Indian Power Sector
Rural Electrification has been one of the key focus areas for the current government.The vision of “Power for All” has been shining brightly in the eyes of government and it aims to electrify all villages by May 2018.The following post will look at the current status of Rural Electrification and various initiatives taken by the government to achieve this target.
Meaning of Electrification
As per the earlier definition of Rural electrification “A village is classified as electrified if electricity is being used within its revenue area for any purpose what. so-ever..” However, the definition needs some revision and the overall purview of Electrification is currently amended definition of Electrification as follows :
The basic infrastructure such as distribution transformer and or distribution lines is made available in the inhabited locality within the revenue boundary of the village including at least one hamlet/Dalit Basti as applicable and
- Any of the public places like Schools, Panchayat Office, Health Centers, Dispensaries, Community centers etc. avail power supply on demand and
- The ratings of distribution transformer and LT lines to be provided in the village would be finalized as per the anticipated number of connections decided in consultation with the Panchayat/Zila Parishad/District Administration who will also issue the necessary certificate of village electrification on completion of the works.
- The number of household electrified should be minimum 10% for villages which are un-electrified, before the village is declared electrified. The revision of definition would be prospective.
Thus,as per the above definition it requires only 10 % of the households in a village to be connected for it to be classified as “electrified”. This implies that even if a large number of households remain un-electrified after covering 10%, still the village will qualify to be called as “Electrified”moreover, the definition doesn’t specify the minimum number of hours of electricity supply in the villages.
Initiatives/Schemes in Rural Electrification
Prima-facie, a couple of major steps have been taken by the earlier government and the current government.Some of these are :
- Establishment of REC (Rural Electrification Corporation) : REC was established in the 1969 with the objective of providing finance and promoting finance and promoting rural electrification across the country.Its main objective is to finance and promote rural electrification projects all over the country. It provides financial assistance to State Electricity Boards, State Government Departments and Rural Electric Cooperatives for rural electrification projects as are sponsored by them.
- RGGVY (Rajiv Gandhi Grameen Vidyutikaran Yojana) It was launched in April 2005 for attaining the National Common Minimum Program goal of providing access to electricity to each and every household within a period of 5 years.The scheme was to officially end in 2009 ,however, due to non-attainment of the targets, certain allocation were made for the continuation in the 12th plan period (2012 -17). In terms of achieving the targets of lighting up unelectrified villages, the performance was much better in the initial years than in the last three years of the program.
- DDUGY(DeenDayal Upadhyaya Gram jyoti Yojana) : In Dec’14, the government announced DDUGY with some modification to the RGGVY scheme already in progress.It aims feeder segregation and strengthening of sub-transmission and distribution infrastructure in rural areas including metering of distribution transformers/feeders/consumers part from electrification of unelectrified villages,household.
As per the revised targets set by REC vis-a-vis government of India , 2,21,424 villages to be electrified out of which 95,977 have already been electrified ( Dated 20.04.2016 http://garv.gov.in/dashboard ) . Nine states (AP , Goa , Haryana, Kerala,Maharashtra,Punjab,Sikkim and Tamil Nadu) have achieved 100 % of the village electrification.Bihar is the worst performer in terms of household electrification. While 97 percent of the Bihar’s village are electrified, only 12 percent homes have electricity connections.
- Location specific technologies like solar,wind,mini-hydel so that target of electrification reach the granular level of society.
- Technological improvement required at the micro level so that the systems are well maintained over longer duration with requisite maintenance strategies.
- Last but not the least, there are still so many villages across India which have not experience the word “Electricity” and they are to be helped with utmost priority.
Aside Posted on Updated on
A transparent Regulatory Framework is required for making the sector viable for its growth as well as invoking investor confidence in the sector. To meet the growing expectations of the manufacturers, investors and consumers, CERC (Central Electricity Regulatory Commission) has amended key regulations and issued orders that can lead to the betterment of the power sector. Some of the amendments done by the regulator can be summarized as follows:
•Compensatory tariffs Approved: In Feb’14 CERC allowed compensatory tariff hikes for the two major power sector players namely Tata Power’s Mundra UMPP and Adani’s 4620 MW Coal Based Power Plant located in Gujarat.
