According to reports, the union ministry of new and renewable energy is lobbying the finance ministry to almost quadruple the paid up equity capital of the Indian Renewable Energy Development Agency (IREDA) to enable the latter to catalyse and fund the development of renewable energy projects in India.
“We are petitioning the ministry of finance to invest between Rs 2,000-2,500 crore additional equity capital into Ireda to allow it to expand its role in funding green power projects. We want IREDA to be able to do for the sector what the Rural Electrification Corporation and the Power Finance Corporation are playing in the conventional power sector in the country,” a top bureaucrat with the government of India told Financial Chronicle.
Ireda established on 11th March 1987 as a public limited government company promotes, develops and extends financial assistance for renewable energy and energy efficiency conservation projects. Notified as a public financial institution, Ireda is registered as Non-Banking Financial Company (NFBC) with the Reserve Bank of India (RBI).
The agency’s equity base has been steadily increased by the central government from Rs 539.6 crore at the end of March 2010 to Rs 589.6 crore at the end of March 2011 to Rs 639.6 crore at the end of September 2011.
The main objectives of Ireda are: to maintain its position as a leading organisation to provide efficient and effective financing in renewable energy and energy efficiency/conservation projects and to increase its share in the renewable energy sector by way of innovative financing.
Tarun Kapoor, joint secretary at the ministry of new and renewable energy said the ministry is working on methods by which to channelise a larger quantum of cheaper funds to IREDA.
“At this point of time the agency’s cost of funds is just around 1-1.5 percentage points. We are taking a multi pronged approach to this by setting up Solar Corporation of India as well as looking to allow IREDA to raise foreign currency denominated debt in global markets.”
January 16, 2012
Equity capital of IREDA likely to quadruple…
Suzlon to develop 3,000 MW of wind energy in Andra Pradesh…
According to reports, India’s largest wind turbine manufacturer Suzlon Energy will develop 3,000 MW in Andra Pradesh by 2016 with a potential investment of Rs.18,000 crore.
The company signed a memorandum of understanding (MoU) with the state government during last week’s Partnership Summit 2012 in Hyderabad.
Andra Pradesh is one of the fastest emerging wind energy destinations in the country.
As per the MoU, the state government will help Suzlon in obtaining mandatory permissions, registrations, approvals and clearances necessary for developing wind-based energy farms, the company said in a filing to the Bombay Stock Exchange (BSE) Monday.
“Suzlon, in turn, will play the role of developer and facilitate the channelisation of investments into the state through its customers investing in wind energy,” it said.
The MoU covers development of new capacity in wind farms across the state, with developments planned in the districts of Tallimadugula, Alankarayanipeta, Gandikota and other parts of Andra Pradesh.
Delhi Metro- first rail network in the world to have two projects registered with UNFCCC…
According to reports, the Delhi Metro is the first rail network in the world to have two projects registered with the UN Framework Convention on Climate Change. Not only has it succeeded in preventing release of almost one lakh tonnes of carbon dioxide into the atmosphere but is also earning carbon emission reductions (CERS) under the carbon credit scheme.
At a workshop on Climate Change Financing organised by the UNDP and the department of economic affairs, DMRC managing director Mangu Singh pointed out that in 2007 alone, Delhi Metro had succeeded in helping reduce 17,000 vehicles from plying on the streets and ensuring an analogous reduction of about 26,691 litres of fuel. “The present ridership in Metro is 18 lakhs per day but will go up to a combined ridership of 40 lakhs per day once the Phase 3 of the Metro is completed,’ Mr Singh said. “The passage per km of Delhi Metro is almost equal to that of the DTC,” said Mr Singh pointing out that its usage has also helped bring down fatal accidents in NCR.
