ENERGY NEWS JANUARY-2020

Petroleum Conservation Research Association

Sanrakshan Bhawan 10, Bhikaji Cama Place New Delhi 110066

INDEX

S. NO. SUBJECT PAGE

1

1.1

1.2

2

2.1

2.2

3

3.1

4

4.1

4.2

4.3

5

TRANSPORT

-E-Vehicles (EV)

-Oil & Gas run vehicles

ENVIRONMENT

- Air, Water & Sound pollution

-Health

ENERGY CONSERVATION

-Oil & Gas

RENEWABLE ENERGY

-Electricity

-Wind

-Solar

OTHERS

1-17 17-19

19-24

24-25

25-64 64-68

68-71

71-84

84-87

This Energy News contains excerpts of articles picked up from selected daily newspapers & magazines.

1

MG Motor India launches ZS electric starting at Rs 20.88 lakh

Morris Garages (MG) Motor India on Thursday launched its first electric vehicle ZS

priced between ₹20.88 lakh and ₹23.58 lakh (ex-showroom in select five cities).

Interestingly, the company has gotten maximum number of bookings from

Bengaluru (more than 600) followed by Hyderabad (around 500), amongst the five

cities it will begin to sell with. Bengaluru and Hyderabad is followed by Delhi-NCR

(around 450), Mumbai (around 400) and Ahmedabad (around 150). The company

will begin deliveries on January 27 across these cities, it said.

“We are getting good response from all over...our target was around 1,000 cars a

year because the whole industry sold 2,000 cars last year, but we received so many

bookings without revealing the prices,” Chaba said, adding that it received over

2,800 bookings in 27 days. He added that the company received many bookings

came from other States as well, especially Kerala, but had to deny them as MG has

initial plans to sell the electric SUV in these five cities only.

MG eShield- Meanwhile, the car-maker has introduced the MG eShield, which

provides privately-registered customers with a free of charge five-year

manufacturer warranty for unlimited kilometres on the car and eight

years/1,50,000 km warranty on the battery.

It also offers round-the-clock roadside assistance for five years for privately-

registered cars, along with five labour-free services. MG has also entered an

alliance with CarDekho.com that will provide assured resale value and can be

availed by the customer by paying a stipulated amount at the time of purchase of

ZS EV.

*****

Our objective and target are to be a clear leader in the EV

segment: Tata Motors

Tata Motors aims for its electric vehicle (EV) business to contribute 10-15 per cent

to the company’s overall passenger vehicle business in the next 4-5 years. Bullish

on the potential of the nascent EV market in the country, it also plans to more than

double its business by next year, as well as grow much faster than the industry, said

2

Shailesh Chandra, President – Electric Mobility Business & Corporate Strategy, Tata

Motors. In an interview with BusinessLine, Chandra detailed Tata Motors’ plans for

the EV market. Excerpts: OAs he rightly said, it is an imperative...We see this is as

the next nation-building opportunity and we have the power of (an EV) ecosystem.

The internal combustion engine (ICE) world is going to become more and more

difficult — costs are going to increase, the technology investments will also keep

on increasing, and that will make the price trend inflationary for the ICE market. As

far as EVs are concerned, as the scale is going to grow, more localisation is going to

come. And with the critical component price in batteries coming down much faster

than what we are anticipating, the ability of EVs to compete on the acquisition price

with ICE is becoming more and more possible in the short term. Therefore, it makes

sense for Tata Motors to start seriously looking into this; the first mover always has

the advantage.

*****

PMI Electro and BYD-Olectra Bag Most E-bus Orders

PMI Electro and BYD-Olectra have won large

contracts floated by state transport agencies for

supply of electric buses under a government

scheme to promote green mobility, followed by

Tata Motors, JBM Auto and Mytrah, people aware

of the development said. Haryana-based PMI

Electro Mobility Solutions, which has a technical

tieup with Chinese commercial vehicle maker Beiqi

Foton Motors, has bagged contracts for about 750

electric buses in the tenders that have been

finalised so far, the persons cited earlier told ET,

requesting not to be named. Phase two of the

₹10,000-crore government scheme — Faster

Adoption And Manufacturing of (Hybrid &) Electric Vehicles in India (Fame India) —

proposes demand incentive of up to ₹55 lakh for long electric buses, ₹45 lakh for

midi buses and ₹35 lakh for mini buses. Olectra-BYD, on the other hand, has won

contracts for about 600 electric buses from city transport corporations, including

those of Surat, Bhopal and Indore. Tata Motors said it continues to play a proactive

3

and constructive role in the e-mobility space with a long-term perspective of the

cause. “In Fame Phase II as well, the company has participated in all tenders so far,

and has won orders for 220 buses in two of them, in addition to the private tender

of AJL for 300 buses,” the company said in its reply to ET’s query. Email queries to

BYD-Olectra and JBM Auto remained unanswered till as of press time.

