1. ET
Total number of pages 56
Volume 1 | Issue 2 | March 2013 | `50
Electricals Today
More power to the industry
focus
Is it time for a rethink
on PPA conditions?
powerless
DESPITE THE HYPE, P CHIDAMBARAM’S budget FAILED TO OFFER THE
SECTOR ANY LIGHT AT THE END OF THE LONG, dark TUNNEL
An ITP Publishing India Publication
01_ET_Mar13_CoverFinal.indd 1 06-03-2013 17:39:47
2.
3. Contents
People 12
12 Cover Story
Despite the hype, Chidambaram’s budget has little to
offer the power sector. Is there any hope at all at the
end of the long, dark tunnel?
25 Column
Sanjeev Aggarwal, MD of Amplus Infrastructure, talks
about green corridors to get rid of the power woes
30 Straight Talk
CCI MD and CEO Maadhav Digraskar wants the
government to give the power sector special status
18 38
REPORTS
18 Distribution
The country's peak demand-supply gap is ever
widening. Are we looking at a likely catastrophe?
26 Finance
The power sector behemoth, Tata Power, reported
a disappointing quarter with losses amounting to
Rs329 crore
Maadhav Digraskar
38 Generation
Fuel is on fire as additional capacity is getting
stranded due to lack of coal supply
“In today’s
30
fiercely
competitive
REGULARS environment it
is challenging
06 News, people & events to retain our
Industry round up, including new events and latest leadership
developments in the extra
high voltage
50 Market data segment."
A look at the key industry trends and statistics.
And an analysis of what the numbers mean
54 Ten things about
Grid stored energy can be used to address peak
power needs
march 2013 | Electricals Today 3
03_ET_Mar13_Contents.indd 3 06-03-2013 12:20:40
5. KNOWLEDGE PARTNER
ET
ELECTRICALS TODAY
MORE POWER TO THE INDUSTRY
temp_Cover.indd 1 07-03-2013 10:54:46
6. NEWS
Shortcircuited: SEBs are increasingly
9 News & P NTPC-CIL DEADLOCK TO
END SOON
resorting to power cuts to get over the
power shortage
It looks like the face-off
between NTPC and Coal India
Limited (CIL) on the fuel sup-
ply agreement (FSA) issue
is nearing closure. Accord-
ing to NTPC officials, most
major issues with CIL have
been resolved. The NTPC
officials have informed the
same to the CEA chairperson
in a meeting held recently.
A meeting to iron out the
remaining differences was
held between NTPC and CIL
officials at CIL headquarters
in Kolkata, towards the end of
last month.
Lanco, R-Power cut off Mine developer
supply to UPPCL for FECPL
Power generating companies Reliance Power (R-Power) and Lanco Infrat- Fatehpur East Coal Private Limited
ech have cut off supplies to Uttar Pradesh Power Corporation (UPPCL) for (FECPL) is planning to appoint a mine
non-clearance of its dues. Reliance Power’s Rosa thermal power station developer cum operator (MDO) to
and Lanco Infratech’s Anpara C thermal power station have stopped sup- develop the Fatehpur East coal block,
plying power to UPPCL. "Both companies have shut down generation as in the Mand Raigarh coalfield of
we have not been able to make timely payments. While dues to Reliance Chhattisgarh. FECPL, a joint venture
amount to approximately Rs900 crore, Lanco’s dues are to the tune of (JVC) of five independent power
approximately Rs400 crore,” an UPPCL official said. producers, has issued a request for
Rosa TPS in Shahjahanpur district has shut down one unit of 300 proposal (RfP) that will include three
MW while Lanco Infratech’s Anpara C project in Sonebhadra different activities, development, oper-
district has shut down one unit of 600 MW. Rosa and ational and mine closure, to be carried
Lanco have a total installed capacity of 1,200 MW out by the chosen MDO. The develop-
Rs1 ,500cr each. While the former has four units, each ment activities primarily involve con-
Approximate dues of 300 MW, Lanco has two coal-fired units struction and maintenance of mining
each of 600 MW. Reliance Power had got into infrastructure as well as arrangement
of UPPCL a commercial dispute with the UPPCL last year of manpower and water supply for the
after which it manually shut two of its four units. project. Bids are expected to be sub-
The power corporation expects the situation to improve mitted by March 18, 2013, following
once the Centre’s bailout package in the form of a financial which the proposals for qualification
restructuring package, comes through. will be opened.
6 Electricals Today | March 2013
06-11__ET_Mar13_News.indd 6 06-03-2013 12:22:04
7. NEWS
& People >>> FSAs still
11
Major challenge is securing fuel
hanging fire
supplies. Though India has the
There is still a long way to go for CIL
and its subsidiaries to sign all the
world's fourth largest reserves
requisite Fuel Supply Agreements of coal and has recently made
(FSAs). In a meeting held recently
convened by AS Bakshi, chairman, CEA, gas discoveries that are notable
the power utilities raised concerns
regarding certain issues with Coal
by global standards, inadequate
India Ltd (CIL) subsidiaries. Subsidiar- fuel supplies are constraining the
ies of CIL namely SECL and MCL in
particular, have refused to consider growth of power sector.”
medium term power purchase agree- Jyotiraditya Scindia, Union power minister
ments (PPAs) necessary for the signing
of FSAs. The companies have termed
long term PPAs as a pre-requisite to
ink the pact. The coal companies have
also demanded written confirmation
regarding supply of 5 per cent power
Distribution companies cannot
to host states on variable charges. continuously go on making losses.
State governments have no choice but to
MoP seeks Rs1,500 increase tariffs to make them viable.”
