‘Cheaper electricity is not all that easy’
Pramod Deo, former Chairperson, Central Electricity Regulatory Commission (CERC) is direct and forceful. He minces no words to put things in perspective. Business Line recently caught up with Deo on the sidelines of a training programme organised by the IPPAI Regulatory & Policy Research Institute in collaboration with the India Smart Grid Forum. He shared his views on a number of issues. Edited excerpts from the interview. The success of UDAY (Ujwal DISCOM Assurance Yojana) hinges on States undertaking regular tariff hikes, wherever required. But, according to ICRA, the average tariff hike for 2016-17 has been only 5 per cent. Does this suggest that we are off the UDAY track? In 2016-17, Tamil Nadu, Kerala and West Bengal went to the polls. So, you could not have expected them to revise power tariffs. What matters is whether they do it next year. To expect that States would hike tariffs, particularly when they have such an event (elections), is like asking somebody to commit political suicide. For other States, getting their balance sheets in order and following yearly tariff hikes to reflect the full cost of running their business is important. The discoms have to also improve their efficiency, for which they will require network strengthening, which will mean incurring capital expenditure. This will finally add to the tariff in later years because the fixed cost gets built into your tariff. So, to say that tariffs will go down is difficult, unless you are talking only about commercial losses, which can be controlled and do not require any capital expenditure. But, the discoms are government-owned entities and have certain limitations. So, increasing the efficiency dramatically becomes difficult. The employees who are hand in glove with big consumers in pilferage have their own political links. What do you think of UDAY? UDAY gives the discoms an opportunity to clean up their balance sheets. There is talk that people will be getting cheaper electricity. But, that is not easy and it will be a long process because the coal linkages of power plants have to be reassigned. Only then will it be possible. Seventy to eighty per cent of the cost of power comes from fuel cost. What you need to see is the price line of all commodities and how power tariffs have moved relative to that. CRISIL had done a study a few years ago that showed that the price index of power tariffs is actually lagging behind the general price index. Also, certain performance improvement goals have been given to the state discoms. It is now for the State government to see that these goals, even if not fully achieved, are not lost sight of. Tariff hikes are a politically sensitive subject. Do the State Electricity Regulatory Commissions (SERCs) really have the power to take tariff decisions independent of political influence, if they so want to? SERCs are supposed to be independent. But, a lot also depends on how active consumer organisations are. A case will always be made out by the discoms (when they file a tariff petition with the SERC) on how justified their demand for a tariff hike is. But, it has to be critically examined and the consumer organisations can question this. Maharashtra, for instance, has very active and knowledgeable consumer organisations. But many States do not. The tariff petition filed by the discom must undergo proper technical scrutiny. Consumer organisations can play an important role here. Under the law, every regulatory commission has to appoint designated consumer representatives for their respective States. But, training these consumer bodies is a big challenge. So, the discoms have been asking for tariff hikes but the SERCs haven’t been approving them? The discoms make inflated demands knowing that these will be slashed by the SERCs. It should not be like that, it must be based on certain objective principles. The SERCs are under political pressure to not propose tariff increase for certain categories of consumers, such as agriculture, public drinking water schemes. If the State government does not give upfront subsidy committed by it, the regulator should go ahead with the proposed higher tariff. So, the SERCs work out the cost of power and the discoms are allowed to recover it either through tariff or subsidy? Normally, the regulation should be such that the SERC should not have to go to the government to check on whether the latter wants to give subsidy or not. The SERC should declare the tariff and then the government should decide what it wants to do (allow hiked tariffs or provide some subsidy in lieu of tariff hike). But, many States have regulations where the SERCs have to make a reference to the State government on this issue. That gives the government an opportunity to pressurise the regulatory commission. In the Tata Power and the Adani Power compensatory tariff case, the CERC and the Appellate Tribunal for Electricity (APTEL) came out with completely different orders. Doesn’t this undermine their credibility? The regulators come out with speaking orders, that is they have to give the reason for their decision. Now, in the Tata-Adani case, APTEL accepted the plea of ‘force majeure’, whereas CERC’s logic was that there is no force majeure but there is a case for ‘mutually agreed compensatory tariff”. The argument given by APTEL is that nobody could have foreseen such upheaval in Indonesian coal prices (which affected the companies’ cost of power production). But APTEL rejected CERC’s power to grant compensatory tariff. Now, whether the arguments given by CERC or APTEL are correct or not shall only be decided by the Supreme Court. Actually, this should not reduce their credibility. Credibility gets reduced if your order is absurd. What is important is what logic has been used and whether that is plausible. There is a common thread in both the judgements — you cannot run a power plant making monthly losses. The reasons on the basis of which you are compensated can be different. Jason Sanders Jersey
Is India really power surplus?
