lot of pre-treatment requirements for adding to the cost of the crop make manufacturing of bio-diesel. farmers switch between cane and other There are also policy related issues crops more frequently. It is a systemic in this segment. There is a need for problem which needs to be resolved states to rationalize Value Added Tax through targeted policy regulations. on blended biodiesel. They have been The demand for diesel is five criticized for their revenue-centric times higher than the demand for approach in taxing biodiesel at the rate petrol in India. But while the of diesel when blended. The Ministry ethanol industry is mature, of Petroleum and Natural Gas directive the bio-diesel industry to ban direct sale of bio-diesel has also is still in its infancy. been criticized as limiting the scope The main reasons of the bio-diesel program. Feedstock are non-availability for biodiesel is not supplied by the of vegetable oil Government at fixed prices. Biodiesel and government price has to be commodity linked, either policies. The to feedstock or diesel or both. In the biodiesel likelihood of bio-diesel demand rising policy has in coming years, a clear roadmap is been structured required to enhance production steparound Jatropha by-step to reach the 20 percent blending which has not of biodiesel with diesel. Finally for both proved to be a bio-ethanol and bio-diesel, subsidies and commercially viable grants can be considered upon merit for crop in the country despite new and second generation feed stocks, its prospects of being grown in advanced technologies and conversion un-irrigated and wastelands. In India, processes. since edible oils are in short supply and the country has to import up to 40 percent of its requirements, they have not been considered affordable or viable For suggestions email at feedback@infraline.com

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OffBeat

Rooftop solar power plants increase roof value of buildings

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by Priyanka Singh

With ever rising population and development of industries on a rapid scale, the demand for power has increased manifold. The frequently occurring power-cuts and the failure of Northern Grid were a result of overdrawing power from the grid which has come up due to the increasing consumption of electricity. Hence a lot more focus is now being given to captive renewable energy sources like rooftop solar power plants to reduce complete dependence on electricity grid and diesel gensets. People in India have shown interest and are gradually upgrading to newer designs and architecture that incorporates such facilities. The rooftop solar power plants can, on one hand provide support for

reducing electricity bills and on the other hand be used for running critical soft load like lighting, fans, computers etc, which are essential even in off peak periods. So unnecessary diesel consumption during seasonal off times can be avoided by having captive solar power plants. An additional benefit of rooftop solar power plants is that it increases the value of the roof by using solar as a shade. For example, in one of the solar power plants in Okhla Industrial Area in New Delhi, the shade or the virtual roof is used as an open-air caf or storage or a green meeting place. Few of the companies that are into creating and installing these structures are Tata BP, Moserbaer and Solid Solar, a subsidiary of Gautam Polymers that

started in 2005. The latter started off by making completed solar lightening solutions and selling it to private labels, industry players and in their own retail network in the beginning. But in 2010 when policy for rooftop solar power plants got announced whereunder the Jawaharlal Nehru National Solar Mission, the government gave a guideline of 30 percent subsidy on captive solar power plants on rooftops plus an 80 percent accelerated tax depreciation. Solid Solar took a plunge in the creation of rooftop solar power plants too. Shubhra Mohanka, directorSolid Solar by Gautam Polymers says, It is quite encouraging to see almost 90 percent of our parent company-Gautam Polymers revenue coming from Solid