( http://www.cercind.gov.in/2013/Reports/COMREP_CGPL.pdf) In lieu of the change in regulations of Indonesian Mining (2011)http://www.indonesiamininglaw.com/tag/iup/, the two players objected of suffering high landed cost of coal and thereby leading to loss on the exchequer’s pocket. Since the tariff revision is effective from April 1, 2013, CERC has directed the concerned DISCOMs to reimburse Rs 3.29 billion to Tata Power and Rs 3.89 billion. Some of the state DISCOMs (Rajasthan,Punjab,Maharashtra) have challenged CERC’s order before the Appellate Tribunal for Electricity (APTEL).Reliance also filed the petition concerning its Tilaiya UMPP in Madhya Pradesh. Adani has been allocated Lohara Coal Block for its project which covered around 75% of the coal requirement for the project but that came under the scanner of Ministry of Environment and Forest thereby leading Adani to hunt for alternate sources for fuel. This ultimately led to escalation of its levelised tariff as defined in the PPA.
•Tariff Regulations : In feb’14 CERC came with the new Tariff regulations 2014-19,http://www.cercind.gov.in/2014/regulation/reg21.pdf which put forward many changes leading to strong repulsion from the major players in the market:
o Incentives for players have been linked to Plant Load Factor(PLF) as compared to Plant availability factor(PAF) as described in the earlier regulations.
o The base RoE(The amount of net income returned as a percentage of shareholders equity. Return on equity measures a corporation’s profitability by revealing how much profit a company generates with the money shareholders have invested) has been fixed on 15.5 % but FGMO,www.srldc.org/var/ftp/FGMO/FGM%20IN%20SR.ppt has been critically linked with it leading to tough times for Generators.
o Provision of PAT(Perform, Achieve and Trade)http://www.performachievetrade.com/ has also been included in the guidelines issues.
o Heat rate norms have been made more stringent for existing as well as new power plants. The factor has been changed to 1.045 from 1.063 (Kcal/KwH)
o The normative annual PAF has been reduced to 83 % from 85 %.
Responding to CERC Tariff Regulations, NTPC moved to courts against CERC mentioning that the PLF based incentive could hit their profitability.
•IEGC Amendment: In Jan’14, CERC issued an amendment to IEGC regulations 2010, further tightening the frequency band to 49.9 Hz – 50.05 Hz from the earlier range of 49.7 Hz -50.2 Hz.http://www.cercind.gov.in/2014/regulation/noti18.pdf In addition to sandwiching the frequency range, Grid integrations has also been pushed further with the inter-connectivity of Raichur-Sholapur transmission line. In context with the change in IEGC regulations, Penalty charges related to deviation mechanism of Unscheduled Interchange (UI) has also been revised.
•Open Access Regulations: Apart from the changes concerning LTOA (Long Tern Open Access) and MTOA (Medium Term Open Access) in Interstate Transmission Regulations, 2008 , there have been proposed amendments regarding the connectivity of renewable energy projects of 5 MW – 50 MW capacity with the interactive grid.
•Power System Development Fund,http://powermin.nic.in/whats_new/pdf/Operationalization_of_Power_System_Development_Fund_Jan2014.pdf : CERC issues PSDF regulations 2014 replacing the earlier PSDF regulations 2010 and intents to push the investments in the transmission sector. The fund will be maintained through a collection of Congestion charges, deviation settlement charges and reactive energy charges. Primarily the fund will be used for capacity building in the transmission sector including installation of shunt capacitors, series compensators, VAR compensators etc.
•PoC Tariff Regulations : In Feb’14 CERC issued a draft amendment regarding the sharing of Inter-state transmission charges and losses regulations, which incorporated the PoC methodology of determining the cost and losses to be shared by the users of the ISTS(Inter State Transmission System)
•RE Tariff regulations: In Mar’14 the first amendment to the Terms and Conditions for Tariff determination from RE sources regulations were approved by CERC,http://www.cercind.gov.in/2014/whatsnew/SO354.pdf. The amendment aimed to address various issues faced by biomass plants.