One of the projects which received the green signal was when DMRC was able to show that they brought down CO2 emissions substantially by adopting regenerative braking systems in the trains. Under regenerative braking process, whenever metro trains apply brakes, three phase-traction motors installed on them act as generators to produce electrical energy which goes back into the Over Head Electricity (OHE) lines. The energy that is supplied back to the OHE is used by other accelerating trains on the same line, thus saving overall energy in the system as about 30 per cent of electricity requirement is reduced. The certification report was given by German-based validation organisation TUV NORD, which conducted an audit on behalf of the UNFCC. The DMRC saves 1,12,500 megawatt hours of power generation by restricting and reusing power through regenerative braking thus preventing over 90,000 tonnes of carbon dioxide from being emitted into the atmosphere. This figure will only increase once Phase 2 and 3 get completed, Mr Singh said. The agency has also earned Rs. 2.4 crores from the sale of 82,000 CERS under the carbon credits scheme. It earned Rs. 1.07 crore through the sale of 39,000 CERs for 2008, and Rs. 1.33 crore through the sale of 43,000 CERs for 2009. DMRC has earned Rs. 1,586 crores though property developed, the Metro chief said.
Solaris commissions 1 MW solar PV plant in Andhra Pradesh…
US-based Abound Solar, a top manufacturer of thin-film photovoltaic modules, and Solar Integration Systems India Pvt Ltd (Solarsis) today announced the commissioning of a 1 MW solar photovoltaic plant at Kadiri in Andhra Pradesh. The commissioning officially took place on January 14 and comes less than a year after the two companies announced a partnership targeting the fast-growing Indian solar market, according to a release said. The project in Ananthapur district was commissioned under the Rooftop and Other Small Solar Power Generation Plant (RPSSGP) scheme as part of the Jawaharlal Nehru National Solar Mission (JNNSM). It is the first project in Andhra Pradesh to use Abound's Cadmium Telluride (CdTe) thin-film modules. The combination of Abound's low-cost modules, along with Solarsis' homegrown racking and mounting solution, cut down on overall balance-of-system (BoS) cost of the plant, the release said. "This plant will generate operational data on different technology performance in Indian weather conditions," Venkat Rajaraman, CEO of Solarsis, said. Craig Witsoe, President and CEO of Abound, said "India is a key market for Abound due to our US-made CdTe panel's excellent performance in India's climate." "We have a significant installed base in India and see this growing in 2012," he added.
Interview of CMD, CIL Nirmal Chandra Jha…
Interview with CMD, Coal India Ltd. by BS.
Coal India Ltd, the world’s largest producer and India’s state-owned miner, is going through a difficult period following an unprecedented decline in output. Chairman Nirmal Chandra Jha defends the company’s recent performance in an interview with Sudheer Pal Singh. Edited excerpts:
Have you agreed on a 25 per cent rise in workers’ wages this time? What would be its impact?
The last meeting with workers remained inconclusive. The two sides agreed on a 25 per cent hike, but subject to certain conditions. That issue is to be resolved in the next 10 days. After the next meeting on January 27, we will decide whether more negotiations are required. The wage hike will not necessarily be followed by a price hike. It will depend on how much increase is settled.
How do you counter the allegation that the sector is going through its worst phase, led by Coal India’s dismal performance?
The allegation needs to be examined in the light of the current operating scenario. Ninety per cent of Coal India’s production comes from open-cast mining. This requires digging the earth, which requires the right to do mining. If coal-bearing land is not given to us, from where would coal be produced? Forest clearances cause delays. Newer terms and conditions are being imposed every time a proposal is taken up. The Forest Rights Act (FRA), 2006, has made settling the rights of all dwellers of the forest a pre-condition. Also, there is a new issue, of the Wildlife Conservation Plan which has to accompany every proposal. In another new issue, a digitised map of the mining plan has to be prepared with the differential GPS by the miner. All these delay the clearance of land for mining purposes. If any incremental production comes from the same mining area, it is again a violation of the law, of the Environmental Clearance (EC) limit. Also, people with land rights do not vacate land. Even if the acquisition is allowed on paper, physical possession is not always feasible. On the one hand, production from a mine is limited. On the other, people are asking for more coal.
Has not the end of the No-Go policy helped? What led to the downward revision of this year’s target?
