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RNI No.:MAHENG/2010/39548 ` 100 Vol.2 s No.6 s February - March 2012 s Mumbai Special Comments Will it boost the power sector? Ramesh ChandakCEO & MD, KEC International and President IEEMA Anil Sardana MD, Tata Power M S Unnikrishnan MD & CEO Thermax Limited Ramesh Kymal Gopi Krishna Chairman and Managing AVP Director, Gamesa India SBI Capital Markets Limited Sector Focus: Renewable Focus: Coal Solar Coal scarcity marring shadow Jawaharlal Nehru National Solar on capacity addition Mission & Its Success

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Editor’s DeskLet’s Cross Fingers! he Budget, as an event, is a great opportunity for the country to un-T derstand the vision of the government. India’s power sector is the fifth largest in the world. The sector is high on India’s priority as it offerstremendous potential for investing companies based on the sheer size of the Editor-In-Chief: Pankaj V Chauhanmarket and the returns available on investment capital. Hence, the industry Consulting Editor: Renjini Liza Varghesehas certain expectations from the Union Budget 2012-13 which is scheduled Editorial Team:to be presented in the parliament on March 16, 2012. P Khode, Rahul Vyas, Devendra MittalPower sector is one of the main consumer of non-coking coal and nearly Research Team:two third of the power generation in the country is coal based. It said that a Santosh Kaushik, Deepti Mishrafurther reduction of customs duty from the imported coal is important as it Vipul Singh, Priya Nair, Sonal Shahdiscourages power projects based on imported coal. The country’s power sec- Marketing & Sales:tor, which is expected to see a capacity addition of about 100,000 MW in the12th Five-Year Plan, is grappling with various problems including acute fuel Pankaj Chauhan – CEO pankaj@vision-media.co.inscarcity and spiralling of coal prices. The Association of Power Producers(APP), a grouping of about 22 companies including Reliance, Tata, Lanco, Sudhakar Chittru – Head MarketingAdani, Jindal... accounting for over 95 per cent of power capacity in the pri- sudhakar@vision-media.co.invate sector, presented a slew of proposals to be considered for the 2012-13 Sameer Shaikh – GMBudget, in this regard. Ahead of the Budget, the apex body of the domestic sameer@vision-media.co.inelectrical equipment industry IEEMA sought extension of the tax exemp-tion to all power projects, including generation, transmission and distribu- K. Pushpageetha – Regional Manager geetha@vision-media.co.intion. Ramesh Chandak, IEEMA President, stated that the domestic electricalequipment manufacturing industry suffers a substantial cost disadvantage of Naveen Bharadwaj – North Region14% vis-a-vis imports while supplying to power projects due to many local delhi@vision-media.co.intaxes such as VAT, entry tax / octroi; higher financing cost, etc. IEEMA has Subscription & Circulation Team:recommended that either there should be mandatory exemption of CST/VAT Geetha, Sunil, Ajay, Vidyafor mega / ultra mega power projects or these levies should be excluded for Creative Head:the purpose of bid evaluation. In the past few years, there has been consider- Prashant S. Kharatable growth in power plants based on renewable sources of energy. Though,MNRE through the Jawaharlal Nehru National Solar Mission (JNNSM) has Graphic Designer:accelerated the growth of the solar industry; there are some challenges for G. Sanjaythe manufacturers and developers of solar energy and associated activities in Production Head:India. There is a need to provide fiscal measures to the Indian solar industry to Shantanu Singhenable a strong solar manufacturing base to develop in India. The import duty All right reserved while all efforts are made toon raw materials / consumables for manufacturing the Solar PV Cells and ensure that the information published is correct,Solar PV Modules in India is levied to the tune of 10 to 15%. This becomes Power Insight holds no responsibility for any unlikely errors that might have occurred. Thean extra burden on the Indian manufacturers resulting in higher cost of indig- information on products & projects is beingenously manufactured cells, modules and collectors, concentrators compared provided for the reference of the readers.to the fully imported complete solar products. The import duty exemption However, readers are cautioned to make inquires & consult experts before taking any decision onshould be removed from imported finished PV cells and modules, so as to purchase of equipment or investment. Powerbring Indian manufacturers at par with the global players. The MNRE is also Insight holds no responsibility for any decisionseeking extension of existing incentives for the wind energy sector in the