•NPEX Plan Shelved : In April’14, CERC passed an order withdrawing its permission for setting up the National Power Exchange (NPEX) http://www.pfcindia.com/Content/National_Power_Exchange_Limited.aspx .Promoters of the Exchange i.e NTPC,NHPC,PFC and TCS voluntarily applied for the closure of the exchange.
In the new future, further key orders are expected that will ultimately (perhaps) helps the revival of the sector.
Power is essential for the socio-economic development of a country and is being recognized as a basic infrastructural requirement. Although the installed capacity has increased to 210 GW but India faced an energy deficit of 10.1% in 2011-12.
Even today, 40 per cent of households are denied electricity; the other 60 per cent do not have reliable access to electricity and is lagging service, measured by hours of supply as well as penetration. Power cuts, erratic voltage and low or high supply frequency have added to the ‘power woes’ of the consumer.
Today, the need of the hour is sustainable power supply which will help address the need for increased demand. For a large and dispersed country like India, with its unique geography and current state of economy, innovative means of producing energy needs to be looked at to reduce its dependence on oil and coal as a primary source of energy.
Ministry of Power, Government of India launched Rajiv Gandhi Grameen Vidyutikaran Yojana (RGGVY) in 2005 for providing access to electricity to rural households. Electrification of about 1.15 lakh un-electrified villages and electricity connections to 2.34 crore BPL households by 2009 was on the agenda. Under the scheme of Rural Electricity Infrastructure and Household Electrification, DDG was introduced in the XIth Plan to address the issue with the recommendations of Gokak Committee.
Technologies which can be used for Distributed Generation are:
• The Internal Combustion Engine.
• Wind Turbines
• Concentrating Solar Power (CSP)
• Fuel Cells
Penetration of DDG: As on 30-11-2012[ ], around 6% of the villages are still to be electrified and these villages will be electrified with a mix of GE and DDG.
Benefits of DDG
-Utilization of waste fuel to Energy
-Investment Deferral in Transmission Sector
-Power Quality and Ancillary Service
-Remote Areas Electrification
Barriers to implementation of DDG
-Lack of Adequate Information for market development.
-Poor Access to Credit
-Lack of awareness of RET(Rural Energy Technologies) in rural India
-Limited Site specific issues may erupt
-Financial Viability-A major factor
To successfully implement DDG,Overall strategy that can be thought of is
-Support Incentive in the near term
-Transition to New Market
-Reducing remaining institutional barriers.
Model/Proposed Framework for Implementation of DDG:
• Rural Electrification Policy: The current REP Clearly discusses the means of achieving 100% rural electrification but it falls short of recommending a single nodal Agency for all rural electrification efforts as shown in Fig 1. The Agency will have to act as an overseer for channelizing of funds through various agencies like MNRE, REC etc. and encouraging private participation in the sector.
Under Sec 14 of Electricity Act 2003, no licence is required for electricity generation & distribution in notified rural areas (26 states have notified).RE Policy states that for villages/habitations, where grid connectivity would not be feasible or not cost effective, off-grid solutions based on stand-alone systems may be taken up for supply of electricity so that every household gets access to electricity.
• Management of DDG systems: Local authority/panchayat/societies need to maintain the system as they are the real consumers and a sense of belongingness may incorporate in them.
• Selection of Technology: Relevant technology need to be adopted by the authorities with adequate feasibility analysis(in terms of raw materials, feedstock level, transportation facilities, usage pattern of consumers etc.) of particular region.
• Capital Subsidy from Government: Generally Rural cooperative societies manage the high expenditure of the DDG but owning to huge capital expenditure involved in the preliminary stage, government should provide adequate subsidy to the developers or the EPC companies whosoever is involved in the project. The incentives/subsidy should be based on the various factors like geographic location of area, planned capacity addition and output performance.
• Enabling guidelines for Tariff revision: Under the purview of CERC, Tariff setting and revision should be taken care by the concerned nodal agency which has been assigned the successful implementation of DDG in a particular area and moreover there should be crystal clear transparency in this process.
• CDM Benefits: All RE projects are eligible for CDM benefits, DDG projects can be made financially more viable and competitive after encompassing the monetary benefits associated with them.