NK Jain, vice-chairman, JSW Energy
cr for discoms
Determined to ensure its ambi-
tious turnaround plan for ailing Reintroduction of Generation
distribution companies, the power
ministry had sought a Rs1,500-
Based Incentive is a timely
crore budgetary support for intervention for the wind industry,
funding the Transitional Finance
Mechanism (TFM) under the which was suffering for over
scheme in 2013-14. It also wanted
Rs4,500 crore for its rural electrifi-
than a year. It will rejuvenate the
cation programme, the Rajiv Gan- sector with more investments.
dhi Grameen Vidyutikaran Yojana
(RGGVY), an 80 per cent jump over This assumes greater significance
the revised estimate of Rs2,492
crore for this financial year. The
as the industry has an ambitious
Rs1,500-crore central allocation is plan of capacity addition in
to be available for states showing
an accelerated reduction in com- the current plan period.”
mercial and line losses. Ramesh Kymal, managing director, Gamesa India
March 2013 | Electricals Today 7
06-11__ET_Mar13_News.indd 7 06-03-2013 12:22:06
8. NEWS
> > at a glance
> AP GENCO TO COMMENCE WORK
The Andhra Pradesh Chief Minister N Kiran Kumar Reddy
TPC to invest Rs500 cr in Jharkhand approved the setting up of three new thermal stations
TATA Power Co Ltd (TPC), which recently signed a power distribution franchise agreement in the state. AP Genco is expected to commence work on
with the Jharkhand State Electricity Board (JSEB), will invest Rs500 crore in the Jamshedpur three projects with total installed capacity of 2,400 MW.
circle of the state. TPC will upgrade existing infrastructure and distribution network there These projects will be based on supercritical technology
and hopes to reduce aggregate technical and commercial (ATC) losses to 13 per cent from and have capacity of 800 MW each. Reddy has directed AP
the current 33 per cent in the new circle. This is TPC’s first power distribution franchise, Genco to complete these thermal power stations in the
although it has distribution operations in Mumbai and Delhi with its own licence. “We state within three years. The total cost is expected to be
will be investing Rs500 crore in improving the distribution network,” said Tata Power’s about Rs13,200 crore. These power plants will be setup
executive director and chief financial officer S Ramakrishnan. Of this, Rs400 crore will be at Krishnapatnam in Nellore district, a green field plant
raised through loans under the Restructured Accelerated Power Development and Reform and expansion at existing power plants at Vijayawada and
Programme (R-APDRP) and Rs100 crore from internal resources, he said. The company aims Kothagudem Thermal Stations.
to reduce ATC losses to 13 per cent over the next five years.
New national power grid to start operations by Jan 2014
While integrating the southern grid with the already formed New Grid is underway, the
Planning Commission has made some important recommendations and said that systems
should be loaded gradually as experience is gained. This national power grid is expected
to be operational by January 2014. The commission has said that for an initial period of six TPC RfP for Delhi power procurement
months to one year, AC ties must be primarily used to build reliability. It has also contended To avoid the inconvenience of power cuts during the summers,
that a right operating philosophy like frequency band tightening and tight control on Tata Power Delhi Distribution Limited (TPDDL) is planning to make
drawals must be put in place for the synchronization to be a success. Experience of Turkey short term power purchase agreements for the period from May 16
can be utilised in this regard, the commission noted. Turkey was synchronously connected to September 15, 2013. Although Tata Power has not put a cap on
to Continental Europe in September 2010. However, three phases of trial operation and the quantum of power to be supplied by the successful bidder, the
stabilisation were conducted for almost two years till late 2012. distribution company (discom) has insisted on a minimum 25 MW for
the entire period. In the request for proposal (RfP) document, it has
WPI for power up in Jan’13 been specified that the power requirement for the 15-day period in
The wholesale price index (WPI) for “Fuel and Power” for the month of January, 2013 rose May will be 50 MW. This will further escalate to 200 MW and 300 MW
by 0.3 per cent to 189.5 (Provisional) from 188.9 (Provisional) for the previous month due in the months of June and July, respectively, and then drop to 150
to higher price of bitumen (6 per cent), light diesel oil and furnace oil (1 per cent each). MW during September 2013. Whatever amount the successful bidder
However, the price of aviation turbine fuel (1 per cent) declined. The annual rate of inflation, agrees to supply, it has to ensure that the actual scheduling does not
based on monthly WPI, stood at 6.62 per cent (Provisional) for the month of January, 2013 deviate by more than 15 per cent of the contracted power as per the
(over January, 2012) as compared to 7.18 per cent (Provisional) for the previous month approved open access on monthly basis. In case such a situation
and 7.23 per cent during the corresponding month of the previous year. Build up inflation arises, the seller has to pay compensation to TPDDL at 20 per cent
in the financial year so far was 5.09 per cent compared to a build-up of 6.15 per cent in the of contracted tariff per KWh for the shortfall in excess of permitted
corresponding period of the previous year. deviation of 15 per cent. Bidders were asked to submit their bids and
supporting documents latest by February 27, 2013.
TD Power Systems wins contracts worth Rs234 crore
TD Power Systems Limited, a manufacturer of AC generators and solutions provider for TN invites bids for imported coal
captive and independent power projects, announced that its wholly-owned subsidiary DF Tamil Nadu PSU TANGEDCO has invited bids for procurement of 4.2
Power Systems Private Limited (DFPS) has been awarded two separate contracts worth million tonnes (MT) of imported steam coal for its 1,200 MW North
Rs234 crore. DFPS won a Rs225 crore order from an industrial conglomerate for setting up Chennai Thermal Power Project (Stage II) (NCTPP), which will com-
of a 45 MW captive power plant in the northeast. Additionally, it also won an order from a mence operation after May 2013, and for its other thermal stations
private sector steel giant for waste gas fired package boilers valued at about Rs9 crore. located in Ennore, Mettur and Tuticorin regions of Tamil Nadu. The
selected bidder will have to supply coal for a six month period from
Best Stall award for ABB at ELASIA June 2013 to November 2013. In case of any delay in commission-
ABB participated in the 5th ELASIA 2013 at Bangalore International Exhibition Center (BIEC) ing of the NCTPP power plant, TANGEDCO has said that the time
as platinum sponsors where it displayed its low voltage switchgear portfolio through a live period will be extended upto a maximum of three months, beyond
exhibiting stand of 90 square metrs. The stand consisted of segment-wise exhibit panels, November 2013. As per the coal specifications mentioned by the
live product demos, KNX living room automation with live demo automation and technical utility, the successful bidder will be liable to supply imported coal with
paper presentations on ‘Innovative and reliable systems in Low Voltage (LV) Networks.. Gross calorific value (GCV) of 5400-6300 kcal/kg and the size of the
It was an ideal platform, where major players from electrical industries like switchgear, coal should range between 0 to 50 mm. All bids need to be submitted
lighting, cables and solutions for renewable energy displayed their products and solutions. latest by March 12, 2013.