A ministerial group recently recommended that the No-Go rider be dispensed with and projects be cleared on individual merit. But this was happening earlier, too; we have come back to the same regime. As on date, we have 177 forestry proposals awaiting clearance. The current year’s target was 447 million tonnes. This required a modest growth of 4.9 per cent. Unfortunately, this year’s monsoon played havoc on our mines and we had huge negative growth in the three months of August, September and October. And, we fell short of 26 mt from the year’s target. Making up the loss is possible only if we grow positively in the months of November till March. If we have a 10 per cent growth in the last three months this year, we would end up producing around 440 mt. But the target for these dry months was already kept high. g higher than what is already high is difficult.
There is potential in a lot of mines to produce more, but by doing this, we would cross the EC limit, which is not allowed. In other cases, the EC limit is present but we cannot produce because of forest clearance and land acquisition constraints.
But land acquisition is an evergreen problem. What makes it special this time?
Land acquisition problems have never been so acute in the past. The problem has aggravated as states have come up with newer relief and rehabilitation policies in the past three-four years, enabling land oustees to get more and more compensation. Also, the Land Acquisition Bill is pending in Parliament, which promises oustees four times the market price. So, why will a land holder give away land until the Bill becomes an Act, making it mandatory for the company to pay four times higher compensation?
There are contradictory provisions in the Acts which disable coal companies from getting land. While acquiring land, a miner cannot pay more than what is to be provided in the compensation provision of the Coal Bearing Areas (Acquisition and Development) Act. So, while the CBA Act asks miners not to pay more than a certain amount, the Land Acquisition Bill asks them to pay four times the market price. This dilemma should be resolved at the earliest. In some cases, we are not getting land even after paying the market price. All over the country, there is an aversion to give away land. While compensation would go up, we are not free to price the coal at whatever price we want.
But coal prices are deregulated.
Deregulation is on paper. It is theory. Naturally, the ministry continues to have a say on prices. The largest consumer is the power sector, whose product is regulated. So, we are not free to fix any price of coal. We are selling coal at a discount of 26 to 70 per cent of the imported price in energy terms. It is not feasible to have 100 per cent import parity in the coal price. The country is not in a position to absorb that high cost.
Do you think it is justified for the power ministry to blame CIL for its ills, given the widening gap between CIL-linked power capacity and coal receipts from CIL?
The blame is not justified. CIL is not the repository of the entire country’s coal resources. CIL is trying to produce the maximum it can. It should be the power sector’s lookout if they are not able to meet generation targets. Even in the current year’s extremely bad situation, we have supplied 91 per cent of the Annual Contracted Quantity (ACQ). Whenever Letters of Assurance (LOAs) have been granted, we have always informed the government that CIL does not have enough coal. We were forced to issue LOAs. If coal has to be imported, consumers have to take coal at that price. When CIL had initially tried to import coal and asked for a back-to-back tie-up, nobody came forward.
CIL has made it clear that it will not be able to meet everybody’s requirement. If this has to be done, 50 per cent of coal will have to be sourced from imports. Even while we supplied 303 mt last year to the power sector against the committed 323 mt, we had 70 mt in the stocks. We have produced enough. CIL cannot make this coal reach their power plants. If they require coal, they should lift it from the pithead. Even in October, when e-auction coal was diverted to the power sector, nobody lifted that coal. So, what is the fun in blaming CIL? Even in the past two months, CIL has added four mt coal to the stocks. This is because we are not getting sufficient rakes. We required 200 rakes in December but we got 186. This translates to a loss of loading of 50,000 tonnes daily. We cannot create rail infrastructure for the entire country. These issues have to be solved at the national level.
Are you in favour of the share buyback proposal in CIL?
We have not received any intimation from the government on this matter. I understand that in a buyback, the company extinguishes its share. What is the benefit to the company of this buyback? If I extinguish my share, it will be bought by somebody, from my money. My cash balance will be reduced and the interest income on this cash will also reduce. The company’s profitability will be reduced. The company will look for greater profitability for the shareholder from this money. The buyback route has been rarely practiced, as I understand. The cash reserve is with public sector banks, which are adequately utilising it elsewhere.
GVK Power & Infrastructure: Investors advised to exit stock…
Capex commitments in the current high interest rate environment are likely to increase the interest burden of GVK Power &Infrastructure(GVK). Availability of gas for its power plants would be an added concern in the near term.
