Majority of the solar companies present in the sector is giving thrust to its R&D to bring down the cost. In all probability it will be low cost solar plants in the years ahead says James V Abraham, MD and CEO, SunBorne Energy in this column.

Through the 20th century, the industrial revolution left in its wake a damaged environment and fragile climate.  This century, economic growth is spreading ever faster.  However, we cannot let this growth further damage our environment. 

To break this compromise between growth and the environment, we must power our economies with renewable energy, and the sun is the most abundant such source.

National Solar Mission – Launched with deep commitment
To tap the power of the sun, the Indian government launched the National Solar Mission.   The Mission is ambitious in its targets and aggressive in its timelines.  The target is 22GW of solar power by 2022, with the first phase of 1.1GW by 2013.

By the end of 2009, Parliament had accepted the Mission’s recommendations.  By the end of 2010, projects for the first phase were already awarded.  By the beginning of this year, PPA’s have been signed and the projects are moving to implementation.  By any measure, the government has been committed and aggressive in moving the Mission to output and action.

National Solar Mission – Phase 1 challenges ahead
The projects in the first-phase were awarded using a liberal bidding process.  As was expected, the winners were aggressive (some say foolish, others say brave) in their bidding and have set prices that were unheard of anywhere, requiring capex reductions of over 35 per cent over the best in the world.

There are many voices saying these plants will never be built and the Mission’s first step itself will fail.  However, early indications are that these naysayers are wrong.

All the winners are progressing and have met their commitments to date.  We at SunBorne Energy are providing engineering and construction services to several of the winners.  These winners, with their infrastructure experience, armed with falling component prices, believe they can build some of the lowest-cost plants in the world.

State Solar Programs and Manufacturing: becoming a global solar powerhouse
But, the Mission is not the only solar program in the country.  The states have launched independent programs to support solar deployment.  Of all, Gujarat has been the most aggressive with 700MW’s of PPA’s.  SunBorne Energy is building its own and other PV plants in the state.

Rajasthan and other states are soon to launch programs of their own.
As the demand grows, manufacturing is scaling up in India.  In solar PV, hundreds of MW’s of manufacturing capacity is being added.  In solar-thermal, the glass manufacturers are looking at moving to India.   All this points to low-cost solar plants in the years ahead.

Low-cost solar a large part of India’s power mix
Looking ahead, 22GW by 2022 may seem ambitious from a solar perspective.  But, it is almost insignificant when the country needs to add some 300GW of total power.  To have any meaningful impact on climate change, solar energy needs to become a much larger part of the power mix.   The barrier is costs.  Today, solar energy costs some 3-4x of conventional power, and that needs to come down.

That is why we at SunBorne Energy have embarked on an indigenous R&D program to reduce costs.  The Ministry of New and Renewable Energy (MNRE) is supporting our efforts.

With low-cost solar plants, we can move away from government subsidies.  Then, we can ask why only 22GW? Why not make solar a major part of India’s power mix? Why not power every village with solar? Why not power India’s economy with solar power? Why build another coal plant?

Threat of a complete shutdown of oil production, as protests in Libya got worse, drove WTI crude oil futures on NYMEX to open the month higher by 2.7 per cent, from the previous month’s close, at US $99.63 a barrel. Intensifying unrest in Libya and protests in the Middle East spread to countries like Bahrain, Yemen and Oman and this led to a rally in oil prices. In addition, a fall in US crude oil inventories and weaker USD helped the prices rise. As a result, WTI crude oil futures prices on NYMEX touched the month as well as more than two-year high of US $106.95 on March 7. Later, oil prices fell as the OPEC stated that it could increase output if supply concerns persisted and the International Energy Agency (IEA) too announced that it could release oil supplies in an event of severe oil supply disruption. Weekly data release that showed US oil inventory increased more than expected dragged down the prices even further. Oil prices remained low also because of weak global cues: while data in the US (jobless claims rose by 397,000 and trade deficit widen to US $46.3B) and China (crude oil production rose by 5.3 per cent in February, from a year earlier) were bearish, there were reports of shutdown of dozens of refineries in the world’s third-largest oil consumer, Japan, following the devastating earthquake and Tsunami. As a result, WTI crude oil futures prices on NYMEX hit the month low of US $96.22 on March 16.