8 Electricals Today | March 2013
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9. NEWS
POSCO may become a CPSU EAC defers forest Odisha criticised for
The power ministry is actively con-
sidering the Planning Commission's
clearances diverting forest land
proposal to categorise Power System
Operation Corporation (POSOCO) as a An estimated Rs22,000 crore invest- for power stations
Group-A central public sector under- ment continues to be at stake as the
taking (CPSU). Being categorised as a Expert Appraisal Committee (EAC) The EAC has raised a red flag over Odisha
Group-A CPSU will lend an indepen- has deferred its decision on clear- Thermal Power Corporation Limited's
dent stature to POSOCO, established ance-related issues for 4,100 MW of (OTPCL) proposal to divert 1,969.78 hactre
as a 100 per cent subsidiary of Power- thermal and captive power plants. of land for the upcoming 3x800 MW
grid in 2009. In the recently convened meeting of supercritical coal based TPP despite five
The Planning Commission has the re-constituted EAC on environ- reserve forests within a 10 km range of
contended that this step is necessary mental impact assessment (EIA), the project site. The committee expressed
as POSOCO performs statutory func- the committee was taken aback by concern that the land for project and ash
tions of national importance through the developers' inability to bridge pond is too large for just one project and
RLDCs/NLDC. Central Electricity the missing gaps in project-specific needs to be scaled down to the maximum
Regulatory Commission (CERC) has documents despite being pulled extent possible. Moreover, OTPCL must
already conferred financial indepen- up earlier for this very reason. If the make efforts to avoid using the 83.91 acres
dence to POSCO. Classifying POSOCO developers fail to follow clear direc- of forest land altogether. During the EAC
as a 'Group-A' CPSU will not entail tions and furnish same old informa- meeting, the committee further directed
any financial implication as a revenue tion for resolution of matters, there OTPCL to strictly adhere to Central Electric-
stream is already provided for by CERC is nothing that the EAC can do ity Authority (CEA) norms and accordingly
in accordance with the provisions of except push its final decisions to the present the revised layout along with the
the Electricity Act, 2003. next meeting. EIA Report.
Tata Power registers 50.4 MW wind project
Carbon-friendly: Tata Power's Samana plant in Gujarat will
reduce carbon footprints by 96,821 tonnes of CO2
Tata Power has successfully registered
its 50.4 MW Wind power project at
Samana, Gujarat under Clean Develop-
ment Mechanism (CDM) programme
by United Nations Framework Conven-
tion on Climate Change (UNFCCC). The
50.4 MW wind plant was commis-
sioned in May 2009 and uses 63 wind
turbine generators of 800 KW capacity
each to harness wind energy for power
generation. Speaking on the occasion,
Anil Sardana, MD, Tata Power, said, “We
have always established that clean and
renewable energy is the need of the
hour and Tata Power will continue its
efforts towards this.” The Samana plant
helps in reducing an annual average of
96,821 tons of Carbon Dioxide equiva-
lent, by producing 104,970 MWh per
year (average) equivalent amount of
clean energy.
March 2013 | Electricals Today 9
06-11__ET_Mar13_News.indd 9 06-03-2013 12:22:09
10. DIARY
Events
Save Power Show
Venue: Le Meridien, Cochin
Date: March 2-4
The show is an excellent networking and knowledge-sharing
platform for the stakeholders in the renewable energy sector.
Save Power Show will showcase renewable energy and energy-
efficient products and solutions under one roof, enabling visitors
to acquire knowledge and information about the latest technol-
ogy and the best solutions for their energy requirement.
12th Coaltrans India
Venue: Grand Hyatt, Goa
Date: March 12-13
The past 12 months have seen dramatic developments in the
dynamics shaping India's coal sector. Yet amidst such difficulties,
the power and steel demand remains strong and India's coal defi-
cit continues to hold within it substantial exciting opportunities for
growth and innovation. At this annual networking event, you can
explore the new frontiers of India's rapidly expanding coal industry.
A must-attend event for coal sellers, buyers and traders.
Indian Solar Summit 2013
Venue: Mahatma Mandir Convention Centre, Gandhinagar, Gujarat
Date: April 18-19
With the aim to accelerate the number of solar installations in the
country to reach a target capacity of 20 GW by 2022, India has
established itself as one of the most attractive renewable invest-
ment markets in the world. In order to make this target a reality,
India’s premier solar show – The Indian Solar Summit and Exhibi-
tion – is back this year. Learn about the latest technologies and
development opportunities which are shaping the Indian solar
market.
Renewable Energy World India 2013
Venue: Bombay Exhibition Centre, Goregaon, Mumbai
Date: May 6-8
Renewable Energy World India 2013 shifts from New Delhi to
India’s financial hub, Mumbai, where the event was last held in
2010. With this move, the high-level conference and exhibition
aims to expand its coverage from the northern part of India, which
has been its main focus, to include the west and south. Under the
theme, Indian Power – Time to Deliver, the event brings together
decision-makers and professionals from leading companies
involved in renewable energy generation, transmission and distri-
bution within India and around the world.