According to a recent report by the Central Electricity Authority, the country is expected to become ‘power surplus’ in 2016-17. Data too show that the all-India ‘power deficit’ has been easing. From 8.7 per cent in 2012-13, the shortfall was down to 2.1 per cent in 2015-16. While this is good news, it needs to be taken with a pinch of salt. Powerless For, the numbers show the extent to which power supply falls short of the demand by those connected to the grid. ‘Connected’ is the word to watch. With nearly six crore rural households, comprising a third of rural households, not having an electricity connection, the reported numbers under-estimate the country’s real demand for electricity. Many urban households, too, have no electricity connection. Also, the supply of electricity to farmers (which is subsidised or free) is limited to few hours every day. It is these limited hours of supply that are taken into account while calculating the power requirement of agricultural customers to arrive at the overall deficit or surplus. “The deficit is only capturing the unmet demand of the people connected to the grid. However, people who are yet to be connected and those with poor supply quality are not being taken into account,” says Ashwini Chitnis, Senior Research Associate, Prayas (Energy Group), a not-for-profit organisation working in the energy sector. “In an absolute sense, by which I mean the availability of 24×7 power supply to all, we still have a deficit,” says VP Raja, former Chairman, Maharashtra Electricity Regulatory Commission. The true picture is captured by India’s per capita electricity consumption: at 957 kWh (kilowatt hour) in 2013-14, it was less than one-third the world average of 3,104 kWh in 2013. Is there an improvement? The narrowing deficit does point to improving supplies and, therefore, reduced load-shedding for those with electricity connections. On the supply side, additional generation capacity, better availability of domestic coal and stronger transmission network have bumped up power availability. On the other hand, industrial slowdown and the strained finances of Discoms have curtailed demand. It’s still dark But for States where access to electricity is poor, the declining deficit that the Centre is harping about does not mean much. Take, for instance, Odisha, Mizoram and Tripura, which are expected to be power surplus in 2016-17 going by CEA data. But as of May 2016, the percentage of un-electrified rural households varied 22 and 52 per cent, with Odisha at the top end. With these States being largely rural, poor electricity access for rural households implies poor access for households, in general. “Since the potential electricity demand of these people does not get registered on the system, the deficit number is artificially low,” says Balawant Joshi, Founding Director, Idam Infrastructure Advisory, a power sector consultancy firm. It’s even worse for the significantly rural UP, Bihar and Jharkhand. As many as 87 per cent of rural households in Bihar, 70 per cent in UP and 63 per cent in Jharkhand have no electricity connection. Bright spots There are, however, some States such as Gujarat and Maharashtra where the access to power is almost universal and the deficit, according to the CEA, is also close to zero. Tamil Nadu is yet another State with almost universal access and a power deficit of 0.7 per cent in 2015-16. According to Joshi, the commissioning of the Tuticorin thermal power plant and the Kudankulam nuclear power plant in the State has made a difference. Tommylee Lewis Authentic Jersey
Odisha:Ball for Electricity Duty Act tweak starts rolling
The State Government is all set to promulgate an ordinance to amend the Odisha Electricity (Duty) Act, 1961 to bring clarity in certain provisions and revise the duty structure for certain category of consumers. The Energy Department has sent a Cabinet memorandum to the State Government along with a draft of the ordinance for approval. Justifying the need for immediate amendments in the Act, the department said the State Government is incurring huge losses due to the ceiling on electricity duty levied on ad valorem basis (at percentage of energy charges). As per Odisha Electricity Duty (OED) Act, there is a ceiling on electricity duty. As a result, the State Government is losing out on revenue front. “As electricity duty (ED) is now collected on ad valorem basis, the ED for some of the industrial consumers is limited to 40 paise per unit though it comes to around 63 paise per unit,” said the Cabinet memorandum. Stating that the Odisha Electricity Regulatory Commission is amending the power tariff in each financial year which automatically enhances the electricity duty, the memorandum said collection of ED is restricted to 40 paise per unit despite the fact that tax should be higher in view of the enhanced tariff. Besides, the proposed amendment in the OED Act will enable the Energy Department to collect arrear ED which has been estimated to the tune of `2.5 crore. Under the existing Act, there is no provision for levying ED on electricity consumed through open access system by consumers of the State. The tax loss on this account is estimated at `3.33 crore every month. This could be saved after the proposed amendment, sources in the department said. As the existing provisions for recovery of ED through certificate case is very cumbersome, the department proposed a special mode of recovery in line with Section 51 of the Value Added Tax Act, 2004. “It is necessary to take immediate steps for bringing such amendments as the Assembly is not in session,” the memorandum said. Earlier, the State Cabinet had approved the memorandum for amendment of OED Act on September 29, 2015 and March 11, 2016. Accordingly, an amendment Bill was placed in the Assembly during the Budget session. But this could not be passed as the House was prorogued. Chief Minister Naveen Patnaik has also given his consent to bring this proposal to the Cabinet. Tavon Young Womens Jersey
