With CCI approval, Coal India on track to boost output by 50%...

 

India’s rising coal imports, increasingly a reason for the country’s wide trade and current account deficits, may be reined in considerably in the next few years, report Raj Kumar Ray and Aftab Ahmed in New Delhi. With the Cabinet Committee on Investment (CCI) approval in hand, the railways is set to complete work on three rail projects by end 2016, helping Coal India and its arms evacuate the black gold from some of their big mines and transport them to industrial hubs. The facility will help increase domestic coal output by 250 million tonnes or nearly 50%.

The three projects — Tori-Shivpur-Kathautia (Hazaribagh) triple line for the North Karanpura Coalfield in Jharkhand, Jharsuguda-Barpalli double line for Ib Valley coalfield in Orissa and Bhupdeopur-Raigur-Mand in Chhattisgarh — were stalled for nearly a decade due to various reasons. With the CCI clearance, work has begun at some of the sites, a senior official told.

“The clearance for these railway lines would be a milestone in terms of efforts to step up domestic production of coal. The rail connectivity has the potential to generate over 250 million tonnes of coal annually, which is almost half of what CIL produces now,” said a coal ministry official, asking not to be named.

India’s domestic coal output, mainly from Coal India, has grown slowly from 431 million tonnes (mt) in 2006-07 to 576 mt last fiscal, while imports more than trebled from 41.5 mt to 138 mt as power plants, steel and other units consumed more fuel to aid growth in Asia’s third-largest economy. Coal imports as a percentage of GDP almost doubled from 0.5% in 2006-07 to 0.9% in 2012-13, and was one of the main reasons along with oil and gold imports for widening the current account deficit.

While many captive coal blocks allotted to private players failed to take off, the pressure has mounted on Coal India to raise output. CIL has often blamed delays in green clearances, land acquisition and lack of rail links from pithead to industrial units as major reason for not being able to scale up its operations.

In this context, the three rail projects will address much of the coal shortage in coming years. The Jharsuguda-Barpalli rail line is essential for transportation of coal from the Ib Valley coalfield of Mahanadi Coalfields with a potential of 90 million tonnes per annum. The North Karanpura Coalfield covers an area of 1,230 square kilometres and has total coal reserves of 13.1 billion tonnes with a potential output of 70 mt annually. The Mand Raigarh Coalfield can supply 100 mt of coal annually once the rail link is built.

The environmental clearance for Jharsuguda-Barpalli was given last month and the project is likely to be completed by June 2016, an official said.

The Rs 2,345-crore Tori-Shivpur-Kathautia project has now got environmental clearance and land acquisition for some stretches is under way. The project is likely to be operational by December 2016.

In the case of the Rs 2,500-crore Bhupdeopur-Raigur-Mand line, the CCI/CCEA has resolved the issue and a special purpose vehicle led by Ircon will be set up by September 2016.

The three railway link projects are a part of the three inter-state rail corridor projects proposed by CIL that are dedicated to coal evacuation in the Naxal-affected areas in Orissa, Chhattisgarh and Jharkhand. CIL’s total investment in these three corridors are of the order of Rs 6,000 crore.

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Tax incentive window for GMR, JSPL, Sterlite power plants...

 

Power generators, like GMR, Essar Power, Jindal Steel and Power and Sterlite Energy, are likely to benefit from the relaxations in mega power policy announced yesterday.

A number of coal-fired power projects have been under stress to non-availability of fuel to reduction in off-take and lack of payments. “The move will help a lot of coal-based power projects,” said Umesh Agarwal, associate director of PriceWaterhouseCoopers.

The mega power status allows projects to claim tax benefits that will net 10% savings on carriage charge of the tariffs. The power policy, which was amended in 2009, covers coal-based power projects of 1000 megawatts and hydro power projects of 500 megawatts, above to claim tax benefits.

They can import equipment duty-free but to avail of the benefits they had to supply around 75% power that they produced through competitive bidding. However, projects based in states like Chattisgarh, Jharkhand, Madhya Pradesh and Orissa could not due to host state obligations.

