States free to give coal to efficient private power producers

News:


The power ministry on Tuesday framed rules giving state governments the freedom to get power generated by the most efficient private companies in the state using the coal allocated to states by miners under a new system that replaces the earlier rigid allocation of coal to individual state-owned plants.

The rules framed in line with the cabinet decision of 4 May last year rationalising coal allocation, to allow states to invite power tariff bids from independent power producers at which they are willing to sell power using the coal that the state is willing to assign to them.

The landed cost of power from the private generation company including transmission charges has to be less than the variable generation cost of power from the state power generation unit, which the private player is seeking to replace, according to the rules released by the power ministry. Power tariff has two components—a fixed cost of the power plant and the variable or the energy cost.

The private power producer has to assess transmission infrastructure availability before making the bid. The state will check with the ministry of railways before assigning coal to the winning bidder whether transportation of the fuel to the private player’s plant was feasible.

The easing of the coal allocation rules is part of the government’s efforts to reduce power generation cost by utilising the fuel at the most efficient plant and enable distribution companies to buy more power.

On 21 December, coal and power minister Piyush Goyal had said that he had cleared the plan to allow state-owned and private companies to swap their allocations of coal so that power plants can source the fuel from the closest available location and improve power generation efficiency. The minister had also said then that eventually he would like such swap of coal to be allowed across sectors of the industry such as power, steel or cement.




My View:


The initiative by Government is quite good which will help to reduce the cost of electricity. But to come under the policy the rules are quite tough as stated in news. There should be some flexibility to private generation companies. 

Coal mine auctions hit a block, four bids to be ‘re-examined’

Government has told the nominated authority in charge of e-auctioning coal blocks to re-examine the bid process for the blocks won by these companies recently, following certain “prima facie discrepancies” including questions over the bid prices. 

Putting Balco, JSPL and BS Ispat in a spot, the government has told the nominated authority in charge of e-auctioning coal blocks to re-examine the bid process for the blocks won by these companies recently, following certain “prima facie discrepancies” including questions over the bid prices.

The coal blocks in question are Gare Palma IV/1, Gare Palma IV 2&3 and Marki Mangli III. Balco had bagged Gare Palma IV/1 block with a bid of R1,585 a tonne Jindal Power, a subsidiary of Jindal Steel and Power, had retained its previously held blocks Gare Palma IV 2 & 3 at R108 a tonne. Its winning bid was the lowest among blocks earmarked for the power sector, which ranged from R470 per tonne to R1,110 per tonne.

Similarly, the Marki Mangli III block won by BS Ispat had the lowest winning bid price of R918 per tonne among the blocks reserved for the unregulated sector, which ranged from R1,402 to R3,502 a tonne.“There are some prima facie issues (with four coal blocks). Nominated authority (for coal blocks e-auction) has been asked to re-examine them,” Anil Swarup, coal secretary, told FE. The government will issue the vesting order for auctioned mines on March 23.



Gare Palma IV/2&3 is the biggest block among those reserved for the power sector with an extractable reserves of 155.49 million tonnes (mt) while Gare Palma IV/1 and Marki Mangli III have extractable reserves of 49.57 mt and 3.58 mt, respectively. These four mines are among the 19 operational blocks the government auctioned off in the first phase of e-auction. The next phase of auction will see 20 near-operational mines being auctioned next week.

The government has estimated that coal-bearing states will receive a revenue of Rs 1.2 lakh crore over 30 years while the states consuming power generated through these blocks will benefit as the collective power tariff will go down to the tune of Rs 37,000 crore.

Stating that auction of coal mines is one of the top three achievements of the government in its nine-month rein, finance minister Arun Jaitley had said in his Budget speech that the process would bring several lakh crore rupees to the kitty of coal-bearing states.

Comment:

The main benefit that government stated that the coal-bearing state will receive a good amount of revenue over a period of time.The states like jharkhand has ample amount of coal reserves.Thus situation will improve and it will create more jobs.The e-auction in coal brings transparency in the system.As,recently Narendra Modi said in an event that the technology will bring transparency in the system.

The reason of re-examined the four coal block is not stated in news.Till now 19 coal blocks are auctioned.However I feel that increase in price of coal in e-auction will surely affect the tariff rate of electricity.

Coal auction to benefit poor states: Coal Secretary

New Delhi: With aggressive bidding for coal blocks likely to continue on the fourth day, the government on February 17 said that poor states would benefit from the auction. "Coal block auction gets underway on the fourth day," Coal Secretary Anil Swarup said in a tweet. He further tweeted, "windfall in offing. Poor states to reap harvest of coal block auctions."