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Solar itself. We are an accredited channel partner with the MNRE and help our customers to get 30 percent subsidy and 80 percent accelerated tax depreciation benefit at the point of investment itself. We have lighted up to 2000 rural homes through mini grids for rural electrification of the country. Since 2010, the company has done it in a couple of places like Jantar Mantar, Safdarjung Tomb, German Chamber of Commerce, IIT Kanpur, BHU Varanasi, couple of bank branches in UP and about 100 KW on a factory in the Okhla Industrial Area. Mohanka adds, There are few projects in pipeline that we are already implementing-there is a 20 KW plant to be installed in a petrol pump in Delhi, we are installing multiple number of mini-grids in UP and another 100 KW in North-East. We would have cumulatively done about 800 KW till date under rooftop solar power plants. Currently, Solid Solar is working with over 1500 village level entrepreneurs to rent solar lights to rural end users in non-electrified areas. The company has tied up with several Grameen Banks to provide financing of solar systems to rural households. Mohanka says that the companys main mission is to generate power at the point of consumption and do away with high Transmission and Distribution losses that happen in the main grid. The Delhi based company has four manufacturing units, two in Okhla- New Delhi, one in Haridwar - Uttarakhand and the fourth in Noida, UP.Our parent company has been growing at about 45 percent per annum for last 7-8 years. This year we target to achieve a 100 percent growth. Majority of the growth is coming from Solid Solars initiatives, said Mohanka. While solar rooftops are primarily being used by industry owners for their factory needs, companies feel that it is still time to make it popular in households like it is in Germany and USA. Companies say that its a hard call to educate people as well as the industry

about the cost and the limitations of installing rooftop solar power plants. Mohanka says, When people approach us they come with extremely absurd expectations and absolutely no knowledge of the cost. It requires a massive awareness programme to teach them that the plant can be only used as a backup option or in conjunction with their DG sets. There should not be high hopes to entirely cut off from the main grid and electricity bills. These plants can at best bear about 30-40 percent load per day.

MNRE is extending huge support to the players in captive rooftop solar power plants. Since it is an offgrid solar power setup, it does not lead into any kind of transmission and distribution losses. Also there are no land clearance hassles to go with it
Apart from this, the developers feel that the people should come with a prepared frame of mind for long term investment. They should not compare it with DG sets whose payback time is about 6-7 years whereas in captive rooftop solar power plants, they have to give a huge upfront payment which is almost like paying 10 years electricity bills at one go. At the moment, these companies are resorting to innovative methods of marketing like exhibitions, seminars, fairs, publicity on websites and approaching industry players and their associations directly. One good thing about these captive rooftop solar power plants is that the MNRE is extending huge support to the players here. Since it is an off-grid solar power setup, it does not lead into any kind of transmission and distribution

losses. Also it does not entail any kind of land clearance hassles. So the ministry is aggressively promoting it through giving 30 percent subsidy to the channel partners after completion of installation plus 80 percent accelerated depreciation benefit. The Ministry had a review meeting with the stakeholders recently to discuss ways to aggressively promote captive solar power plants and had asked them for any support needed. In fact, many companies including Solid Solar have banked upon this subsidy scheme extended and are aggressively promoting these plants among industry players by giving these subsidies and discounts on the very first day of the deal. Mohanka says, Its a worldwide trend especially in countries like Germany, France and US that players and the government are supporting captive rooftop solar power plants more than large utility scale projects. These countries have learnt after 20 years of experience that captive solar plants are more useful and much in demand than utility scale plants. As a result, they are now promoting it more. We are following the same path as it is a first step towards attaining self-sufficiency in power generation, said Mohanka. Installation of a 100 KW of a captive rooftop solar power plant would require approx. 900-1500 square metres of land (roof). On the cost front, 1 KW of these plants would fetch `2.7 lakhs with battery backup facility and `1.9 lakhs without battery backup facility. A 100 KW rooftop solar power plant can generate up to 400-500 units per day, as a result if a company uses 4000-5000 units per day-this plant can reduce 10 percent of the electricity bill per-day. Encouraged by the overwhelming support of the government and the response country-wide, Solid Solar has plans to install about one mega watt of these rooftop solar power plants in this financial year.