• Considerations to be taken w.r.t various institutional Models recommended by Gokak Committee: Models like Sunderbans Model, TERI Model, Bangladesh Model may be adopted after suitable changes in order to increase people participation at large.
• Other recommendations:
Extend RGGVY to fund evacuation infrastructure
Develop transparent and simple interconnection rules and procedures.
Streamlining Project Approval
In the long run, distributed generation will help consumers to get power at lower tariff as power will be available at lower per unit cost. More employment opportunities, both at plant management level and in the manufacturing sector for related machinery, will improve living standards of the people. Availability of power at low cost will attract more investments, which would be more evenly distributed throughout the country rather than being limited to cities alone.
Going forward, concerted efforts by the Union and State Governments, financial institutions, academic and research institutes, non-governmental organisations, as well as multilateral and bilateral agencies is required. A distributed generation matrix for India is recommended for lighting the lives of those for whom lighting a bulb still remains a distant dream!
• Biomass Energy for Rural India Society, available at http://bioenergyindia.kar.nic.in Central Electricity Authority http://www.cea.nic.in)
• Village Electrification report of CEA
• Gokak Committee Report on Distributed Generation
• “Electricity Act 2003”, Ministry of Power, Government of India, New Delhi, India, Jun. 2003.
• World Bank Report on “Empowering Rural India: Expanding Electricity Access by Mobilizing Local Resources” 2010.
• California Energy Commission “Distributed generation and cogeneration policy roadmap for California” 2010
• Chandrashekar Iyer,” Decentralized Distributed Generation for India” – 2011
Introduction of REC(https://www.recregistryindia.nic.in/index.php/general/publics/AboutREC) trading framework has been a significant step in 2010,transforming the renewable energy market to go for market based modelled approach. Success/ Failure of the REC Trading framework can be gauged from the inventory being built up in monthly trading sessions. Of the 712792 RECs put up for sale in the two power exchanges in Sep 2012 session, about 450000 remained unsold and moreover 37% of the REC holders didn’t participate in the trading session at that time. This growing demand supply mismatch is giving alarming bells to the project developers and various potential investors who are eager to invest in RE sector in the near future.
REC mechanism seeks to expand its horizon from resource rich states to the deficit states but the key factor which will lead to success of REC is the RPOs by various obligated entities. Nonetheless state power regulators need to play a proactive role in the development of REC market. Till date all states except Arunachal Pradesh and Sikkim have declared their RPOs explicitly(http://ceew.in/pdf/Appendix_F-Renewable_Purchase_Obligation_for_States.pdf).
A survey was conducted to gauge the total renewable energy capacity of states,RPOs declared by them, CUFs of various renewable sources of energy. It has been analysed that only 4 states -Tamil Nadu, Gujarat, Karnataka and Maharashtra have significant wind power installations and RPOs higher than those required in 2010-11 and 2011-12.For eg Tamil Nadu needed about 4000MW of renewable energy capacity to meet its RPO of 14 % and it has already installed capacity of 4908MW.Except these states, rest of them were unable to meet their solar RPOs.
-There is huge inconsistency in RPO norms across the states. NAPCC,2008 targets 5% of the total grid purchase to be achieved through renewable energy. However in the absence of national level RPOs, states have been fixing their own targets depending upon the availability of renewable energy in that particular area.
-Another risk that is quite prominent as far as REC market is concerned- regulatory capture by the obligated entities which further skews the market against developers and investors. Certain states have been revising their RPOs targets in a downward trend for e.g Tamil Nadu(wind rich state) revised from 14% (2010-11) to 10% (2011-12).According to regulators, unrealistic targets imposed by some state regulators could set a wrong precedent not only for the state. Similarly, in April 2012, MP Power Trading Company Ltd. requested MPERC to waive RPO targets for solar energy for 2011-12 and 2012-13 because no solar power plant has been commissioned in MP and solar RECs were not available for trading on any one of the exchanges.
-RPO setting in most of the states is based on the assessments that are outdated. Therefore, they are set much lower than what could be feasible. Some stake holders are worried about the impact on tariff due to these targets. Like a study conducted by CRISIL along with CERC indicated that compliance with NAPCC target will have a marginal tariff impact of Re 0.01/unit/consumer ,reducing every year to reach Re 0.005/unit/consumer by 2017.
