Not policies but process of implementation counts

“… it is not the power but the productive power that is required by India,” says Rajiv Agrawal, Secretary, Indian Captive Power Producers Association (ICPPA)
 From 1992 onwards, investment in captive power plants (CPPs) was reasonably high. Even the growth of CPPs was much higher than national power growth. In an exclusive interview with EPR, Rajiv Agrawal suggests how one can expect investment to pour in and put up large industries without assured cost-effective power.
With about 51,000 MW, captive power sector forms 18 per cent of India’s total installed capacity. Can captive power plants be the saviours for power-hungry India?Just as land, water and other resources are required for setting up industry, cost-effective quality power from captive power plants (CPP) is also a requirement. If the government wants industries to really grow and more investments as they are asking through “Make In India”, it is very important that discrimination with CPPs should end. The government thinks that the IPPs can provide 24/7 power. They forget that it is not the power but the productive power that is required by India. 24/7 can be a political slogan but in reality India has to catch-up with China’s 67 per cent share of industrial power consumption from 44 per cent level. If you tell integrated steel plant to start the operation without having captive generation, they will say we won’t invest in this plant. Grids can’t guarantee quality of power. We find that public sector powerhouses are selling electricity at Rs 5-11 per unit. Private IPP have PPA at Rs 1.5-3, but the same power reaches the industries at Rs 8. In addition, most CPP are located at the place of consumption, so there are no T&D losses. And this is how CPP are sustaining the country.
How badly is the lack of coal-linkage to CPPs going hurt industries and economy?It is already hurting. For any power intensive industry, mostly converting natural raw materials, the cost of energy form 30-60 per cent cost, depending on the type of industry. If you increase this cost, everywhere down the line the cost will go up. This is where it is affecting the economies. The policies are good, but the process of implementing has either taken them a backseat or is implemented to favour a few.
Why is the investment scenario in this sector becoming sluggish?From 1992 onwards, investment in CPPs was high. Growth of CPPs was much higher than national power growth. It is an open story that when IPP went to Manmohan Singh in 2012 seeking coal, but Coal India assured only 50 per cent. Than under presidential directives, they got FSA for 65-80 per cent. This additional coal is diverted from the share and linkages of CPPs. So how do you expect investment to pour in and put up large industries without assured cost-effective power.
India imported 7.9-million tonnes of coal for the steel and cement industries and 32.8-million tonnes for thermal power plants during first quarter of 2013-14. How can we stop our dependency on imported coal?The way our Indian coal prices are going up; there is already reducing cost benefit for using Indian coal due to shortages, poorer quality by 2-5 grade slippage, increasing taxes, charges and royalty and increasing railway freight. For example, it is on record that from Central Coal Fields Ltd., industries are getting shortage of 150-300 tonnes (3-8 per cent) in a single rack. Despite follow-up from last 2 years, CCL Chairman is not willing or unable to take any effective actions. When 200 tonnes lesser weight was found at re-weighing enroute, as per rules, railways charged higher of the two. And CCL is anyways charging for coal not supplied by it. It only means omission or commission on the part of CCL. Another issue is government obstructing even linkage coal supply to industries for diversion to power houses. Due to this, SECL customers located far away from area could only get 20 per cent of coal in the last one year. They will definitely have to rely on imports.
When there is no hidden additional cost with imported coal, dependency on it will increase. In many parts of the country, Indian coal is costlier than imported coal. This phenomena is now happening for lower grade like G10 and G12.
In the coal block case, CAG said that from 1990s’ block allottees got benefit of Rs 294 per tonne. This RS 294 is actually the profit of Coal India, calculated by CAG on the production cost of  Rs 700. That means 40 per cent profit — a figure can’t be even thought of by most businesses. With government’s nearly final plans to auction coal linkages, the cost will further go up.
What is your opinion on the government’s plan for e-auction of linkages?When we are doing the auction under extreme shortage, the cost of coal is getting increased. Even if the government argue that bidders are responsible for irrational bids, they forget that a sinking person will make all effort to float – without thinking of future injuries. 