BUSINESS
GVK Power and Infrastructure (GVK) is a holding company that has assets across various sectors such as power, airports, roads and natural resources through various special purpose vehicles (SPV). GVK operates the Mumbai and Bangalore airports.
In the power division, GVK has three operational gas-fired power plants with a combined operational capacity of 901 MW and has additonal 870 MW capacity under construction.
INVESTMENT RATIONALE
Gas availability for three of GVK's gas-fired power plants is a concern due to the reduction of gas supply from ONGC and Reliance. Lack of clarity on gas availability has forced it to defer expansion of its gas-fired power plants.
GVK's consolidated debt has increased as a result of aggressive expansion. It has expanded its stake in the Mumbai and Bangalore airports, which has consequently increased its debt by approximately Rs 1,800 crore last year. In addition, Mumbai airport has planned capex of Rs 9,800 crore of which Rs 4,200 crore is to be funded by debt. It is perceived that there has been a cost escalation of nearly Rs 3,000 crore from the original estimation.
The company has a 50.5% stake in Mumbai airport. Any unfavourable change in tariff rates by the Airports Economic Regulatory Authority of India, which is currently reviewing the tariff rates at Mumbai airport, would impact earnings from the airport.
GVK recently acquired a 10% stake in Australia's Hancock Prospecting for $1.26 billion. The deal includes acquiring a majority stake in coal resources, railway line and the port infrastructure projects of Hancock Coal. For this, the company would have to incur additional capex.
FINANCIALS & VALUATIONS
GVK's consolidated debt increased by 24% to Rs 6,901 crore in September 2011. This figure is likely to go up as the company has increased its stake in the Bangalore airport to 43% for $231 million in October 2011.
In a high interest rate situation, existing debt as well as additional capital expenditure would substantially increase the company's interest burden in future. This was 46% of its EBIDTA in six months ending September 2011.
A fall in interest rates may provide respite for the company's stock. However, availability of raw materials and capex commitments are likely to curtail its profits in the near term. Investors are advised to exit this stock.
Power play: DVC bends for RInfra…
The Damodar Valley Corporation (DVC) has come under further cloud regarding the commissioning of six power plants to supply power to Delhi during the 2010 Commonwealth Games (CWG).
According to Sources such as DNA, Spark found that DVC violated rules to award the Anil Ambani-owned Reliance Infra Limited an Engineering Procurement and Construction (EPC) contract worth Rs4,000 crore to construct a 1,200 MW power plant in Raghunathpur, West Bengal.
DVC also gave Reliance an interest-free loan of Rs354.07 crore in violation of Central Vigilance Commission (CVC) guidelines. The loan was given to Reliance before it submitted all bank guarantees (BGs) and before an agreement was signed.
The contract for the Raghunathpur Thermal Power Plant (RTPP), located in WB’s Purulia district, was awarded to Reliance on a single tender basis without re-tendering despite other bidders, including BHEL, formally asking that the tender opening date be extended.
DNA has documents that show that AK Barman, ex-chairman, DVC; Subrata Biswas, ex-secretary, DVC, and currently principal secretary, animal husbandry, Govt of Kerala; Gautam Chatterjee, ex-Chief Vigilance Officer (CVO), DVC, now vice-president & CEO, Maharashtra Housing and Area Development Authority (MHADA), and top officials of the ministry of power were involved in awarding this questionable contract. It is alleged that the contract was given in lieu of kickbacks and the matter needs to be investigated further.
Even as questions were raised over the awarding of the contract, the main contract file disappeared from the DVC office, making it impossible for the CAG to begin an audit of the contract. While DVC bent several rules to award Reliance the RTPP project using the urgency of the 2010 Games as an excuse, the project along with five others commissioned, is still incomplete. The projects are part of a power purchase agreement (PPA) executed between DVC and Delhi Transco Ltd in August 2006 for the supply of 2,500 MW of power for the CWG.
