Opinion
Private participation - A feasibility check
27 Jun 2011 |
Ms Arpita Khanna
,Ms Aastha Mehta
| The Financial Express
With the state-controlled coal sector unable to meet the demand-supply gap, the decade old privatisation proposal is being looked into again. To draw private investors, the government needs to facilitate enabling policies and transparent procedures.
Government needs to bolster green buildings movement
23 Jun 2011 |
Ms Mili Majumdar
| Mint
The government's move to give priority to green buildings is the environmental impact assessment process is a welcome step. But there’s more to be done to sustain the green buildings movement.
Solid waste, the funding fixation
15 Jun 2011 |
| Planet Earth
Positives have been noticed in the handling and disposal of solid waste in India. Yet, the sector finds itself deficit in financial support, says Dr Shilpi Kapur, Associate Fellow, Resources, Regulations & Global Security.
Urgent need to get rid of subsidies
13 Jun 2011 |
Mr Pravin Kumar Agarwal
| The Financial Express
Fuel subsidy has thwarted competition and ensured the dominance of oil PSUs. It has drained government finances and hurt oil marketing companies. What we need is market determined pricing for petroleum products.
The blame game on coal shortage
07 Jun 2011 |
Mr S K Chand
| The Financial Express
The serious shortage of domestic coal supplies, becoming graver by the day, is being directly attributed to the ministry of environment and forests's (MoEF) green activism; particularly that of its minister. The standoff between the ministry of coal and MoEF is only partially resolved, but this time the minister has hit the nail on the head. At the last Group of Ministers meeting, the minister pointed out that Coal India Ltd (CIL) wants to bring in more and more new areas under mining without fully exhausting the production potential of existing areas.
Is CIL left with any other option?
It is now clear that CIL has reached a stage where it is unable to further increase coal production either from the existing mines or by starting new mines. CIL had already stretched its capacity to limits when in December 2005, Public Investment Board (PIB), under the chairmanship of then-expenditure secretary, cleared 16 proposals in one shot for enhancing the capacities of several large opencast mines by an additional 100 million tonnes (mt) of annual coal production (read government approval for over-exploitation of existing mines). CIL's total annual production in the year 2004-05 was only 323 mt, which, thus, grew to 431 mt in 2009-10-an increase of over 100 mt in 5 years. Then, CIL registered zero growth next year in 2010-11.
CIL is also unable to quickly projectise virgin coal blocks, not only because of the recent go/no-go controversy but also because of the skewed government policy of the past. CIL had reported that it can produce 500 mt annually starting 2011-12 until 2036-37 if it was allowed to retain 289 virgin coal blocks (known as CIL blocks) out of the total kitty of 499 virgin coal blocks for meeting its long-term requirement. These 289 virgin coal blocks were better explored, had largely proven reserves with developed infrastructure viz rail, road, power, etc, compared to the blocks being offered for captive mining (174 in number) to private parties and others, which were largely unexplored or were away from developed infrastructure. But this was not to be. The Prime Minister's Office (PMO) supported the recommendation of the Ratan Tata-headed Investment Commission (2006), which recommended that 'CIL blocks' should be de-reserved. Since CIL was planning to projectise only 150 blocks until 2011-12, the balance 79 fully explored virgin CIL blocks were de-reserved, thus seriously limiting CIL's capacity to manoeuvre against the go/no-go embargo in 2010. Now, many of the CIL's virgin blocks to be projectised by 2011-12 got stuck with the go/no-go controversy as many of these blocks lie deep in unbroken forests in newer coalfields or in existing coalfields with already high levels of pollution. Understandably, CIL now desperately needs all these shallow virgin coal blocks to be cleared for opening new mines as it is hardly left with any other option.
In spite of many constraints, out of 40 blocks allotted prior to 2003, 14 blocks (out of 26 today) were operating in 2009 and more were ready to follow. On the other hand, the de-reserved good CIL coal blocks allotted to private parties or governments for fast tracking coal production have failed to produce any coal so far.
In the long-term, CIL's production is going to decline very sharply as the older mines get depleted faster due to over-exploitation and it would not have any virgin coal blocks to projectise after finishing the current lot due to the release of 'CIL blocks' to private parties and others.
The problem of shortage of coal to the power sector had become so acute that the PMO intervened and got some of the blocks cleared that were initially under no-go, including one coalfield in Orissa, which was high on Comprehensive Environmental Pollution Index.
