Govt slashes IREDA’s borrowing target for 2017-18
The government has lowered the estimated borrowing target of Indian Renewable Energy Development Agency (IREDA) — the key lender to clean energy sector and also called India’s green bank — by a massive 34 per cent to ?8,043.31 crore in Budget 2017. The Revised Budgetary borrowing for financial year 2016-17 stood at ? 12,212.60 crore. The target for financial year 2017-18 is even lower than the ?9,118.85-crore borrowing target set under Budget 2016-17. Vishal Jain, Chief Financial Officer, 8minutes Future Energy, said the lowered borrowing targets for IREDA will put strain on clean energy financing. He said, “Clean energy is a capital intensive sector and we have to manage our borrowings efficiently. The lower availability of capital will increase our borrowing costs and this will directly impact consumer tariffs.” Currently, IREDA raises funds from international development agencies such as the German government-owned KfW and Asian Development Bank. IREDA also builds its corpus by issuing bonds for clean energy development projects. It hedges its borrowing in foreign currency denominated financial instruments. Since IREDA’s foreign borrowings are backed by the Indian government, development agencies and bond holders are assured of returns. IREDA then routes its borrowed corpus for financing clean energy projects in India. The PSU’s lowered borrowing can reflect in lower lending. But, IREDA is not the only institution that facilitates development financing institutions to extend support for India’s clean energy mission. Hari Natarajan, CEO at Clean Energy Access Network, said, “There currently are sources beyond IREDA for financing clean energy development in India such as the solar rooftop line (funding) from the World Bank with the State Bank of India and from the Asian Development Bank with the Punjab National Bank”. However, Mayank Shah, Chief Financial Officer at Waaree Energies, is optimistic about the clean energy sector. He said, “Green bonds will come to the aid of the clean energy sector’s need for financing. Also, a large number of global renewable energy focused funds are looking to invest directly in India’s clean energy sector. “Further, development financing agencies have been approaching banks directly for disbursing these loans in India.” While the diversification of funds augers well for the clean energy sector, IREDA’s role seems diminished for now. Jackie Robinson Jersey
Budget disappoints power sector: expert
Stake holders are of the opinion that the failure on the part of Union Finance Minister Arun Jaitley to consider power sector as part of the infrastructure sector in the Union Budget presented last week will severely dampen the impressive growth initiated in the electricity installed capacity of the previous years. Electricity finance expert D. Shina, who analysed the situation post-budget, said that while the budget gave a boost to the infrastructure sector, it had given a shock to the power industry. The sidelining of the sector in the budget could lead to its disorientation at the very crucial stage of high expectations of growth. ‘No more sops’ “This is because the power industry pivoted around many sops. In fact, the ambitious steps taken by the government in the past years succeeded in eliminating the supply-demand gap to a considerable extent. But an abrupt end to these now can divert many investors from the scene thereby arresting the growth,” Dr. Shina said. To add to the woes of the sector power, cost can go up by a considerable amount due to various reasons. The budget said that the 80-IA tax holiday for the sector would be discontinued from April 2017, disappointing solar power developers and thermal power players who were expecting extension of this clause, Dr. Shina said. The Economic Survey was vocal on difficulties being faced by the private power generation sector. The industry had expected some relief in terms of corporate tax and minimum alternate tax (MAT). But there was no such mention in the budget speech. The lack of major provisions for hydro or nuclear energy was also glaring. Rural electrification A positive attempt in the budget was to maintain focus on rural electrification. The Finance Minister was confident of meeting the country’s ambitious 100% rural electrification target by May 2018 and he allocated a sum of Rs. 4,814 crore to its flagship scheme Deen Dayal Upadhyaya Gram Jyoti Yojana. This was sure to brighten up rural India, but it was not clear how its increased energy demand could be met without ensuring a matching growth in the generation sector, Dr. Shina said. Mitch Williams Authentic Jersey
35 open access companies return to Maharashtra power discom’s fold