Some states mandate these power projects to sell 35% of the power produced to the state-owned utilities at regulated tariffs. “The power producers will have to supply 30% power at  regulated rates and seven% at variable costs,” explained Debasish Mishra, senior director at Deloitte Touche Tohmatsu.

The latest relaxation allows 65% of power to be sold under competitive bidding.

“This dispensation would be one time and limited to 15 projects which are located in the states having mandatory host state power tie-up policy of power purchase agreements (PPAs) under regulated tariff,” said a press release by the government. 

“This is more of a move to align it to suit state regulations,” said Agarwal. Added to that, the Cabinet Committee on Economic Affairs (CCEA) also extended the the maximum time period to 60 months instead of 36 months from the date of import for provisional mega projects, for furnishing final mega certificates to tax authorities. This time extension will benefit 25 power projects, which would have a net capacity of around 30,000 megawatts.

The mega power policy was introduced in 1995 but benefits under it were available to only those generators who had either put up their power plants or had got provisional certificate by placing orders before July 2012.

No new projects will stand to benefit with the latest relaxation. “It will only benefit those projects which have received a provisional certificate already,” said Agarwal.

Source: Business Standard

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Changes to the Mega Power Policy approved by CCEA...

 

The Cabinet Committee on Economic Affairs on Thursday approved the Power Ministry's proposal to amend the Mega Power Policy.

The policy was introduced in November 1995 to provide impetus to the setting up of large power projects and derive benefits from economies of scale.

Thermal power projects of 1,000 MW and hydel plants of 500 MW are eligible for benefits under the policy.

These guidelines were modified in 1998, 2002 and 2006 to encourage power development in Jammu & Kashmir and the North Eastern region.

The projects can tie up electricity sales with distribution utilities through long-term power purchase agreements. They can also sell power outside these agreements, in accordance with the National Electricity Policy 2005 and the Tariff Policy 2006, as amended from time to time.

The benefits of policy also apply to energy-efficient supercritical projects that are awarded through international competitive bidding with the mandatory condition of setting up indigenous manufacturing facilities.

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CCEA may take up Mega Power Policy proposal tomorrow...

 

The Cabinet Committee on Economic Affairs is expected to take up Thursday the Power Ministry's proposal to amend the Mega Power Policy.

The policy was introduced in November 1995 to provide impetus to the setting up of large power projects and derive benefits from economies of scale.

"The proposal for making changes to the Mega Power Policy may be taken up at tomorrow's (Cabinet) meeting," said a source without providing further details.

Thermal power projects of 1,000 MW and hydel plants of 500 MW are eligible for benefits under the policy.

These guidelines were modified in 1998, 2002 and 2006 to encourage power development in Jammu & Kashmir and the North Eastern region.

The projects can tie up electricity sales with distribution utilities through long-term power purchase agreements. They can also sell power outside these agreements, in accordance with the National Electricity Policy 2005 and the Tariff Policy 2006, as amended from time to time.

The benefits of policy also apply to energy-efficient supercritical projects that are awarded through international competitive bidding with the mandatory condition of setting up indigenous manufacturing facilities.

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CCEA relaxes 3-year tapering coal linkage policy...

 

The Cabinet Committee on Economic Affairs (CCEA) relaxed the coal tapering linkage policy thereby relaxing the coal supply to 9 power projects with investments worth about Rs 60,000 crore with capacity of 11,000 megawatt (MW).

These power projects which were initially proposed to benefit from this relaxation were -Essar Power’s Mahan,  Adani Power’s Tiroda project, Damodar Vally Corporation’s Mejia project, Gujarat State Electricity Board’s Ukai project and Mahagenco’s Parli project.

These power plants already have got their own captive coal supply blocks, but because of environmental clearances and other issues these power blocks could not be developed and hence they wanted the government to ensure that coal supplies to these power projects continue for a period of six years instead of three years which is a current norm as per the tapering coal linkage policy.

 

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Government allows Coal India to produce gas from coal bed methane...