*****

Ashok Leyland, ABB arm ink pact to develop electric buses

with flash- charging tech

Truck and bus maker Ashok Leyland and ABB Power Products and Systems India Ltd

have signed an agreement for development former’s new electric buses using

latter’s fastest flash-charging technology to advance urban mobility while cutting

down carbon emissions. The pact is to develop a pilot electric bus based on ABB’s

flash-charge technology, Tosa, which tops up the battery in just seconds while

passengers get on and off the bus. This avoids the need to take the vehicle out of

service for recharging every few hours or having a replacement bus ready, thus

minimising the size of the fleet while increasing passenger carrying capacity,

according to a statement.

“The aim is to provide a zero local emission mass public transportation bus system

with high passenger capacity. We are pleased to be working with Ashok Leyland in

advancing responsible urban mobility,” said N Venu, Managing Director, ABB Power

Products and Systems India, which represents ABB Power Grids’ business in India.

*****

4

What happens in Vegas…

Hyundai S-A1

No, that is not the abbreviated model code name for the next compact sedan from

the Korean brand. Instead, it is the full scale concept model of the first flying vehicle

from Hyundai. Yes, you read that right, the brand is taking to the skies with a plan

to get into mainstream production within the next 3 to 5 years. Hyundai Motor has

partnered with Uber for the new partnership to develop Air Taxis for a future aerial

ride share network. The new full-scale aircraft concept was unveiled at the CES.

Hyundai is the first automotive company to join the Uber Elevate initiative, bringing

automotive-scale manufacturing capability and a track record of mass-producing

electric vehicles. The air vehicle concept was created in part through Uber’s open

design process, a NASA-inspired approach that jump-starts innovation by publicly

releasing vehicle design concepts so any company can use them to innovate their

air taxi models and engineering technologies. In this partnership, Hyundai will

produce and deploy the air vehicles, and Uber will provide airspace support

services, connections to ground transportation, and customer interfaces through

an aerial ride share network. Both parties are collaborating on infrastructure

concepts to support take-off and landing for this new class of vehicles. Hyundai and

Uber Elevate have collaborated to develop the PAV (Personal Air Vehicle) model, S-

A1, that utilizes unique design to optimize the electric vertical take-off and landing

(eVTOL) aircraft.

It is designed for a cruising speed of up to 290 kmph, a cruising altitude of around

1,000-2,000 feet above ground, and to fly trips up to 100 kms range. The Hyundai

vehicle will be 100 per cent electric, utilizing distributed electric propulsion and

during peak hours will require about five to seven minutes for recharging. The

5

aircraft based on the S-A1 powered by distributed electric propulsion, will use

multiple rotors and propellers around the airframe to increase safety by decreasing

any single point of failure. Having several, smaller rotors also reduces noise relative

to large rotor helicopters with combustion engines, which is very important to

cities. The model is designed to take off vertically, transition to wing-borne lift in

cruise, and then transition back to vertical flight to land. The 4-seater Hyundai

vehicle will be piloted initially, but over time they will become autonomous.

Mercedes-Benz VISION AVTR

If it is Vegas, the Hollywoodian influence can’t be very far away. At CES this year,

German luxury car maker Mercedes-Benz was the one posing for the cameras with

a concept inspired by the hugely popular Sci-fi film series Avatar. According to

Merc, their concept vehicle connects human, machine and nature in an

unprecedented way. The Vision AVTR is the result of a global partnership between

Mercedes-Benz and the AVATAR films franchise. The VISION AVTR concept vehicle

uses a revolutionary battery technology developed with graphene-based organic

cell chemistry that is completely free of rare earths and metals. The materials of

the battery are compostable and therefore completely recyclable. In this way, Merc

claims that electromobility can become independent of fossil resources. In doing

so, the company wants to underline the high relevance of a future “circular

economy” in the raw materials sector. The concept of the VISION AVTR combines

the design disciplines interior, exterior and UX on an unprecedented scale. A design

language inspired by nature characterizes the appearance of the concept vehicle.