Crude oil prices increased steadily, from the month-low level, almost through the rest of the month. What triggered a reversal in the oil movement was escalation in violence in Bahrain that fuelled concerns that the regional unrest might spread to Saudi Arabia, the world’s biggest producer. Later, weakness in USD, coupled with upbeat sentiments in global financial markets, also lent support for the prices to rise. Oil prices increased even further as air strikes by US allied forces threatened to prolong a supply disruption in Libya. By the month’s end, the prices steadied around US $106 levels, as allied forces and the US prepared for a second round of attacks in Libya to control violence with Libyan President Gaddafi declining to surrender in any circumstances. Finally, WTI oil futures on NYMEX closed the month higher by 10.05 percent, over the February close, at US $106.72. Notably, the spread between Brent and US crude futures prices narrowed to about US $10 for the premium on the North Sea benchmark this week after widening to a record level of US $17 a barrel at the start of March. Meanwhile, IEA stated that it expects Brent to remain above US crude into the year 2013, driven by increased interest from a section of participants in the Brent contract and inventories at Cushing in Oklahoma to remain high.

Among other energy commodities, futures of two oil derivates — heating oil and gasoline — too moved up by 5.61 per cent and 13.85 percent, respectively, on NYMEX in the month of March. Falling gasoline inventory levels and expectations of high demand in fast-approaching summer driving season in the US aided the price rise.

Natural gas futures too clocked a monthly rise of 8.72 per cent on NYMEX as US President Barack Obama pushes for finding more ways in which the country can use it. Obama wants to cut oil imports by a third over the next decade, and he says the US could rely more on natural gas and bio-fuels to make that happen. Additionally, end-of-the quarter buying also lent support to the rise in gas prices. In tandem with the general energy commodity uptrend, ICE Rotterdam monthly coal futures contract increased by 6.03 per cent in March 2011 on strong demand from Asian economies. Lastly, futures prices of carbon commodities — CER (carbon credits) and EUA (European Union Allowances) on the ICE-ECX platform also posted a monthly rise of 10.71 and 10.33 percent, respectively, largely in sync with the price increases in German power, coal and oil. Nuclear crisis in Japan and a German government move to shut a third of its nuclear capacity were some of the key factors behind the rise in carbon prices. Also, Green Party’s victory in Germany’s state elections suggested that the country would rely more heavily on coal plants, which pushed up carbon prices even further.

Views are personal.

Thereafter, a spill-over of the political protest from Egypt to other oil-sensitive countries like Bahrain, Iran and Algeria reignited a spurt in oil prices. What followed was a further aid to the oil uptrend by clashes reported from Yemen and Libya. With momentum gathering in the political protest in Libya, workers at an oilfield also went on strike raising concerns over supply disruptions. Libya being an OPEC member and one that exports to the tune of 1.1 million barrels per day (bpd), the situation there came under great scrutiny. Concerns over Libyan oil supply were further fuelled as European oil and gas companies evacuated staff and suspended drilling preparations on growing violence. As a result, WTI futures contract on NYMEX scaled to its month high of US $103.41 on February 24. That the worries over growing turmoil in Libya could spread to other oil-producing countries lent strong support to the oil price surge. Later, near the month’s end, expectations that increased production from Saudi Arabia could cover up supply disruptions arrested the upside in oil prices. Saudi Aramco CEO Khalid al-Falih came out with a statement that Saudi Arabia was pumping around 9 million bpd and demand caused by the unrest in Libya had been met.

Finally, WTI oil futures prices on NYMEX closed the month higher by 5.2 per cent, over the January level, at US $96.97. Notably, the regional oil glut at Cushing, the delivery point for NYMEX WTI, resulted in widening the spread between ICE Brent and NYMEX WTI up to almost US $20 on February 21. Besides WTI crude oil, its derivates — heating oil and gasoline — too moved up largely on concerns that the political upheaval in Libya could reach Middle Eastern oil producers like Saudi Arabia and, thus, intensify future oil supply crunch. As a result, the prices of heating oil and gasoline futures on NYMEX increased by 6.5 and 9.6 per cent, respectively, on a monthly basis.