The pressure from the ministry of power has also been increasing because many of the existing power plants are forced to back down due to a shortage of coal, and there is a clear possibility that the shortage will result in the stranded capacity of almost 24,000 MW of the current Plan period's likely capacity addition of 55,000 MW; lowered down from the ambitious plan of 78,000 MW to start with.
It is obvious that CIL, a maharatna company, is left with no contingency plan to fall back upon and, therefore, it is now coercing the government to clear all the leftover virgin coal blocks; be it a case of diversion of deep forest land or be it a case of ignoring the high degree of pollution in the coalfields. Now the Prime Minister himself has decided to intervene by scheduling a high power meeting of concerned ministers and the deputy chairman of Planning Commission.
It is going to be a tough call but the outcome of the meeting is a foregone conclusion.
Climate proofing businesses is an imperative
05 Jun 2011 |
Dr R K Pachauri
| The Financial Express
Industry needs to assess the impact of climate change and prepare to encounter this growing challenge, not just in keeping with global objectives, but also in the interest of success purely in a business sense.
To not land in trouble
05 Jun 2011 |
Dr Ibrahim H Rehman
| Hindustan Times
Every year, industrial development projects displace about 10 million people globally. In India alone, involuntary resettlement has affected about 50 million people over the last five decades. Three-fourths of them still face an uncertain future. People displaced by such projects are prone to being rendered landless, jobless, homeless and marginalised.
Yet, the policies and programmes related to their relocation and rehabilitation are yet to find satisfactory answers to questions like: Is the land acquisition in terms of the quantity and quality of the land acquired justified? Does the process follow the principle of causing minimum displacement?
If it affects the habitat or livelihood or both of the displaced, does the form and content of compensation reflect the current value of the land? Does the compensation package provide sustainable means of livelihood?
The land acquisition processes by the corporates hasn't moved in tandem with the needs and aspirations of affected communities. The first issue is that of identifying a piece of land based on parameters that depend on intensive assessments of social and environmental aspects.
For instance, while setting up a water-intensive industry, a detailed assessment of current and future estimation of aquifer conditions in the area must be undertaken.
Further, productive and fertile land is often acquired when non-productive land may serve the purpose. At times, even the quantum of land acquired exceeds the immediate and near-future needs.
To begin with, corporates should avoid as much displacement as possible. They should also look beyond the technical requirements and availability of raw materials to focus on social and environmental issues. Once the land to be acquired is identified, it's critical to determine the number of families that will get affected, as there is always a conflict on the actual number of 'victims'.
The scenario is further complicated as the process often takes two to three years to get completed. During this period, there is lot of in-migration to the potential site. Consequently, there is often dispute on the residential status of families and the grievance redressal mechanism to resolve such concerns is usually lacking.
It’s desirable that a credible grievance redressal system is in place wherein collective complaints are addressed among people, corporates and the district administration.
The compensation package is usually worked out on the basis of the number of potentially affected families. The problem here is that relocation and rehabilitation packages treat the displaced as an obstacle to be overcome rather than as partners in the process of industrialisation.
Further, neither the Land Acquisition Act, 1894, nor the Land Acquisition (Amendment) Bill, 2007, prescribes an accurate methodology to determine the rate at which land should be acquired. So a scientific process to determine land rates should be devised and an appropriate legal and regulatory framework should be set up.
One-time compensation packages don't last for long. Therefore, along with a paradigm shift in the compensation packages, we need to devise innovative experiments like giving equity participation as part of compensation or a subsistence allowance along with pension schemes.
On the issue of relocation, corporates often shy away from constructing relocation and rehabilitation colonies. It's desirable that these colonies provide good quality health and education facilities and reflect, and address, the socio-cultural sensitivities and sensibilities of the displaced communities.
While the livelihood concerns are planned to be addressed by creating employment opportunities, either a detailed analysis of livelihoods and their disruption is not undertaken or the promises made aren't kept. Further, in case of the acquisition of agricultural land, monetary compensation doesn't adequately address the concerns of livelihood and economic sustenance of the displaced family.
A subsistence allowance should be given to every affected family till adequate means of livelihood are made available.
The Land Acquisition (Amendment) Bill, 2011, and the Rehabilitation and Resettlement Bill, 2011, will soon be tabled in Parliament. They promise to bring radical changes to the existing process of acquisition. However, acts and regulations alone won't bring about the real change.
A new thinking and a spirit of inclusion at the level of corporates are equally important.
Power from all
30 May 2011 |
Dr Debajit Palit
| The Financial Express
Off-grid power can supplement the government's rural electrification efforts and help ensure power for all by 2012.