up- taken by readers on the basis of information provided herein. All disputes are subjected tocoming Union Budget. This would ensure growth momentum in the coming Mumbai Jurisdiction only.years after the sector added record 10,500 megawatt in the 11th five year plan. Printed, Published, Edited and Owned by PANKAJ V CHAUHAN, Printed at MAGNALet’s hope that the Budget 2012-13 can bring in huge opportunity in restoring GRAPHICS (INDIA) LTD.,101, C & D GOVT. IND.investor sentiments in power sector, such that shelved projects are brought ESTATE, KANDIVLI (WEST), MUMBAI 400 067back on track and the sector could get the required fillip along with offering and Published from G-3A, JUNGLEE PEER DURGAH, K.A.GAFFARKHAN ROAD, WORLI,necessary reforms to help electrical equipment industry in getting the level MUMBAI 400 018.playing field. Editor: PANKAJ V CHAUHANEditor - in - Chief RNI. NO. : MAHENG/2010/39548Pankaj V ChauhanEmail : editor.scribe@gmail.com Power Insight | February - March 2012 | 1

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Renewable Focus: 44 Contents Solar Power : Energy for all JNNSM & its success 18 Thrust on distributed generation to make electricity available for the remot- est village of the country and adding solar capacity, a well learned lesson in the first year of JNNSM....... more While the previous year, it was the equipment supply and raising funds for the projects were the key high- lighted issues, this year, Coloumn’s: reduction in domestic coal Budget production and volatility in imported coal pricing are adding fuel to the fire. Head- ing to another budget, the Need to Electrify Focus Power Issues needs to be power sector players are Hemant Joshi Sector addressed expecting announcement, 2012-13 Sr. VP Finance – CLP Gopi Krishna Shaji John which could translates into AVP – SBI Capital Chief - Solar Initiatives an accelerated momentum 24 Market Ltd at L & T in the sector. 22 46 Vol.2 s No.6 s February - March 2012 s Mumbai Cover Story JNNSM: the lessons learned JNNSM-Great begin- ning or False Start? Solar PV As A Value Proposition Hari Kiran Chereddi Madhavan Nambhoothiri K Subramanya Managing Director, Founder & Director, RE CEO – TATA BP Solar Sujana Energy Solve Energy Consultants L&T Sector focus Interactions: 48 49 58 Coal scarcity In this issue marring shadow on Increasing energy efficiency of Coal Press Releases: Thermal News 04 capacity addition Peter Gunn Director of Total Synergy Betagaurd MCB’s and DB’s from Siemens..................Pg 36 Nuclear News 05 International (TSI), Geo- 32 CoalTM Skintop @ Solar.............................................................Pg 36 T & D News 08 How far the PM’s intervention to increase coal supply to thermal Results Updates 10 GE – Entelligaurd...........................................................Pg 37 power plants and Coal Ministry’s Exploring overseas Gas News 12 decision to reduce the quota of 30 supply to increase coal Largest Gas Turbine combined Cycle Project.............Pg 38 e-auction coal will help resolving e-auction: Mjunction Coal News 14 the severe shortage Alternative Energy Summit 2012..................................Pg 38 Vinaya Varma Wind News 42 Vice President 26 Maktoum Solar Park – Dubai........................................Pg 39 Solar News 43 Mjunction Services Limited Events Updates 40 Ps.: Pictures are for reference only and bears no resembelance to any project or company.2 | February - March 2012 | Power Insight Power Insight | February - March 2012 | 3

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National News National News Orissa to get 200 MW through Thermal power banking Anticipating power short- set to get 200 MW fromGovt for early start of environ- Legal tangle delays NTPC’s order fall in the upcoming sum- mer months, Grid Corpora- northern states like Him- achal Pradesh and Haryanament management fund placement tion of Orissa (Gridco) is in through the power bank- the process of striking pow- ing route. Gridco, the bulkConcerned over possible contribution and to work er banking deals with other power purchaser, is also in Mired in legal tangle, coun- Due to the dispute, NTPCenvironment damage to out the maintenance and states to ensure uninterrupt- talks with other states like try’s largest power produc- has not been able to placebe caused by working and expenditure of the fund. In ed availability of power and West Bengal and Gujarat to er NTPC is unable to place orders worth about Rsupcoming private thermal view of the above, you are tide over the deficit. procure power through this equipment orders worth Rs 34,000 crore for four proj-power plants, the state requested to kindly take mode. 34,000 crore for four super- ects spread across Maha-energy secretary has writ- necessary