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StatisticsRenewableEnergy
State-Wise Cumulative Wind Generation Data in (BU) (As on 31.03.2012)
S. No. 1 2 3 4 5 6 7 8 Name of the State Andhra Pradesh Gujarat Karnataka Kerala Madhya Pradesh Maharashtra Rajasthan Tamil Nadu Total Upto March, 2005 0.721 1.332 1.409 0.047 0.300 2.650 0.494 11.970 18.923 2005-06 0.079 0.286 0.935 0.000 0.030 0.790 0.427 3.444 5.991 2006-07 0.111 0.455 1.397 0.000 0.070 1.714 0.532 5.268 9.547 2007-08 0.101 0.851 1.840 0.000 0.069 1.804 0.682 6.066 11.413 2008-09 0.333 2.104 1.723 0.000 0.003 2.207 0.758 6.206 13.334 2009-10 .106 2.988 2.895 .065 .082 2.779 1.127 8.146 18.188 2010-11 .076 2.881 2.825 .065 .090 2.692 1.387 8.720 18.735 2011-12 0.122 4.181 3.279 0.070 0.130 3.296 2.420 9.855 23.353 Cumulative 1.650 15.077 16.303 0.246 0.775 17.931 7.826 59.675 119.483

Source: MNRE

Salient Features of REC Mechanism


Participation REC Denomination Validity Categories Trading Platform Banking Borrowing Transfer Type Penalty for Noncompliance Price Guarantee Price Discovery Mechanism Trading Calendar Trading Period Market Clearing Financial Settlement Voluntary 1 MWh 365 Days after issuance 1. Solar REC 2. Non-Solar REC Power Exchanges only Not Allowed Not Allowed Single transfer only, repeated trade of the same certificate is not possible Forbearance Price (Maximum Price) Through Floor Price (Minimum Price) Closed Double-sided Auction* (*As advised by CERC) Last Wednesday of the month (T day) 1300-1500 hrs (T day) 1700 hrs(T day) Buyers pay upfront (T day) and Sellers receive on (T+1 day)

YoY Commissioned Biomass/Cogeneration power projects, July 2012


Year Biomass (MW) Annual Cummulative Addition 290.50 12.03 137.97 84.30 81.20 97.30 162.30 131.5 169 302.53 440.50 524.80 606.00 703.30 865.60 997.10 1166.10 1192.10 Cogeneration (MW) Annual Cummulative Addition 437.03 9.97 55.03 113.80 184.17 248.73 285.30 333.5 325.2 447.00 502.03 615.83 800.00 1048.73 1334.03 1667.53 1992.73 2079.73

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Upto Dec 2004 Till Mar 05 Till Mar 06 Till Mar 07 Till Mar 08 Till Mar 09 Till Mar 10 Till Mar 11 Till Apr 12 Till July 12

Source: Infraline RE Knowledge base

Source: Infraline RE Knowledge base

Monthly REC Inventory in India


Month Year June, 2011 Jul, 2011 Aug, 2011 Sep, 2011 Oct, 2011 Nov, 2011 Dec, 2011 Jan, 2012 Feb, 2012 Mar, 2012 Apr, 2012 May, 2012 June, 2012 July, 2012 Aug, 2012 Total: Opening Balance 14119 24824 36480 43197 71447 102487 132657 109091 39915 34463 38545 89688 151700 173998 398311 REC Issued 27090 30224 31813 74612 126544 135697 88055 102348 200736 203819 122369 230697 259125 382712 312148 2361294 REC Redeemed 16385 18568 25096 46362 95504 105527 111621 171524 206188 199737 71226 168685 236827 158399 1650835 Closing Balance 24824 36480 43197 71447 102487 132657 109091 39915 34463 38545 89688 151700 173998 398311 710459

Source: REC Registry of India

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Status of Wind Monitoring Stations in India (As on 4.8.2012)