The contract: Tailor-made for Reliance Infra
A notice inviting tender (NIT) was issued in May 18, 2007, through the international competitive bidding (ICB) route for which the extended bid submission date (during the pre-bid conference) was July 31, 2007. Three out of the four bidders — Dongfang Electric Corporation, China; China Machinery Engineering Corporation (CMEC) and Bharat Heavy Electricals Limited (BHEL) in letters dated July 9, July 18 and July 21 requested that the dates be extended to August 31, August 14 and September 10 respectively.
However, the DVC management denied an extension, stating that it would impact the project schedule geared towards supplying the CWG with power. This denial is against a chief technical examiner’s organisation (CTEO) manual of the CVC that states that for any big project, extensions asked for by a majority of bidders, may be considered in the interest of the project. Because of this non-extension, the other three bidders couldn’t submit bids and Reliance Infra was the only company to do so.
DVC opened the Reliance bids by August 31. In the negotiations that followed, Reliance submitted a revised price of Rs 3,725 crore on September 14. During negotiations, DVC officials accepted Reliance’s request for interest-free loans.
Controversially, DVC also accepted a modification of a coal specification that Reliance wanted along the lines of its plant in Hisar. This violated another CVC guideline that specifies neither party can change any tender specification after the bid is opened.
“Accepting this is a clear favour by DVC management which includes the then chairman, secretary and CVO,” says Padamjit Singh, chairman, All India Power Engineers’ Federation (AIPEF).
After the deed was done, the DVC board curiously decided to seek the CVC’s advice regarding its decision not to extend the date of submission of bids as per the request of the three other potential bidders.
DNA has a copy of a letter dated October 4, 2007, to the CVC on behalf of the DVC board by the company’s CVO Gautam Chatterjee in which the CVO suggests the DVC board was justified in not extending the date for the submission of bids and that the decision did not lack fairness or transparency.
Chatterjee’s role in sending the letter is questionable since he should not have been party to processing and decision-making as a vigilance functionary.
To this, the CVC replied that “an extension of time or snap bid” is the preferred option. A ‘snap bid’ is a period of time given to those who have made a bid but do not fulfill tender specifications. This allows bidders to bring their bid up to required specifications. The DVC management seemed so desperate to ink the deal that it approached the CVC again via Chatterjee. This time, Chatterjee personally met Pratyush Sinha, the then CVC. The result was that the CVC removed the option of an ‘extension of bid’ and suggested ‘snap bid’ as the only option. “Such an intervention on the part of a CVO clearly suggests his intentions,” said AIPEF’s Singh.
Since technically, ‘snap bids’ are open to those who have made a bid in the first place, the ‘snap bid’ was an unfair option as of the four bidders who purchased bid documents, only Reliance Infra actually submitted the bid and was technically eligible for the ‘snap bid.’ DNA has a copy of a letter written by chief engineer, central electricity authority (CEA), part of Ministry of Power, dated October 30, 2007, where he suggests the ‘snap bid’ option was unfair since the other three bidders had not participated in the earlier tender and therefore it was inappropriate to invite snap bids from these bidders.
The letter adds that bidders need to be given adequate time in view of the complexity involved in the preparation of tender documents. However, the DVC went ahead with the ‘snap bid’ with the clause of revised coal specifications and the provision of an interest-free advance.
DNA has documents which prove that the inclusion of ‘interest free advance’ during the snap bid was not passed by the finance department. In a tender process, two bids are made. One deals with the project cost and the other details technical specifications.
While Reliance was asked to submit the price bid, the others were asked to submit the techno-commercial bid, too. To this, the chief engineer’s letter referred to earlier said: “Coal quality to be considered has been modified in the new bid proposal. Since the change in coal quality will involve major changes in the design of boilers, coal mills, electrostatic-precipitator & ash handling system, bidders should be given a reasonable time to submit the offer.”
Documents suggest that the other three bidders were not given any details of the issues that DVC and Reliance Infra had negotiated upon. “Since DVC have held a series of discussions with Reliance, who was the only bidder against their earlier bid, it is desirable that deviations/clarifications that have been given to REL are also made available to all bidders so as to provide a level playing field to all of them,” said the CEA letter. The result: No other bidder submitted a bid and Reliance Infra was awarded the contract.