actions to cre- From April 1, Orissa is critical projects in the coun- rashtra, Bihar and Uttarten to the Forest and En- ate and manage the fund,” try. The placement of these Pradesh. The orders werevironment Department to said B G Mathi Vathan, thetake initiatives to start op- state energy secretary in a orders have been stranded since one of the participat- to be placed for two units each of Solapur and Mouda JITPL to commission 600 MW by Deceration of an Environment letter to the Environment Jindal India Thermal Power Ltd (JIT- The company plans to operationalize monitoring the progress of the proj- ing bidders -- Ansaldo Cal- projects in MaharashtraManagement Fund (EMF) Department. The state PL) has set target for commissioning its second unit of equivalent capacity ect. The company has expressed con- daie Boilers (ACB) -- ap- and two units of Meja plantin Odisha. has signed Memorandum of the first unit (600 MW) of its 1,200 by March 2013. “We had a meeting fidence in commissioning the first unit proached the court after its in Uttar Pradesh. Each of of Understanding (MoU) MW plant proposed at Derang village with top officials of JITPL recently. (600 MW) by December 2012,” said a“Forest and Environment bid was rejected by NTPC these projects have a capac- with 29 companies to pro- in Angul district by December this Their proposed coal-fired power plant senior official of state energy depart-Department is the nodal citing non-fulfillment of ity of 1,320 MW. Another duce about 37,000 MW year. is on the fast track and we are closely ment.department for creating minimum criteria in the order was to be placed for electricity by the end ofthe EMF for receiving the tender. three units of 1,980 MW 2022. Nabinagar plant in Bihar.NTPC to follow WBPDCL’s rehabilitation Jharkhand to have sur- Nuclearpackage plus power in 5 yrs US approves first nuclear plant Country’s largest power company NTPC Jharkhand could have been a surplus state in 3 decades is expected to follow the rehabilitation in power sector if a section of locals had US has approved construc- The site for the proposed package offered by West Bengal Power not resisted setting up of two major power tion of two atomic reac- plant already has two old Development Corporation for land acqui- projects by the state-owned National Hy- tors in the country, making reactors. Only one mem- sition for the proposed 1,600-MW Katwa droelectric Power Corporation (NHPC) them the first to be built in ber of the five-person thermal power project in the state. and the National Thermal Power Corpora- America in more than three NRC, Chairman Gregory tion (NTPC). decades despite objections Jaczko, dissented, citing NTPC had decided to go ahead with land acquisition directly from land owners, However, Jharkhand State Electric- from the nation’s top nucle- safety concerns following after the state government said it will ity Board (JSEB) now intends to attain ar regulator. a triple meltdown last year not acquire any land for any commercial a power surplus status within next five at the Fukushima Daiichi Commissioners of the Nu- project. “We have deployed our officials years. NHPC has struggled for over two plant in Japan. He argued clear Regulatory Commis- who are making a survey of land for the decades to set up one hydel power plant that the new licenses don’t sion (NRC) voted 4-1 to Katwa thermal power project and we — to the extent of 710 MW in the first go far enough in requiring approve the construction of will be following the West Bengal Power stage and 2,200 MW in the second stage the builders to incorporate two 1,100 megawatt West- Development Corporation (WBPDCL) — harnessing water from South Koel riv- lessons learned from the inghouse-Toshiba AP1000 package for acquisition,” an NTPC of- er and its tributary stream, North Karo, in Japanese nuclear disaster at power generator at Vog- ficial said. Khunt and Torpa districts of the state. last year. tle in Georgia.4 | February - March 2012 | Power Insight Power Insight | February - March 2012 | 5

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National News Nuclear Jaitapur nuclear plant mak- ing progress The Jaitapur nuclear “Progress is happening US safety nod to Westinghouse power plant project, there. I am confident reactors for Gujarat project which is going to be the project will take off built as part of the India- soon. Ground breaking Nuclear Power Corpo- tion report on the techni- France civilian nuclear is a matter of time. This ration (NPC), which is cal review of the AP1000 cooperation agreement, project will take off as operating plants with standard nuclear reactor would take off soon, soon as possible,” Bigot 4,780 Mw capacity in design. Westinghouse Bernard Bigot, chairman told reporters after