Power-Gen India & Central Asia 2013
Venue: Pragati Maidan, New Delhi Clearly, oblivious to the 25,000 volts line in
Date: May 9-11
Power-Gen India & Central Asia 2013 aims to showcase the latest the backdrop, a recluse prefers a quick nap
technologies and solutions in the power and energy sector as well
as gather industry leaders and professionals together on a single under the sun to the vagaries of the Indian
platform. The show will provide immense opportunities for com-
panies and industry experts to network, develop business rela- power sector. And why not? The government’s
tions and establish future business prospects. Keep up-to-date
with the latest developments in the industry. promises for the man on the street remain no
more than a pipe dream.
10 Electricals Today | March 2013
06-11__ET_Mar13_News.indd 10 06-03-2013 12:22:11
11. DIARY
the big picture
POWER NAP March 2013 | Electricals Today 11
06-11__ET_Mar13_News.indd 11 06-03-2013 12:23:48
12. cover story
E
nergy demand in India is growing at a fast pace.
Both domestic consumption and industrial con-
sumption were at the upper curve of the growth
trajectory in the 11th Plan period. This trend is
expected to continue in the 12th Plan period as well.
The average per capita electricity consumption in the country is
pegged at 876 kwh, as opposed to that in China, which is close
to 3000 kwh. According to the World Bank data, the consump-
tion in India was 556 in 2008, 590 in 2009 and 616 in 2010 and
climbing close to 800 kwh in 2012.
It is imperative that the government takes the right steps to
bridge the demand – supply gap, which is hovering at above 10
per cent. The power generators in the country, who are facing a
number of issues, expected a budget that will go at least part of
the way towards making the power sector financially viable. But
Finance Minister P Chidambaram’s Budget 2013-2014 gave little
cheer to the beleaguered sector.
One market analyst put it succinctly. “The budget was neither
populist nor reformist. It was actually feminist,” he said, reflect-
ing the industry’s response to the budget. In contradiction to
the expectation as the country heads into an election year, the
budget was subtle with more concentration on women and
children.
BUDGET HIGHLIGHTS
Policy on blending the prices of domestic and imported coal
to be introduced.
Proposal to executive coal mining projects in the Public
Private Partnership (PPP) model through Coal India Limited to
be floated.
5 LNG terminals at Dabhol plant to be cleared.
Shale gas exploration to be encouraged in the next fiscal.
Generation-based incentives to wind energy projects reintro-
duced; Rs800 crore provided for the purpose to Ministry of
New & Renewable Energy.
The tax holidays enjoyed under Section 80-IA extended for
another year (till March 31, 2014).
State governments urged to participate in the scheme
announced earlier for financial restructuring of discoms.
Power transmission system from Srinagar to Leh to be
constructed at a cost of Rs1,840 crore (Rs226 crore will be
disbursed in next fiscal).
Zero customs duty levied for electrical plants and
machinery.
MEDIUM-TERM SOLUTIONS
The backbone of the economic
876 kwh
infrastructure and energy sector,
however, got a larger men-
tion. The FM started with
one of the major problems
average per capita electricity
consumption faced by the thermal power
producers in the country: fuel
supply constraint. “Coal imports, which
crossed 100 million tonnes during April-Dec
12 Electricals Today | march 2013
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13. budget
powerless
Despite the hype, Finance
Minister P Chidambaram’s
budget has little to offer
the power sector. Is there
any hope at all at the
end of the long,
dark tunnel?
By LIZA V
march 2013 | Electricals Today 13
12_16_ET_Feb13_Cover story_Budget.indd 13 06-03-2013 12:25:12
14. cover story
‘Corrective measures not taken’
JG Kulkarni, president, IEEMA, says the budget does little for the key electrical equipments industry
We were hoping for some corrective measures to revive the downturn in the
domestic electrical equipment industry, which is reeling under the twin onslaught
of the slowdown in the country’s power sector that has depressed domestic demand,
and the rapidly escalating imports of electrical equipment. This has resulted into
under-utilisation of the manufacturing capacity for electrical equipment.
Given the need to accelerate the Rural Electrification Programme, the fall in
Central Plan allocation for Rajiv Gandhi Grameen Vidyutikaran Yojana (RGGVY) from
Rs4,900 crore to Rs4,500 crore is a matter of concern. Further, the revised estimate
of Rs2,492 crore against the budget estimate for 2012-13 shows that funds provided
were not fully utilised.
The Restructured Accelerated Power Development and Reforms Programme
(RAPDRP), which is primarily focussed on reduction of AT&C losses, has also seen a
sharp decline in Central Plan allocation from Rs3,114 crore (BE 2012-13) to Rs575
crore given the gross under-utilisation of funds allocated last year. Only Rs1,500 crore
were utilised out of the total allocation of Rs3,114 crore.
The financial health of the discoms is a critical success factor for the viability of the
electrical manufacturing sector. Although a sum of Rs1,500 crore has been allocated
for debt-restructuring of discoms, till date, only a handful of states have evinced
interest in the debt-restructuring plan the central government announced some
months ago.
However, the budget did include some measures that would certainly provide
relief to this sector. These include:
• Extension of the sunset date by one more year for the power sector for claiming
100 per cent deduction of profits under section 80 IA.
• Generation-based incentives for wind energy.
• Rs50,000 crore provision for tax free infrastructure bonds.
• For the growth of Micro, Small and Medium Enterprises (MSMEs), the continuation
of the benefits for three more years, despite their growing out of their respective
category.
• Impetus to investment in plant and machinery above Rs100 crore through
investment allowance of 15 per cent to manufacturing companies.
• Funding and other incentives for the ambitious target of skilling 50 million people in
the 12th Plan. This will enhance availability of skilled labour and talent.
