Govt plans to reduce dependence on coal and oil imports

The government is keen on reducing India’s dependence on coal and oil imports. It has launched discussions on a scheme that calls for lower usage in energy-intensive sectors. And allows these saved units to be traded on energy exchanges. CNBC-TV18’s Ashwin Mohan and Anchal Gupta report.
The carror and stick approach is in use again and this time by the power ministry. As per its proposed perform, achieve and trade or pat scheme, the ministry is making it mandatory for 563 identified units across eight sectors to reduce their energy consumption over a 3-year period. If a unit manages to exceed its energy saving target, the extra energy can be traded as energy savings certificates on energy exchanges. However, failure to meet targets will mean heavy penalties.

Uma Shankar, Secretary, Ministry of Power said, “Penalties have been revised in the recent amendment of the Energy Conservation Act. Now it is Rs 10 lakh that is the base plus whatever the industry fails to achieve that would also be monetised using certain formulae and these two together would be the penalty for that particular unit.”

Companies involved in power, iron & steel, cement and aluminum will fall under this scheme.

The reduction target is set at 4% of current energy consumption. Initial estimates suggest compliance with these new norms will need total investments of around Rs 36,000 crore. Of which companies in the power sector alone will have to pay Rs 20,000 crore in total.

But the government is confident that returns on this investment will be high.

Shankar added, “Investment that people will have to make to achieve the target that has been set most of it is recovered in about three years time. The payback period is very small, so in about three years time the money that is invested would be got back.

The first phase of the scheme will run for a period of three years beginning the first of April 2011. The pricing of energy certificates will be a market-determined mechanism, with price discovery taking place a few months after the scheme launches – much before actual trading starts.

Source –



Executive at India Electron Exchange

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