Defaulter firms may be barred from bidding for power generation and transmission projects
Companies that have defaulted in setting up any government infrastructure project are likely to be barred from bidding for power sector generation and transmission projects, a senior government official said. The proposal has been incorporated in the bid documents for ultra mega power projects (UMPPs) that are likely to be taken up for discussion by the Union Cabinet soon. It is also likely to be replicated in the new bidding format for power transmission projects, the official said. The clause that bars companies from securing more than three UMPPs has been retained. An expert committee formed to review bid rules for power transmission projects has recommended insertion of the debarring clause to the power ministry. “There was no debarring clause in the existing bidding framework and standard bidding documents (SBD) with regard to the parties who have earlier defaulted,” says the recommendations of the committee, uploaded on the power ministry’s website. “The committee was of the view that parties who have earlier defaulted on similar projects must not be allowed to participate in further projects. It was also discussed that such a clause has been proposed in the new UMPP document, which has been developed after detailed deliberation and stakeholder consultations by the expert committee constituted for revision of the SBD for location specific power generation projects.” Of all the mega transmission projects for which tariff-based competitive bidding was held, only two projects could not be implemented. The project developer, Reliance Infrastructure, had claimed that regulatory clearances led to delay in implementing the projects secured in 2009. The debarring clause bars those companies from participating in the auction whose managerial personnel have been charge sheeted or convicted on matters relating to security and integrity of the country. Firms convicted by any court or against whom adverse orders have been passed by any regulatory authority casting doubt on their ability to undertake project are also likely to be restrained from bidding. The prospective bidders will have to submit details of all investigations pending against them and their key managerial people. The power ministry and state-run auctioneer MSTC will soon launch a bidding platform to shift from the present manual auction process to determine the lowest bidder for power transmission projects. Jimmy Garoppolo Womens Jersey
International airport to be set up in Hisar: Hayana Finance Minister
Haryana Finance Minister Capt Abhimanyu on Friday said the state government has decided to establish an international airport in Hisar. This will ensure development of the area alongwith nearby areas and provide employment opportunities to youth. This was stated by the Finance Minister while addressing a public meeting in village Pali in Narnaund Assembly Constituency, said an official release. He said in this year’s budget, a provision of Rs 75 crore has been made for Civil Aviation Department and Rs 50 crore has been allocated especially for development of airport in Hisar. He said a consultant has been appointed to prepare a detailed report. It would soon submit its report. Darcy Tucker Womens Jersey
Himachal’s 1st instrumental landing tech at Kangra airport
Kangra Airport is set to become the first in Himachal Pradesh to have an instrument landing system. Airports Authority of India has approved the installation of devices which will reduce minimum visible runway length for any plane landing at the airport from 5,000 to 2,400 metres. he Directorate General of Civil Aviation (DGCA) has fixed the minimum visible runway length for any plane landing at Kangra airport at 5,000 metres, due to which many flights could not land during monsoon, as the weather remains misty in this season. The equipment is also expected to reduce the cancellation of flights to the tourist destination considerably. Kangra airport manager Parwinder Tiwari told TOI that the device — Doppler Very High Frequency Omni Range (DVOR) — has been sanctioned for this airport, and the process to install the device has started. “The length of the runway is 1,372 metres, and the width is 30 metres. This airport falls in category II (c). Two types of aircraft — ATR-72 and Q-400 — at present are connecting this airport with the national capital. But earlier, we could allow them to land only if the runway is visible to them from at least 5,000 metres,” said Tiwari. However, the Himachal government had imposed a 5% entry tax on the equipment being brought here for reducing landing visibility criteria. But now, the government has decided to waive the entry tax on the equipment. In the absence of the said system, navigation authorities had made some modifications at the manual end to cope with bad weather. “We used to inform the Delhi sector for flight take-off only when reports were for clear weather and visibility. It has reduced cancellations, but delay in flights was normal during the monsoons,” he said. Sammy Watkins Jersey
Airport’s trump card for security