Among other energy commodities, CER (carbon credits) futures and EUA (European Union Allowances) futures on the ICE-ECX platform posted a monthly rise of 3.1 and 3.7 per cent , respectively, largely in tandem with the price increases in German power, coal and oil. Price sentiments were also buoyed by a Barclays Plc report that said the EU’s option of setting aside as many as 800 million surplus carbon allowances may add 10 euros a ton to the prices in 2013. Owing to dull physical activity, the movement of coal futures on ICE was largely range-bound with a positive bias, clocking a monthly rise of 1.4 per cent.

Breaking the general uptrend energy prices, natural gas futures on NYMEX slumped by 6.6 per cent, from the January level, in February 2011. Rising output and higher-than-normal seasonal stocks of gas and a forecast for higher-than-normal temperature in the US were some of the factors that drove the prices of natural gas down.

Mahagenco is the largest amongst state utilities in the country with an installed capacity of 6800 Mw thermal, 2469 Mw hydro and 852 Mw gas power. Thermal generation contributes around 68 per cent of the total generation of Mahagenco. About 13 per cent is contributed by very old units and 50 per cent is from units between 20 to 25 years old.

Very old units

Out of these 34 units, 10 units with capacities below 210 Mw are between 33 years to 42 years-old. These units are facing more forced outages and are difficult to maintain and operate under the norms given by the MERC and commercially incurring heavy financial losses. Hence, Mahagenco has recently decided to close down these units (Total installed capacity 570 Mw) and replacements units are proposed in place of these old units. These replacement units will be commissioned during 2013-14 – Koradi-1 to 4, Bhusawal 1, Parli 1&2 – all of these will be replaced with 660 Mw.

Paras & Nasik 1&2 are also being proposed for replacement.

 Other Old units:

Out of the remaining 24 units, 14 are more than 25 years-old and require major renovation and modernization (R&M) as their boiler components, equipments, breakers and cables have exhausted their life and have not been replaced earlier because of inadequate provision of funds.

Mahagenco has decided to take up a major R&M programme for the following units in phase I in the 11th plan period. Koradi unit no 6- 210 Mw will be replaced with World Bank funding while Nasik unit 3- 210 Mw will be replaced with the help of KFW, both to be completed by end 2013.  Similarly, the following units are also proposed for major R&M in phase II with the help of the World Bank in the 12th plan.

1) Bhusawal unit 2  – 210 MW with World Bank funding

2) Parli unit 3  -  210 MW with World Bank funding

3) Chandrapur unit 1&2  -  210 MW each with World Bank funding

Forced outages on account of boiler tube leakages (BTL) are a major concern for Mahagenco. This is because of the high erosion rate of boiler tubes as ash percentage in coal is relatively very high i.e., 40 per cent. To tackle this problem a committee was formed with a member from BHEL to suggest suitable preventive and remedial action. The committee recommended that boiler components such as economizer, LTHS, super heaters and reheater coils need more frequent replacement.

Mahagenco is implementing a five-year rolling plan to replace these boiler components in a phase-wise manner during annual overhaul of the units. This has helped reduce the boiler tube leakages to below three per cent.  Efforts are being done to reduce this to 1% within the next three years. Recently MahaGenco has encountered BTL soon after overhauling of units due to defective welding of factory welded joints. The matter has been taken up with BHEL. 

Environment issues: Ash emission

Presently the environmental norms have become more stringent. As most of the Mahagenco units are old, their ESP are designed for higher SPM. To meet the present SPM norms of 150mg/Nm3 Mahagenco has taken various steps such as replacing microprocessor based controls, retrofitting of ESP internals of ESP fields and maintenance of ESP fields during overhauls and plans to replace the ESP during major R&M of the units to comply with  new environment norms in 11th and 12th plan.

MahaGenco has also experimented with ESP fitted with bag filters for its Koradi units-5 and 6, but the experience is not encouraging.

Recently Mahagenco has taken up the installation of AFGC system for reducing emission to below 150 mg/nm3 at the following plants.

ESP’s of new units are designed with 70 mg/Nm3 Paras (2 X 250 Mw) and Parli (2 X 250 Mw), Khaperkheda (1 X 500 Mw) and all future projects.

Mahagenco has also decided to put dry fly ash evacuation systems for its new plants i.e., Khaperkheda, Paras and Parli, along with Geho pump for evacuating ash in dense phase. Mahagenco has also been making efforts to maximize fly ash utilization. Present fly ash utilization is around 50 per cent and increased from 2006-07.