his the country, has got yet Electric Company had of the French Alternative meeting with Srikumar another push, as it can submitted its application Energies and Atomic En- Banerjee, secretary, de- now expedite talks with for the AP1000 design on ergy Commission said partment of atomic ener- the US nuclear major March 28, 2002. The US here on Wednesday. gy and chairman, Atomic Westinghouse Electric nuclear regulator’s certi- Energy Commission. Company for the pro- fication would be ratified curement of AP1000 re- in due course of time by actors for the proposed the US Senate. CII for more clarity in nuclear project at Mithi Virdhi, NPC has already initi- damage law Gujarat. This was pos- ated pre-project activi- The Confederation of In- it said. sible as the US Nuclear ties in Mithi Virdhi with dian Industry wants clarity Regulatory Commission “Section 46 states nothing ground breaking planned in some clauses of the Civil last week has released in the civil liability law will in the current year or ear- Liability for Nuclear Dam- the final safety evalua- prevent the operation of ly next year. age Act, 2011. Welcoming other laws in force in the the notification of imple- country and makes clear mentation rules, the CIIIndia eyes US $100 bn FDI in said a framework is in place that criminal liability innuke energy in 20 yrs for the first time, instituting case of an accident remains, as indeed do tort claims.India is expected to get ter Anand Sharma. strict liability for the opera- However, clarification isforeign direct investment tor who has to pay damages “In the coming two de- required to ensure that this(FDI) of over $100 billion of up to Rs 1,500 crore. A cades, India will see invest- provision does not alter thein nuclear energy in the balanced legislation would ments in excess of $100 exclusive channeling ofnext 20 years, of which a send the right signals to billion in the nuclear power any claims for nuclear dam-quarter would come from investors and suppliers sector alone and I am sure, age on a strict liability basisFrance, according to Com- and expedite the country’s at least, a quarter, will come only to the operator whomerce and Industry Minis- nuclear power programme, from France,” Sharma said. owns the plant,” it said.6 | February - March 2012 | Power Insight Power Insight | February - March 2012 | 7

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National News T&D Action plan to reform distribution In a bid to give a much methodology of utili- These steps are cru- needed boost to dis- ties to enable them cial, as the cumulative tribution reforms, the get loans, provide a losses of distribution power ministry has reform-linked interest companies increased launched an ambi- subsidy to utilities and sharply to Rs 1,06,347 tious action plan. It promote distribution crore as on March 31, will revise Case I and franchises to reduce 2010 from Rs 79,339 Case II standard bid aggregate transmis- crore in the corre- documents (SBDs), sion and commercial sponding period of the introduce a rating (AT&C) losses. previous year.Five states accounted Power Gridfor 80% of total dis- board okays twocom loss projects worthRating agency Fitch today said the Rs 1,682 crlosses of power distribution compa- State-owned transmis-nies in five states contributed to 80% sion utility Power Gridof the total losses in the sector dur- Corporation today saiding 2009-10. “[Losses of] Distribution its board has approvedcompanies [discoms] in the five states two projects entailing-- Tamil Nadu, Uttar Pradesh, Madhya a total investment ofPradesh, Jammu & Kashmir and Hary- Rs 1,682.13 crore. Theana, constituted 80% of the total losses approvals were givenof all discoms in the country in finan-cial ended March 2010,” Fitch said in at the company’s board PFC issues draft guidelines meeting. In a filing toa statement. the Bombay Stock Ex- for power drawl change (BSE), Power Distribution licensees er market presentlyThe weak financial profile of discoms Grid said the board will now have to pro- comprises 10 per centis the primary cause of stress for state has given green signal cure short-term power of the total electric-power utilities. They posted Rs 29,500 for system strengthen- (less than or equal ity procured in India.crore worth of losses in fiscal 2009-10 ing in Raipur-Wardha to one year) through PFC has convened aagainst Rs 7,000 crore in fiscal 2005- Corridor for IPP Proj- competitive bidding meeting with the rep-06. ects in Chhattisgarh, at say the draft guide- resentatives of distri-“This means that under the “cost-plus” an estimated cost of Rs lines of the Power bution licensees ontariff, generation and transmission com- 1,422.85 crore. Finance Corporation February 10 to discusspanies are able to push their costs to the (PFC). This is expect- the modalities. Cur- This project is expect-discoms, which are unable to recover ed to reduce the over- rently, the per unit rate ed to be commissionedthe same from their consumers,” Salil all cost of procure- of short-term power within 36 months fromGarg, Director in Fitch’s Asia Pacific ment of power. procurement stands at the date of investmentUtilities team said. Rs 3.80 to Rs 4. approval. The short-term pow-8 | February - March 2012 | Power Insight Power Insight | February - March 2012 | 9

