RAJIV AGRAWALSecretary, ICPPA

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CONOMIC MPACT OFCONOMIC MPACT OF UDICIAL ECISIONSUDICIAL ECISIONS

EE IIJJ DD

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All the views expressed in this presentation may not be official views of ICPPA

RECOMANDATORY SESSION

What is the Way Forward?for Private Sector, Entrepreneurs & Landers in India’s Infrastructure Sector?

Is there a Need of Intervention – Example of CPPFew Root Causes of discontentment Seeking

InterventionsWay Forward - Out of Box Thinking

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ICPPA is an Apex Body of Captive Power Producers

ICPPA members are from diverse industries i.e. Steel & Iron, Aluminum & Metals, Cement, Chemicals, Pharma, Fertilizer, Paper, Textile, Sugar, Engineering. etc.

ICPPA exchanges constructive views with ministries and has been invited by Coal Ministry for participation in policy framing:

Formation of New Coal Distribution Policy (NCDP’07)

NCDP review by H’ble Coal Minister in 2011

sub-committee for 13th 5-Yr. Plan,

ICPPA vouch for equitable distribution of Natural Resources

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Sustaining Two DecadesSustaining Two Decades

of National Economic Growth:Employment Generation, GDP, Forex, Tax Revenue

Despite Power Deficitsand

By Ensuring 24x7By Ensuring 24x7UninterruptedUninterrupted

Least CostLeast CostQuality Power forQuality Power for

Industry and NationIndustry and Nation

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CPP provide Cost effective Uninterrupted Quality-power for global competitive industries not possible through Grid

CPP installation =20%of Grid connected Capacity CPP capacity equates 71% of industrial consumption CPP growth in past decades from 1992

in 1st decade = 88% i.e. 9000MW to 17000MW; in 2nd decade = 300% to 50,000MW

from 13% to 20% of Grid capacity; from 53% to 71% of equating industry power

CPP have very deep Cascading & Bull-whip effect on growth statistics as “first link in the national value chain” by converting natural raw materials into goods used by innumerable down line industries.

Stand-by CPP can immediately meet National peak power deficit Rs. 2.5 lac Crore Investment is tied up that supports another Rs. 50-60

Lac Crore investment in Manufacturing End Use Plants (EUP) INR 2 Lakh Crores CPP Investments already made / planned / idling /

differed, while awaiting coal for last 5-8 years (excluding EUP investment)

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Captive Generation is Higher Efficiency Model

India: 2010-11 2011-12

CPP: Zero T&D Loss

Large, Mega, UMPP Plant Efficiency = 35% – 41% CPP overall efficiency for “Coal to Power Consumption” = 39%-45% Co-Generation Plant Efficiency = 45% – 75%

Save huge cooling water Qty + Power consumed

Waste Heat Recovery CPP increase efficiency by 5-15% Smart Grid Ready – as distributed power source

T & D Losses National Avg > 23% Best of City Discom > 12% International Avg 9%

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Govt’s unidirectional rhetoric of 24x7 power – at what cost

Coal import (170 mMT @70 = 11.9 b$) = FDI in 5 months (12.8 b$) =3.6+1.9+3.5+1.3+2.5(sep’14)

For growth, focus must be on productive consumption i.e. to increase share of Industrial Power Consumption (India 44.87% v/s China 68.47%)

Govt. forcing CPP to shut down in the name of common man and forcing them to buy power from grid

390 CPP applications for 43,000MW linkage are pending from 2010 in MoC/MoP/CEA

It is estimated that 15,000-20,000MW CPP are already operative or are at advance stage but produce low / no power in absence of coal linkages

Nation is deprived of Investment of approx. Rs. 30 Lac Crore (+resultant economic growth) due to differed projects / End Use Plants that were to get quality-power from 23,000 MW CPP that are shelved in the absence of coal linkages

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Discrimination with CPP manifested in many ways in past 5-8 yr:-

Today CPP is 20% of grid but get only 6-7% coal dispatch

Some reports suggest that during pre-NCDP in SLC(LT), CIL pointed to future coal projections being much higher than achievable but allocations to one section continued thus leaving little or no coal for CPP and rest of nation?

NCDP & all other policies placed all power producers at par

NCDP implementation in 2008 : From day-one discrimination started. CIL forced CPP to accept 50% of Linkage, though other producers got 100% coal.