Besides short term, long term agreements on BOT basis with cement manufacturers to install dry ash evacuation system and to lift the ash through silos for their use are under finalisation.

Quality of coal

MahaGenco’s coal requirement for its thermal plants is 40 mmtpa. Major coal companies supplying coal to Mahagenco under fuel supply agreements are listed below (with the percentage shares):

Western Coalfields – 61 per cent

Mahanadi Coalfields – 16 per cent

South east coalfields – 16 per cent

Singareni Coal Companies – 6 per cent

Generally E&F grade coal is received by Mahagenco Power Stations and there is a demand/supply gap due to inadequate production of coal. To bridge the gap Mahagenco has to import coal.

For 2010-11 Mahagenco is procuring about 3.35 mmt of coal to bridge the gap as per the directives of ministry of power.

The production from cost-plus mines (Bhatadi, Junad, etc) has started.

This import coal is used in the plant by blending it with indigenous coal so that the average quality shall improve along with loadability of the units.

Mahagenco receives coal with about 40 per cent ash which causes heavy erosion resulting in frequent boiler tube leakages. To overcome this problem Mahagenco has decided to maximize use of washed coal and accordingly placed orders for washed coal of about 10 mmtpa from WCL area, 2 mmtpa from SECL, 3 mmtpa from MCL in order to reduce the ash.  

Mahagenco also faces unloading problems of wagons because of receipt of heavy lumps and shales along with coal when crushers at loading end are under maintenance.

Constraints during the rainy season

Wet coal

Mahagenco receives about 60 per cent coal from WCL. This coal contains excessive mud and gets sticky during the monsoons. Such wet and sticky coal decreases the unloading rate due to choking of various coal chutes in the unloading stream. The issue of wet and sticky coal has been taken up with WCL from time to time. However, WCL has expressed its inability to avoid the supply of wet and sticky coal during the rainy season.

Plant design

Most of the existing CHPs are of old design based on the then coal GCV and have small-sized coal chutes and larger number of transfer points with Y chutes, thereby increasing the potential at various points until the wet coal reaches the coal mill. Considering the above aspect, the CHP at Khaperkheda thermal plant was designed later with minimum transfer points and Y chutes with adequate overload capacity and redundancy in the system.  Coal Handling Plants of Units 6 and 7 of Parli, units 3 and 4 of Paras have single unloading streams and as such without any redundancy and gets stuck-up if any problem occurs in the existing stream.

Problems at the loading end

At most of the sidings loading in rakes is done by pay loaders and therefore mud getting loaded along with coal at the bottom cannot be prevented. On many occasions crushers at the loading end are under maintenance and in such cases the coal company crushes the coal with dozers which generates a lot of fine dust particles, aggravating the choking problems in the plant. These matters are being taken up regularly with coal companies but very little improvement is seen.

Efforts to find solutions

Despite all the above problems Mahagenco is taking all possible measures to improve unloading. To clear the choke-up in the system, additional manpower is deployed at transfer points, chutes and crusher house round the clock. Manual unloading is also carried out by deploying extra manpower and machines like pay loaders. Moreover 48 engineers from MahaGenco are now deputed at various loading points/sidings for monitoring the coal quality before and during loading. We hope all these steps will lead to improvement in the quality of coal loaded on the rakes and the speed of unloading.

India’s crude import bill increased by 15 per cent to US $91 billion during 2008-09 due to the rally in global crude prices apart from shocks induced by volatility. Being unable to pass it on to end-users, the government had to bridge the gap at the cost of fiscal health. S&P instantly (February 2009) downgraded India’s long-term sovereign credit rating to negative from stable affecting long-term fund flows. 

The country experienced a payment crisis in 1991 as the oil price shock precipitated by the Gulf war impacted the economy. The value of India’s petroleum imports almost doubled from around US $ 3.8 billion to over US$ 6 billion. Dwindling forex reserves, accentuated by weakening exports and invisibles, led to a declining ability to support its rising crude dependency. In 1990-91, forex reserves took a double blow due to weakened investor confidence. Widening current account imbalance and depleting reserves dampened investor confidence. All this led to the payment crisis. Will India continue to face the onslaught of oil price shocks or is there a way out?