While the intent of the budget is to accelerate the GDP growth in the 12th Plan, it
will be constrained by an absence of matching impetus to the electrical equipment
manufacturing sector in particular and in the value chain of power covering
generation, transmission and distribution, on the whole.
14 Electricals Today | march 2013
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15. budget
2012, are expected to go up to 185 million tonnes in 2016-17,”
Chidambaram said.
For relief in the medium term, he announced the introduction
of a policy on blending imported coal and domestic coal. He
said that the government was working out a public private part-
nership (PPP) model for coal mining. Commercial coal mining is
being considered as a possible solution to increase the output
to meet the growing demand for coal from power producers.
Another issue related to coal Coal is linkage, which may get
sorted out, thanks to the railway budget, which earmarks Rs100
crore for coal linkage facility.
Gautam Adani, chairman, Adani Group, pointed out, “The
upward revision of import duty, from 1 per cent to over 4 per
cent on steam coal imports will adversely impact the industry
as it will lead to increase in the cost of power generation. This is
The announcement to equalise
a little amusing as the country has a huge deficit in coal and the
government is trying to minimise cost by augmenting coal sup-
custom and CVD for steam and
ply through various initiatives for domestic production as well bituminous coal used in thermal
as opting for price pooling of domestic and imported coal.”
India Ratings, in its reaction on the budget announcement,
power generation at 2 per cent each provides
said, “While it may be a little premature to form a definitive
assessment, the government's plans to encourage public - pri-
clarity to claims that are raised otherwise by
vate partnership projects along with the state-owned Coal India the customs department”
should, prima-facie, be deemed positive if it helps accelerate
and supplement domestic coal production, particularly to meet Anil Sardana, managing director, Tata Power
the acute fuel scarcity facing power projects.”
Anil Sardana, managing director, Tata Power, one of the
country’s largest power producers, said, “We are thankful for the
minister's announcement to equalise custom and CVD for steam LENDING TO THE SECTOR
and bituminous coal used in thermal power generation at 2 per Cheaper loans and making lending to power projects priority
cent each as this provides clarity to claims raised otherwise by have been long-pending demands of the country's power gen-
the customs department.” erators. This time, the finance minister has relented.
Says Sabyasachi Majumdar, senior vice-president, corporate
sector ratings, ICRA Ltd, “The government has proposed a num-
ber of measures for augmenting the availability of long-term
funds at competitive rates. These include encouragement for
creation of infrastructure debt funds (IDFs), fixation of limit for
fund raising through tax-free bonds at Rs550 billion and credit
enhancement mechanism through IIFCL.”
The major cheer, however, was reserved for the wind sector
with the re-introduction of Generation Based Incentive (GBI).
Also, the tax holiday for wind projects under 80 IA has been
extended for another year. In addition, the finance minister
has announced an allocation of fund from the National Clean
Energy Fund (NCEF) through IREDA with a life span of five years
to make the renewable energy lending cheaper.
Ramesh Kymal, chairman, Indian Wind Turbine Manufactur-
The upward revision of import duty, from ers’ Association (IWTMA) and managing director, Gamesa India,
1% to over 4 % on steam coal imports said, “The re-introduction of GBI is a timely intervention for the
wind industry, which was suffering for more than a year. This
will adversely impact the industry as it would certainly rejuvenate and boost the sector with more
investments. Reintroduction of GBI assumes greater significance
will lead to increase in the cost of power.” as the industry has an ambitious plan of capacity addition in
the current plan period. I am confident that the industry would
Gautam Adani, chairman, Adani Group bounce back by 2014-15 and may be able to cross the set target
of 5,000 MW capacity every year.”
march 2013 | Electricals Today 15
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16. COVER STORY
cover story
RUNNING FOR COVER?
The power generators in the country,
who are facing a number of issues,
expected a budget that will go at
least part of the way towards making
power sector financially viable. But
Chidambaram’s budget gave little cheer
to the beleaguered sector.
TOO LITTLE, TOO LATE
The most vital segment of the power sector – the electrical
industry – is unhappy with the budget. JG Kulkarni, president,
Indian Electrical and Electronics Manufacturing Association
(IEEMA), said, “We were hoping for some corrective measures to
revive the downturn in the domestic electrical equipment indus-
try which is reeling under the twin onslaught of the slowdown
in the country’s power sector, which has depressed domestic
demand, and the rapidly escalating imports of electrical equip-
ment. This has resulted in under utilisation of the manufacturing
capacity for electrical equipment.”
Looking at the mammoth problems faced by the sector and
recalling the near-total blackouts last year, experts says these
measures seem like small drops in the ocean. There should be
a way to end the policy paralysis in the power sector with an
investor-friendly policy environment. But that may have to await
the next government as UPA gears up for elections in 2014. The
question for the power sector is: will it be too late by then?
16 Electricals Today | march 2013
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18. Special report
18 Electricals Today | march 2013
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19. distribution
lights out!
India’s peak hour demand-supply gap
to widen to 22%. is there a way out?
BY Liza V
T
he power situation is fast progressing from a
‘warning’ to a 'crisis' situation. While ‘Power for
all’ is still a distant dream, the situation is fast
becoming critical!
Last year, during the summers, northern parts of
the country faced a complete black out for 48 hours. The reason:
Over-drawing by some utilities to meet demand owing to fuel
supply issues. But the question that is staring us point blank
right now is whether we are heading towards another crisis
bigger with fast dwindling fuel supply.
The ambitious plan of adding 75,000 MW to the grid
in the 12th five year plan will remain a mirage, point out
industry experts. For a country which added between
50,000- 60,000 MW in the 11th Plan period (2007-2012),
75,000 MW should be an easily attainable target. But that
does not seem to be the case.
Total installed capacity in the country stood at 2,11,766
MW with less than 1,000 MW addition from the December
2012 levels. Out of this, the contribution from the thermal sector
is 738 MW. This too was achieved mainly because of the commis-
sioning of one unit of 660 MW of the Mundra UMPP in January.