 

The Union Cabinet on Thursday decided to give state-owned miner Coal India Ltd a licence to produce natural gas from coal seams (CBM) in its existing mines.

The cabinet committee on economic affairs (CCEA) headed by Prime Minister Manmohan Singh, allowed Coal India, the world’s largest coal miner, to explore and produce coal bed methane (CBM) in its existing mines, coal minister Sriprakash Jaiswal said. “Yes, it is approved,” he told reporters in New Delhi.

Currently, rules and regulations prohibit mining firms from extracting CBM during mining as the policy does not allow for simultaneous extraction of methane (CBM) and coal. CBM exploration and production is allowed only in pure coal-seam gas bearing blocks which are auctioned.

Since 2001, 33 CBM blocks have been awarded in four auction rounds. Besides, two CBM blocks to Oil and Natural Gas Corp. (ONGC) and one to Great Eastern Energy Co. Ltd were awarded on a nomination basis.

According to the directorate general of hydrocarbons (DGH), India has CBM reserves of about 4.6 trillion cubic metres. Currently, three CBM blocks are producing around 0.15 million standard cubic metres per day (mscmd). This is likely to touch 7.4 mscmd by 2013, according to the DGH.
Sources said CIL holds at least 20% of the estimated 60 billion tonnes of coal resources in India. It has several coal mines in eight states, which are estimated to have CBM reserves of 3.5-4 trillion cubic feet (Tcf). Many of its acreage are gaseous and unsafe mines, where mining of coal is possible only after the extraction of CBM.

Extracting methane (gas) ahead of coal mining from seams will allow CIL help unlock very significant quantities of coal reserves in areas of Jharkhand, West Bengal.

Sources said Coal India will be allowed to explore for CBM in the mines that were given to it on nomination basis. It can take a state-owned explorer like Oil and Natural Gas Corp. (ONGC) as a partner for the venture.

Union oil minister M. Veerappa Moily had originally proposed allowing Coal India to rope in even private firms for CBM exploration and production. However, the proposal was killed after strong objections from Jaiswal. CBM extracted by CIL will be priced and marketed as per the oil ministry’s gas pricing and utilisation policy.

Sources said CIL had short-listed five blocks in Jharkhand with estimated CBM reserves of about 1 Tcf for exploration in the first stage. They are: Munidih (282 Bcf), Kathara (282 Bcf), Asnapani (212 Bcf), Putki Buliwari (247 Bcf) and Mohuda (14 Bcf). These five assets are considered to be gaseous and unsafe mines at present. CBM extraction would help CIL unlock nearly 100 million tons of medium grade coking coal, and about 1 Tcf of gas.

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Power ministry floats draft cabinet note on mega power policy...

 

The ministry of power has circulated a draft note for cabinet committee on economic affairs (CCEA) for certain amendments in the mega power policy, power minister Jyotiraditya Scindia said in the Lok Sabha.

“Details will be finalized once the comments of the concerned ministries are received and considered,” Scindia said in a written reply.

Thermal power projects of 1,000 megawatts (MW) or more, or a hydel power plant of 500MW or more, will be eligible for the benefit under the mega power policy.

It aims at providing impetus to development of large sized power projects and derive benefit from the economies of scale. These guidelines were last modified in 2006.

Scindia also said the government has decided that fuel supply agreements (FSAs) will be signed for the plants commissioned after March 2009 and scheduled to be commissioned by March 2015 totalling 78,000MW.

So far, of the 172 FSAs as many as 157 pacts have been signed between power producers and Coal India Ltd.

Signing of FSAs will ensure availability of fuel to the power plants which will boost power generation in the coming years, he said.

The government has taken several initiatives to enhance private participation and boosting power generation in the country including structural reforms for state electricity boards, formation of central and state regulatory commissions and formulation of national grid, Scindia added.

The government has also recognized power trading as a distinct activity.

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Financial Restructuring Plan for power discoms’ by CCEA...

 

The Cabinet Committee on Economic Affairs is likely to take up the power ministry’s proposal of tweaking the financial restructuring package for distribution companies today.

