Monthly Archives: February 2013

Budget 2013:Duty increase on steam coal may push up electricity tariff

The government on Thursday announced raising basic custom and countervailing duty on steam coal, used in power generation, a step which analysts said will lead to marginal increase in power tariffs.

Finance Minister P Chidambaram in his budget speechannounced a hike in the basic customs duty on steam coal from present nil to two per cent and countervailing duty (CVD) from one per cent to two per cent.

According to analysts the increase in basic custom and countervailing duty may marginally increase the electricityprices.

“With the hike in both duties, the power generating companies will pass on the increase to the consumers and may lead to increase in power tariffs,” an industry analyst on the condition of anonymity said.

The steam coal import target for the current fiscal is 70 million tonnes against 60 million tonnes in the last fiscal. Till now country has imported 50 million tonnes of steam coal

Steam coal also known as thermal coal is mainly used in power generation.

 

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CIL to chart out PPP model for coal exploration

Acting on the advice of the Planning Commission to involve the private sector in the extraction of coal to meet the rising demand, the Finance Minister, P. Chidambaram, on Thursday, said Coal India Limited (CIL) would soon unveil a proposal for executing coal mining projects under the PPP (public-private partnership) mode.

To meet the increasing demand for coal from the power sector, the Finance Minister sort of suggested that it was imperative to introduce a policy on blending the prices of domestic and imported coal. “If the coal requirements of the existing power plants and the power plants that will come into operation by March 31, 2015, are taken into account, there is no alternative except to import coal and adopt a policy of blending and pooled pricing,” Mr. Chidambaram said while presenting the 2013-14 budget in Parliament.

A number of State governments and independent directors of CIL have opposed the pool pricing policy for coal as they felt it would lead to power tariff hikes. Coal imports, which shot up to 100 million tonnes from April to December last year, will further scale to 185 million tonnes by 2016-17. A proposal for approval of the new pool pricing policy for coal is likely to be put up before the Cabinet shortly. The pool pricing policy would not be implemented for power plants commissioned before March 31, 2009.

 

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Uttar Pradesh Power Corp incurring loss of Rs 31,000 cr: Akhilesh Yadav

The Uttar Pradesh government today said that UP Power Corporation is incurring a loss of Rs 31,000 crore and situation has arisen due to faulty policies of the previous government.

“Yes… UP Power Corporation is suffering losses. It’s around Rs 31,000 crores”, Chief Minister Akhilesh Yadav said in reply to a question raised by BJP member Hukum Singh.

He said that the situation has arisen due to faulty policies of the previous government, which had not taken right decision for this sector.

“The SP government is trying to improve the situation by taking right decisions and its impact will be visible in the days to come”, he said.

On question of commission taken in purchase of transformers to the tune of 25 per cent by Singh, the Chief Minister said his government would ensure that good quality transformers should be purchased and if needed third party verification would also be made in this regard.

“It has come to my notice that poor quality transformers were purchased. In Gorakhpur alone 1,200 transformers stopped working in a day but now such things will not happen,” he added.

On ways to deal with the financial crunch, Yadav said power distribution companies will prepare a financial reorganisation scheme with the consent of banks and would be approved by the state government.

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Prudent Budget: Fine Balance between Austerity and Profligacy with Infra-push, says Mr. Adani

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It is a prudent growth oriented budget with a special focus on improving Healthcare, Education, Livelihood and Infrastructure sectors. I think the political compulsions made the FM decide that the best way is to play it safe, economics calls for austerity while the politics demands profligacy – in nut shell it is fine balance between populist measures and hard-nosed reforms.

 

To project India as a favorable investment destination, it was clear that fiscal correction and ways to boost foreign investment would be high on his agenda in this year’s budget and this has been reflected in the budget speech.

I am in agreement with the FM when he said that India should aim for higher growth that will lead to inclusive and sustainable development of the country.

The union budget seems realistic, credible and is a sincere attempt towards

achieving fiscal consolidation with heavy emphasis on infrastructure sector. Containing the fiscal deficit at 5.2 % is commendable, this coupled with a projection of 4.8% deficit for FY 13-14 seems achievable. The subsidies in petroleum sector are gradually diminishing, food and fertilizer subsidy too are at reasonable level. There is an honest attempt to bridge the gap to the extent feasible for which the finance minister and his team deserve compliments.

 

The capital intensive manufacturing and infrastructure will get a push on account of introduction of 15% investment allowance, the validity being till 2015, it removes uncertainty associated with next year’s budget. The budget also focuses on measures that will facilitate corporates to access funds through tax free Infrastructure bonds for which the limit has been revised to Rs. 50,000 crore, extending the sunset for section 80 –IA for two more years too will help the infrastructure developers.  The PPP model for improving domestic coal production, developing ports on the eastern coast of country, tenders for 3000 km of roads in the next six months etc., indicates a clear push towards propelling infrastructure development in sectors like roads, ports, coal mining   and power. The budget has tried to clear couple of grey areas too, specifically GARR, import duty on coal etc. In a nutshell, a series of good interventions to kick start the investment cycle and investor confidence in the infrastructure sector.

 

The upward revision of import duty, from 1% to over 4 % on steam coal imports will adversely impact the industry as it will lead to increase in cost of power generation. This is little amusing as the country has huge deficit in coal and the government is trying minimize cost by augmenting coal supply through various initiatives  for domestic production as well as opting for price pooling of domestic and imported coal.