-Another risk that is anticipated by developers is lack of visible long term RPO trajectory. Only 7 states(AP,karnataka, Delhi, HP, Kerela, Maharashtra, Odisha) have declared their RPO trajectory till 2015-16 or beyond.
Limited Focus on CPPs and Open Access consumers
While most of the states have amended their regulations to include open access customers and CPPs under the purview of RPO but still there are some states which have not notified their OA and CPP consumers to meet RPOs. The glim scenario can be seen from the trading of RECs over IEX in which over 90% of the participants are DISCOMs and there have been very few CPPs and Open Access users. But there are states like Karnataka i.e KPTCL directed OA users in the state to fulfill 5% RPO for 2011-12.Similary Chattisgarh has also notified CPPs to provide RPO compliance on monthly basis.
Recently Rajasthan high court dismissed an appeal raised by Hindustan Zinc, Ambuja Cements etc that had challenged RPO regulation enacted by RERC. The petitioners stated that RERC did not have authority to pass the RPO regulation and impose a surcharge(penalty) as CPPs and OA were completely de-licensed under EA 2003.However Jaipur bench of High court rejected the petition stating the exact meaning of word ‘total consumption’ as total consumption in the area of distribution licensees in all modes. One of the reason for non compliance is the lack of incentive mechanism to support RPO implementation.
-A key stumbling block in the implementation of RPO is the financially strained DISCOMs. Burdened with over 2 trillion of losses, how can one expect DISCOMs buying costly RECs? However a recent development is the Debt restructuring for the DISCOMs(http://powermin.nic.in/whats_new/pdf/Financial_restructuring_of_State_Distribution_Companies_discoms_Oct2012.pdf)
-Another encouraging trend is that several DISCOMs have been facing losses due to their inability to hike tariffs but recently over 17 states have revised their tariffs giving a good signal to the market stabilization for RE.
Need to Improve REC Market Design
-There is lack of visibility in floor and forbearance price beyond the initial five year period because only non PPAs based sales are eligible for RECs.
-REC trading is restricted to auction markets and can be conducted only on a “once through” basis, thereby not permitting forward contracting and liquidity reduction.There is a sheer need of secondary trading market,which both the exchanges as well as industry players have been seeking for some time.
-Finally compliance window has to be shortened to a quarter or half year to ensure that there is continuous procurement action on obligated entities.
Thus,REC markets will fail to bring the desired results unless regulators are empowered to enforce the RPOSs and DISCOMs are allowed to function as independent power utilities rather than as an arm of government.
References: Power Line Magazine,MNRE Website, ICRA report on DISCOM bailout,REC registry,RE Connect etc.
As discussed in my previous post about the sorrow plight of Indian Coal Sector. The demand supply gap of Indian Domestic sector is increasing with each succeeding year (161MT ;2011-12). Under the umbrella of this mismatch between demand supply of Indigenous coal sector ,various recommendations have been put forward which can be summarized as:
Innovation and Technology:
- 1.Increase in Coal Production :Today, as the world has already started looking after a ‘sustainable practice’, in any domain and industrial and commercial practices, we really need to start assessing our potential and compare practices in the country vis-a-vis the other parts of the world which are more advanced in the sector. There can be 4 major advantages with the advent of new technology like Higher returns(IRR),Lower environmental degradation, lower per tonne of ore cost and higher production realization. An example of innovation in coal mining is moving from smaller capacity shovel to bucket sizes of even 25-30cu m capacities depending on factors like mine geology, size of mine etc. having digging capacities of the order of 11,000 MT/hr.
- Effective exploitation of resources: Evaluation of mineral resources required typical geological models and various geological technologies and the prospect of getting coal reserves in those particular areas is heavily dependent on the extracted data. As on April 2011
Total coal resource: Proved -114001.60,Indicated- 137471.10,Inferred- 34389.51, Total – 285862.21 .
