Companies & Sectors
Economy & Nation Exclusive
What NTPC should have done with its 16.10 billion units of surplus electricity

NTPC knows that it cannot ‘store’ the electricity generated. Instead of wasting the generated power, it should be used to run industries that do not involve grid locking and sold at the best possible price to obtain some revenue!


In a country starved for power, because of some grid restrictions, NTPC has reported that during 2011-12, it was stuck with 16.107 billion units of surplus electricity. This, according to the news item, was produced from fossil based fuels that went waste as there were no takers because the price was ‘expensive’! ( This is shocking to say the least.  Why was it produced in the first place, without adequate market research?
After all one wonders why NTPC did not learn enough from its previous year’s performance of a similar experience when it could not get buyers to dispose off 13 billion units that were produced likewise in 2010-11?  This needs to be investigated by some responsible authority.
NTPC depends upon indigenous supply of fuel requirement up to 90% and the balance is imported, but, apparently electricity generated at a cost of Rs4 per unit has no takers!
Across the Indian Ocean, down in Australia, Adani Group’s Adani Ports is already developing a coal terminal at Abbots Point, currently with a 50 million tonne (MT) capacity that can be raised to 85 MT should the demand increase.  

And, in order to support the coal and mining industry, Australia’s biggest coal companies are jointly laying a new rail line to carry 27 million tonnes per year to the Pacific ports.
In contrast, however, Indian coal producers have the perennial problem of wagon shortage, slow movement and being subject to pilferage en route.
GVK Power, also in Australia, in a new development, has received clearance for its Alpha Coal and rail project in Queensland.
Reverting back to NTPC, according to Arup Roy Choudhury, chairman and MD, unless the price of domestic gas or coal is made competitive, electricity generated from these sources will remain uncompetitive, and even more so, if the fuel is of foreign origin.
Under the circumstances, NTPC, like all others must be enterprising enough to look for competitive supply sources of coal externally and improve production in captive coal mines that it may hold, or enter into long-term supply contracts by investments in existing units.
NTPC knows that it cannot ‘store’ the electricity generated; at the same time, the question of “grid restrictions” that has caused this loss should not be allowed to continue. Rather this needs to be addressed at the highest level. Or else, instead of wasting the generated power, it should be used to run industries that do not involve grid locking and sold at the best possible price to obtain some revenue!
It would be nice if NTPC clarifies this matter a little more elaborately?


Economy & Nation Exclusive
Weak IIP not translating into lower inflation; will RBI go in for a rate cut?

While weak IIP numbers are still not translating into weaker inflation, which continues to be high, several economists believe that this may prompt the RBI to cut rates by 25 bps on 18th June

Growth in factory output, as measured by the Index of Industrial Production (IIP), was 5.3% in April last year. The manufacturing sector, which constitutes over 75% of the index, grew barely 0.1% against 5.7% in April 2011, according to the official data released on Tuesday.

"Uncertainty over global demand further clouds India's growth outlook at this stage, the main problem being that slow growth has not yet translated into weaker inflation readings. We expect wholesale price index (WPI) based inflation to inch higher in May for which the data is due on 14th June, mainly on rising food prices, though we expect core inflation, which is more demand-driven, to ease," said Sonal Varma, economist, Nomura Financial Advisory and Securities (India) Private Ltd.

While April 2012 IIP data for consumer goods has strengthened marginally, the growth is largely driven by insignificant segments. This indicates a slowdown in both consumption and investment demand. Key thing to note is that despite weak industrial production data the inflation continued to remain high at 7%.

Expressing disappointment over the dismal industrial growth rate in April, finance minister Pranab Mukherjee said the government would take steps to give positive signals to the industry. "I am disappointed. Industry has not yet picked up. Negative sentiments are there. We have to take steps to give positive signals," he told reporters in the capital.

As many as 10 of the 22 segments, including capital goods and mining, posted negative growth as the country grapples with global slowdown and subdued domestic demand. The IIP had grown by 5.3% in April 2011. However, offering some consolation, the data for the month under review was positive, as against 3.2% drop logged in March.

"The (IIP) data, which has been volatile of late, reflects the impact on the industrial sector due to the high interest rates and also due to the delays in policy initiatives. The markets had expected a low number and hence, the performance was almost discounted," said Dipen Shah, head of fundamental research, Kotak Securities.

The slowdown in industrial production will surely weigh on the Reserve Bank of India (RBI) to cut lending rates at its mid-quarterly review on 18th June.

Ms Varma said, "In our view, today's weak IIP reading increases the likelihood of a 50 basis points (bps) rate cut. Our base case view is still a 25 bps repo rate cut on 18th June with no change in the cash reserve ratio, but we wait to see the WPI inflation data before making a final call."

According to CRISIL chief economist DK Joshi, "The numbers are pointing towards continued deceleration. The figures are much lower than expected... RBI could cut rates by 25 bps in forthcoming policy review."

Expressing similar opinion, SBI economist Brinda Jagirdar said, "These numbers are even weaker than anticipated. This is the trend which is seen in the last some months...It indicates that the investment pipeline is dry."

However, Dhananjay Sinha, co-head for research, economist and strategist at Emkay Global Financial Services feels that the rate stimulators, even if given by the RBI, would fade away due to entrenched liquidity deficit. "We continue to believe that the key tool for the RBI to tackle to growth slowdown will be open market operations (OMOs), which are already at Rs44,000 crore for FY13 and cuts in CRR. The rate cut even if done in an environment of steep liquidity deficit at 1.4% of net demand and time liabilities (NDTL), will not have meaningful bearing on the borrowing costs. One must bear in mind that the liquidity deficit is at 1.4% despite first quarter being lean season in terms of loan pick up. Hence, we believe that even if rate cut is done in the forthcoming mid-quarter review, as we progress towards the second half of FY13, its impact on the interest rates will fade away," he said.


Unclaimed bank accounts: RBI asks RRBs, coop banks to frame policy

RBI had given detailed instructions to these banks to deal with unclaimed deposits or inoperative accounts and had advised them to find the whereabouts of the customers or their legal heirs


Mumbai: The Reserve Bank of India on Wednesday asked cooperative and regional rural banks to frame policies to locate customers with unclaimed deposits or inoperative accounts, reports PTI.

"On a review, with a view to further strengthen the regulatory framework for inoperative accounts and unclaimed deposits, state and central cooperative banks or regional rural banks are advised to put in place a board-approved policy on classification of unclaimed deposits, grievance redressal mechanism for quick resolution of complaints, record keeping, and periodic review of such accounts," RBI said in a circular.

RBI had given detailed instructions to these banks to deal with unclaimed deposits or inoperative accounts and had advised them to find the whereabouts of the customers or their legal heirs.

The central bank had also asked them for an annual review of such accounts, levy no charge for activation of inoperative accounts after due diligence.

However, it said, these banks have not been pro-active in tracking customers linked with unclaimed deposits or inoperative accounts.

In order to identify owners of such accounts with due diligence of know your customer (KYC) norms, RBI had also asked them to display list of unclaimed deposits or inoperative accounts which were inactive or inoperative for ten years or more on their websites by 30 June 2012.

The first periodic review of unclaimed deposits or inoperative accounts should be put up to their respective bank boards by 30 September 2012, RBI said.


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