The telling blow to the Indian economy from the increased volatility of oil prices in both 1990-91 and 2008-09 was clearly visible on key economic indicators such as GDP, IIP and inflation numbers. However, the sustained oil surge of 1999-00 did not have much impact, as lower volatility helps stakeholders to form realistic expectations in the market and keep their bottom-lines secure. 

Gireesh B Pradhan

Gireesh Pradhan, addtional secretary ministry of power   

Transmission in the Indian power sector has always been the non-glamorous segment, mostly neglected but taken for granted. Over the past few years the pace of investment in this segment has increased as the realization that strengthening both the state and central transmission networks is vital for the power sector.

If one looks at the growth of the transmission lines and associated facilities, the track record is impressive; but if one factors in the vastness of our country and the concentration of our resources, we have a long way to go in expanding transmission lines. Quite apart from the expansion programme, the state transmission lines also need to be upgraded and in some cases replaced, given their vintage. The cash-strapped state utilities till recently have been concentrating their resources on adding generation capacity, which has left little over for investments in transmission.

The central transmission utility, Power Grid, has during the 9th and 10th plan periods sought to build a strong grid that integrates the different regions. Thus, from a level of less than 5,000 Mw of inter-regional transfer capacity at the beginning of the 10th plan, it stands today at over 20,000 Mw. By the end of the 11th plan it could be anywhere between 32,000 and 37,000 Mw. India today has one of the largest HVDC systems in the world and is seriously trying to develop 1,200 kV AC transmission lines. The challenge before the central transmission utility is to build a strong hybrid backbone of UHV lines that will allow for large transfers from one part of the country to the other and integrate the larger capacities that are going to come up both in the public and private sectors. In the coming years, generation capacity location will be severely constrained by a number of factors. Added to that would be the strong push towards renewable energy; a grid that doesn’t plan for the future integration of different sources of power would handicap the growth of the power sector. The future requires a very “smart” grid and Power Grid needs to move fast towards taking all the necessary steps to create the unique Indian “smart grid”.

Historically, it has been the states which have created transmission networks in their states. Most of the larger states were fairly advanced during the 60s and 70s and it was a state utility that first inducted the HVDC system in India. But as mentioned earlier, the priorities for the states came to be generation capacity and later distribution. The ratio of investment, which ideally should have been 2:1:1 amongst the three broad segments of generation, transmission and distribution, was unfortunately given up. The result is that the present intra-state transmission is in dire need of expansion, and more importantly, of strengthening. The restructuring of the monolith boards has allowed the transmission utilities in the states to concentrate on expansion and strengthening, and some states have been able to come up with plans to do so with funding from both domestic and multilateral funding agencies. This area, however, remains one of great concern and the Government of India is attempting to assist the states with both expertise and help in sourcing finances. One of the gaps that many states have is the lack of an integrated approach on transmission planning. Unless this is addressed, problems on the transmission side will remain.

There is a general view that “transmission is a natural monopoly” and thus the private sector has little role to play. This is far from the truth. The private sector has a crucial role to play in a segment that hitherto has been the closed monopoly of state and central utilities. The efficiencies that the private sector brings in are vital for the transmission segment as the ultimate beneficiary is the consumer. The competitive bidding route that is being followed for private players to bid for transmission lines has received enthusiastic support in the private players. Some states too are following the central lead and although still tentative, more and more interest in private sector participation is being shown by states. To the states this also makes perfect financial sense as scarce resources need not be deployed on the projects going through the bidding route.

There is a vital element in the transmission segment that is at the crux of the reform process – “open access”. Open access insofar as the central transmission utility is concerned has by and large been satisfactory. However, with the states it has almost proved a non-starter and in some cases the state governments have misinterpreted the provisions of the Electricity Act, 2003 to actively block such access. States have also been slow in ring-fencing the State Load Dispatch Centres which all the states are committed to do within a set time-frame. State regulators need to play a much more pro-active role in allowing open access. Consumers must have the freedom to procure their power from such sources that give them the assurance of both quality and price. Similarly, power producers within the state should not remain prisoners of the transmission utility in that state. So also it is necessary that intra-state open access is allowed and the fear of the distribution utilities that paying customers would flee should be allayed.