The mines on sale on February 17 are Amelia (North) mine in Madhya Pradesh (power sector), Ardhagram mine in West Bengal and Chotia mine in Chhattisgarh — non-power sector. The 10 companies in the race for Amelia (North) mine are Adani Power, Bharat Aluminium Co Ltd (Balco), Essar Power M P Ltd, GMR Chhattisgarh Energy Ltd, GVK Power Goindwal Sahib Ltd, Jaiprakash Power Ventures, Jindal Power Ltd, JSW Energy Ltd, RattanIndia Power Ltd, Reliance Geothermal Power Pvt Ltd.

The five companies vying for Ardhagram coal mine are Easternrange Coal Mining Pvt Ltd, Monnet Ispat and Energy Ltd, OCL Iron & Steel Ltd, SS Natural Resources Pvt Ltd and Visa Steel Ltd. The technically qualified bidders for Chotia mines are Balco, Godawari Power & Ispat Ltd, Hindalco Industries, Prakash Industries, Rungta Mines and Ultratech Cement Ltd.

Amelia (North) mine has extractable reserves of 70.28 MT, Ardhagram has extractable reserves of 19.29 MT, Chotia mine has extractable reserves of 13.57 MT. On February 16, Jai Prakash Associates, Durgapur Projects and B S Ispat — had bagged one mine each, even as the government said that it expects more aggressive bidding for blocks as the mines were already producing.

After the Supreme Court cancelled allocation of 204 mines in September, the government decided to auction the blocks. It has put 19 blocks on sale in the first tranche. The last day for the auction of first lot of mine is February 22.

Comment:

In my point of view the statement given by the coal secretary is not convincing.For example recently Hindalco won Kathautia mine in Jharkhand by offering Rs 2,860 per tonne of coal. It means around RS 3 per kg,so we can estimate that the cost of electricity generated will increase thus companies will pass this cost to the end consumer.However it is still not clear that Hindalco will use it for steel or power.

Adani Power to bid for all six coal blocks reserved for the power sector: Sources

(Adani Power is in race for…)

 Adani Power is in race for all six coal blocks reserved for the power sector in the upcoming auction of 23 operational mines, while Jindal Steel & Power is eyeing four, people with knowledge of the matter said.

Hyderabad-based Madhucon Group's subsidiary, Simhapuri Energy, is expected to be a surprise bidder and may vie for all the coal blocks earmarked for the captive use of power producers.


The Tokisud North block that earlier belonged to GVK Power is expected to attract the highest number of bids. More than a dozen companies including Adani Power, Essar Power, GMR Energy, Jindal Power, Lanco Infratech, Sesa Sterlite, Tata Power and West Bengal Power Development Corp are likely to submit bids for this block that lies in the South Karnapura coalfields in Jharkhand, a coal ministry official said.

The block with 2.32 million tonnes of annual coal production capacity has rail connectivity within 2.5 kilometres.

Gare Palma IV/2 and IV/3 in Chhattisgarh, previously owned by Jindal Steel & Power, is also being eyed by close to a dozen companies. Besides Adani and Simhapuri, they include GMR Energy, Jindal Power, Lanco Infratech, Reliance Power, DB Power, Sesa Sterlite and KSK Energy.

The block has a capacity to produce 6.25 million tonnes a year, but the nearest rail head is about 55 km away.



Some eight companies are expected to bid for the Amelia North block in Madhya Pradesh that earlier belonged to Madhya Pradesh State Mining Corp. The potential bidders include Essar Power, GVK Power, Jindal Power and Lanco Infratech.

About half a dozen companies including Adani Power, DB Power, Jindal Power and Sesa Sterlite are said to be in race for Talabira-I in Odisha that was earlier owned by Hindalco. Sarisatolli and Trans Damodar in West Bengal are also expected to have attracted about half a dozen companies.

Power firms have to bid lower than the price arrived after the technical stage. The last date for bid submission is February 3 while the price bidding starts February 14. The final price will be the cost of coal that the winner can pass on to electricity consumers.

Comment:

Coal block auction is the first step to improve the fuel supply issues in power sector. Many steel companies are also competing with the power companies to acquire the coal blocks.In my view the competition in South Karnapura coalfields (Jharkhand) will be worth watching.

Pros and Cons for coal block auction:

As per my view the advantage of inviting private sector in coal block auction is efficient use of coal blocks.At present Coal India is not working efficiently,so due to this fuel supply issues will get its solution.