As per the proposal, the state electricity boards of Jharkhand, Bihar and Andhra Pradesh will be allowed to convert their outstanding loans till March 2013 into bonds as part of an amendment to the discom debt restructuring package.

According to a power ministry official, the proposal may be taken up in today’s meeting of the CCEA. Jharkhand, Bihar and Andhra Pradesh had approached the ministry seeking this special provision. Under the current Financial Restructuring Package (FRP), which was approved by the government last year, 50 percent of the accumulated debt of the discoms till March 2012 can be converted into bonds.

These bonds will be issued by the distribution companies to the participating lenders, backed by state government guarantees.

The balance 50 percent loans will be restructured by providing moratorium on principal and best possible terms for repayments.

The support under the scheme is available for all participating state-owned discoms on fulfilling short-term mandatory conditions. The accumulated losses of state power distribution companies were estimated to be about Rs 1.9 lakh crore as on 31 March 2011 and Rs 2.46 lakh crore as on 31 March 2012.

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CCEA likely to take up Power Grid FPO tomorrow...

 

The Cabinet Committee on Economic Affairs may today take up the Power Ministry's proposal for a follow-on public offer of state-run Power Grid Corporation, which is expected to mop up over Rs 7,500 crore.

According to sources, the proposal is likely to be considered during the CCEA meeting tomorrow.

The follow-on public offering (FPO) will comprise 13% fresh equity by the public sector company and 4% stake sale by the central government. The company will issue fresh 60.18 crore shares through the offer and a part of it would be reserved for the employees.

Meanwhile, the Department of Disinvestment has invited applications from merchant bankers for the proposed FPO.

The government proposes to dilute 4% stake, or 18.51 crore shares, out of its current 69.42% holding.

At current prices, the government could get over Rs 1,782 crore from the disinvestment, while the company would get over Rs 5,793 crore from the sale of fresh equity.

This would be the second follow-on offering from Power Grid, which sold a 10% stake along with a similar stake divested by the government in November 2010 at an issue price of Rs 90 a share.

The company hit the capital market with its initial public offering in October 2007.

Power Grid shares today were last traded at Rs 96.25 apiece, up 0.94% on the BSE. This values the entire company at Rs 44,561 crore.

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Take up Chhattisgarh power project with CCEA: GMR to Coal Minister...

 

GMR Group has asked Coal Minister Sriprakash Jaiswal to take up with CCEA the issue of providing fuel for its 1370 MW supercritical power project in Chhattisgarh, involving a cost of Rs 8,290 crore, which is scheduled to start commercial operations next year.

"The Cabinet Committee on Economic Affairs (CCEA) on June 21, 2013 directed that coal may be supplied to power plants of 4660 MW and other similarly placed power plants that do not have any fuel linkage but are likely to be commissioned by March 31, 2015, having long-term PPAs and a high bank exposure," GMR Group said in a letter to Jaiswal.

"Our Chhattisgarh project is one of the plants under this category of similarly placed power plants. Hence we request you to take up this matter with CCEA for considering our plant under this category and to enter into fuel supply agreements (FSAs) similar to 78,000 MWs of power projects immediately," the letter said.

GMR Group is setting up 1370 MW coal-based supercritical thermal power project at Raikheda in Chhattisgarh. The project is in advanced stage of commissioning with 89 per cent of project work completed and scheduled to achieve commercial operation by April 2014, the letter said.

"Out of the estimated project cost of Rs 8,290 crore, we have already spent over Rs 7,900 crore which includes Rs 5,250 crore of debt fund from banks, towards the implementation of the project. The company entered into long-term power purchase agreement for supply of power to the extent of 35 per cent of the capacity, with the Chhattisgarh state government entity," the letter added.

"Further, we wish to bring to your kind notice that the power plant can participate in long term case-1 bids for sale of power only if they have long-term coal allocation. Hence it is important that we are allocated domestic coal availability so as to enable us to participate in long term case-1 bids," GMR Group said.

"We sincerely request you to help us at this critical juncture where huge investments have been done, and help us to get coal allocation and enter into FSA with Coal India at the earliest," it added.

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