CEE Jan-Mar 2012

Sources privy to the devel– opments told Business Line that utilities have raised the issue with Coal India, which has assured them that if the consumer price gets affected beyond a point, say, higher than 10 per cent, then the mechanism can always be reviewed. Tariff Implications On December 30, the Power Ministry had written to the Coal Ministry stating that the switchover would have serious technical and financial implications on tariff. This was based on deliberations with various Central and State power utilities and the Central Electricity Authority. Though agreeing that the implementation of GCV based coal pricing system is in sync with international practice, it also requires that some prerequisites are met before it is implemented, the Ministry said. Some of the requirements include an automatic sampling facility. Further, in the international coal market, where GCVbased pricing is adopted, coal is sold through legally enforceable fuel supply agreements, with stringent provisions on quality parameters and penalties for deviation from the stipulated parameters. The existing fuel supply agreements would need to be suitably modified to adopt these practices. Pricing Formula URV-based pricing is based on empirical formula (which deducts ash and moisture content from the standard formula). Under URV pricing, the coal is categorised into seven grades. The worry was that these bands were very wide and did not offer significantly higher price for washed coal . GCV-based pricing, on the other hand, is linked to the actual calorific value or quality of the coal. Coal India is classifying the seven grades of coal into 17 bands under gross calorific value. Coal with similar calorific values may have similar price across the mines. There will be discount on coal with high ash content. Courtesy: The Hindu Business Line, January 7, 2012, New Delhi POWER MINISTRY ENDORSES TRIPLING DUTY ON CHINA EQUIPMENT India's Power Ministry endorsed a plan to almost triple import duty on generation equipment to help local manufacturers Bharat Heavy Electricals Ltd. and Larsen & Tubro Ltd. compete for orders with Chinese rivals. A proposal for increasing import duties to 14 per cent for all electricity generation equipment will likely be submitted to India's cabinet in January, Power Secretary P.Uma Shankar said. The Power Ministry opposed a similar recommendation last year to avoid levying the duty on near-term orders, Shankar said. Chinese suppliers won 34 per cent of new equipment orders for additional capacity that's planned in Asia's second– fastest growing major economy in the five years ending March 31 , according to the Ministry of Power. The additional duty may help ease India's budget deficit, which reached $59 billion in the seven months to October, or 74.4 per cent of the current financial year target. "This could be a money– maker for the government, that's one reason why it may change its mind this time around," Bhargav Buddhadev, vice president at Ambit Capital Pvt., said. "For Bharat Heavy, this is nothing but a sentimental positive. This doesn't change our outlook for the company as it won't deter Chinese companies from competing." Orders were placed with Chinese companies for equipment for 21 ,100 megawatts of the 61 ,237 megawatts of capacity expected to be added in the five years ending March, junior power Minister K.C. Venugopal said recently. Courtesy: Total Energy Nov. -Dec. 2011, P21. HEFTY HIKE IN DUTY ON CAPTIVE POWER PLANTS IRKS INDUSTRIES The Maharashtra government has raised the maxi– mum electricity duty charged on captive power plants by around four times. Captive plants are units that generate power" for a respective company's consumption. The current duty is 40 paise per unit under the Bombay Electricity Duty Act, 1958. On Monday, it was increased to Rs.1.50 per unit. The Cabinet asked the Governor to promulgate an ordinance to this effect. The decision irked industry associations, which challenged the state to give them uninter– rupted 24x7 supply round the year before raising the duty on captive power. Though chief minister Prativiraj Chavan said the decision intended to garner more revenue for the state, experts felt it was done primarily to rescue the state power distribution Mahavitaran. company Open access systems allows a consumer, who needs 1 39