During the 12th Plan period, according to the plan CEA
document, the government plans to add a capacity of 72,330
MW from thermal power projects. But the plan is likely to hit
a road-block with the fast changing fuel supply scenario, both
domestic and internation.
The Problem
The investment in the power sector by private players is
expected to reach over 50 per cent by 2017. In 2011, during the
last phase of the 11th Plan period this was below 30 per cent.
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20. Special report
Total installed capacity as on 31-12-2012
The private sector came into the picture when they proved that they
have the ability to complete projects in an efficiently and timely
Fuel MW %
manner. It was a smooth run both for the companies and the govern-
Total Thermal 140976.18 66.82
ment till recently when the competitive bidding process started and
Coal 120,873.38 57.29
projects were awarded. The scene took a U-turn when the fuel supply
Gas 18,903.05 8.96
issue came to the fore with the rising prices of coal.
Oil 1,199.75 0.56
Hydro (Renewable) 39,339.40 18.64 The beginning
Nuclear 4,780.00 2.26 Under the competitive bidding Case I, the bids were awarded in two
RES** (MNRE) 25,856.14 12.25 categories
Total 2,10,951.72 100.00 i) Projects awarded with domestic coal supply guarantee by Coal
Source: CEA
India Limited (CIL)
ii) On 100 per cent imported coal.
Details of Captive Coal Block Allocation to Power Sector Under both categories large power projects were envisaged
Utility Coal Blocks Geological and awarded.
Reserves (MT)
As a result of the changed coal price scenario, power generators
CPSU 13 6893
bidding for projects which were awarded in the second category
State Utilities 39 12717
(with 100 per cent imported coal), have appealed to the authorities
UMPPs 7 2607 to revisit the inked PPAs. These companies, while bidding for the
Private 32 6076 projects, assumed that the coal prices will remain at the lower price
Total 91 28294 bracket in the long term. However, the situation changed dramati-
Source: CEA cally with coal prices going up globally and the Indonesian govern-
ment, followed by the other major coal exporting countries, announc-
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21. distribution
Higher fuel cost will transpire into
decreased returns from power
projects. This will result in generators
defaulting in loan payments to lenders
and the spiraling effect would result
non-performing assets for the banks.
Globalcoal New Castle index, the New Castle Export index
and the Platts-1 index. This pushed up the coal price higher
than what was indicated in the purchase contract. Some of
the available calculation shows that in money terms, the
effect of this will be an increase equivalent to 0.70 paise per
unit of electricity generated using imported coal.
Indonesia is not alone, Australia has imposed a pollution tax.
The projects which were contracted under the competi-
tive bidding process with 85 per cent domestic coal supply
guarantee from the CIL and 15 per cent imported coal,
are facing the real challenge because of the short fall in
ing that the export prices will have to follow either an index or supply. Owing to different issues including the envi-
a floor based on an index. Investors who assumed coal price at ronmental clearance and forest land, CIL is not
$40-45 per tonne while bidding for power supply are now wit- able to meet demand. There is a marginal
nessing the price shooting up to $100 a tonne. Those who have increase in CIL’s coal production, but
contracted projects by acquiring mines abroad under captive the demand is much higher.
consumption are also facing challenges with the international There are coal blocks
2,11,766 MW
price. Many of the generators have bought coal mines either in awarded domesti-
Australia, Indonesia and South Africa. Considering the proximity cally under the
to the Indian coastline, majority of the companies went into captive use
contracts with Indonesia for captive mining. The lower price in category. Total installed capacity in
Indonesia was attractive for the domestic companies. The problems of green the country
Companies like JSW Energy, Reliance ADAG, Adani Group, area/forest/ area markings
Tata Group, Lanco have over the years acquired mines in has delayed mining by the private
Indonesia. Over 50 per cent of the coal imports for the companies. In some cases the coal
domestic power companies are from Indonesia. Indonesian blocks have been taken back because of
companies have entered into agreement with the Indian the delay in mining. In short, projects which are
companies to sell coal according to a price agreed between contracted either with domestic coal and international
the two parties. This price was much lower than the coal coal are put into a situation where the signed PPAs are fall-
indices which was being adopted by many countries for price ing flat.
bench marking. Realising the loss of revenue, the Indonesian A higher fuel cost will transpire into decreased returns
government has imposed a royalty on coal exports. For the from the projects. This may result in the generators delaying/
price calculation they have taken the average of four coal defaulting in loan payments. The spiraling effect would be
indices, which include the Indonesian coal price index, the the non-performing-assets for the banks.
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22. Special report
PROJECTS AWARDED THROUGH TARIFF BASED COMPETITIVE BIDDING ROUTE
What the industry wants ULTRA MEGA POWER PROJECTS(UMPPs) ( as on 1st July,2012)
“In the current scenario, all PPAs will fall flat,” pointed out Ashok
Name of the Project Name of the Date of LoI Levelised
Khurana, Director General, Association of Power Producers. "The and capacity as per LoI Successful Bidder Tariff
(Rs/KWH)
earlier PPAs had a commitment of 85 per cent supply from CIL
which came down to 70 per cent in the previous year and now MUNDRA (5x800 MW) M/s Tata Power Ltd 28.12.2006 2.264
(Gujarat)
it is 60 per cent,” he points out. Bringing down the percentage
SASAN (6x660 MW) (Gujarat) M/s Reliance Power Ltd 01.08.2007 1.196
of guaranteed coal by another 25 per cent is surely going to hit
KRISHNAPATNAM(6x660 MW) M/s Reliance Power Ltd 30.11.2007 2.333
the profitability of the project. The government has to look at (Andhra Pradesh)
the ground reality and find out a solution to resolve the prob- TILAIYA(6x660 MW) M/s Reliance Power Ltd 12.02.2009 1.770
lem at the earliest, Khurana said. (Jharkhand)
Other industry experts are of the opinion that this is purely Source: CEA
a contractual issue. However, the fear of not being able to pay
back the loan is a harsh reality both for the generation utilities
and the banks. A senior member of a state regulatory commis- can ramp up production tremendously,” pointed out Kamesh-
sion, on condition of anonymity commented that “Change war Rao . There is no doubt that the companies are getting
is possible if all the parties agree to it. Reopening PPAs is a affected. Third quarter results of Tata Power is a mirror to the
possibility in long term contracts after 10 to 12 years, taking existing situation, he added.
