Power ‘less’ situation continues: Struggles over stumbling blocks!

With the power situation continuing to remain grim, the ministries ought to come together to remove the hindrances that prevent the exploitation of resources for gainful purposes

Instead of getting enhanced power supply, what appears is the ‘power’ struggles that goes on in ministries which act as stumbling blocks in giving clearances for work to progress!
 
It may be recalled that between 2004 and 2009 some 64 coal blocks were allotted to private parties. A public outcry for not following standard procedures resulted in CBI (Central Bureau of Investigation) investigations, called a “preliminary probe” and this shows that None of the allottees have really started any work at site—which means we have made no material progress in eight years! What is surprising, however, is that many of the allottees are major blue chip companies!
 
Now this perhaps needs another set of ‘study’ as to what prompted the allotment and what has prevented any work from being done and, in the national interest why not the government  take punitive measures against the allottees for not ‘delivering’ the goods? Does this all look like the dog in the manger policy of the privileged few?
 
For a moment, let us turn our attention to CBM (coal bed methane), which is currently produced in the USA, Canada and Australia. China, Indonesia and India are the new entrants in the field, with India's Great Eastern Energy Corporation (GECL) being the first to explore for CBM.  Now what is their problem, if any?
 
CBM can be extracted from virgin coal mines. Though the Product Sharing Contract (PSC) was signed in September 2010 by GEECL, which permits them to conduct pilot assessment surveys for three years, no work has actually be done so far in the last one and half years. Why? The ministry of environment & forests (MoEF) has not yet given the necessary clearance. Are they hard-pressed, over-worked and understaffed? Perhaps.
 
Work on CBM in India is still in its infancy due to above reasons.
 
Yogendra Kumar Modi, chairman of GEECL, laments that instead of permitting this loss of precious lead time, the MOEF should have given them interim permission to drill a few holes, take out samples and carry out lab tests to assess the gas potential.
 
Looks like MOEF wants to put the cart before the horse? After all if gas is found in viable quantity and quality, the necessary environmental requirements can be complied. Thus, the work at Mannargudi in Tamil Nadu has not even started, as a result.
 
Now, let us take a look at the progress made, if any, at CMM, which is coal mine methane, found on the surface of the mines and may be extracted along with coal. This process is relatively less expensive than CBM.
 
Fortunately, the tug-of-war between coal and petroleum ministries is now over, with the latter permitting Coal India to extract CMM but it will decide later on the price, commercialization and allocation pattern for the same.  CMM can be gainfully utilised by captive power units installed at head of pit mines.  However, for reasons unknown CIL have not received permission to extract CMM from the five blocks in lease-held properties, and it is hoped that this matter will be reviewed in due course.
 
We know that imported coal is expensive but indigenous coal producers have various problems to overcome. Coal India alone has some 102 proposals pending with the MOEF awaiting various types of clearances with 25 of them in the final stage.  It is now apparent that this ministry has such a large backlog, perhaps to shortage of qualified manpower and related constraints.
 
To overcome process delays, the Charturvedi Committee had earlier proposed that miners be allowed to bore holes with a 15-20 per sq km density rather than the current stipulation of 1.5 to 2. This proposal is under review so that some relaxations may be granted.
 
Meanwhile, Coal India has offered some 70 million tonnes of pit head stocks over and above the FSA commitments; Sterlite Industries, Adani Power and China Light & Power have shown keen interest in this offer.
 
Coal India is also planning to associate with the Indian Railways in expeditious movement of coal from pit heads. It is time that Railways themselves come forward with a workable solution to lay dedicated coal transport lines from pit heads to power generating points. They need to consider the possibility of re-scheduling the rail-track usage timings so that cargo can be on the move, even if with some interruptions at night and we can overcome the power shortages.
 
The ball, now, is in the railway ministry’s court.

(AK Ramdas has worked with the Engineering Export Promotion Council of the ministry of commerce and was associated with various committees of the Council. His international career took him to places like Beirut, Kuwait and Dubai at a time when these were small trading outposts; and later to the US. He can be contacted at [email protected].)