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National News T&D IPPs may have to pay central grid DNE TRANSFORMERS charges for state supply Independent Power (Gridco) has objected with the state grid, ? Transformers upto 5000 KVA and 33 KV class are Computer Aided Design and DNE Producers (IPPs) to pay these charges. the state-owned util- manufactured under strict supervision by our qualified and experienced Engineers to in Orissa may have ity should not pay for In a recent meet- comply with the requirements of IS : 2026, 1180, BSI: 171 to bear the cost of charges of transmis- ing, Gridco officials national grid trans- sion made through pointed out that mission charges for Power Grid Corpo- since private power providing electricity ration of India Ltd producers have the to the state, as Grid (PGCIL) network. option to connect Corporation of Orissa Our Range of Products Oil Cooled Transformer • Power and Distribution Results Rating 5 KVA to 5,000 KVA ? Transformers. Standard IS 2026 / IS 1180 / IEC - 76 ? • Special Purpose Transformers. Temp. Class : Up to 105 0C ?Tata Power Q3 net down 41% to PowerGrid Q3 net soars 37% to Voltage Class : 0.441 KV, 11 KV, 22 KV, 33 KV ? • Auto Transformers.Rs 263 cr Rs 809 cr Dry Type Transformer • Dry Transformers.Tata Power Company Ltd with Rs 4,519.18 crore Central transmission utility a line of credit worth Rs Rating 63 KVA to 1,000 KVA ?has posted a 40.6% de- achieved a year ago. PowerGrid Corp, which re- 5,000 crore to us. We ex-cline in consolidated net ported 37% rise in Decem- pect to get the first tranche Application: Standard IS 2026 / IS 11171 / IEC - 726 ? On a standalone basis, the ? HT Consumers Allprofit for the quarter ended ber quarter net profit at Rs of the fund by the end of Temp. Class : 900C - 1150C ? company’s net profit for theDecember 31, 2011 at Rs 809 crore, aid it is likely to next month,” a company ?Power Calibration262.67 crore, compared reporting quarter stood at get a Rs 5,000-crore line of official told PTI on condi- Voltage Class : 11 KV ? Rs 422.88 crore, up almost ?Industrial Transformerswith Rs 442.37 crore in credit (LoC) from the State tion of anonymity here on Types : Resin Cast / Resin Impregnated three fold from Rs 154.07 ?Domestic Transformersthe corresponding quarter Bank of India (SBI). the sidelines of result an-a year ago.The firm’s total crore a year ago. The nouncement event. ?Multystory Complexes Special Features : No partial discharge, Low noise firms total income was up “The State Bank has in- level, Maintenance free, Compact for indoorincome rose 57.45% to Rs ?Colonizers 53.26%, from Rs 1,737.12 principle agreed to extend7,115.60 crore for the quar- Installation, Over loadingter under review, compared crore in December 2010 to ?Electricity boards Rs 2,662.34 crore in 2011. KEC Int’l keen to take more business abroad DNE Transformers RPG group company, already has presence in whole world as a market. systems, water, railways Key Person KEC International, is almost 40 countries, vows We are already present in and telecom to more Jagdish Chandra Joshi : Proprietor planning to take more of to slowly expand more di- the transmission sector in countries,” said Ramesh Admin. Office Factory its business overseas, in visions of its business, to most of the countries. Chandak, the managing R-1/11, Jay Shree Colony, 1st Street, Opp. Bhasker School, H-161, RIICO Ind. Area, hunt of more orders. The more number of countries. director and chief execu- Udaipur - 313 001, Rajasthan, India Dhoinda, Infront of MIning Office, capital goods and con- But we plan to take each tive officer of the com- Bhilwara Road Bypass Road, Ph.: +91 294 2494408 +91 294 2494408 , struction company, which “We are looking at the of our divisions like tower pany. Mobile: +91 94141 56892 +91 94141 56892 Kankroli, Rajsamand - 313 326, Rajasthan, India Email: dne@dnetransformers.com ; Web: www.dnetransformers.com Ph: +91 2952 223852 +91 2952 22385210 | February - March 2012 | Power Insight Power Insight | February - March 2012 | 11