 

Steps towards implementation of GST will help the trade. It will make taxes uniform and can also help to reduce prices. The budget has made provision of Rs. 9000 crore towards this, which indicate clear intent for implementation. Today, some consumer goods are not launched in certain markets where the VAT rates are high as it would increase prices. GST in a way will also boost consumption.   It will help us to plan better and can even boost profitability of our consumer goods portfolio, specifically edible oils. The progress on DTC and promise to introduce the same in current budget session too is a positive development.

 

Overall, this budget can be termed a moderately populist one as the FM has tried to address majority of the issues faced by the common man and it has also shown the softer side of the United Progressive Alliance by announcing gender sensitive schemes, especially for women. I sincerely hope and wish that this budget will steer the growth of the economy upwards and India into a phase of renewed growth trajectory.

 

 

About The Adani Group

 

The Adani Group is one of India’s leading business houses with revenue of over$8 billion for financial year 2012.

 

Founded in 1988, Adani has grown to become a global integrated infrastructure player with businesses in key industry verticals – resources, logistics and energy. The integrated model is well adapted to the infrastructure challenges of the emerging economies. It multiplies the benefit of synergy and economies of scale both for the Group and for the customers.

 

We live and work in the communities where we operate and take our responsibilities to society seriously. The Group protects biodiversity in ecologically sensitive areas like Mundra and undertakes initiatives to reduce CO2 emissions. At Adani, we deliver benefits to our customers and customers’ customers.

 

  

Budget Highlights – 2013 on Energy Sector : Courtesy Infraline

 

FY14 Plan expenditure pegged at Rs 5.5 lakh crore

  • Current Account Deficit still high – One of the main reasons is high import of coal
  • CCI to be consulted in taking up decisions in oil/power/coal projects.
  • To seek assistance of World Bank and Asian Development Bank to build roads in north-east Indian states
  • Roads to be connected to Myanmar
  • Wind energy sector to get generation based incentives
  • Rs 8 billion allocated for Ministry of New and Renewable Energy
  • To encourage states to take up waste energy projects via PPP mode
  • 3,000 km of road projects in Gujarat, Maharashtra, Karnataka in first 6 months of 2013-14
  • Oil and Gas policy to be reviewed
  • Shale policy to be announced
  • Oil and Gas blocks under NELP to be cleared this year
  • Coal import in April-December at 100 mn tonnes, to rise to 185 mn tonnes
  • To encourage PPP projects along with Coal India.
  • Natural Gas Pricing Policy to be reviewed – to benefit ONGC, Reliance
  • Government approved discoms restructuring – states to be urged to sign MOU’s
  • Tax holiday for power plants extended to FY14
  • Regulatory authority to be set up for road sector
  • Rs 52.80 billion allocated to Department of Energy
  • Five LNG terminals in Dabhol will be operational in 2013-14

Higher freight rates may force a rethink on power plant location

The phased deregulation of diesel prices and its impact on railway freight rates may finally force India overhaul its policy for the power generation sector. Also anticipated is a change in how coal is consumed, which should prove to be a relief for the country’s clogged transport logistics.

On Tuesday, the Rail Minister announced a 5.5 per cent hike in coal freight (from April 1) from an average of Rs 701 a tonne in 2012-13 to about Rs 740 a tonne in 2013-14. This will mark a 20 per cent rise in average freight cost of coal from March 31, 2012 (Rs 617 a tonne).

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Coal is still under-priced

The pricing of coal is now done on gross calorific value basis (GCV) replacing the earlier system of useful heat value (UHV).

This revision in GCV is likely to increase domestic coal prices to some extent, but domestic thermal coal continues to be under-priced.

Currently, there is a wide gap between domestic and imported coal prices of similar calorific value.

The Indian coal price is just 30 per cent of Indonesian or Australian coal.

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Economic Survey 2013: Fast-track green approvals for 795 MT coal output in 2012-17

Delays in environment clearances needs to be addressed on a fast-track basis for achieving coal production target of 795 MT during the current five year plan (2012-17), the Economic Survey said today. “Problems like delays in obtaining environmental clearances, land acquisitions and rehabilitation need to be suitably addressed in fast-track mode to achieve the 12th Plan targets for coal production,” the Survey tabled in Parliament said. It should, however, be ensured that there is a balance between growth needs and environmental concerns while undertaking such steps. The survey also said efforts should be made to improve competition and efficiency in the sector which may call for structural reforms.

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Economic Survey 2013: Private power firms may face financing troubles

Private power generation firms may face project financing hurdles unless the issue of fuel supply is addressed, Economic Survey 2012-13 said today. “The private developers may not be able to finance the projects if coal linkages are not resolved and there are delays in finalisation of fuel supply agreements ( FSAs),” said the Survey, tabled in Parliament. It noted that the delivery of capacity addition target of 88,000 MW in the 12th Plan period (2012-17) will critically depend on resolving fuel availability problems, especially when about half the generated capacity is expected to come from the private sector. While some decisions have been taken for restructuring discoms’ finances, these may need to be monitored and implemented in spirit.

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Coal India invites bids for acquiring assets abroad

Coal India Ltd today invited bids from bankers and interested parties for acquiring assets abroad, a move that would help the world’s largest dry-fuel producer meet shortages as it battles problems in enhancing output. “Coal India Seeks Expression of Interest (EoI) from investment bankers, owners/owner’s representatives for acquisition of coal assets abroad,” CIL said. The bids have been invited by Coal India Videsh, set up with the intent of enhancing the nation’s energy security. Coal Minister Sriprakash Jaiswal had said recently that acquisition of coal mines overseas should be done in an aggressive manner to meet the country’s energy requirements. In order to tide over the fossil fuel shortages, the government is also proposing to import coal and pooling domestic and international prices.

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