Altogether 35 firms drawing power for their units have decided to become consumers of the Maharashtra State Electricity Distribution Company Limited (MSEDCL) again. The 35 companies were among 130 firms in the Konkan region of the state power utility and had been buying power from private producers as part of the open access system introduced last year. These consumers are known for prompt and huge payments, as they buy power in bulk. The companies had opted for the open access system. It allows the firms to buy power from independent producers located anywhere by paying some duty and the wheeling (carrying) charges to the electricity company. What came as a boon for MSEDCL is that the state energy regulator, Maharashtra Energy Regulatory Commission (MERC), in November 2016 tariff order allowed it to increase the wheeling charges and duty for consumers buying power from other producers, which use its network to supply to its consumers. “The result was that the electricity tariff of consumers buying power from private players became costlier. This is the reason why some of these companies have decided to return to us,” a senior MSEDCL official told TOI. The officer added out that the tariff provided to them by the independent producers was lower than that of MSEDCL. But the new conditions mean that the companies have to cough up more as power tariff. “Had the regulator’s ruling not come, these firms would not have approched the MSEDCL for power supply,” said Siddharth Soni, a consumer representative from Nashik. MSEDCL officials are, understandably, happy with the development. “We are reaching out to the companies promising best services. As a result, we are gaining back their confidence. The tariff and other conditions are favourable no doubt, but the company has also improved its services and infrastructure over a period of time,” MSEDCL regional director Satish Karpe said. Justin Pugh Authentic Jersey
Budget provides leeway to increase power demand, wanting in tackling stressed assets: Experts
The problem of subdued power demand ailing the thermal as well as renewable energy sectors was addressed by Union Finance Minister Arun Jaitley in his budget proposals for fiscal 2017-18 on February 1, but there is no “direct, head-on tackling of stressed power assets”, experts say. Jaitley said the country was well on its way to achieving 100 per cent village electrification by May 1, 2018, and proposed an increased allocation of Rs 4,814 crore under the Deendayal Upadhyaya Gram Jyoti Yojana in 2017-18. “The progress towards 100 per cent rural electrification target by May 2018, as announced in the budget for the previous financial year, is on track and thus a higher level of funding support in the current budget is likely to gradually improve the energy demand, and the PLF (Plant Load Factor) levels for power generation entities to some extent,” Sabyasachi Majumdar, Group Head, Corporate Sector Ratings at ICRA, told IANS. The government has sustained its focus on infrastructure spending, which is budgeted at Rs 3.96 trillion ($59 billion) in 2017-18, an increase of 10.5 per cent over the previous fiscal. Allocations for power in the latest budget shows an increase of 51 percent, while that for road transport, railways and shipping have gone up by 31 per cent, 19 per cent and 16 per cent, respectively. These measures are expected to trigger higher industrial activity, thus translating into greater demand for industrial power. “Moreover, an increased allocation for the infrastructure segment is likely to result in an increase in energy demand from the industrial sector, which has shown subdued demand in the past two-three years,” he added. However, according to a report prepared by ratings agency Crisil, overall infrastructure investments will take longer to pick up, especially given the private sector’s inability to invest due to below-expectation performance. “Investments have been steadily falling — to 29 percent of GDP in fiscal 2016-17 from 34 per cent in fiscal 2011-12,” the report said. Interestingly, no specific measures have been highlighted in the budget to address the issue of stressed power assets. “We would have been heartened to see a direct head-on tackling of stressed power assets. The latest Economic Survey ignited hopes by talking about a very innovative solution by creating a Public Asset Rehabilitation Agency (PARA). “However, while the Finance Minister talked about recapitalising the banks to the tune of Rs 10,000 crore, the Budget was silent about a direct measure to address this big challenge facing the (power) sector. Maybe, we may see a post-budget follow-on around PARA,” KPMG (India) Partner and Head of Energy and Natural Resources Manish Aggarwal told IANS. On the positive side, halving of the basic customs duty on LNG from five per cent to 2.5 per cent would support stranded gas power plants. It would also help ease FDI regulations with the proposed abolition of the Foreign Investment Promotion Board and extension of concessional withholding tax on ECBs (external commercial borrowings), enabling foreign investors to pump money into the energy sector, he said. The Budget has also outlined measures to support the development of solar capacity such as taking up the second phase of