S. No. 1 2 1 2 3 4 5 6 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Name of the Station Ittarai Vellamadam Lamba Sarva Jegawada Virewadi Balwa Jikiali Jagmin Jawla Harni Shewga Morewadi Shembawani Aadiware Hivarapahadi Chinchwe Khandala Pimpri Isapur Mirkhel Palsi Bombhale Khokade Uswad Dhanger Rohilagad Nimbhora District Tamilnadu Erode Tuticorin Gujarat Jamnagar Bhavnagar Surendra Nagar Bhavnagar Jamnagar Amreli Maharashtra Satara Yavatmal Buldana Aurangabad Kolhapur Kolhapur Ratnagiri Pune Nashik Aurangabad Washim Yeawatmal Parbhani Aurangabad Satara Satara Nasik Aurangabad Jalna Aurangabad Status In operation In operation In operation In operation In operation In operation In operation In operation In operation In operation In operation Re-commissioned on 01.07.2012 Commissioned on 31.05.12 Commissioned on 02.06.12 Commissioned on 04.06.12 Commissioned on 06.06.12 Commissioned on 08.06.12 Commissioned on 10.06.12 Commissioned on 23.06.12 Commissioned on 25.06.12 Commissioned on 27.06.12 Commissioned on 29.06.12 Commissioned on 03.07.12 Commissioned on 17.07.12 Commissioned on 20.07.12 Commissioned on 22.07.12 Commissioned on 26.07.12 Commissioned on 30.07.12 In operation In operation In operation In operation In operation In operation In operation In operation In operation In operation In operation In operation In operation In operation In operation In operation S. No. 1 2 3 4 5 6 7 8 9 10 11 12 1 2 Name of the Station District Karnataka Hulkotti Gadag Jogimatti Chitradurga Dasarahalli Bellary Huilgol Gadag Dotihalu Koppal Jeyur Bijapur Shamsherpurwadi Bidar Nagaranahalli Hassan Ganganur Chamrajnagar Gopalanahalli Tumkur Beermangala Chickaballapur Somagudda Chitradurga Uttarkhand Malari Chamoli Maneshwar Champawat Status In operation In operation In operation In operation In operation In operation In operation In operation In operation In operation In operation In operation Commissioned on 26.07.12 Commissioned on 04.08.12

1 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 1 2 1 1 1 1 2 1 1 1 2

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16

Andhra Pradesh Chinnapalasa Adilabad Vysapuram Anantapur Basavapuram Anantapur Kuttalapalli Anantapur Kodiganipalli Chitoor Molagavalli Kurnool Chinnakolumulapalli Kurnool Gangadevipalli Kaddapa Ottuguntla MahabubNagar Bandameedapalli Rangareddy Mangi Thanda Medak Gopiyanayak Thanda Medak Samudrathanda Nizamabad Patha Ananthapur Adilabad Ontimamidi East Godavari Malameedapalli Prakasam

Rajasthan Jaisalmer In operation Jammu & Kashmir Bidda Reasi In operation Pir Ki Gali Poonch In operation Patnitop Udhampur In operation Kangan Ganderbal In operation Parihaspura Baramula In operation Gulmarg Baramula In operation Uplina Baramula In operation Taru Leh In operation Fotu La Leh In operation Upshi Leh In operation Diskit Leh In operation Hanley Leh In operation Chushul Leh In operation Khumbutha Kargil In operation Photang Kargil In operation Rungdum Kargil In operation Hambotingla Kargil In operation Lakthang Kargil In operation Bihar Zindapur Gaya In operation Shankarnagar Munger In operation GOA Sirigao North Goa In operation Andaman & Nicobar Islands IRBN Complex Andaman In operation Meghalaya Rymbai Jaintia Hills In operation Manipur Kamnong Ukhrul In operation Mao Senapathi In operation Assam New Panbari Dhubri In operation Sikkim Sadam South Sikkim In operation Kerala Puthuppally/ Palakkad In operation Kanjikode Vandiperiyar Idukki In operation Total No. of Stations in operation at the end of May.2012= 70 Total No. of Stations closed down in Jul.2012 = 14 Total No. of Commissioned in Jul.2012 = 18 Total No. of stations in operation as on 04.08.2012 = 88 Akal