The question is who will be the beneficiary for this rise in cost – a very high national benchmark. This is the time to think from the nation’s perspective. The upcoming commercial mine owners will rake in huge profits because for them the open-cast production cost will be Rs 300-400, and they will selling coal at Rs 1,500 – 2,500, i.e. the expected auction price to match import landed parity. History of coal e-auctions show that with introduction of high-price benchmarks black marketers and mafia at CIL loading sites gained. Even those CIL transporters responsible to move coal from mines to private sidings are benchmarking with these prices. It is interesting to note that being coal transportation cost, it is pass-through in the power tariffs. Another set of people are washeries selling coal disguised as middlings and washery rejects.
We should believe that 1-1.5 billion-tonne planned production in next 3-5 years is achievable, but the demand can be higher. Thus sufficient import is expected. Due to toughening of global environment issues and increasing cheap shale gas, a lot of spare coal mining capacity is awaiting buyers and markets. Only if Indian coal cost are closer to import landed parity. These coal can be sold by some of the largest energy giants like Rio and Glencore. As per recent reports, a new Austrian mine will be profitable at $100 and this can be brought to India only if prices are high. I am ready to buy these projections because transglobal energy companies plan and work on 10-15 years horizon.
How do you propose to decrease the coal price in the country?We ask a simple question on the goal – whether the purpose is to own coal block or to get assured, cost-effective coal supply from the coal blocks? Today the biggest problem is everyone wants coal. At the same time, everyone is talking of owning a coal block. Therefore, whatever further coal blocks are being planned for auction and whatever coal blocks are being given to various PSU and state government through dispensation routes, everything should be put on reverse auction.
We had suggested a reverse auction model that let all these coal blocks be given for 30-50 per cent captive consumption for the block developers. Here I wouldn’t call them block owners but block developers. During bidding, block developers quote the minimum rate to supply balance 50-70 per cent coal to the nation. This coal can be sold through a central agency for equitable distribution with long-term contracts for power and industry. This appears to be only viable method for nation to lower its energy cost by increasing efficiency.______________________________________Only if Indian coal cost are closer to import landed parity. These coal can be sold by some of the largest energy giants like Rio and Glencore.

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Not policies but process of implementation counts

“… it is not the power but the productive power that is required by India,” says Rajiv Agrawal, Secretary, Indian Captive Power Producers Association (ICPPA)
 From 1992 onwards, investment in captive power plants (CPPs) was reasonably high. Even the growth of CPPs was much higher than national power growth. In an exclusive interview with EPR, Rajiv Agrawal suggests how one can expect investment to pour in and put up large industries without assured cost-effective power.
With about 51,000 MW, captive power sector forms 18 per cent of India’s total installed capacity. Can captive power plants be the saviours for power-hungry India?Just as land, water and other resources are required for setting up industry, cost-effective quality power from captive power plants (CPP) is also a requirement. If the government wants industries to really grow and more investments as they are asking through “Make In India”, it is very important that discrimination with CPPs should end. The government thinks that the IPPs can provide 24/7 power. They forget that it is not the power but the productive power that is required by India. 24/7 can be a political slogan but in reality India has to catch-up with China’s 67 per cent share of industrial power consumption from 44 per cent level. If you tell integrated steel plant to start the operation without having captive generation, they will say we won’t invest in this plant. Grids can’t guarantee quality of power. We find that public sector powerhouses are selling electricity at Rs 5-11 per unit. Private IPP have PPA at Rs 1.5-3, but the same power reaches the industries at Rs 8. In addition, most CPP are located at the place of consumption, so there are no T&D losses. And this is how CPP are sustaining the country.
How badly is the lack of coal-linkage to CPPs going hurt industries and economy?It is already hurting. For any power intensive industry, mostly converting natural raw materials, the cost of energy form 30-60 per cent cost, depending on the type of industry. If you increase this cost, everywhere down the line the cost will go up. This is where it is affecting the economies. The policies are good, but the process of implementing has either taken them a backseat or is implemented to favour a few.
Why is the investment scenario in this sector becoming sluggish?From 1992 onwards, investment in CPPs was high. Growth of CPPs was much higher than national power growth. It is an open story that when IPP went to Manmohan Singh in 2012 seeking coal, but Coal India assured only 50 per cent. Than under presidential directives, they got FSA for 65-80 per cent. This additional coal is diverted from the share and linkages of CPPs. So how do you expect investment to pour in and put up large industries without assured cost-effective power.