Solar Park development for an additional 20,000 MW capacity and the plan for installation of 1,000 MW of solar capacity at railway stations. “While these measures would support off-take from solar power, they would affect the demand for thermal power generation to some extent,” Majumdar said. The Make in India programme in the solar sector, which was being affected by imports of cheap Chinese modules, has also got a fillip. The significant rise in allocation under the Modified Special Incentive Package Scheme (M-SIPS) and the Electronics Development Fund (EDF), which provides capital subsidy of up to 25 per cent, is expected to benefit major domestic solar cell and module manufacturers, as well as foreign players planning to set up their manufacturing base in India, the Crisil report said. However, Vinay Rustagi, Managing Director of solar consulting firm Bridge To India, said the 10-year tax holiday and GBI (generation-based incentive) for the wind sector, as expected, have been phased out. “Reduction in corporate tax rates and MAT (minimum alternative tax) credit extension will help small- and medium-sized businesses. There is also some rationalisation of duty structure for components used in manufacturing solar modules to help domestic manufacturers,” Rustagi told IANS. The experts said there was no big bang or material announcement in the budget. “We wanted the Budget to address the issues of curtailments and payment delays that have increased substantially over the last one year for the renewable sector. A limited play guarantee fund only for renewables that can take care of payment delays to independent power producers beyond a defined timeframe of say three months would have gone a long way to get an exponential jump in investments from overseas investors, as well as domestic players,” Aggarwal said. “We are disappointed that there is no funding set aside for new transmission schemes or any skilling and customer education initiatives,” Rustagi added. Steve Atwater Jersey
All set for exploration of shale oil and gas by ONGC in State
The final public hearing for exploring shale oil and gas by Oil and Natural Gas Corporation Limited (ONGC) and Oil India Limited was conducted without any hitch in Alamuru mandal headquarters of East Godavari district on Saturday. Banking on its rich experience and data, the ONGC had informed the Government of India that it identified 50 blocks in the country — 28 in Cambay basin, 10 in KG Basin, 9 in Cauvery Basin, and 3 in Assam and Arakan Basin. The ONGC had estimated availability of 187.5 trillion cubic feet of shale gas in these basins. Consequently, it had been tasked with exploring shale oil and gas on an experimental basis by 2019 in the existing blocks. In 2014, it had drilled the first shale gas exploratory well in Cambay. Though there were some positive leads, it could not achieve any major breakthrough. In Andhra Pradesh, the ONGC would go in for a two-phase exploration in three districts – Krishna, West Godavari, and East Godavari. In the first phase, it would drill five wells — two each in Krishna and West Godavari, and one in East Godavari. In Krishna district, two locations had been identified – Komallapudi village of Kruthivennu mandal and Modugumudi village of Mandalvalli mandal. The estimated cost in the district was put at Rs. 800 million. In West Godavari district the ONGC would take up drilling in Kolanapalli village of Kalla mandal and Andaluru village of Veeravasaram mandal at an estimated cost of Rs. 930 million. In East Godavari, it would take up drilling at Kalvacharla village in Alamuru mandal at an estimated cost of Rs. 2.17 billion. HRF objection Meanwhile, rights activists are apprehensive about the entire exercise. General secretary of Visakhapatnam-based Human Rights Forum (HRF) V.S. Krishna says that exploitation of shale gas in the region will lead to depletion of potable groundwater, salination of water table, earthquakes, and air pollution. ‘No water contamination’ However, P. Chandrasekharn, Group General Manager, shale gas and oil, KG Basin, says that exploration is only on an experimental basis. He further says that drilling is done by adopting the Hydrofracking method with the approval of the Government of India. There will be no water contamination as drilling is done with appropriate casing of four layers, he says. The drilling will be completed in three months. Klay Thompson Authentic Jersey
Merged PSU energy giant to have global edge: B Ashok, IOC Chairman