Due to various limitations of the renewable sector, there is a need to tap our huge coal reserves. As far coal mining is concerned ,most of the mining practices are Open case mines(around 90%) as compared to Under ground mining thereby leading the drop in net coal production in some areas where the coal seam in as below as 90-100KM.Some of the prominent steps that can lead to increase in coal production are Use of proper and scientifically proven mining technology, Adopting the correct mining method (OCM/Long wall/other variants), Combining smaller mining areas to develop these into one single mine of large capacities, Promoting mining industries to have a maximum level of extraction by giving them incentives/tax rebates, Close monitoring by our government agencies in each mining project to crosscheck,the progress of each mining project in terms of percentage extraction,Meeting targets of mining projects not only in terms of production (per annum),but also on per annum level of extraction to match with the overall mineable reserves of a mining project.
3. Coal Quality Improvements : Indian Coal is characterized by high ash content, low sulphur,low moisture content. Lower washeability index, lower liberalization size. Due to these peculiar problems in Indian coal, there comes the need to go for importing of coal. CFRI(Central Fuel Research Institute,Dhanbad) has proposed some of the methods to improve wash ability index of the coal like improved froth floatation process, oil agglomeration process, oleo floatation process.(http://eprints.nmlindia.org/5887/1/Chap_9.PDF)
4. Improving Infrastructure and transport: One of the major issues being faced by the industry for the coal movement within India is transportation and infrastructure. Following are the major challenges being faced in coal transportation:
-Lack of availability of proper transportation mode for produced coal
• Mismatch between the demand and supply of railway wagons
• Lack of infrastructure to support a coal movement at full capacities
Some of the steps to improve the transport facilities and infrastructural requirements in order to compliment the coal industry rather than hamper its progress are as follows:
• Enhanced road connectivity across mineral zones and consumers
• Infrastructure developments driven by PPP
• Restructuring and/or reallocation of railway networks to connect with the coal
• Doubling of railway routes at places where coal movement is higher
• Enhancing port capacities as well as evacuation efficiency and augmenting the
existing capacities from existing ports.
Policies and Regulations: Without relevant policies measures and regulations every step will be of no use. Government has recommended various policy measures in its report of Coal Competitiveness and they can be summarized as follows:
- Auction of Coal licenses/ non coal minerals through competitive bidding and thereby leading to a boost In investor confidence.
- MMDR Bill 2011 guaranteed annuity of 26 % to the local population, thereby increasing the inclusion of host population in the mining process in particular area.
- Drafting of national sustainable energy framework for mining areas.
- Thrust on exploration on mineral resources by AMD, GSI, CMPDIL and MECL and classification of mineral resources as per the United Nations Framework Classification (UNFC) code.
- Setting up of coal regulatory authority that will act as watch dog for coal pricing mechanism in India.
- Single window clearance mechanism for taking the clearance such environment, land etc.
Above mentioned recommendations and policy regulations if implemented with proper strategy will ultimately transform India from Coal Importer country to Coal Exporter Country in the near future.
References : Report of Indian Chambers of Commerce,MoP,Newspaper Abstracts etc.
Globally, coal resources have been estimated at over 861 billion tonne.While India accounts for 286 billion tonne of coal resources (as on 31 March 2011), other countries with major chunk of resources are USA, China, Australia, Indonesia, South Africa and Mozambique.Coal meets around 30.3% of the global primary energy needs and generates 42% of the world’s electricity.India has the fifth largest coal reserves in the world. Of the total reserves, nearly 88% are non-coking coal reserves, while tertiary coals reserves account for a meager 0.5 % and the balance is coking coal. The Indian coal is characterised by its high ash content (45%) and low sulphur content.The power sector is the largest consumer of coal followed by the iron and steel and cement segments.
Some Facts about Coal Generation:
At the end of September 2012, 35 coal-based power plants had less than seven days of
coal stocks . This was due to the following:
Twenty-two of these occurrences is due to no, inadequate or delayed receipt from Coal India or one of its subsidiary firms.
Ten of these instances are due to plants running at above-planned PLFs.
Five instances are due to inadequate import of coal.
Similarly, for the first half of 2012-13, the average PLF of coal-based plants has been 68.27%, as opposed to 71.20% for the same period a year ago. Approximately 12.3 BU of generation shortfall in this period is directly attributable to the shortage of coal.
