The Supreme Court’s questioning last week of the Centre’s authority to allocate coal blocks during the hearing of a public interest litigation regarding the ‘coalgate’ will have major implications

India’s ambitious capacity addition programme in wind power generation could get derailed as a slackening demand in renewable electricity threatens to turn off investors.

Power distribution companies (discoms), which are supposed to anchor the demand for renewable power, are avoiding buying costly wind power because of their poor financial health. As a result, the wind power industry has been left in the doldrums.

Funds-starved state electricity boards (SEBs) across the country are resorting to load shedding in a massive way to deal with power shortages rather than buy electricity from the open market, which is turning more expensive. This is reflected in peak-hour electricity deficits of states with heavily indebted power distribution utilities.

SEBs, operating under political patronage, find it easier to opt for load shedding than buy power from the open market and pass the additional cost to the consumers through tariff increases.

Though the targets set were not met, the last two decades — particularly the later one — were marked by some revival of investor interest in the power industry, especially in the generation sector.

The momentum, however, was partly lost in 2012 as fuel shortages and political arm-twisting led to inadequate pass-through of costs, denting investors' confidence. Incidence of payment defaults by distribution firms worsened the financial position of generation firms, forcing the Centre to announce another massive bailout package for the sector, involving a recast of outstanding debts of R1.9 lakh crore.

Merchant power plants based on captive coal might soon feel the pressure to enter into power purchase agreements (PPAs) for selling electricity as states return to market for power procurement through the tariff bidding route.

Companies such as Jindal Power, which are selling cheaper power generated from captive coal in the free market, have so far dodged compliance with the coal ministry's directive to sign PPAs by citing lack of tender for power purchase by states.

New Delhi After two stagnant years, April-September coal output posted a robust growth of 8.5%. Public sector Coal India (CIL) and private players with captive mines ramped up production after a worried government put them on notice.

CIL exceeded its production target in the first half. If the trend continues, the pressure on the coal import bill may ease, helping reduce the country's trade deficit. Coal shortage has put several power sector projects on hold.

New Delhi Coal India will need to increase domestic coal price by 8-21% during the current 12th Five-Year Plan to offset the impact of the high cost of coal that it may have to import to meet at least 80% of the fuel requirement of power companies as per contractual terms.

The company, which is struggling to step up production to meet the power sector’s fuel demand, has projected coal import requirement at 18 million tonnes (mt) in the current year (2012-13), 45 mt in 2013-14, 38 mt in 2014-15 and 19 mt in 2015-16. But it expects to be able to meet the power sector’s fuel demand from indigenous production alone in 2016-17.

New Delhi The petroleum ministry will soon come out with a policy on setting up LNG infrastructure in the country to expedite the development of the domestic gas market, hobbled by the wide gap between demand and indigenous production of the green fuel.

While the petroleum and natural gas regulatory board (PNGRB) has the power to authorise development of LNG terminals, there is no policy that could provide clarity to investors looking at putting their money in the sector.

New Delhi With banks and financial institutions unable to offer liberal funding to solar power projects due to Reserve Bank of India’s (RBI) stringent sector exposure limit norms, developers have urged the government to treat solar industry as a separate sector to facilitate its financing.

The issue was raised by solar project developers at the ongoing consultations with the government to finalise plan for the second phase of capacity addition under the national solar mission where fund requirement is estimated at over R1 lakh crore.

New Delhi The power ministry has sought views of the central electricity regulator on the proposed changes in the standard bidding guidelines. The ministry’s proposal to vest ownership of project land in power buying utility, instead of the selected developer, is being opposed by both power companies and bankers.

“The power ministry has sought CERC’s comments. The commission is studying the proposed bidding guidelines and will shortly give its views under Section 79 (II) of the Electricity Act,” Pramod Deo, chairman, central electricity regulatory commission, told FE. The ministry can seek statutory advice from the regulator under this section.

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