The disadvantage is the increase in cost of coal.Suppose if Tata power will not be able to acquire any coal block,then Tata power have to buy coal from other private sectors at high price.

But there are many pros than cons in coal auction.So lets pray for best so that efficiency in the Indian power sector will improve.

Coal workers’ strike called off

The two-day old strike by coal workers across India was today called off with the government and the unions reaching an agreement after a marathon meeting.

“The strike has been called off,” AITUC leader Lakhan Lal Mahato said after a meeting with Coal Minister Piyush Goyal that lasted for over six hours.

The calling off of the strike midway will bring relief to the power sector that has faced prospect of fuel supplies drying up due to closure of half of the country’s coal mines during the strike.

Mahato, however, did not share the details of the terms and conditions of the agreement reached between the government and the unions.

Indian National Mineworkers’ Federation (INTUC) President Rajendra Singh also confirmed that the strike has been called off and an agreement with the government is being signed.

Comment

As per my view the goverment tackled the situation in a lucid way due to the clear mandate.The strike called off due to most of the unions has connection with BJP and RSS. 

Coal Sector Seeks Image Makeover In 2015

In an urgent need for its image makeover, the scam-tainted coal sector will require mammoth efforts in 2015 from the government and the corporates, after a year full of adversities and stuck projects undermined investments totalling billions of dollars.

The least glamorous among all raw materials, coal turned out to be a pricey affair in 2014, but a silver lining appears on the horizon with the courts and the government stepping in to overhaul the entire process of mine allocations.

In a historic judgement, the Supreme Court this year cancelled 204 mines alloted since 1993, while terming those allocations as flawed. Those affected by the decision include biggies like Jindal Steel, Essar Power, GVK and JSW Steel.

Among these, billionaire Naveen Jindal-led Jindal Steel and Power Ltd (JSPL) had to shelve a $10-billion coal-to-diesel project, while casualties continue to pile up from the controversy and the alleged scam in this sector, which has come to be known as 'Coalgate'.

The companies that had got these mines claim to have invested close to Rs 300,000 crore in the coalblocks and further Rs 400,000 crore for their end-use plants.

Making a hue and cry over the issue, the companies said such mass-cancellation of mines would hamper supply of this core fuel for the power sector in a country that is targeting to take electricity to every home in next few years, while adversely impacting the investment sentiments in a big way.

The government watchdog CAG had earlier estimated a Rs 1.86 lakh crore presumptive loss to the exchequer on account of allotment of 57 coal blocks without competitive bidding.

Soon after the court order, the government came out with an Ordinance to conduct fresh allocations of the affected coal blocks through a "transparent" e-auction, but the bill continues to hang in balance and a re-promulgation might be required soon as a permanent law remains elusive.

The Left parties and several trade unions have opposed the e-auction of coal blocks and the enabling provision in the Ordinance that allows commercial mining by private firms and have sought its reversal, while warning of a nationwide strike if the Centre went ahead with the changes.

Allaying concerns that the move would pave the way for de-nationalisation or privatisation of the coal sector, Coal Minister Piyush Goyal has said that the government was in fact strengthening the PSU major Coal India Limited.

Beyond the coalblock controversy, the new government, headed by Prime Minister Narendra Modi, has announced an ambitious target of doubling the coal behemoth CIL's output to about one billion tonnes by 2019.

Coal India, which accounts for over 80 per cent of the domestic coal production, has incidentally been headless for almost six months and has been facing production constraints and labour union related problems on a regular basis.

The new government has also given charge of both coal and power ministries to Goyal, a move seen as being aimed at avoiding conflicts between these two ministries.

Gearing up for a fresh allocation of the blocks cancelled by the Supreme Court, the government has meanwhile decided to auction 65 mines to private players while 36 other blocks will be directly allotted to state-owned companies.

Of the 101 blocks to be alloted and auctioned in the first lot, 63 mines would be given to the power sector, while the rest would be for sectors like steel and cement.

Out of these, government is targeting a revenue of Rs 1.47 lakh crore from the allotment and auction of 92 coal blocks.

Coal block auctions likely by December, power cos to get priority

The coal ministry may commence the auction of coal blocks by early as December this year, highly placed sources in the government told HT. The Cabinet Committee of Economic Affairs (CCEA) is expected to approve the plan soon.

As 79 out of the 214 blocks de-allocated by the Supreme Court relate to the power sector, the move is expected to help power projects with a combined capacity of 40,000 MW, ease chronic power shortages over time and give a fillip to the government’s efforts to revive the economy. Investments of Rs. 2 lakh crore are stuck in these projects.