Some of the broader aspects of the Coal Sector can be listed as follows:
Operational and Sustenance Issues:
- Issues relating to fund raising for various coal projects in rural and semi urban areas, and this can be primarily cited as monopolization of the CIL in the sector which is barring the private sector investment in the sector
- Issue related to performance of mining activities in India as most of the mining that is done in India is Open Cast Mining(http://en.wikipedia.org/wiki/Open-pit_mining) instead of Underground Mining(http://en.wikipedia.org/wiki/Coal_mining)
- Private sector investment is also underdeveloped as there is not a detailed classification of various minerals according to UNFC(http://ibm.nic.in/unfc.pdf).
2. Key Administrative Issues:
- Long queue of Mining applications are lying at various levels of state and center levels thereby creating roadblocks in the path of adequate mining.
- There has been a proposal for Single Window Clearance Agency(SWCA) that will root out the so called “red tapism” in various governmental procedures.
- There have been a case of multiple registration counters/mechanisms for traders,miners,developers thereby making the final target a blurred one to be achieved in a target time.
3. Regulatory Issues: According to mine developers there are many loopholes in the policy regimes and regulatory issues regarding mining of natural resources.Prominent ones may be listed as follows:
- There is a lack of incentive mechanism in the mining sector-recommendation will be like to extend performance based incentive as has been laid down in NELP policies.
- There has been lack of policy support in transfer of mining licenses.The mine owners are not able to mine scientifically while complying to all the environmental norms and would like to dispose off these areas or develop them through forming a joint venture.States may allow this move in order to increase the production capability of the state mining companies.
The government must strictly adhere to timelines as per the MMDR act and MCR, and extension should be granted only on genuine cases as permitted under law.
4.Fiscal Issues: There have been really poor connectivity issues between the mining areas and moreover the evacuation facilities are also having a downsizing trend.
5. Infrastructural Issues: Cadastral (Khasra) maps are either not digitized or the geo referencing has not been done properly. This creates problems in lease boundary determination, thus hampering genuine miners. As a recommendation states may appoint a nodal agency to undertake these prefeasibility studies and thereby indicating the authenticity of data too.
These are some basic issues that are needed to be tackled by Indian Power Sector at the earliest and thereby making it a efficient coal production nation. Various recommendations about the problems will be taken up in the subsequent posts.
References: Indian Chambers of Commerce, MoP, CEA etc
India being fifth largest energy consumer in the world is rising high in terms of installed capacity (207 GW,Source : CEA as on 11.Nov.2012). Much progress is evident in Infrastructure,Telecom but things in power sector is not going as per the planning done by our GoI and MoP and thus India’s economic growth is at risk. Inspite of having so many reforms and policies,Indian power sector is grappling with “Cancer” and it requires some sheer reforms that will ultimately lift it to more sustainable position. Some of recent reforms/policies that have jolted Indian power sector in recent times can be summarised as below:
- Competitive Bidding of Captive Coal Blocks: Competitive Bidding Mines Rules,2012(http://www.coal.nic.in/100212.pdf) has been notified in Feb,2012 and according to which Captive coal blocks will be allotted on the basis of competitive bidding to the power plant developers.After the recent COAL SCAM(http://en.wikipedia.org/wiki/Indian_coal_allocation_scam) there was a lot of hue and cry about the allotment of coal mines to non serious players in the Indian power market.Almost each and every bidder has earned a windfall gain through the Coal Scam. According to the recent Competitive Bidding guidelines, Coal will now be allocated to companies in specific end use sectors(excluding power companies) through an auction under which two part bids would be invited over a floor price.For power companies, the respective state will select a developer on the basis of competitive tariff bids and recommend coal block allocation. Moreover power companies are required to pay the reserve price fixed by state government for such coal blocks.