(Views expressed in this article are personal)

Ashu Sagar, Secretary General - Association of Oil & Gas Operators

 The Supreme Court delivered its judgment in Reliance vs. Reliance  dispute and cut the Gordian Knot, whereas three separate disputes that were made to look intertwined , contrarian and therefore irresolvable, were separated for what they were.

The first is the issue between Kokilaben, Mukeshbhai and Anilbhai . They signed a piece of paper to divide the empire. They have personal responsibility to give effect to its legal, moral and emotional fallouts. They cannot pass their personal responsibility to the shareholders of the companies, whose money they use to build their power.

Second is the issue between shareholders of RIL & RNRL, who through an instrument of demerger decided their respective shares of wealth in their new Avatars. They cannot claim to riches beyond what they inherited in that instrument at the time of their birth.

Third, perhaps most unconnected but roped in the dispute is a contract between RIL & Government of India defining rights, responsibilities and obligations of the former. RIL cannot give what it does not possess i.e. Authority for Crony Sale of Gas, or Sale without Government approval.

A connected and not yet explored Corporate Governance issue maybe the implied contract made by management to the minority shareholders of RNRL of hidden value in the company, by building these tenuous connections.

The court rightly observed that PSC is Supreme, and an MOU does not stand on the same footing as a contract. It shall be interesting to see its impact on the NTPC vs. RIL dispute.

The court also observed that the Government is the owner of the Mineral Wealth of the country. As a basic principal it is undisputed. However it is not clear if the court has considered the fetters on these rights, created by the Sovereign himself; when he of his own accord, enters into a contract, and, in return for a consideration received, imposes limits on his own rights.

As per PSC ( the top document in this case), RIL- the contractor has a “Right to  Freely Market its Gas” subject to – “Gas Utilization Policy”, “Sale within India” , “Negotiation at  Arm’s Length” and “Approval of Government” . It is elsewhere established that a public authority’s decision cannot be whimsical, and must be after due application of mind. Thus the Government has a right to approve (or not approve after due consideration); but does not have a right to determine the counter-party, quantity, and price of sale.

The media reports that the Government’s absolute right to determine the price, quantity and buyer has been upheld. If that were so, it would be a grievous concern to the industry. In this case the Government rejected the sale of Gas to RNRL. Government had a right to do so. There the matter should rest. PSC did not oblige Government to act merely because some wing of it knew of what was being planned by some commercial entities. The argument on Governments right to price or disturb the free market, by artificially imposing barriers is a matter of another debate, and should rightly have been at another time.

The Solicitor General and other Government counsels have clearly submitted to the Honourable Court, that dismantling of APM is a “sine qua non” for expediting exploration through private equity and PSC regime. It remains to be seen, whether this judgment has struck at the roots of Governments own logic. Does it recreate an APM ? What shall be the validity of NELP subsequent to such a change ? In such a case, the least Industry shall expect is for the Government to bring out a white paper on its position on above issues.

As a country, we should also be aware that while the Sovereign can get away with unilateral distortion of contracts; the economy is far less forgiving. The free world and free markets react and recreate a balance.

Deepak Mahurkar

Deepak Mahurkar  

E&P companies, especially those with gas interests in India, were closely following the legal tussle between RNRL and RIL. They were anxious to see how the apex court views the decision of the Government to get involved in pricing as well as utilization of gas produced from NELP blocks, despite being promised freedom under the production sharing contract (PSC).  Also on test was the strength of the Ambani family MoU which served as the guiding document for the group demerger scheme.  

While the apex court did not recognize the family MoU as a legally binding document, the Government’s sovereign right of ownership on natural gas resources in the country received sanction of the court, thus empowering the Government to decide, in nation’s interest, as to who gets gas, in what quantity and at what price.   

This decision may be a sweet victory for the ‘respondent’ RIL but it is a bitter pill for an ‘E&P investor’ RIL. The verdict effectively means that until a transparent gas pricing policy is in place, for every additional gas field brought to commercialization by RIL or any other company, it has to knock the doors of the Government to nominate off-takers and to approve price formula. It took long time to get these approvals for the first NELP field to come to commercialization.  