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    Reliance Industries net profit sinks 21% due to higher expenses and exchange rates

    RIL has reported disappointing results, with its net profit tanking 21%, to Rs4,473 crore on account of increased  expenses higher exchange rates

    Reliance Industries (RIL), an enterprise run by Mukesh Ambani, has reported poor results as its net profit sank by about 21% year-on-year (y-o-y), to Rs4,473 crore, for the quarter ended June 2012. Its net profit margins too shrank, from 6.99% to 4.87%, more 200 basis percentage points, for the same period. This was due to higher material consumption, which increased by 23.1% from Rs64,443 crore to Rs79,335 crore mainly on account of higher exchange rate. Its net sales increased 13.4% from Rs81,018 crore in June 2011 quarter to Rs91,875 crore in the June 2012 quarter. Higher prices accounted for 4.1% growth in revenue while higher volumes accounted for the balance 4% growth.
    Its operating profit for the quarter ended June 2012 declined 32% y-o-y to Rs6,747 crore, from Rs9,926 crore for the corresponding period last year. This is actually worse than its preceding three-quarter y-o-y decline in operating profits (30%). Reliance Industries’ revenues come from three segments namely: Petrochemicals, refining and oil & gas. All the three segments reported decline in operating profit on a y-o-y basis.
    However, sequentially, its operating profit increased, albeit marginally and the first time in three quarters it reported increased operating profit. This underscores the difficulty in containing the cost structure of the business when the going gets bad. Employee costs for the quarter were Rs847 crore which is 41.9 % higher over the trailing quarter on account of one-time performance linked payments for the previous year’s performance. Its sales have been slow to respond, growing at a rate of 13%, which is almost half of its three-quarter y-o-y growth rate of 24%. The disappointment over the last few quarters caused its valuations to drop. Its market capitalisation to operating profits is now in single digit territory, at 8.64 times its operating profits while its return on equity is 11% only.

    Addressing the positives rather than the shortcomings, Mukesh Ambani said in a press release, “Reliance Industries has improved its earnings profile as profits from operations were higher on a sequential basis on the back of volume growth in the refining business. We have commenced our next phase of capital investments in the refining and petrochemical segments to enhance earnings and value of our core energy businesses.”
    Earlier, the company was served a notice by the Government of India, relating to a production sharing contract in one of the blocks (KG-DWN-98/3) in the Krishna-Godavari basin with regard to cost recovery. The company has initiated arbitration proceedings on the same matter.  

    On a related note, its Canadian joint venture partner, Niko Resources, had earlier had reported that the reserves in the Krishna-Godavari Basin actually holds 80% less reserves than original estimated. In its press release it said, Reliance Industries is planning to submit Revised Field Development Plan (RFDP) for D1-D3 which is aimed at maximizing gas recovery from the existing fields. It also plans to further pursue approval of RFDP of D 26 (MA) submitted in the earlier quarter. Further, to expedite the development projects of other discoveries, RIL is preparing development plan(s) based on an integrated concept which is planned for submission in third quarter of the current fiscal.

    RIL’s portfolio currently consists of 13 exploration blocks excluding KG D6, CBM, Panna-Mukta and Tapti. Both the Panna-Mukta and Tapti have reported decrease in production and reserves respectively.

    Reliance has also started to get rid off some assets, for cash. Reliance Exploration and Production DMCC, a wholly-owned subsidiary of Reliance has completed the transaction for divestment of its 80% working interest and operatorship in the production sharing contracts (PSCs) for Rovi and Sarta Blocks in the Kurdistan Region to the subsidiaries of Chevron Corporation.

    Outstanding debt as on 30th June 2012 was Rs73,213 crore compared to Rs68,259 crore as on 31st March 2012. The increase in debt in rupee terms is mainly on account of change in exchange rates.

    In its press release, Reliance has mentioned about the newly planned Broadband Wireless Access that is supposed to offer 4G services. But no timeline has been mentioned.

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    Taro board rejects Sun Pharma’s offer for complete acquisition

    Sun Pharma had proposed to fully acquire Taro with an offer to purchase all the outstanding shares of the Israeli firm at $24.50 per share

     
    Israel-based Taro Pharmaceutical Industries said a special committee of its board has rejected an offer from Sun Pharmaceutical Industries to purchase its issued and outstanding shares not held by the Indian pharma firm due to inadequate price, reports PTI.
     
    “The Special Committee of the Board of Directors unanimously rejected the 18 October 2011 unsolicited, non-binding offer from Sun Pharmaceutical Industries to purchase all of the issued and outstanding shares of Taro not currently held by Sun Pharma for $24.50 per share as inadequate and not in the best interests of Taro’s minority shareholders,” Taro Pharmaceutical Industries said in a statement on its website.
     
    When contacted, a Sun Pharma spokesperson said that the company would not like to offer any comment.
     
    Sun Pharma had proposed to fully acquire Taro with an offer to purchase all the outstanding shares of the Israeli firm that would have entailed an outgo of $367.5 million (over Rs1,810 crore).
     
    Sun Pharma, which holds 66.5% stake in Taro, had said it was proposing to acquire 15 million outstanding shares at a price of $24.50 per share.
     
    Sun Pharma had acquired a controlling stake in Taro in September 2010.
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