The merger of state-run energy companies will provide India the muscle to acquire assets abroad and negotiate better, but the business model of the new entity thus created will be key to its success, chairman of the country’s largest oil marketing firm said. Finance minister Arun Jaitley in the Union Budget last week announced a proposal to merge stateowned oil companies to create an integrated oil behemoth, which could potentially top $100 billion in market value and enter the league of global oil heavyweights. “Energy is critical and strategic for the growth that India aspires for,” Indian Oil Corp chairman B Ashok told ET. “Consolidation would help us strengthen, leverage and enhance our position more strongly in the international market. This will not happen overnight and we will have to work on different models, but it is the way forward.” Indian Oil is the top-ranking Indian company on the ‘Fortune 500’ list for 2016 at 161, with the other two state-run oil marketing companies also making it to the list. The merged entity would be catapulted to the league of global majors such as BP, which has a market value of $115 billion. “The top ranking energy companies on ‘Fortune 500’ are integrated players. While we are on the list, individually we are much smaller in scale. The merger would help scale and consolidate our position in the world,” Ashok said. “An integrated company can absorb volatility much better.” On concerns that the merged entity may have to cut down on staff to reduce duplication and redundancies, Ashok said the government will have to work on a model that works best to leverage the strengths of these companies. “The thought process for being consolidated across the value chain has been in place for a long time. IOC has believed in this model and has been working towards it. Simultaneously, we have been removing duplications in our operations and staff,” he said. In 2005, an official panel had advised against the merger of the state run oil companies, saying that a dominant entity may not be good for competition in an energy-starved country. “Industry has grown a lot and those concerns are not relevant anymore. This is the right time for such a move,” IOC chairman said. The top eight public sector oil companies together would have a market value of $108 billion, which would surpass the $50 billion of India’s Reliance Industries and that of the $70 billion Russian major Rosneft, which is increasing its presence in India by buying stake in Essar’s refinery. Troy Apke Jersey
Pakistan to start civil work on TAPI by end of this year
A delegation comprising officials of the Dubai-based TAPI Ltd is set to reach Islamabad this month to sign various agreements and contracts for the Turkmenistan-Afghanistan-Pakis¬tan-India Pipeline, Federal Minister for Petroleum and Natural Resources Shahid Khaqan Abbasi said on Saturday. Talking to Dawn, he said the TAPI consortium, led by Turkmengaz (the national gas company of Turkmenistan), is serious about the project deadline which is set for 2019. The ongoing construction work on the portion falling in Turkmenistan shows their commitment, he added. Mr Abbasi, however, was not optimistic about the execution of the Iran-Pakistan Gas Pipeline Project in near future, especially in view of fresh sanctions imposed by the United States. “This project is already on hold for the last couple of years after the US imposed sanctions on Iran. What will be the impact of fresh sanctions on this project, we will come to know soon after studying the list of companies blacklisted by the US under latest sanctions,” he explained. He said Pakistan has signed the agreement on IP pipeline with the National Iranian Oil Company – a state run subsidiary of the Iranian government. Hopefully the name of this company will not be in the list of companies blacklisted by the US, Mr Abbasi said. “If the name shows up in the black list, this project will be in further trouble,” the minister added. Pakistan is expected to initiate civil works on the 780km long portion of TAPI which falls in its territory by the end of this year, a senior official of the Inter State Gas Systems (ISGS) said on Saturday. The 1,800km long pipeline, which begins from the Galkynysh gas field in Turkmenistan, passes through Herat and Kandahar in Afghanistan, moves through Pakistan via Quetta and Multan and concludes at Fazilka in India. Various activities, including signing of respective contracts and preparatory works including route survey are likely to begin by end of this month, the official said. “We are well prepared to assist the TAPI consortium and respective firms for the accomplishment of various tasks. We are hopeful that the civil work on the pipeline’s portion, which falls in our territory, will be launched by end of this year or by January, next year,” said ISGS Managing Director Mobin Saulat. Talking to Dawn, the chief of ISGS – a subsidiary of the Ministry of Petroleum and Natural Resources – said a German firm (ILF) has already been engaged as the project management consultant by the TAPI consortium. The team is likely to start various works related to route survey, designing, planning and feasibility studies within this month. Turkmenistan, being a lead partner or leader of the TAPI consortium, has already started construction work on the portion falling in its territory last year. The consortium has also established a company based in Dubai to supervise and execute the project that is planned to be completed by December, 2019.