If that is any indication, the process of conducting transparent gas price discovery and then proving that it is at arm’s length can potentially get long, and does not assure any level of price.  Also the prices thus decided are subject to revision. In case of KG-D6, the EGoM decided to review the price basis and formula after five years.    

Notwithstanding, the formula approved for the KG-D6 block and the final price accruing to RIL was not disappointing. The price is linked to crude oil price, allows a cap of a reasonable $60 per bbl crude price, and promises a review after five years presumably to reflect the market.  Most importantly, it offers stability of price for a term of five years.  

Therefore, investors who are able to take risk of uncertainty and draw comfort through legacy of NELP KG-D6 pricing, will invest.  Others, and typically the global majors who have option to invest in other regimes, may look for other compelling reasons to invest in India.  

The Government will have to assure international investors and established Indian E&P companies of its intents to suitably reward.  The best way to do so would be by laying down transparent gas pricing policy.  As the Hon’ble Supreme Court ruling comments, “it is high time it (GoI) frames a comprehensive policy/suitable legislation with regard to energy security of India and supply of natural gas under production sharing contracts”.  

The last but not least by any perspective, is the emphasis made by the Hon’ble Supreme Court on the balancing of interests of shareholders of both RIL and RNRL.  RIL has been directed to initiate re-negotiation of the Gas Sales & Master Agreement (GSMA) with RNRL, although-  

• Gas price is non-negotiable;
• Contract term will be determined based on PSC terms;
• Current allocations may remain unchanged; the Government will need to alter them to offer gas quantity set out in the MOU;
• RNRL will need to observe the same procedures as laid down by the Government for allocation of gas from RIL’s KG-D6 field, like any other project developer in the country; and
• Family MoU is to be taken into account during negotiations. 

Therefore, another chapter in the RIL-RNRL gas dispute opens with the start of re-negotiation since it will be a tight-rope walk to balance the interest of RNRL shareholders should gas supply not get contracted given little flexibility on the pricing, term and allocation aspects.   

For the gas consumers, there will be no change in the way gas industry is running today. KG-D6 gas price and allocation remain as they are and will be revised periodically as per policies of the Government.   

We now await announcement of the next NELP round hopefully with candid removal of pricing and marketing freedom clauses from MPSC.  

 (Views expressed are personal) 

While India clarifies that there is no international pressure involved in halting the Iran-Pakistan-India gas pipeline project. May be true says Gayatri Ramanathan, Editor, The Energy Businees, but attributes the real reason to the security risk attached to it.

On the sidelines of a recent meeting between the former foreign ministers of Pakistan and India held at Khursheed Mehmood Kasuri’s residence, Mani Shankar Aiyar, former petroleum minister and one who supported the idea of an Iran-Pakistan-India pipeline throughout his tenure claimed that there was “no international pressure” involved in halting the Iran-Pakistan-India gas pipeline project. The real issue he claimed was the pricing formula.

Aiyar’s comments are in line with what the Indian government has been saying at several national and international fora,  it has repeatedly reiterated its “commitment” to building the pipeline, without either of the other concerned parties exhibiting a similar sentiment.

It has even denied the likelihood of a deep-sea pipeline that bypasses Pakistan. Answering questions regarding the signing of pact with Iran on gas supply, minister of state for petroleum and natural gas Jitin Prasada, however, said in written replies to Rajya Sabha that a memorandum of agreement had been signed between Indian and Iranian companies on 1 December, 2009 but the two countries had not signed pacts on energy needs.

All of which goes to highlight the seriousness with which the Indian side is taking the issue of securing energy supplies for the future. It is understandable that in order to fuel its growing economy, India should turn to Iran. The proposed 2,600 km pipeline would carry natural gas from gas fields in Iran to India at an approximate cost of US $ 7.5 billion dollar via Pakistan.

And on the face of it, it is a win-win deal for all – Iran gets around US $22 billion for 5 million tonnes of gas over a 25-year period. Pakistan favors deal because in addition to getting natural gas from Iran, it earns an estimated US $ 1 billion annually as transit fees.

For sometime now, it is the US that has been throwing the spanner in the works. The US sees the pipeline as means for Iran to escape the economic sanctions imposed by the west for its nuclear weapons programme. The US concern is that the international investment in Iran’s oil and gas industries is giving confidence to the Iranian government, and that Iran is not paying much of a price for its defiance of the Security Council over the nuclear matter.” The United States says Iran would benefit from huge gas sales as a result of the pipeline. Washington fears the pipeline will reduce the West’s economic leverage over Tehran – economic leverage that is necessary to persuade Iran to abandon its nuclear ambitions.