During 2013-FSA renewal additional 25% cut leaves only 37% coal with CPP

From 2011 CIL calls CPP as “non-power producer” to charge 35% higher

Very efficient co-generation CPP plants get linkage only for 40-60%

As per NCDP, CIL was required to fix norms for balance consumption but norms were never declared to prevent linkages

First time in the history, for 2 months in a row, F-grade coal dispatches to CPP were stopped by SECL and further dispatches are only 30-40%.

Railway lapses CPP monthly linkage quantity for diversion of coal

Reduced e-Auction has exhausted market stocks & plants are closing

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HierarchiesIndian Constitution

Laws

Policies

Rules

Propensity to act in the “National Interest”

Administrative decisions

Push & Pulls to refine / redefine decisions

Expectation that some should sacrifice in National interest

The expectation turns to suppression while still swearing of Nation

Unrest Not Revolutions but Seeking Interventions

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HierarchiesPromissory Estoppels

Promise of Constitution (Justice, Liberty, ‘Equality of Status & Opportunities)

Promise of Law (MMDRA, Coal Mines Nationalization Act, Electricity Act)

Promise of Policies (2005: Elect. & Tariff, 2007:NCDP)

Propensity to act in “National Interest” (Power for All, Block allotment)

Administrative decisions (reverse calculation of power demand)

Push & Pulls (2005-07 SLC over-rule CIL forecast, Mad rush for IPP & Blocks)

Promise by Govt. (IPP LOA, Blocks allotted)

Contract (Post Presidential Directive forced FSA)

Unrest No coal left for others (Some one Seeks Intervention)

CPP, Industry await LOA (2007-2009-2012 Freeze)

Auction, Dispatch reduced

ना खुदा ही िमला ना िवसाले सनमNew IPP @50% coal, Rest with 0%-10%-25%

Elections are fought using:•Religion & divides•Muscle Power•Money Power

Hierarchies

Sufferers of Intervention:•Themselves•Other Business•Banks (Public’s saving)

Outside Support

Involvement

Themselves Fighting Election

Generating Clout & Money

Plowing in business

Higher efforts to stake claim on those very resources

Economic Impact Bearers

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HierarchiesBCG Matrix – Two Ingenious Interpretations

Holy Cow (PPA)

Dogsmerchant

Private

Govt.5-Star

IPP CPP

Star

Banished

Use of BCG matrix is good for business strategy – Problem starts when Markets

are made to Make Share HighThe Oligopoly may trigger seeking intervention

Present coal distribution by Govt. is contrary to policies of Equitability

HierarchiesEquitability of Coal & Power Policies

Govt. IPP Govt. CPP Pvt. IPP Pvt. CPP

Linear Equitability Giving raise to discrimination of Priorities

Govt. IPP

Govt. CPP

Pvt. IPP Pvt. CPP

Planer Equitability Solution to the mess

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Out of Box Thinking Need to Take some hard decisions: Self Restraint in seeking resources v/s Accumulation Give full needs of coal to CPP to increase share of industrial power and trigger

& sustain national growth. For make in India initiative also it may be crucial. Let the coal be available to all users by taking voluntary Cut in place of

banishing other coal users For 2-3 years / till production from Blocks starts or till incremental quantity is

given by CIL, may Government give moratorium for defining the assets as NPA

and for payingback By rotation operate power plants for few months at a stretch so that operation

is at high PLF and all plants can earn / pay back some thing to Banks / Lenders

Power on Tap Through CPP Immediately power can be made available to any industry that want to start

production if they are assured coal for CPP This will boost investor confidence and exposure of banks is also secured

because CPP need neither go back to them for re-cast nor to Govt. for revising

PPA rates citing any reasons

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Out of Box Thinking Reverse Auction of Coal Blocks Allow bids only for operating capacities and not for yet to start plants. Make

bidding in two parts – Actual assessment of demand & controlled bidding Merge smaller blocks for efficiency, common rail / road links Allow only 30% - 70% coal for self use – depending on block size and balance

coal goes to the nation The bidder should quote that at what cost he is ready to give the balance coal

to the nation. If he find that his business can absorb higher cost than a

situation can come where for higher quality coal, bidder is ready to even pay

some amount to nation The such received 30-40% coal be transferred to a central agency for

distribution against linkages\ No blocks be given to states – the benefit should be available to all & not a

restricted section influencing state govt. Fractional ownership be given to smaller business so that they also can get

benefit of fixing coal cost – that can otherwise be done only by large companies

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