into consideration all the changed scenarios. However, in a According to Rao, the solution is not as easy. However, clarity
competitive bidding scenario, the PPAs need to be verified.” The in coal pool pricing can address the issue to a large extent in the
contracts which have been signed with fixed cost components short term.
are the ones which are taking the most hit. “On the face of it,
fuel appears the major villain here. The risk component in the Bailout
PPAs may differ from case to case. So before jumping to conclu- The problems of fuel supply and utilities not being able to
sion, the technical, commercial and legal aspects also required recover money is snowballing with each passing day. Some fear
to be carefully examined,” he added. that this can grow to where the discoms financial conditions
“The problems faced by the utilities are not unique. Globally are now. “Everyone fears the current situation,” says Rao. A pass-
unanticipated developments have triggered similar situations through according to CERC guidelines which is viable with the
for utilities. While, fuel is one issue, in Europe it was the change tariff mechanism could be a possible answer.
in subsidies, while in other case it was a newer technology “Bailing out the generation utilities at this point is unfair. The
which created issues,” said, Kameshwar Rao, executive direc- post-bid change may indicate that the companies which lost
tor, PricewaterhouseCooper, a consultancy firm. “This is not a the bid may have been more competitive. The companies have
dispute but a circumstance driven issue to look at a long term consciously decided to absorb the risk by bidding in this man-
contract. Here the problem is big as fuel shortage or price ner. Firms which won the bid should have had back to back coal
hike was not envisaged in the contract,” he added. supply agreement in place,” argued Shantanu Dixit of Prayas
Energy Group, a Pune-based energy sector think tank.
Fuel Supply The country has a peak demand deficit of over 9 per cent. The
When the power producers slipped stake holders are trying to bring down the T& D losses to the 15
60%
to acute fuel shortage last per cent levels. With many of the projects on hold, the question
year, the Prime Minister’s which worries many is what will happen to the capacity addi-
Office intervened tion plans? A power analyst from a leading financial lender is
with the formula of quick to say that, “the second half of the current plan period will
CIL's coal supply commitement Fuel Supply Agreement see a huge slip in capacity addition. The first half will add the
or FSAs. On the face of it, the slippage from the last plan period, so it will be stable.”
formula, appeared to be a surety Kameshwar Rao quantifies it when he says “There will be an
card for fuel supply. The generation utili- off the cliff slip which will be between 7-8 per cent. The demand
ties are of the opinion that the FSA hasn’t made supply gap will increase to 20-22 per cent by 2017 (end of the
any change to the problems of fuel supply yet. current plan period). This will result in even cities ending up
Now, the government has suggested coal pooling prices with 4-5 hours of power cuts a day.”
to address the issue immediately. Experts believe that one should look at Case 2 bidding as
“The fuel price pass through shouldn’t be seen as a profit fuel supply is the sole responsibility of the government and as
making formula. It should be reviewed from case to case. The a generator, the role of the utility will be limited. In that case
suggestion is to constitute an independent committee to look the price of power will be stable. In the short term, government
into the problem,” said Khurana. should clarify how it is going to incorporate the price pooling
“Further improvement in fuel (coal) supply can be possible. formula at the PPA level. Until and unless there is transparency
Government may look at more investment in coal sector which in this, the solution will be as much an eye wash as the FSAs.
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23. distribution
'The basic problem facing
the sector today is fuel cost'
Hemant Joshi, CFO, CLP India, on the urgency to resolve PPA related issues
Interviewed by Liza V
Could you please explain the problems faced by thermal In the recent past many private power generators
projects currently? who have signed PPAs have approached different
Fuel shortages, both coal and gas shortage is the major agencies highlighting the projects become unviable
problem facing thermal projects now. The shortfall in supply in the changed scenario. Your comment
of domestic coal and a large increase in price of imported Many of PPAs signed earlier either were relying on
has resulted in such a scenario. Projects which were planned with procuring 100 per cent domestic coal or cheap international coal.
100 per cent domestic coal are facing the problem because Coal Since then domestic coal availability has decreased and interna-
India Limited (CIL), the sole supplier of coal in India is unable to tionally, coal prices have increased. Further PPAs were signed in
meet all the demand. Internationally, because of change in laws in two broad categories first, on fixed tariff basis where the fuel risk
countries like Indonesia and also because of the demand supply in borne by the electricity producer and secondly with the fuel
situation, coal prices have increased. The sudden changes in the price changes as a 100 per cent pass through. The ones which are
prices are hitting the planned projects in a major way. signed with fixed tariff are facing a major problem as their cost of
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24. Special report
For many fixed tariff PPAs, this is an issue that needs to
be addressed urgently as cash flow from such projects
can no longer support debt payments. Many of these
projects have been financed by public sector banks. Thus,
a power sector problem has the potential of becoming a
much larger financial sector problem."
production is now sometimes higher than the quoted PPA tariff. sector problem will be quickly converted in to a banking sector
For many fixed tariff PPAs, the issue needs to be addressed as problem.
the cash flow from many such projects can no longer support the Given all this background, some sort of concessions can be
debt payments. Many of these projects have been financed by considered. I think that the sector has learned some lessons and
public sector banks. In such a scenario, a power sector problem we might not see that type of aggressive bidding done earlier. I
has the potential of being converted in to a much larger financial also think that banks will be more cautious and only good proj-
sector problem. Something similar can also happen with the ects will be able to raise money.
large amount of public debts that are supporting the discom
losses. Overall, lending to power sector projects will be extremely What is the kind of dip we anticipate in capacity addi-
difficult for the banks tion in the current Five Year Plan considering we are in
the first year of the Plan Period battling a huge crisis?