But analysts believe that the US cannot afford to sacrifice its relationships in the subcontinent to the pipeline, and in fact, such pressure may backfire. “If Indian public opinion sees that Americans are pressurizing India because India wants to have good relations with Iran, then old memories of the Cold War come into play, and a big part of public opinion, particularly the left parties, say that we should not be pressurized by a superpower like America and we should be free to have whatever relations we want with any other country like Iran,” says a London based Indian analyst Vijay Rana.
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National security advisor and former foreign secretary Shiv Shankar Menon went on record to neither the pipeline nor the relationship between India and Iran should concern Washington or any other third country: “Everything we do with Iran is open, above board and quite clear to everybody. Frankly, from our point of view, the more engagement there is, the more Iran becomes a factor of stability in the region, the better it is for us all.”
Adds Washington-based Pakistani journalist Khalid Hasan “The fact is that this pipeline suits Iran, it suits Pakistan, it suits India. It will also be a major contributor to the goodwill of the peace process now underway between India and Pakistan. So, I think the national interests of all three countries will override any objections the US might have.”

At least they should. But given the current internal security environment in Pakistan, the pipeline stands in danger of becoming another potential high-risk, high-probability hostage to the Taliban’s efforts to control the Pakistani establishment. Says an Indian security analyst, “The pipeline at this point of time is fraught with risk given the internal situation in Pakistan.”

As oil secretary S Sundareshan said recently, “We have genuine issues that need to be addressed before we sign up for the pipeline.” Most of them concern the secure delivery of gas. In fact, New Delhi has been boycotting project talks since 2008 after its concerns of safe delivery of gas were ignored. It wants Iran to be responsible for safe passage of gas through its 1,035-km route in Pakistan and would pay for the fuel only when it is delivered at the Indian border.

Iran on the other hand has suggested a trilateral mechanism, meaning contractual provisions between three countries, to ensure safe delivery of gas to India. Under this system, New Delhi pays for its share of gas even if the supplies were to be disrupted in Pakistan. While the 1,100-km pipeline from South Pars gas fields in the Persian Gulf to Iran-Pakistan border would be laid by an Iranian firm, New Delhi wants to take stake in the 1,035-km pipeline section in Pakistan.

India feels that its participation in execution of pipeline in Pakistan would make the project more bankable, reduce the financing cost, ensure timely execution and ensure transparent and efficient management of the operations, they said, adding Islamabad has so far not agreed to the proposal. Iran is unwilling to commit to a supply-or-pay regime wherein it would have been held accountable for non-delivery of gas at Indian border. It, however, wants New Delhi to commit to a strict take-or-pay clause wherein India would have to pay even if it does not take deliveries. All it now says is that if Pakistan were to disrupt supplies to India, Iran will make a proportionate cut in the quantities to be delivered to Islamabad. This obviously is not acceptable to India.

Launch of Jawaharlal Nehru National Solar Mission (JNNSM) under the National Action Plan for Climate Change has created lot of interest both nationally and internationally. The implementation of the mission is being observed carefully by various players including other governments. India is not just one of the biggest countries in the world but is also a fast growing economy with an average growth rate of 6-8 per cent. In the last few years India’s energy demand (particularly electricity demand) has increased significantly and is likely to go up by four to six times by 2030. Solar energy is envisaged to play an important role in keeping this development on a sustainable path, ensuring energy security. The mission therefore, has much riding on it and its success or failure will impact India’s credibility and its ability to deliver on its promises.

The mission targets are summarized below

National Solar Mission Targets

The mission is ambitious from many perspectives.

• Firstly, it aims to provide an answer to energy security issues and low carbon energy by tapping the vastly availability of solar energy
• It aims to provide electricity in rural areas through enhanced implementation of off-grid systems
• It aims for a large-scale implementation of solar thermal devices to supply heating/cooling solutions to industries, commercial and residential sectors.
• It aims to develop the Indian solar industry to a level where it can take on international competition
• It outlines an ambitious plan to develop local R&D so that world class technology development can happen in India