The block was allotted to GMR Energy along with other major power companies in January 2008. Company officials had said that the joint venture had been formed, and the other clearance processes were on
Huge capacities have been planned by Indian power companies. However, coal supply to fuel these huge expansions still remains a concern with years spent only on clearances. In yet another example of delayed decisions, mining activities have not started in the block allotted to GMR Energy along with the other power companies in 2008.
“The joint venture company has been formed. Pre-development activities take around two to three years’ time. Forest clearances, exploration clearances and environmental clearances are required. The process is going on,” said Raaj Kumar, chief executive for energy sector, GMR Energy Ltd. The coal block was allotted to GMR Energy by the Indian government in January 2008.
GMR has a planned capacity of 4,200 mega watts (MW) to be completed by 2012. However, the company does not expect coal supply to be a problem in achieving these targets.
The Rampia and dip Rampia block in the IB Valley of Orissa was allotted to GMR Energy along with Sterlite Energy Ltd, Arcelor Mittal India Ltd, Lanco Group Ltd, Navbharat Power Ltd and Reliance Energy Ltd.
The Indian government had decided to allot 15 coal blocks reserved for the power sector in mid-2007. The coal blocks where then allotted in January 2008. GMR Energy was among the 31 power companies shortlisted for allotment of coal blocks for captive use.
Eight of the 15 coal blocks were allotted on a sharing basis, the Orissa block being one of these 15 blocks. These coal blocks were allotted with a view to accelerate coal production in the country to meet the huge demand from the power sector. However, the Orissa block, one of the 15 blocks allotted in this phase, is an example of how domestic coal supply in India suffers due to time lost in various clearances.
While this Orissa block awaits clearance, last year Adani Power was denied environmental clearance for two Lohara coal blocks in Maharashtra. The coal block was expected to fuel Adani’s power project at Gondia to start by 2011.
‘Every system is equally bad, but if the top person is committed and passionate about growth, development and investment in his state, then things work better’
Deepak Parekh has just retired from the position of executive chairman of HDFC. A few days ago, we carried Mr Parekh’s candid thoughts on the housing shortage due to bottlenecks in urban infrastructure, expressed during the conversation with Moneylife. Mr Parekh has equally strong and clear views on infrastructure projects thanks to the fact that HDFC has been involved in the formation of Infrastructure Leasing & Financial Services Ltd as also Infrastructure Development & Finance Corporation of India. Mr Parekh has spent decades getting a ringside view of the problems of launching a viable infrastructure project. Here are his thoughts on these issues, as part of his conversation with Moneylife magazine, for the Pathbreaker series of interviews
Moneylife (ML): On infrastructure, land acquisition had come to a halt all over the country after the special economic zone (SEZ) related excesses. Where do you see India going if there are no new cities being built with new infrastructure? Do you see any thinking on this issue at a time when riots are breaking out over ownership of cities—like in Hyderabad?
Deepak Parekh (DP): McKinsey has done a study, which says that 400 million people are going to move into cities in the coming years. Where are they going to stay? Where are they going to work? How are they going to travel? It is a frightening number. But there is no discussion on this, because land is a big stumbling block in India for all infrastructure projects—roads, power or steel plants, not necessarily for housing. We must have clarity on what is agricultural and what is not agricultural land and how to convert agricultural land into non-agricultural land, how to acquire land for infrastructure and pay market prices for that acquisition. Don’t save money and forcibly take away land from someone, because then he goes to court and your project gets stalled. We don’t want to force people to give up land or to convert land. What happened in the east with the Nano project or at Singur was that the payment was not made to the poor farmers. The land accumulators/aggregators had already bought pockets of land in anticipation of this and they were all staying in Delhi and Kolkata in posh localities.
The poor farmers had been paid a paltry sum, so the benefit was going to someone else—the middlemen—and not to the actual farmer.
ML: Is it the same everywhere, or do you think things are better in places like Gujarat?
DP: It is the same everywhere. The problem in Gujarat is less because there is a better development agenda and more fairness in the system. The tone has to come from the top. Every system is equally bad but if the top person is committed and passionate about growth and development and investment in his state then things work better. For instance, I read somewhere that after trying for years to put up a project in the east, LN Mittal says that he wants to put up a project in Karnataka or Gujarat. A steel plant would have come up in the time he waited for land. Posco is another example. A $10-billion project—the single largest investment, but what a sad state of affairs. The state government is saying, I will give you the mines, I will give you the land for the plant but there is no road or railway between them or at the ports and I don’t have the money to build them. You have to build it yourself. Now why would anyone build that? Land acquisition in Posco's case was less of a problem. In the Tata Steel case, land is a big problem in Orissa.
Tata Steel is waiting for so many years and has even ordered some equipment for the plant. As for the SEZs, they are now a thing of the past. Someone must do a survey on what kind of money has been lost by industrialists on the SEZs that are unlikely to come up.
Experts from the industry expect the new open access policy to ease pressure on merchant power tariffs, if it is implemented
The Cabinet note for allowing the Indian government’s discretionary power quota being pooled into open access has been floated. Industry experts believe that the new policy could help ease fluctuating merchant power tariffs.
“It will free sufficient amount of capacity for the merchant market. I think that will also help in stabilising the tariffs in the merchant market to a reasonable level. Today, there is too much of fluctuation, it (the tariff) has also come down to as low as Re1 per unit. There is a lot of fluctuation and uncertainty. This (the policy) will surely have a stabilising effect,” said Raaj Kumar, chief executive for energy sector, GMR Energy Ltd.
On Monday, market price for merchant power fluctuated from Rs99.70 per megawatt hour (MWh) to Rs3,350 per MWh.
However, some analysts are still in the wait-and-watch mode over the policy. “There still needs to be certain clarity on the proposed law. More clarity is required on the new capacities and new plants that are being spoken about. If it is new plants, then the power would take another five years to be made available,” said an analyst from a leading brokerage.
Based on the inputs available at the moment on the proposed policy, the law will allow 25% of the government’s discretionary quota for open-access customers. The power ministry has discretion of using 15% of the output from federal generating stations.
The proposal also speaks about allowing State-run power producer NTPC Ltd to sell 50% from the government’s (up to) 50% unallocated quota in new plants to open-access customers. The existing power projects of NTPC would also be allowed to sell 25% of the government allocation.
“Open access is a requirement for all of us, if it comes out as a policy it will come out for all of us and not only for the central stations,” Mr Kumar further added.
When asked whether NTPC’s additional capacity in the merchant power segment would mean overcapacity in the merchant power segment, he added, “No, ultimately, the capacity remains the same.”