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National News Results NTPC pays Rs 2,886-cr divi- NPC net rises 110% to Rs 1,497 dend for FY12 cr in Apr-Dec State-run NTPC today which is the promoter of The turnover of Nuclear 110 per cent paid an interim dividend the company with 84.5% Power Corporation (NPC) NPC, which has supplied of Rs 2,885.92 crore for stake. during April-December these provisional numbers, the current fiscal. “NTPC shot up 42 per cent at Rs The company has paid says the improved perfor- paid the highest ever 5,517 crore compared to Rs interim dividend of Rs mance of 20 plants with interim dividend of Rs 3,885 crore during the cor- 3.50 per equity share be- installed capacity of 4,780 2,885.92 crore,” a compa- responding period last year. ing 35% of the paid-up Mw was largely due to an ny statement said. Interim The state-run company’s equity share capital of the increase in the availability dividend is a payment total income rose 33.5 per company amounting to of fuel for both domestic made before a company’s cent at Rs 6,129 crore com- Rs 2,885.92 crore for the and foreign reactors, be- final financial statements. pared to Rs 4,590 crore. Its financial year 2011-12 on sides increased installed NTPC paid this divi- net soared to Rs 1,497 crore February 9, 2012, it said. capacity. dend to the government, from Rs 715 crore, a rise of GasMontek flays current gas pricing methodologyPlanning Commission government. Liberalisation and Policy,” that (companies) must al-Deputy Chairman Montek written by Anil K Jain, a se- locate gas according to the “We should decide now abSingh Ahluwalia has criti- nior bureaucrat and former government’s priorities,” intio what should be thecised the current gas pric- joint secretary-exploration he said citing example of price of natural gas. Whating methodology where in the oil ministry. “On the fertilizer sector which can should be the principles,producers are asked to ‘dis- one hand, we (advocate) “bid for whatever price” which should be applied,”cover’ market price of the freedom to price gas on an because their input cost is he said at the launch of thefuel by calling bids from arm’s length basis. But on pass through. book, “Natural Gas in India:consumers identified by the the other hand we also sayIran issues ultimatum to India over gas fieldIran has given a one-month month ultimatum to India Indian’s delays to developultimatum to an Indian over its decision on partici- the field,” he said.consortium over the de- pating in the development Iran said the field’s in-placevelopment of a gas field of Farzad-B gas field,” Fars gas reserves have been esti-whose delay by India has quoted an unnamed oil of- mated at 21.7 trillion cubicbeen attributed to western ficial as saying. feet (tcf), of which 12.5 tcfpressure, the semi-official “Possibly foreign pressures are recoverable.Fars news agency report- played a role in influencinged. “Iran has given a one-12 | February - March 2012 | Power Insight Power Insight | February - March 2012 | 13

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National News GasPetronet in talks with Kerala govt for power plant at KochiPetronet LNG, the coun- the company’s upcoming company’s second termi- chase agreement beforetry’s biggest natural gas im- regassification terminal at nal after Dahej in Gujarat. so that the anchor load isporter, is in talks with the Kochi. “The Kerala government taken care of. Ideally, itKerala government to set wants us to set up a gas- should have a capacity of Petronet is investing Rsup a gas-based power plant based power plant in the 750 Mw,” said A K Baly- 4,500 crore in setting upat an investment of around state under a joint venture. an, managing director and the 5 million tonne terminalRs 3,000 crore. The plant We have asked the govern- CEO, Petronet LNG. at Kochi. This will be themay be set up adjacent to ment to sign a power pur-NTPC in talks with GAIL for sourcing Govt rejects RIL demandgas supplies for gas price revisionState-run NTPC today said pact for sourcing imported gas for its The government has rejected Reliance Indus-it is in talks with GAIL for plants. The company is in initial talks tries’ demand for a revision in the KG-D6 gassigning a long-term term with GAIL for sourcing gas, provided price, saying the $4.2 per mmBtu rate for five it finds buyers for the electricity pro- years was not only agreed to by the Mukesh duced from those plants. Ambani-run firm but also upheld by the Su- “We are talking to GAIL for sourc- preme Court. ing gas through long term agreement The Ministry on January 30 wrote to RIL only if we find buyers,” NTPC CMD quoting from the May 7, 2010, Supreme Arup Roy Choudhury told. “If we Court judgement in the gas row between the have a long term buyer for electricity company and Anil Ambani’s RNRL to assert from those gas-based plants ...say 25 that “any price revision proposal will be ex- years then sourcing fuel through an amined by the government