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Source: CWET

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InFocus

`1.63 lakh crore scam in Delhi airport deal: CAG

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DIAL given post contractual benefits thereby violating tender process Govt handed prime land to DIAL at dirt cheap price
On July 3, 2010, Prime Minister Manmohan Singh inaugurated the new integrated terminal building (Terminal 3) of the Indira Gandhi International airport. The new terminal building had been completed in a record time of 37 months and in time for the Commonwealth Games later that year. The swanky T3 was hailed as Indias gateway to the world. Delhi International Airport Limited (Dial) the GMR-led consortium that runs the Delhi airport had delivered on its promise of turning around the countrys flagship airport into a world class facility. The new integrated passenger terminal had a capacity to handle 34 million passengers per annum with 78 aerobridges, piers, travellators and elevators. The plush T3 was one of the largest in the world having business centers, malls, a hotel and a galaxy of reputed shopping chain brands. National carrier Air India soon announced its plans to make Delhi its hub. Accolades and awards followed and IGI was rated as the second best airport in the world in the 25-40 million passengers per year category. The decision to enter into a joint venture to develop and manage IGI airport was the first of its kind. DIAL, a joint venture consortium of GMR Group (54 percent), Airports Authority of India (AAI) (26 percent), Fraport & Eraman Malaysia (10 percent each), had won the contract to operate the airport for a 30-year-term in January 2006.

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As the Comptroller and Auditor General of India (CAG) began its audit of the mega project, it became clear very soon that the picture wasnt all that rosy and there was a lot of mess behind the gloss. While it is true that we have a world class airport, what cannot be ignored is that rules were bent and DIAL was given post-contractual benefits, a senior CAG official said. Allowing these post-contractual benefits violated the tendering process by which the joint venture partner was selected, he said. Many observations in the present report would indicate that whenever DIAL raised an issue regarding revenue to accrue to it or expenditure to be debited to government in contravention of the provisions of Operation Management Development Agreement (OMDA), the ministry and AAI interpreted the provisions always in favour of the operators and against the interest of the government, the CAG said in a scathing audit report titled Implementation of Public Private Partnership IGI airport. The auditor noted that basic documents like Khasra were missing thereby making impossible for audit to check the land actually transferred. Against the area of 470,179 square metres indicated in the major development plans, Dial had actually constructed 553,887 square metres of area at IGIA. The build up ground floor area exceeded the Major Development Plan by nearly 83,708 square metres (17.80 percent). The financial auditors (M/s KPMG Advisory Services Private Limited) appointed by AAI to verify the final project cost submitted by Dial, reported on October 15, 2010 that the ground area for peak hour passenger at T3 was higher than most of the leading airports in the Asia Pacific region. M/s Engineers India Limited, the technical auditor, appointed by AAI also opined in August 2010 that due to this

increase in area, all other items of the project have increased proportionately. Neither the ministry of civil aviation nor AAI took any action for such gross violation of the master plan and the consequent increase in the project cost, the auditor noted. As per the business plan, the original project cost approved by Dial and communicated to AAI was `8,975 crore in January 2008. The project cost in July 2010 as claimed by dial was `12,857 crore. The final project cost adopted by Airport Economic Regulatory Authority (AERA) the airport regulator was `12,502.86 crore. The variation between the approved project cost and the final project cost was `3,882 crore i.e. 43.25 percent higher than the original project cost.

While it is true that we have a world class airport, what cannot be ignored is that rules were bent and DIAL was given postcontractual benefits, claimed CAG
As per the original estimates the entire funding was proposed to be through equity, debt, security deposits and internal accruals. However, this was reduced to 72.68 percent of the total fund requirements of the actual project cost. This financial gap was mainly met by levy of Development Fee (DF) which constitutes 27.32 percent of the total capacity outlay. Operation Management Development Agreement (OMDA) did not envisage the funding of project cost through levy of DF from passengers since the entire funding was to be through debt and equity only. That was not all. In fact, the initial findings were just the tip of the iceberg. CAG raised several red flags, pointing out procedural lapses and raising crucial questions pointing to how rules were