At present, Indian public and private sector banks have a combined exposure of close to Rs. 5 lakh crore in various coal and gas-based power projects. An early auction of coal blocks will provide fuel linkages to stressed power projects and ease power shortages. A steady and quality supply of power is a necessary pre-condition for growth.

“The decision vests with the CCEA.... as soon as the approvals come, we (ministry of coal) will commence auction of coal blocks, by December this year,” the source told HT.

“Those power projects that don’t get a coal block in the auction will be considered for allocation of coal by Coal India Ltd. CIL will import coal to meet any shortfall in its own production and pool this with a part of domestic production,” he said.

The total installed power capacity of the country is 250,000 MW. Coal-based plants account for 150,000 MW or 60% of this.

Coal shortages have short-circuited India’s power capacity addition plans. Coal production could not keep pace with demand from the power sector: in the last 5 years, demand grew 87%, but coal output grew a mere 15%.

Adding to this low production were Letters of Assurance (LoAs) for coal linkages the coal ministry in the previous regime had issued to power projects. Upto 2010, LoAs were issued for projects equivalent to 108,000 MW, though coal available was sufficient to generate only 60,000 MW, or 65% of the coal requirement if power plants operated at 85% of capacity.

As on date, Coal India has signed Fuel Supply Agreement for about 74,000 MW. That still leaves about 14,500 MW already commissioned or to be commissioned in the 12th Plan, without coal linkages provided.

India moves to reform troubled coal industry

India’s government has pledged to open up the coal mining industry to private players in the energy-starved country as Prime Minister Narendra Modi steps up promised reforms to revive the ailing economy.

Modi’s right-wing government approved an ordinance late Monday to allow auctions of coal mines to private companies for their own use, as well as permitting commercial mining at some point in the future.

The decree comes after the Supreme Court in September cancelled more than 200 permits for coal mines, after declaring the process of awarding them illegal, throwing the sector into turmoil.

“It was decided to issue an ordinance in the cabinet,” Finance Minister Arun Jaitley told reporters at a briefing on the issue.

“The entire coal sector was lying idle, it is an attempt to bring it to life once again,” Jaitley said after the cabinet meeting.

The ordinance – or executive order – takes initial steps towards ending a four-decade monopoly on mining and selling coal after the industry was nationalised in 1972 creating Coal India, one of the world’s biggest miners.

The coal industry, plagued by inefficiencies, poor infrastructure and government red-tape, has long struggled to increase production to meet electricity needs of India’s 1.25bn
population.

Modi stormed to victory in May elections on a pledge to revive the faltering economy, but some experts have been disappointed by a lack of early big-bang and much-needed reforms.

His government has introduced several initiatives in recent days and is likely to be spurred further after his party’s thumping weekend victory at two state elections.

It announced on Saturday it was freeing diesel prices from government control and increasing natural gas prices, in a bid to attract foreign investment and cut its subsidy bill.

India sits on some of the world’s biggest coal reserves, yet its power stations are starved of the fuel, with some idle and others running dangerously low on supplies.

Coal provides nearly 60% of India’s electricity generating needs, but the power sector relies heavily on imports of the fuel.

Blackouts are common across India, especially during peak summer months, amid surging demand including from a fast-rising middle class.

Economist DK Joshi welcomed the move, saying the power sector has long been operating at below capacity because of uncertainty over coal supplies.

“It (the government) is beginning to address the conditions holding back the economy and inefficiency of the sector was at the top of the heap,” Joshi, chief economist at local ratings agency Crisil, told AFP.

“It’s not a big-bang reform but it’s a good first start.”

Coal India accounts for more than 80% of the country’s total production but has missed its output targets in recent years.

Some private cement, power and steel companies are currently allowed to mine coal for their own use, but the ordinance includes a provision for firms to sell their coal at an unspecified time in the future.

Coal minister Piyush Goyal said legislation would need to amended to allow for such commercial mining, adding “this is only for the future”.

“This process would not in any way impact the structure of Coal India,” Goyal added on Monday, according to the Press Trust of India news agency.

The ordinance’s new auction system replaces the policy of allocating coal blocks based on recommendations from a panel of bureaucrats, that the court deemed was faulty.

The ordinance takes immediate effect but must eventually be passed as a bill by parliament or it will lapse.

Stocks for private firms already mining were trading higher on Tuesday, with Jindal Steel and Power surging 6.28% and Hindalco Industries up 3.08%.