Energy Sector Updates – Part 1
How India is making a way for coal?
Coal has not been only always costlier from the perspective of socio, economic, and ecology but it has also been one of the biggest greenhouse gas emitters in the energy sources. Despite that, post-pandemic, India is aggressively pushing coal than ever before. On the other hand, the newly elected President of The United States, Joe Biden has announced to rejoin the Paris Agreement and the global effort to curb climate change. Global is going away from coal, But India is just doing the opposite of that. Last month, the union home minister Amit Shah said the coal sector can be the biggest contributor towards the target of India becoming a USD 5 trillion economy by 2025 while inaugurating single-window clearance for coal mining. Additionally, the government has taken many other decisions and eased rules and regulations in favor of large private companies in the energy sector like single window clearance, E-auction of coal block, and coal. CIL has targeted more coal production and increased its budget for the fiscal year. NTPC is not only commissioning new coal power units but also acquiring coal blocks for its coal mining business. Despite building a clean image internationally by India, the challenges remain domestically due to the heavy pressure on the coal sector. While, financial institutions have been continuing their eyes on the Indian energy sector, and also looking at opportunities to invest in.
Pandemic pushes Coal Power Plants in India
Coal power projects are at their peak in India. India’s largest public-sector power producer NTPC has also added 1,320 MW capacity in its two ongoing coal power projects. With this NTPC’s total installed capacity has increased to 63,635 MW. NTPC’s power project of Bihar, Nabinagar Power Generating Company has begun its commercial production of the second unit 660 MW by December end. Thus, the total production has increased by 1320 MW with this project. Around 85 percent (1120 MW) power of this project will be for Bihar. Similarly, in Uttar Pradesh, NTPC’s Meja Thermal Power project of Meja Urja Nigam Limited has also added a second unit of 660 MW with trial operation in the project. Now the total installed capacity of the project has become 1,320 MW. NTPC’s many power plants are achieving high load factor in the country. The oldest unit of NTPC at Singrauli power plant in Uttar Pradesh achieved the highest plant load factor (PLF) of 100.24 percent from April 2020 to December 2020
Additionally, a new under construction Ghatampur coal-based thermal power plant’s progress was also reviewed. The 1980 MW capacity plant is located in Ghatampur in Kanpur Nagar district in Uttar Pradesh. It is a joint venture of NLC India Limited (NLCIL) and Uttar Pradesh Rajya Vidyut Utpadan Nigam Limited (UPRVUNL) with 51:49 equity participation. The estimated cost of the project is INR 17,000 Crore. The original commissioning schedule was December 2020, but due to the pandemic crisis, the project has got delayed.
The Maharashtra Electricity Regulatory Commission (MERC) has approved two orders as per directions by the Appellate Tribunal of Electricity (APTEL). These orders would permit Adani Power Maharashtra Limited (APML) to claim revised compensation of higher coal for 3,300 MW Tiroda power plants from Maharashtra State Electricity Distribution Company Limited (MSEDCL). Meanwhile, PTC India Financial Services has also resolved its one of the stressed power projects, viz. IL&FS Tamilnadu Power Company Limited 1,200 MW imported coal-based thermal power project at Cuddalore in Tamilnadu. The resolution was done with the agreement of the lead bank Punjab National Bank.
How India is making a way for coal
The Government of India has launched an online single-window clearance system to enable smooth operationalization of coal mines on 11th January, 2021. Currently, project proponents are required to approach different ministries and departments to obtain about 19 major clearances before starting a coal mine. These clearance include approval of Mining Plan and Mine Closure Plan, Grant of Mining Lease, Environment and Forest Clearances, Wild Life Clearance, Clearances related to Safety, Environment, Rehabilitation of project affected families, the welfare of workers, etc. Now, the project proponent can obtain the complete process from the Single Window Portal.
While launching the single window clearance system in the same event, the next tranche of commercial coal mine auctions will be launched in January 2021 and further rounds will continue thereafter, said Union Coal Minister Pralhad Joshi. In the same event, Union Home Minister Amit Shah mentioned that the government has successfully auctioned a total of 19 coal mines across the country in the first commercial coal mine auction and more reforms in the mining sector are in the pipeline. Further Union Home Minister added that state-run and private firms are expected to invest around INR 4 trillion in India’s coal sector this decade, of which, Public Sector Undertakings (PSUs) will invest INR 2.5 trillion, in areas such as surface coal gasification, coal bed methane, new coal mining plans and clean coal projects. Mr. Shah also mentioned that the coal sector can be the biggest contributor towards the target of India becoming a USD 5 trillion economy by 2025.