A day after the DVC board met to consider the bid on December 11 2007, it sent a letter of acceptance (LOA) to Reliance. Giving an LOA within a day is unprecedented. In DVC’s case, the LOA was given even before the board meeting’s minutes were circulated.
When DNA spoke to some DVC employees, they said the then power minister Sushil Kumar Shinde and power secretary Anil Razdan visited the DVC office on December 11, 2007 to ensure the deal was passed. However, DNA has been unable to verify this independently. Interest free in Reliance’s interest
This was not all. DNA found that besides irregularities in the tender-awarding process, DVC favoured Reliance by granting it an interest-free loan in complete violation of CVC guidelines. Though bid documents said DVC would grant the successful bidder a loan @12.75%., Reliance was offered an interest-free loan after the bid was opened. This is in violation of CVC guidelines that stipulate that if an interest-free loan is necessary, it should clearly be stipulated in tender documents itself. In exchange for this relaxation, Reliance reduced its bid amount by Rs100 crore. But even by a conservative estimate, DVC lost Rs 50 crore because of the interest-free loan. There are questions over the loan disbursement too.
The Letter of Acceptance (LOA) issued on December 11, 2007 mentions that a mobilisation advance would be given only after Reliance issued all bank guarantees (BGs). CVC guidelines also stipulate that an advance should only be given after all BGs are submitted. But Reliance was paid the first installment of Rs173.56 crore on December 17, 2007 even though it had not submitted all BGs. DVC justified the haste, saying it was done because it needed to fix the zero date (date project officially begins) as December 14, 2007 given the Commonwealth Games deadline.
But even the second loan installment of Rs183 crore was given ignoring provisions made in the letter of intent (LOI) issued on February 29, 2008. The LOI says an advance cannot be given without signing a contract agreement. A Reliance spokesperson said that the company was not ready with its reply to DNA’s and it would formally communicate with DNA on Monday. When contacted, Chatterjee said: “I have nothing to add on this
matter. I am not aware of any of this.”
The mystery of the missing file
When CAG attempted an audit to see whether the interest-free loan to Reliance was justified, the DVC management informed it that the main file for the Rs4,000 crore project was missing. Not only that, the DVC management did not bother to file an FIR regarding its loss, a procedure ordinary people follow after the loss of simple documents like a driving licence or passport.
DNA has copies of letters exchanged between the CAG and the DVC management between November 2009 and till the end of 2011. The letters astonishingly suggest that the DVC management intended to hush up the matter. In one letter, from M. Mukherjee, Sr audit officer, DVC HQ, to the director (projects), DVC, dated February 12, 2010, Mukherjee asks for the exact date the main contract file went missing. The letter asks whether any action was taken and if not, the reasons thereof. It also asks whether DVC filed an FIR reporting the loss.
The CAG also wrote two more letters asking for the same, to no avail. Finally, on May 11, 2010, the chief engineer, DVC, replied, saying that the exact date was not known and that a one-man committee had been constituted to look into the loss.
DNA found that the DVC management was misleading the CAG by giving such information since GS Sarna, who submitted a CVO report following a complaint by MP Rabindra Kumar Rana, said the file was missing since August 2008, months after Reliance was paid the advance.
DNA has a copy of minutes of a December 18, 2011 meeting held by P Umashankar, secretary (power), where he emphasises that reconstituting a new contract file would be enough to address the issue of the missing file. “The main file of a contract worth Rs4,000 crore has gone missing but the management didn’t bother filing an FIR. This clearly shows it wanted to hide its misdeeds,” said a senior DVC official.
Subsequently, the CAG wrote several letters dated December 13, 2010, January 14, 2011, January 20, 2011 and March 17, 2010 seeking the findings of the one-man committee. To this, the DVC management directed the CAG to approach one department or the other. In a letter dated September 20, 2011, the CAG wrote to the additional secretary, DVC, saying: “I am to state that reply to the same (above dated letters) has not yet been received from your end despite issuance of repeated reminders/several personal persuasions. Since the matter is urgent and needs to be sent to C&AG’s office, New Delhi, the same may please be furnished to this office expeditiously.” The file is still missing.