Last year after the PMO intervention we saw FSAs Could you quantify the effect?
being signed between the power producers and CIL. In The effect of the current problems will be felt in the second
the current scenario, it is coal pooling which is being half of the Twelfth Plan Period. The projects which were started
talked about. How effective will that be? at the end of the last Five year Plan will be the ones which will be
The basic problem facing the sector today is fuel costs. coming on-stream in the near future. However, very few new coal
Due to shortage in domestic coal and increase in price of inter- based projects are being taken up. The story is even worse for
national coal, the cost of fuel has increased. These costs have to new gas projects as the availability of gas has dipped to alarming
be allocated across the system which consists of IPP’s, state and levels. Hydro continues to be plagued by tremendous delays
central generators, coal India and the discoms. Who will absorb whereas even wind additions have slowed down recently due
this price gap is the question which needs to be addressed? Coal to regulatory uncertainty. Overall, I think that meeting Twelfth
pooling is one solution in which the cost increase is uniformly Plan targets will be challenging unless the fuel issues are urgently
spread across the system. But this is zero sum game in the sense resolved.
that if cost for one particular set of people goes down, then
someone else in the system is faced with the higher cost. The By the end of 12th Five Year Plan it was envisaged that
question about who shares the cost in what proportion is very electricity will be in an affordable bracket with all the
difficult and something the government needs to decide quickly capacity addition plans coming on stream. Do you
and move forward. Given the nature of the problem, it is going to think cheaper electricity will be a reality?
be very difficult to please everyone with any single solution. I think cheaper and affordable are two different things.
On one hand, both coal and gas costs are going up. Depreciation
If these PPAs are reopened and given a revision in in the value of rupee means that cost of imported fuel has also
tariff, don’t you think it will be completely against the increased. Overall, we should consider cost of producing power to
structure of competitive bidding? go up. On the other hand, the national income is also increasing
What you are saying is essentially correct but a pragmatic and India’s middle class and the commercial and industrial users
and timely solution needs to be found. Thousands of mega- can absorb the higher costs if they are assured of a reliable source
watts of capacity are currently stranded as it is not viable under of electricity. This issue gets caught up in politics where the differ-
the existing PPA’s. New capacity additions have slowed down ence between costs and affordability is often lost. As they say in
and demand continues to grow. Further, if these problems are basic economics, if you don’t pay a fair price for a commodity, it will
not corrected now, payment defaults can happen and a power be in short supply which in this case means blackouts.
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25. transmission
Plan for
green corridors
Creating large transmission projects to
evacuate RE power is the need of the hour
Sanjeev Aggarwal
Managing Director, Amplus Infrastructure
F
rom the current installed renewable capacity of approx. potentially come up in Tamil Nadu or solar that can come up in Raj-
27,000 MW, 18,500 MW is contributed by wind and 1,250 asthan cannot be absorbed in those states; we need to provide a
MW by solar. No mean achievement for a sector that has proper outlet for this capacity if we intend to use nature’s gift to us.
consistently been at the margin of capacity addition in Creating large-scale transmission lines that can serve multiple
India – renewable power was always considered as a states is one answer. We should be thankful to Powergrid that it has
me-too in the larger context of thermal and hydro plants. already started working on this idea and has developed a detailed
Last few years of volatile fuel prices and availability has pushed plan for intra-state and inter-state system strengthening, requiring
the Indian power sector as well as the global market towards focus an investment of more than Rs42,000 crore. About Rs20,000 crore
on wind and solar technologies. In the next 5 years, India expects would be for intra-state strengthening and Rs22,000 crore for inter-
to add 30 GW of wind and 10 GW of solar, not an unrealistic target state grid integration. This would also include other work such as
if one goes by global examples, and that gets coupled with the energy storage, real time monitoring system and setting up of a
lack of alternate power capacities that can be planned in India in renewable energy management centre.
this timeframe. However, financing of such a large amount is not the only chal-
With wind power achieving ‘grid parity’ and solar achieving lenge that faces the industry today. Just like other infrastructure, it
‘socket-parity’ vis a vis the alternatives that the consumers have, it is is the implementation challenges on land, right of way, and forest
likely that large investments will continue to flow in these segments. clearances that can significantly delay the projects.
This is where the problems arise for wind and solar power. They
perform best in certain areas and for optimal capital utilisation; we
ought to plan it that way.
Renewable energy facilities where fuel is costless, operating costs Powergrid has already begun
are typically lower than fossil generation facilities, but the capital system strengthening proejcts
cost, including transmission line cost, are often a significant com-
ponent of total project costs. Because renewable energy resources worth Rs42,000 crore.
are often located in remote locations, greater reliance on renewable
electricity generation will also result in a geographic shift in the
location of generation capacity, and in turn have repercussions for
the new transmission investments required to address transmission Any large scale transmission projects will take 2 to 4 years to be
congestion. As a result, adequate existing transmission access is also implemented while wind and solar projects are delivered in 3 to 9
likely to be a driver of early large-scale, grid-connected renewable months of starting work. This creates a mismatch in our expecta-
energy development. tions and what can be actually delivered on the ground. If we really
There have been reports in the last couple of years about plants want to push our renewable programme, we have to create larger
facing evacuation constraints in specific areas of the country. This transmission capacities that can provide sufficient evacuation. We
is obvious considering that so much capacity comes on line during do not want to create infrastructure investments that do not deliver
specific times of the year and can create problems for grid stability. the results we expect because of avoidable bottlenecks. Not after
As examples, it is becoming obvious that wind capacity that can what is happening to gas and coal projects in the coutry!
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