Financial express of 29th December 2020 said that the government has received INR 8,964 crore till November 2020 from the auctioned and allotted mines. In addition, royalty and taxes or cess are payable over and above these payments.
Since Power giant NTPC has stepped into the coal mining business. The company has directly allotted 10 coal blocks by the central government. Mines included are Pakri-Barwadih, Chatti-Bariatu & Chatti- Bariatu (South), Kerandari, Dulanga, Talaipalli, Banai, Bhalumuda, Mandakini-B, Badam and Banhardih. NTPC has planned to produce about 103 million metric tonnes (MMT) of coal per annum from these mines when all the mines would reach the peak-rated capacity. NTPC also announced the operation of the Dulanga mine in Odisha. So far, out of 10 blocks, three mines, Pakri-Barwadih, Dulanga, and Talaipalli are in operation and about 27.2 MMT of coal has been produced from these mines till November 2020.
Similarly, Maharashtra State Power Generation Company (Mahagenco) has also got environmental clearance for its captive coal mine in Chhattisgarh. The mine Gare Palma II will supply coal to Koradi, Chandrapur and Parli power plants. The state-run company has appointed Adani Group as the mine developer and operator for the block and the coal mining agreement has been approved by Maharashtra Electricity Regulatory Commission (MERC). The company is expected to begin production of 23.60 million tonnes per annum (MTPA) from March 2023.
Apart from these development in mining sector, State-owned mining giant Coal India Limited (CIL) has also introduced coal distribution through E-auction to provide access to coal for such buyers who are not able to source the dry fuel through the available institutional mechanisms. CIL has allotted 25.78 million tonnes (MT) of coal in the first eight months of this fiscal under the spot e-auction scheme, registering a year-on-year increase of 59.4 percent according to the government. CIL has not only revised its production target to 650-660 MT for 2020-21, it has also revised its capital expenditure (CAPEX) budget for same year by an additional INR 3,000 crore. So, now CIL’s total revised budget would be INR 13,000 crore for the fiscal year. This has happened the first time in history that the mining giant revised its CAPEX upwards. The increase and revision in the capital expenditure budget are in line with the Centre’s directive to public sector undertakings (PSUs) in order to “stimulate economic activity. The company will use the enhanced part of the CAPEX to acquire land, procure heavy earthmoving machinery, upgrade rail evacuation infrastructure and develop mines.
A subsidiary of CIL, Western Coalfields Limited (WCL) is planning to enter into a joint venture with Orissa Mineral Development Corporation (OMDC). WCL has planned to open 20 additional coal mines by 2023-24 to achieve a production target of 75 million tonnes. The company opened up 23 mines and acquired a total of 9,522 hectares of land in the past six years.
Growing Nuclear Energy in India
Looking the development in nuclear sector in last month, the Nuclear Power Corporation of India (NPCIL) has three major updates. Firstly, Larsen & Toubro emerged as the lowest bidder for an order from the Nuclear Power Corporation of India (NPCIL) for its Kudankulam nuclear power plant Unit 5 & 6. The Kudankulam plant has two operational units (3 & 4) and is in the process of building four more, each of capacity 1,000 MW. The order for units 5 & 6 are scheduled to be completed in 64 months. Secondly, NPCIL has also appointed Bharat Heavy Electricals (BHEL) to supply 32 reactor header assemblies. BHEL got this order under the NPCIL’s fleet mode procurement for indigenously-developed 700 MW Pressurized Heavy Water Reactors (PHWR) to be set up at four locations in the country. Currently, BHEL has supplied around 75 percent of PHWR based nuclear power plants in India. Thirdly, the Kakrapar Nuclear Power Plant (KAPP) has been synchronized with the grid for the third unit of 700 MW capacity.
The above updates tell us only one story, coal will be a major contributor to the Indian economy, despite that India is investing greatly in renewable energy after the Paris Agreement. India is reducing its coal import, but it is also increasing its coal production domestically by auctioning coal mines. And, these mines, definitely will be made available to the coal power projects dependent on imported coal. At the same time, India is also planning to construct few nuclear plants and also commissioning new units in the existing plants like the Kandakulam project.
Part 2 of this will look into hydro and RE sectors