bent to favour the governments joint venture partner. It has given several instances where the government went out of its way to given post-contractual benefits to the private partner. Government, the auditor said, handed over prime land to Dial for a pittance leading to a notional loss of over `1.63 lakh crore. The prime land that would fetch `1,63,557 crore to the private sector partner was leased out at an annual rent of `100 for 58 years. With an equity contribution of `1,813 crore, Dial got a brownfield airport for 60 years with a potential of earning capacity of `1,63,557 crore, CAG has said. The company had got 4,799.09 acres of land on a `100 annual lease rent for 60 years for an equity contribution of only `1,813 crore. OMDA permitted DIAL to utilise 5 percent of the total land area that would work out to 239.95 acres for commercial exploitation. Consultancy firm Merrill Lynch had worked out the valuation of the land at `100 crore an acre. Thus, even in terms of this conservative estimate, the total current value of the land available to Dial for commercial exploitation, would amount to `24,000 crore. The CAG said, The projected earning capacity of this land (239.95 acres) in terms of licence fee over the concession period of 58 years was indicated by Dial itself as `681.63 crore per acre in a letter to the joint secretary, aviation ministry. Thus for the entire area of 239.95 acres, the potential earning from the land, according to the calculations worked out by Dial itself, amounts to `1,63,557 crore. Audit would like to draw the attention to the fact that this area is part of the entire area of land that has been handed over to Dial at the lease rent of `100 per annum, it noted. The auditor has pointed out that the governments decision to allow levy of Development Fees was a post-

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InFocus

contractual benefit provided to Dial at the cost of passengers who were taxed for using Delhi airport amounting to `3415.35 crore. The auditor said the original deal did not mention that part of the project cost would be raised through development fees. It said that if the joint venture was to have the permission to levy the fee, it should have been made known to

The governments decision to allow levy of Development Fees was a post-contractual benefit provided to Dial at the cost of passengers

Airport
Size of the scam: `1.63 lakh crore The scam:
DIAL was handed out the airport for 60 years with a potential of earning capacity of `1,63,557 crore, with an equity contribution of only `1,813 crore. Land was leased to Dial on a highly concessional annual lease rent of `100 for the entire stretch. Airport development fee (ADF) levied by the DIAL was not part of original terms of the contract Delhi airport charges ADF of R 1300 and R 200 per passenger for international and domestic travel respectively. In addition, Dial has started charging a User Development Fee from May 15 ranging between `436- Rs1068 from international and `195 `462 from domestic passengers.

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Delhi airport Terminal 3: Gateway to the world


Terminal 3 : Salient Features Integrated Terminal International and Domestic 34 million passengers per annum capacity 5.4 million sq ft. area 9 level passenger terminal building and 2 piers each 1.2 km long. In-line Baggage Handling System with capacity to handle 12,800 bags per hour 6 Common check-in islands -168 check-in counters 95 Immigration counters (49 Outbound and 46 Inbound Immigration counters) 78 Passenger Boarding Bridges (including 3 Passenger Boarding Bridges for A380 or similar sized aircraft) 14 Baggage reclaim belts including 2 belts for Out of Gauge (OOG) bags 6.7 million sq ft. of apron area 100 room Transit Hotel for Domestic and International passengers (68 rooms for domestic transit and 32 rooms for international transit) 96 automatic travelators /walkways (Longest one being 118 mts in length) Over 20,000 sq mters. of retail space. Multi Level Car Park to accommodate 4300 cars 7 MLD Water and 10 MLD Sewage Treatment Plant (total quantity for entire airport, treatment plant inside airport premises only)