In a bid to deal with identity-related security breaches, Airport Authority of India is planning to introduce biometric access control and badging systems at the Chennai Airport. The airport director Deepak Shastri told City Express that biometrics system would be introduced by next year. The system would regulate employee access throughout the airport and help keep unathorised people out of restricted areas. The airport is now being manned by Central Industrial Security Force (CISF) personnel, who manually check staff’s identity cards. It is learnt that the Bureau of Civil Aviation Security is planning to do away with these manual checks and provide its personnel with a secure contactless card, which will have a biometric template for multi-factor authentication. This system can use eye pupils or fingerprints for biometric access. The contactless card will be fool-proof and impossible to replicate, thereby putting in place a mechanism to monitor or control movements of personnel and vehicles into the airport. The doors and access points can be accessed only by authorised personnel after they have been identified by the system. The authentication of the cardholder will take place at the backend access control system. All successful or unsuccessful attempts will be recorded in the database server. Erik Karlsson Jersey
Dedicated import cargo storage area coming up at Tiruchi airport
Amid slight improvement in international import freight, a dedicated import cargo storage area is being established at the Tiruchi international airport. Civil works are apace at the new import cargo area that is coming up adjoining the export freight terminal. The need for such a facility was warranted as the existing place has been converted into an exclusive international courier terminal, poised for commissioning soon. Airport sources said that the new import cargo area is being set up at a cost of around Rs. 9 lakh with facilities such as examination area and storage room. Nearly 60 per cent of the works had been completed at the new area. Consequent to the setting up of the new import cargo area, the entry to the operations area at the airport would be shifted. Unlike export cargo which showed a robust growth over the years, international import freight did not show any appreciable rise despite a steady rise in overseas flight operations. Orlando Pace Womens Jersey
Raju to look at improving air connectivity to Surat
Civil Aviation Minister Ashok Gajapathi Raju today said he plans to convene a meeting with airlines to discuss ways to improve air connectivity to Surat. “Delighted to meet delegations from Surat, a city with a lot of potential. Have asked for a meeting with airlines to improve connectivity,” Raju said in a tweet. In May, Air India decided to run daily services from the national capital to Surat, almost five months after it had curtailed operations to the diamond city due to paucity of aircraft. T.J. Green Authentic Jersey
IndianOil: Fuelling growth
Indian Oil, the country’s largest public sector oil refiner and marketer, had a good 2015-16 fiscal year. The company’s consolidated profit more than doubled year-on-year to ?112.19 billion despite a 21 per cent dip in revenue to about ?3540 billion. The strong profit growth was thanks to a few factors. The fuel pricing reforms — diesel decontrol and direct bank transfer of LPG subsidy — along with the rout of crude oil over the past two years slashed the under-recoveries of the oil marketing companies. Indian Oil’s net subsidy burden in 2015-16 was just ?90 million compared with ?12 billion in 2014-15. Its borrowings continued to reduce and interest cost dipped 13 per cent last year. A favourable refining market environment helped too; the company’s gross refining margin (GRM) — the difference between price of its product basket and the cost of crude oil — rose to $5.06 a barrel in 2015-16 from $0.27 a barrel in 2014-15. The GRM would have been higher, but for the heavy inventory loss booked by the company when crude oil was touching new lows last year. Indian Oil’s inventory loss was higher than that of peers BPCL and HPCL, since many of its refineries are located away from the coast; this entails more transport time and higher levels of stock keeping. Promising outlook The Indian Oil stock, which has rallied sharply over the past two to three years, has lagged its peers. There still seems good upside potential in the stock. At ?468, it trades at about 10 times its trailing 12-month earnings, lower than the average 14 times in the past three years. Also, the company’s prospects look promising, thanks to a favourable pricing environment and recent big ticket expansions expected to pay off in the coming years. Besides, the company’s plans to expand refinery and petrochemicals capacity should improve margins and aid earnings growth. Investors with a long-term perspective can buy the stock. In the near term, the rise in crude oil price since January should mean inventory gains for Indian Oil. This should help offset the recent weakness in the refining margins, which are inherently cyclical. While it is tough to predict crude oil prices, they are expected to be in the range of $45-$60 a barrel, given the global demand-supply dynamics. This is a comfortable level for the oil marketing companies with less risk from inventory loss and under-recoveries. Better volumes Demand for petroleum products in the country is expected to grow at a healthy pace. Over the medium to long term, Indian Oil’s recently commissioned 15 million tons (mt) Paradip refinery is expected to ramp up to full capacity by 2017-18. This high complexity refinery should improve the company’s volumes and profitability. Besides, the company’s plans to expand and upgrade its existing refineries to raise total capacity to over 100 mt by 2022 from about 80 mt currently should help. So should the aggressive investments in petrochemicals over the next few years; the business contributes about a third of the company’s operating profit and provides a hedge against volatile oil prices and refining margins. Besides this, the company is adding to its formidable pipeline network and has 45 per cent stake in the upcoming 5 mtpa gas regasification plant in Ennore, Tamil Nadu. It is also adding to its small presence in the upstream business by making use of low prices to acquire stakes in hydrocarbon assets abroad. With a comfortable financial position (debt-to-equity ratio at 0.7 times), funding is not a constraint. Thomas Chabot Jersey