New pricing tiers add to instability
02 May 2011 |
Ms Aastha Mehta
| The Financial Express
The building blocks of coal security - availability and affordability - have recently been questioned. The coal availability that was believed to be in plenty is proving to be a myth. Now there are concerns about its affordability too, given the frequent price revisions. The domestic demand and supply gap is widening. The Annual Plan Document (2011-12) has projected the coal imports at 137 million tonnes as against 83 million tonnes in the last fiscal. Such high import levels are likely to destabilise the financial structure of the coal-dependent sectors.
Though coal pricing is decontrolled, the industry, with its low price elasticity and a majority of its production and demand coming from the government sector, continues to be under the influence of the ministry of coal.
Prior to nationalisation, the price of coal was determined by the market forces, with very little government intervention. However, the nationalisation of the industry in 1973 brought the sector under a monopoly market structure with coal pricing shifting to an administered regime. Under that regime, several committees were constituted and the prices were revised at frequent intervals to cover the rising input costs. Subsequently, the prices were linked to the useful heat value of coal, and the Bureau of Industrial Costs and Pricing (BICP) developed a formula for estimation of coal prices based on the average long-run marginal cost. Finally, coal prices were completely decontrolled in 2000. Coal producing companies were given the right to determine the price levels, but in practice the ministry still is in full control.
Now different grades of coal are supplied at different prices fixed by Coal India in consultation with the ministry. The supply of coal is ensured to the regulated sectors, based on the historical prices set by the BICP. The regulated sector is defined to include power, fertiliser and defence sectors, however, the latter two constitute only a miniscule share. For other sectors about 75% demand maybe met through the Fuel Supply Agreement and the rest is acquired via imports or e-auction. In addition, due to the shortage of coal and high transportation costs to the western region, the consumers are compelled to accept the cost-plus pricing. But the price of premium quality coal is estimated at import parity level. Therefore, different grades of coal are priced either on historical rates i.e. price determined under ministry's guidance; or via e-auction i.e. highest bid price; or at an import parity price level; or at cost-plus price. To add to the complexity, the Union Budget (2011-12) has rolled out a dual pricing mechanism for the first time. This implies same-grade coal will now be available at differing prices to different consumers.
In this year's Budget, the price revision has been three-tiered: 30% hike for the sectors whose prices are market-driven (excluding power, defence and fertiliser); price hike for coal produced by MCL to bring it on a par with SECL; and price hike for higher grades of coal to bring it on a par with international rates.
Besides, it is being speculated that Coal India may increase prices across all sectors again during July-August 2011, after it has negotiated a salary hike for its employees.
These unstable prices and the lack of transparency translate into a highly complex market structure.
Emitting confusing signals
18 Apr 2011 |
| The Financial Express
The National Clean Energy Fund (NCEF), announced in Budget 2010-11, was a major step in India's quest for energy independence and climate change mitigation.
NCEF's objective was to fund research and innovative projects in clean energy technologies. It has been estimated that a nominal clean energy cess of R50 per tonne on coal, both domestic and imported, would bring in about R2,500 crore. The launch of NCEF has raised the expectations that it would help galvanise clean energy-related R&D.
Last year, environment minister Jairam Ramesh hinted at utilising NCEF for climate change adaptation. Now, by any stretch of imagination, such actions cannot be linked to clean energy or for that matter, energy. On the other hand, there are proposals to use NCEF for facilitating large-scale deployment of renewable energy. While no one disputes the urgent need for accelerating diffusion of renewable energy, it is also a fact that R&D in renewable energy does not get the kind of attention it deserves.
Unless substantial public investments are made in R&D it would be very difficult to achieve the goal of deep cost reductions in this field. Besides, the NCEF corpus could be leveraged appropriately to bring in additional funds for innovative renewable energy projects. Indeed, a portion of NCEF can be earmarked as venture capital to provide financial capital to early-stage and high-potential projects.
In keeping with the intention behind such a fund, it may be worthwhile to use NCEF ingeniously to provide the much-needed impetus to development, incubation and demonstration of renewable energy technologies through the relevant entities, both public and private.
R&D activities being pursued by different establishments in India need to be reviewed with a view to bring about greater synergy among all developmental activities pertaining to clean energy technologies. It would be helpful if a complete road map, indicating clear-cut milestones, quantum and nature of resources (both, financial as well as technical expertise) to reach the predetermined goals, is prepared.
It is high time the objectives and goals of NCEF were defined transparently, and a mechanism for its implementation was put in place along with an institutional set up for operationalising it. This is important to ensure that NCEF does not become yet another general pool of fund.