Construction Time
Airport Changi Airport Singapore (T3) Heathrow T5 London, UK Beijing Airport New terminal for Olympics T3, China IGI Airport T3, New Delhi, India Capacity 22 Million 25 Million 45 Million 34 Million Time 76 months 60 months 60 months 37 months

all the other bidders too. Delhi airport charges `1,300 and `200 per passenger for international and domestic travel, respectively as ADF. Besides, from May 15, Dial started charging a User Development Fee of `436-1,068 from international and `195-462 from domestic passengers. The decision to levy DF after the effective date, has vitiated the sanctity of the bidding process, as the draft OMDA, which was part of the bid documents does not mention about funding of the project cost of the airport through levy of DF. In case the JV was to have been permitted to levy DF to finance the project after signing of the OMDA, this important condition should have been known upfront to all bidders at the time of bidding, the report said. CAG has further said that undue favour was granted to Dial, which led to a loss of `239.69 crore during 2006-11 to the public exchequer, as funds were diverted from Passenger Service Fee escrow account for purchase of security equipments by Dial. Treatment of services such as ground handling, cargo handling or parking as non-aero services in OMDA provided undue financial advantage to Dial, CAG said. Dial enjoys a unilateral right to extend the concession period for another 30 years. This is not only a violation of the commitment in the cabinet note but is also a unilateral and unfair advantage given to Dial which is detrimental to government interest as it does not provide the government any scope for review of any of the conditions. The State Support Agreement allows right of first refusal to Dial with regard to any second airport planned within 150 km radius of IGI. This provision thwarts competition and provides dial with a natural advantage on the second airport. The auditor also points to some glaring contradictions, which have all benefited the private operator of the Delhi airport. The audit report also points to a conflict between OMDA (signed

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between Airports Authority of India (AAI) and Dial) and AERA Act in defining aeronautical and nonaeronautical services. In terms of section 13(2) of the AERA Act one of the important functions of the Authority was to determine the tariff for aeronautical services. However, definitions of aeronautical services differ substantially between OMDA and the AERA Act. Ground handling and cargo handling service are non-aeronautical services in OMDA but are aeronautical service in terms of AERA Act. According to AERA, these services are less capital intensive and more profitable. Treatment of services such as ground handling, cargo handling or parking as non-aero services in OMDA provided undue financial advantage to dial, as in terms of SSA (state support agreement), the targeted revenue for the purpose of tariff fixation takes into account only 30 percent of the revenue generated from non-aero services. Following SSA, a significant part of the revenue generated by DIAL could not be included by AERA for determining the targeted revenue for the purpose of tariff fixation for IGI airport.

The aviation ministry has refuted the loss figures and other allegations as made in the report. It has said the calculation of presumptive gain from the commercial use of land at the Delhi airport is totally erroneous and misleading as it simply adds the nominal value of the projected revenue, without taking the net present value. Benefit to AAI is likely to be more than `3 lakh crore in this process during the entire concession period, the ministry said. We feel sad that a showcase airport created with dedicated efforts and a well-thought-out policy of the national government has come in for adverse remarks, DIAL said. The company said it had not received any undue benefits from the government before, during or after the bidding process. The entire process of the privatisation and selection of joint venture was based on a transparent, international, competitive bidding which was guided and presided over by competent bodies and has been upheld as such by the Supreme Court in 2006, it said. The Airport Development Fee, it said, is allowed as per the AAI Act and was known to all bidders.

Sources in the Nationalist Congress Party, whose leader Praful Patel was the aviation minister said the CAG report was full of factual inaccuracies. They said all decisions were taken by the Cabinet and the tender process was transparent and upheld by Supreme Court. The action now moves to the Public Accounts Committee, which would examine the CAG report. The damning report has no doubt pushed the government on the back foot. It has given the opposition the muchneeded ammunition to launch a fresh offensive on a government that is already cornered from all sides. Delhi is the countrys flagship airport. It handles VVIP from across the country and the world and hence it gives a lot of access to the company that operates the airport, an aviation ministry official said. While chances of the contract being cancelled are next to nil, it remains to be seen what action is taken to rectify the mistakes pointed out by the government auditor.
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PhotoEssay