after expiry of five agreement with GAIL is feasible,” he years from commencement of supply”. added. COALThe coal crisisWith Prime Minister Man- have failed to develop their was originally expected tomohan Singh’s office work- own captive coal reserves touch 680 mt by the ending on urgent measures to over the past two decades. of the current Plan periodaddress the ‘coal crisis’, the in March. This was scaled Currently, India requiresprivate power industry’s down to 630 mt in the mid- 690 million tonnes (mt) ofhue and cry over the issue term appraisal and again to coal a year to fire plants,seems to have subsided for 554 mt at present, creating largely in the infrastruc-now. Experts, however, say a 136 mt gap between de- ture sectors of power andprivate developers have no mand and supply. steel. Domestic productionright to complain, as they14 | February - March 2012 | Power Insight Power Insight | February - March 2012 | 15

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National News COAL Power sector exempted from coal block auctions In a landmark development, the than power sector companies, the government has exempted pow- competitive bidding method would er sector companies from going replace the current practice of al- through the auction route for the locating blocks for notified captive allocation of coal blocks for cap- use on the basis of recommenda- tive use. The move comes even as tions of an inter-ministerial com- the Supreme Court last week can- mittee. The new system is expected celled 122 telecom licences for not to induce “transparency and objec- following auction as the method tivity” in the overall coal block al- for allocation of second-generation location process. In the first phase, (2G) spectrum, another scarce 54 blocks would be offered to both natural resource, used in mobile te- power and non-power users, under lephony. However, for users other the new dispensation. Fewer power projects may get more coal in 12th Plan The government seems to to more coal for a limited Rules notified for competitive be preparing the power sec- number of projects. While bidding for coal blocks tor for low fuel availability. reduction in the power ca- In the next Five-Year Plan, pacity addition target might The government today “In exercise of the pow- it is looking to reduce pow- be a dampener for the sec- said it has notified rules for ers conferred by the Mines er capacity from Coal India tor, industry experts say if allocation of coal blocks and Minerals [Develop- Limited (CIL)’s linkages. If befitting power projects re- through competitive bid- ment and Regulation] Act, the plan is carried out, the ceive coal linkages, it could ding process in order to 1957, the Central Govern- trend of huge capacity ad- be good news. A number of bring transparency in al- ment hereby makes the ditions and low coal supply companies, including Ad- lotment. The auction will following Rules... Auction would be checked. ani Power, Tata Power and be done by the Centre after by Competitive Bidding of Larsen & Toubro, have said fixing a minimum price for Coal,” the Coal Ministry The move is being cheered they would plan more proj- blocks on offer. said. by many in the sector, as ects after there was more reduced targets would lead clarity on coal.Forward e-auction coal may be reserved for power firmsThe government is consid- for the smooth sailing of ing held by the PMO with six-seven million tonneering reserving forward e- power companies amid a representatives of infra- (mt) coal available for theauction of coal, exclusively severe coal crunch that is structure sectors, including power sector. Forwardfor the power sector. The hurting investments worth coal and power, for easing contracts account for 15proposal could be part of thousands of crore. coal availability, according per cent of the 45 mt Coalthe detailed road map be- to sources. If implemented, India (CIL) sells through e- The proposal is part of theing finalised by the PMO it could make an additional auction every year. discussions currently be-16 | February - March 2012 | Power Insight Power Insight | February - March 2012 | 17