Top Power executives to meet PM Singh over power issues…
Top executives from India's major power companies will meet Prime Minister Manmohan Singh on Wednesday to push for swifter action to improve access to coal and make it easier to get funding, acquire land and get environmental clearances.
Lack of progress on such issues has held up projects and threatens India's economic growth.
Tata group Chairman Ratan Tata, his deputy Cyrus Mistry, Reliance Power Chairman Anil Ambani, Adani Power Chairman Gautam Adani and top executives from other private power firms will be part of the delegation, organised by the Association of Power Producers.
The executives will also meet ministers in charge of finance, coal, petroleum and environment on the same day.
"The basic issues in the power sector are not being resolved and are impacting generation programs. The companies will seek quick redressal," Ashok Khurana, director general at the Association of Power Producers, told Reuters.
Policy gridlock in India, which has resulted in little economic reforms in the past few years, has crimped investment and contributed to a slowing of the economy.
Late last year, Singh met top executives from the telecommunications sector to hear their concerns about regulatory issues.
A shortage of coal and gas and uncertainty over supply have thrown the business plans of the generators into disarray and made lenders reluctant to lend, delaying projects.
Tata Power and Reliance Power, developers of 4-gigawatt plus power plants, are lobbying the government to free them from loss-making power sales contracts and want to be allowed to pass on rising fuel costs to consumers.
Plants that can produce about 20,000 megawatts thermal power are working at sub-optimal capacity, and another 30,000 MW of plants under construction are likely to be affected by fuel shortages, Khurana said.
India has an installed capacity of 187,000 MW, about a fifth of China's capacity, and a peak-hour deficit of about 12 percent.
A shortage of coal could prevent India from reaching its target of raising capacity by 75,000 MW in the five years to March 2017, a government draft report said late last year.
In its 12th five-year plan ending March 2012, India will add only 52,063 MW, falling short of the targeted 62,374 MW, continuing a trend of missing power output targets.
Coal accounts for more than half of India's power generation and will be required for about 85 percent of the target capacity addition in 2012-2017, the draft said.
India has about 10 percent of the world's coal reserves, but has struggled to provide enough of the fuel to power sector because of challenges in land acquisition and environmental clearances for mining.
A shortage of domestic supply is likely to push up coal imports by four times to 213 million tonnes in 2016/17 from 54 million tonnes this fiscal year, the draft said.
Costly imports, which may seem the only way to meet the country's coal demand, make power more expensive, forcing distribution firms, which sell at subsidised tariffs, to slow procurement.
Power Trading Update – 15th January 2012
Power Trading snapshots of two major exchanges IEX (Indian Energy Exchange) and PXI (Power Exchange of India) for 15th January 2012.
Market Snapshot on IEX
| Category | Purchase Bid (MWh) | Sell Bid (MWh) | Unconstrained MCV(MWh) | Constrained MCV (MWh) | Unconstrained MCP(Rs/MWh) |
| Total | 55968.5 | 69560.0 | 39186.3 | 34918.1 | - |
| Max | 3578.8 | 3552.7 | 2380.3 | 1736.8 | 3501 |
| Min | 1735.1 | 2428.4 | 1271.5 | 1283.5 | 1769.6 |
| Average | 2332.0 | 2898.3 | 1632.8 | 1454.9 | 2906.08 |
Market Snapshot on PXI
| Category | Purchase Bid (MWh) | Sell Bid (MWh) | Unconstrained MCV(MWh) | Constrained MCV (MWh) | Unconstrained MCP(Rs/MWh) |
| Total | 2290.2 | 11865.9 | 2077.9 | 1013.4 | -- |
| Max | 133.8 | 655.9 | 133.8 | 63.92 | 3250 |
| Min | 59.06 | 355.9 | 52 | 23.29 | 2010 |
| Average | 95.43 | 494.41 | 86.58 | 42.23 | 2771.25 |
Legends:
- MCV : Market Clearance Volume
- MCP: Market Clearance Price