Augmentation of LNG project in Kerala remains a pipe dream
The schemes envisaged to boost the use of natural gas in Kerala are moving at a snail’s pace, despite the state being home to South India’s only LNG terminal. Data available with the Petroleum and Natural Gas Regulatory Board show the number of natural gas connections rose to 78 by November-end from 16 in the beginning of the financial year, although still remains the lowest in South India. Currently, Karnataka and Andhra Pradesh are in the forefront of adopting natural gas in South India. After rolling out the city gas project last year, not a single CNG outlet was opened in the state to dispense fuel to vehicles. The time is ripe for Kerala to take advantage of the LNG terminal, in view of the reduction in Customs duty in the Budget (from 5 per cent to 2.5 per cent). “Currently, FACT and Kochi-Refinery are the largest consumers of natural gas in the state. LNG consumption at households and vehicles is yet to pick up momentum. All the new residential apartments in the state have the provision for natural gas connection. It is high time the government intervened to enhance the state’s LNG infrastructure,” said Kerala Chamber of Commerce and Industry chairman Raja Sethunath. Currently, LNG accounts for 50 per cent of the gas demand in the country. “The issues pertaining to pipe laying by the PWD at Kalamassery have been resolved, and construction of CNG outlets at Kalamassery, Eloor, Kundannoor and Aluva is progressing. We expect to start work at two more stations soon,” said Ajay Pillai, deputy general manager of Indian Oil-Adani Gas, the implementing agency for the city gas project. Post-Budget, the government estimates LNG would become price-competitive. According to experts, states like Kerala should effectively utilise the opportunity. “The reduction of Customs duty is a positive move. Since the KG-D6 deal has turned out to be a damp squib, the country will increasingly be dependent on import to meet its LNG demand,” said energy analyst Sudha Mahalingam. Wayne Gretzky Womens Jersey
Halving of LNG duty to save Rs 9 billion for consuming industries
The government’s move to halve import tax on liquefied natural gas (LNG) in a bid to promote use of the cleaner fuel, will result in Rs 9 billion savings to gas-consuming industries. A host of industries from petrochemical plants to fertilizer units will benefit from the Budget announcement of cutting import duty on LNG to 2.5 per cent from 5 per cent currently, Oil Ministry sources said. This, they said, augurs wells to achieving the objective of increasing the share of natural gas in India’s energy mix to 15 per cent by 2020 from 6.5 per cent at present. Government is focused on increasing the usage of natural gas in overall primary energy mix for promoting a gas-based economy in the country. In view of limited availability of domestic gas, there is continuous increase in import of super-chilled natural gas (LNG) in the country. Import of LNG is allowed under Open General Licence (OGL) scheme and prices are based on international market demand-supply scenario, they said, adding import duty of USD 0.35 per million British thermal unit on a spot LNG price of USD 7 per mmBtu will now halve. Presently, imported LNG meets about 50 per cent of gas demand of various sectors in the country. The import of LNG is expected to rise in the future for catering to the rising demand of energy for industries, they said. Sources said abased on LNG consumption in FY 2015-16, the estimated savings to gas consuming industries will be to the tune of Rs 9 billion on account of reduction in customs duty. The move, they said, will help in making LNG price competitive to alternate fuels and industries will be encouraged to switch over to LNG from liquid fuels. IG: managing director E S Ranganathan said lowering of customs duty will reduce the fuel’s price by 15-17 cents per million British thermal units for industrial and commercial customers. Spot LNG price in Singapore has risen about 50 percent over the past year, making the fuel unaffordable for many consumers. Sources said the reduction would benefit petrochemical, steel and fertilizer plants. Power producers were exempted from the import tax since 2012. The step is credit positive for regasification terminal operators including Petronet and GAIL, K. Ravichandran, group head of corporate ratings at New Delhi-based ICRA, said in a statement. According to BP India, natural gas at 25 per cent of energy mix in 2030 is 970 million standard cubic meters per day of gas consumption, a seven-fold growth over 2015-16 levels. “To meet this level of demand there has to be a judicious combination of mainly domestic natural gas and imported LNG,” it said on its website. India’s gas supply deficit is expected to widen from 78 mmscmd this fiscal year to 117 mscmd in 2021-22, according to a government estimate. Tyreek Hill Womens Jersey