Cairn Indias Growth momentum in India


Cairn India been exploring for hydrocarbons in India for more than 17 years and has a world-class resource base, with interest in nine blocks in India and one in Sri Lanka. Cairn Indias resource base is located in three strategically focused areas namely one block in Rajasthan, three on the west coast of India and six on the east coast of India, including one in Sri Lanka. Cairn Indias focus on India has resulted in a significant number of oil and gas discoveries. It has to its credit the biggest oil discovery in last 40 years (Mangala) in Rajasthan in the north west of India at the beginning of 2004. Today, it has a proven track record of making exploration discoveries and fast tracking them to production. Cairn India has opened up three new frontier basins with over 40 discoveries. Three out of the seven landmark discoveries made in India between 2000 and 2005 were by Cairn India. Today, Cairn India contributes over 25% of the domestic crude oil production for the nation. Cairn India has helped reduce oil imports by $6 billion in the last fiscal year, and contributed $2.4 billion to the national exchequer. In Rajasthan, Cairn India operates Block RJ-ON-90/1. The main Development Area (1,859 km2), which includes Mangala, Aishwariya, Raageshwari and Saraswati is shared between Cairn India and ONGC, with Cairn India holding 70% and ONGC having exercised their back in right for 30%. The Operating Committee for Block RJ-ON-90/1 consists of Cairn India and ONGC. In Sri Lanka, Cairn Lanka, subsidiary of Cairn India has made successive gas discoveries in the frontier Mannar Basin last year and is

The company operates the largest oil producing field in the Indian private sector and has pioneered the use of cutting-edge technology
now evaluating well results to determine its commercial potential. Cairn Lanka has now entered into second phase of exploration. Cairn Lanka has 600 square km of 3D Seismic data and plans for

further exploration drilling in CY 2013. The Company was adjudged the fastest growing energy company in Asia and the fourth fastest in the world at the Platts Top 250 Energy Company Awards 2011 at the International Energy Week, Singapore. With the support of Joint Venture partners and the Government, Cairn India continues its efforts in creating value for all stakeholders, thereby contributing to the nations energy security.
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PhotoEssay

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pipeline: ~670 km long and 24 crude oil 1. Human Resource- Nurturing our strength: Cairn pipeline with Skin Effect Heat Management Indias greatest assets are its people. With a system. 590-km pipeline completed which strong workforce, Cairn Indias people are of passes through eight districts of Rajasthan highest global standards, who are recruited, and Gujarat to transport the crude to refiners in developed and trained according to a People Gujarat- IOC and private refiners Reliance and Strategy. Essar 2. Barmer Basin: One of the largest onshore 6. Mangla Processing Terminal: Lifeline of the hydrocarbon finds in India in the last 25 years, Rajasthan block became operational in 2009 the Rajasthan block today has a potential and within three years, it is now producing resource estimated at 7.3 billion barrels of 175,000 bopd. oil equivalent (bnboe). The block can further 7. Corporate Social Responsibility: Amongst support 300,000 bopd, equivalent to a various CSR initiatives to empower local contribution of ~40% of Indias current crude communities, Cairn India is supporting a dairy production development programme in association with 3. Mannar Basin in Sri Lanka- Cairn Lanka, NGO Society to Uplift Rural Economy in subsidiary of Cairn India Ltd. has successfully Barmer, to help improve milk sales for rural completed Phase 1 of the exploration with farmers, and has helped empower local successive gas discoveries- CLPL-Doradowomen 91H/1z and CLPL-Barracuda-1G/1 in the 8. Krishna Godavari Basin: Ravva unit in KG basin frontier Mannar Basin has been operational over 17 years where 4. Cambay Basin: Cairn Indias operations in Cairn India has recovered 245 mmbbls of oil Block CB/OS-2 are centred on the Lakshmi and 330 bcf of gas, more than double the and Gauri oil fields, and the CB-X development original estimates. In the same basin, Cairn has area. A JV with ONGC and Tata Petrodyne recently notified the Management Committee of Limited, Cairn India is now producing over a second oil discovery, Nagayalanka-SE after 60% oil and the infrastructure is being used Nagayalanka-SE-1 well in the onshore block creatively to process the North Tapti gas KG-ONN-2003/1 5. Worlds longest continuously heated insulated

Magazine Title Code: DELENG18199 Form 2: (I-11)/Press/2012

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