India imported 7.9-million tonnes of coal for the steel and cement industries and 32.8-million tonnes for thermal power plants during first quarter of 2013-14. How can we stop our dependency on imported coal?The way our Indian coal prices are going up; there is already reducing cost benefit for using Indian coal due to shortages, poorer quality by 2-5 grade slippage, increasing taxes, charges and royalty and increasing railway freight. For example, it is on record that from Central Coal Fields Ltd., industries are getting shortage of 150-300 tonnes (3-8 per cent) in a single rack. Despite follow-up from last 2 years, CCL Chairman is not willing or unable to take any effective actions. When 200 tonnes lesser weight was found at re-weighing enroute, as per rules, railways charged higher of the two. And CCL is anyways charging for coal not supplied by it. It only means omission or commission on the part of CCL. Another issue is government obstructing even linkage coal supply to industries for diversion to power houses. Due to this, SECL customers located far away from area could only get 20 per cent of coal in the last one year. They will definitely have to rely on imports.
When there is no hidden additional cost with imported coal, dependency on it will increase. In many parts of the country, Indian coal is costlier than imported coal. This phenomena is now happening for lower grade like G10 and G12.
In the coal block case, CAG said that from 1990s’ block allottees got benefit of Rs 294 per tonne. This RS 294 is actually the profit of Coal India, calculated by CAG on the production cost of  Rs 700. That means 40 per cent profit — a figure can’t be even thought of by most businesses. With government’s nearly final plans to auction coal linkages, the cost will further go up.
What is your opinion on the government’s plan for e-auction of linkages?When we are doing the auction under extreme shortage, the cost of coal is getting increased. Even if the government argue that bidders are responsible for irrational bids, they forget that a sinking person will make all effort to float – without thinking of future injuries. 
The question is who will be the beneficiary for this rise in cost – a very high national benchmark. This is the time to think from the nation’s perspective. The upcoming commercial mine owners will rake in huge profits because for them the open-cast production cost will be Rs 300-400, and they will selling coal at Rs 1,500 – 2,500, i.e. the expected auction price to match import landed parity. History of coal e-auctions show that with introduction of high-price benchmarks black marketers and mafia at CIL loading sites gained. Even those CIL transporters responsible to move coal from mines to private sidings are benchmarking with these prices. It is interesting to note that being coal transportation cost, it is pass-through in the power tariffs. Another set of people are washeries selling coal disguised as middlings and washery rejects.
We should believe that 1-1.5 billion-tonne planned production in next 3-5 years is achievable, but the demand can be higher. Thus sufficient import is expected. Due to toughening of global environment issues and increasing cheap shale gas, a lot of spare coal mining capacity is awaiting buyers and markets. Only if Indian coal cost are closer to import landed parity. These coal can be sold by some of the largest energy giants like Rio and Glencore. As per recent reports, a new Austrian mine will be profitable at $100 and this can be brought to India only if prices are high. I am ready to buy these projections because transglobal energy companies plan and work on 10-15 years horizon.
How do you propose to decrease the coal price in the country?We ask a simple question on the goal – whether the purpose is to own coal block or to get assured, cost-effective coal supply from the coal blocks? Today the biggest problem is everyone wants coal. At the same time, everyone is talking of owning a coal block. Therefore, whatever further coal blocks are being planned for auction and whatever coal blocks are being given to various PSU and state government through dispensation routes, everything should be put on reverse auction.
We had suggested a reverse auction model that let all these coal blocks be given for 30-50 per cent captive consumption for the block developers. Here I wouldn’t call them block owners but block developers. During bidding, block developers quote the minimum rate to supply balance 50-70 per cent coal to the nation. This coal can be sold through a central agency for equitable distribution with long-term contracts for power and industry. This appears to be only viable method for nation to lower its energy cost by increasing efficiency.______________________________________Only if Indian coal cost are closer to import landed parity. These coal can be sold by some of the largest energy giants like Rio and Glencore.

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