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Curtain Raiser Curtain Raiser Budget 2012-13 Budget 2012-13Will it boost the power sector? Renjini Liza Varghese modernisation of existing network are Power Projects (UMPPs) have been Plan. While the situation on the fund- eligible for exemption. exempted from central excise duty to ing side has improved considerably bring them on an even platform with since the middle of 2008, companies According to the rating agency Crisil, foreign suppliers who have a cost ad- are stepping up on new projects with “There were no major announcements vantage and also enjoy a concessional utmost caution. This is especially addressing the power sector in the custom duty. However, this will have given that linkage for fuel (especially Union Budget 2011-12. Sunset date a marginally positive impact on do- coal and gas) is becoming a tough nut for tax holiday under section 80IA for mestic equipment manufacturers.” to crack. However, rural electrifica- the sector has been extended by anoth- er year to March 31, 2012, which will Some of the market analyst sees the tion continues to get a boost in each encourage investments. The enhanced last year’s budget announcements to passing budget and so is the improve- limit of USD 40 billion for Foreign be inadequate in all respects to give ment in the T&D network. Budget Institution Investors (FIIs) investing the required lift up to the sector. Over 2011 was no different, as it allocated in corporate bonds issued by infra- the past few quarters, the power sec- higher funds for the development of structure companies and the creation tor has seen hard times given the se- the power sector with a view of speed- of infrastructure debt funds with tax vere liquidity crunch that hit existing ing up the expansion of new genera- benefits will improve availability of as well as new projects. And as such, tion capacities. funds to the sector. Domestic equip- the sector once again saw capacity ad- “The proposals in respect of the ener- ment manufacturers for Mega Power dition that was way below the targets gy sector - oil and gas, power and re- Projects (MPPs) and Ultra Mega set out as part of the XIth Five Year newables were as anticipated; the roll Highlights of 2011-12 budget forward of the income tax holiday for power by a year, denial of tax holiday • Tax Exemption for power sector network. for the ongoing round of NELP and extended for an year more • Higher allocation for infrastruc- indirect tax concessions for renew- L • Aims to boost capacity addition ture to aid the overall develop- ables. These were quite predictable.” ike the previous year, power sector continue to be under performer this year as well. While the previous year, it was the equipment supply con- plans ment of the power sector. said BMR Advisors in their post bud- cerns and raising funds for the projects were the key highlighted issues, • Higher allocation for rural elec- • Reduction in surcharge of 7.5% get analysis. this year, one more got added to it, fuel supply constraints. Reduction in domestic trification on domestic companies to 5% Now when we are days away from the coal production and volatility in imported coal pricing are adding fuel to the fire. to aid net profits of power com- D-day, all eyes are set on New Delhi. • Excise duty exemption for UMPP Heading to another budget, here we are trying to give an outline of what the power panies. The step taken by the Prime Minister equipments to aid fast-track sector players are expecting the government to announce, which in-turn translates recently to ensure coal supply even creation of new large-scale • Tax incentives on foreign funds into an accelerated momentum in the sector. before the budget was cheered by the power generation capacities. for financing of infrastructure to While extending the tax holiday for an year for power sector was last year’s budget aid the sector’s financing needs. industry. However, the expectation is • Higher FII limit for investment in that there could be announcements re- highlight for the sector. However, many of the economists and the industry experts corporate bonds issued by in- • Customs duty on solar lanterns garding import duty on coal as the de- rated the power sector announcements to be a neutral one. The tax holiday was frastructure companies to pro- reduced to 5 percent from 10 pendency on imported coal are on the announced with the aim of boosting the power generation in the country to meet vide additional funding to the percent. rise. In a similar situation like that of the growing needs and also bringing down the distribution losses. power sector. a decade back, a section of the indus- • Customs duty on few inputs The power sector is entitled to tax exemption, under section 80-IA of the Income try feels that there could be potential • Higher investment on rural in- used in the manufacture of so- Tax Act. The announcement was beneficial for projects that took off in the last announcements to improve the health frastructure to aid development lar modules/ cells reduced to one year, including the Ultra Mega Power Projects. Projects that start power gen- of DISCOMS. So it is wait and watch of the rural power distribution nil. eration, distribution, transmission or that undertake substantial renovation and as of now.18 | February - March 2012 | Power Insight Power Insight | February - March 2012 | 19