- Approval of draft of MMDR(Mines and Minerals(Development and Regulations) Bill,2011: Another much awaited bill is the MMDR Bill(http://pib.nic.in/archieve/others/2011/sep/d2011093002.pdf) which has been approved by the cabinet in Sep,2011.It will be enacted after getting approval from President as well as Parliament.The bill provides a strong legislative environment for socio- economic conditions of the mining areas and the people which are effected by the same.The core of bill is a provision that mandates coal mining lease holders to contribute 20% of their Post tax profits( PAT -It is the net profit earned by the company after deducting all expenses like interest, depreciation and tax.PAT can be fully retained by a company to be used in the business. However dividend is paid to the share holders from this residue.) to a distinct mineral fund,which will be used to meet social compensation obligations.With the advent of this policy,it might make a dent to the profits of CIL,SCCL and they can take a harsh step of increasing the coal prices which will affect the developers and consumers at last.
- Revision of Royalty Rates: Another significant aspect that occurred in recent times is the revision of Royalty rates in which there is an increase of 14% ad valorem and 6% advalorem on coal,lignite respectively.(http://pib.nic.in/newsite/erelease.aspx?relid=82191)
- Exemption of Import Duty on thermal Coal: The finance Bill that has been passed by Parliament enforces the exemption of 5% basic customs duty and 1% Countervailing duty on thermal coal imports for indefinite time.This is major step in favour of major coal importers as well as power plant developers.Moreover,ECB has been allowed in case of Indian power sector which will be used to part finance the rupees based debt of power plant projects.
- Presidential Decree to CIL: A presidential decree has been issued to CIL for supplying coal to power generating companies under the terms and conditions of FSA.
- Revision of Standard Bidding Documents: In the generation side, There has been a major revision in case of Case 1 and Case 2 Bidding Documents in lieu of competitive bidding.MoP has also issued drafts related to UMPP Power projects and these aimed at more stringent bidding process with higher performance guarantees and other eligibility norms.Only core sectors companies can participate in bidding process and company can’t have more than 3 UMPPs in the pre commissioning stage.CERC has been made a regulatory body to intervene in the cases related to PPAs.
- Issue of Guidelines for Short Term Market: MoP released a notice of guidelines related to comptetive bidding in short term power market(accounts for 10% of the total electricity generated in the market).
- Imposition of Import Duty on Power Equipment: Union cabinet approved the request of imposing 21 % import duty on the power plant equipment. The move has been taken to restrict the cheaper equipment that are being used in the Indian power scenario thereby hampering the growth of Indian manufacturing industries which are still struggling to develop the power plant.
- Steps in Renewable Sector: A major step taken in Renewable sector is the withdrawal of Accelerated Depreciation and GBI i.e Generation Based Incentives (http://www.eai.in/debate/scrapping-of-the-accelerated-depreciation-incentive-for-wind-projects). This move will led to low capacity additions in the coming years & it has been speculated that MNRE will reintroduce incentives in the 12th plan.
- Regulatory Initiatives: CERC has played major role in the past year in formulating various key policies especially related to transmission and distribution sector i.e tightening of frequency band from 49.5 – 50.2 to 49.7 – 50.2 Hz. This has been primarily done to increase grid security in more stricter manner (under Electricity Grid Code 2010)
- Ensuring Timely tariff revision: In Nov 2011,APTEL (Aplleete Tribunal) passed a landmark judgement regarding timely revision of tariffs by state DISCOMs.SERCs(StateElectricity Regulatory Comissions) has been directed to issue suo moto proceedings for tariff determination within a month of scehduled tariff petition.In June 2010,GERC became the first commission to implement APTEL’s order.
- Implementation of Open Access: In Nov 2011,MoP announced all consumers to be eligible for Open Access who have their load more than 1 MW.Moreover state regulators have jurisdiction over fixing of energy charges for these consumers. Inspite of these efforts, there is a need to take strict steps to implement it as in some cases like Odisha they are trying to suppress it by Sec 11 of EA 2003.
- Renewable Energy Regulations: Renewable Energy Regulations has been made effective from 1st,April 2012 for five years.It lays down the guidelines for tariff determination and moreover the floor prices, forbearance prices have been revised. Forbearance Price of Non Solar RECs Rs 3300/MWh & Floor Price as Rs 1500/MWh(Solar RECs).
So, a bunch of steps have been taken to revive the Indian Power Sector but the Sector requires strong implementation strategy which will ultimately make India from Power deficit nation to power surplus nation.
References: PowerLine Magazine,Govt. sites like MoC,MoP etc