This is illustrated by the stretched, sporty “one-bow” design, which merges with

spherically pronounced wheelhouses. Merc says that 33 multi-directionally

movable flaps – the “bionic flaps” – on the back of the vehicle enable a new form

of interaction for the VISION AVTR with its surroundings. Digital neurons,

*****

6

Uber, Hyundai team up to build electric air taxi

US ride-hailing company Uber Technologies Inc. and South Korean automaker

Hyundai Motor have teamed up to develop electric air taxis, joining the global race

to make small self-flying cars to ease urban congestion. Global players like

Germany’s Daimler, China’s Geely Automobile and Japan’s Toyota have all unveiled

investments in startups that aim to deploy electric flying cars capable of vertical

takeoff and landing. But there are big technological and regulatory hurdles to the

plans. Uber and Hyundai, for instance, gave widely different timelines for

commercialisation, underlining these challenges. “We’ve been making steady

progress towards a goal of launching Uber Air by 2023,” Eric Allison, head of Uber

Elevate, said at the Consumer Electronics Show (CES) in Las Vegas. Euisun Chung,

executive vice-chairman of Hyundai, expects commercialisation of urban air

mobility service in 2028, saying it takes time for laws and systems to be in place.

Hyundai is the first carmaker to join Uber’s air taxi project, which also counts

Boeing subsidiary Aurora Flight Sciences among its partner firms. Hyundai will

produce and deploy the vehicles while Uber will provide aerial ride-share services.

Uber, which has partnered with eight companies on its air taxi project, however,

acknowledged it would be “unrealistic” to expect all its partners to go to market at

the same time.

*****

7

Electric mobility requires incentives charge

The country’s electric mobility mission is moving gingerly. Big plans have been laid

out but it is time to implement the plans by incentivising early adoption. The near-

term plan for 2020 focuses on creating an environment to develop manufacturing

in the country. The long-term plan is to bring down greenhouse gas (GHG) emission

intensity by 33-35 per cent below 2005 levels, by 2030, with electric mobility as a

key enabler. The National Electric Mobility Mission Plan 2020 has been designed to

enhance national fuel security and provide affordable, environment-friendly

transportation. The Department of Heavy Industry charted out a scheme — Faster

Adoption and Manufacturing of (Hybrid &) Electric vehicles in India (FAME India) —

in 2015 to pave the way for manufacture of electric and hybrid vehicles and ensure

sustainable growth. Phase I of FAME launched in April 2015 was extended up to

March 2019 with focus on the creation of demand and a technology platform,

taking up pilot projects and creating charging infrastructure. It aimed at

incentivising 2-3-4-wheelers, light commercial vehicles and buses. This was

followed by the NEMMP 2020, which set out with a target to achieve sales of 6-7

million hybrid and electric vehicles by 2020. During March 2019, the Department

of Heavy Industry notified the Phase II FAME scheme with an outlay of ₹10,000

crore for a three-year period. As a part of the scheme, the Government brought

electric vehicles under 12 per cent GST without cess as against 28 per cent GST rate

with cess up to 22 per cent for commercial vehicles. It also envisages deployment

of over 5,000 electric buses by State Transport undertakings. NITI Aayog, in its Zero

Emission vehicles (ZEVs): Towards a Policy Framework, says India has a lot to gain

by converting internal combustion engine (ICE)-powered vehicles to EVs at the

earliest, which will help reduce the oil import bill. Experts expect some sort of parity

8

beteween ICE and EV by 2023. If the government comes up with some incentives,

including a scrappage policy for old vehicles when they take up EVs, it could spur a

new growth phase for electric mobility.

*****

Zero to 60 in 2.2 seconds? 10 electric vehicles to watch

This was the year that Tesla’s lock on high-end all-electric vehicles began to break,

with Audi and Jaguar sending electric SUVs out into the world. They joined more

workaday EVs from Chevrolet, Honda, Hyundai, Kia and Nissan.

So 2019 was, finally, the year of the electric vehicle. Right?

Sales of electric autos were double those from the year before, but they were still

dwarfed by their fossil-fuel-powered brethren. With a slew of new models

promised for next year and beyond, and with charging station infrastructure still

being built out, the tipping point for electric autos is still in the future. But

automakers are betting big on that future, and how quickly the industry takes off

depends not just on choice but on a shift in customer expectations. Hurdles to a

breakout include higher prices, the end of federal tax subsidies for some models

and a paucity of charging stations — even though the industry argues that most

charging will be done at home at night. That, especially, can be a deterrent given

electric cars’ shorter range. Even so, as Mark Reuss, the General Motors president,

recently wrote, “Just as demand for gas mileage doesn’t go down when there are

9

more gas stations, demand for better range won’t ease even as charging

infrastructure improves.”

That infrastructure is growing, nonetheless. More than 21,000 locations in the

United States, with some 57,000 hookups, offer Level 2 charging, which can add

maybe 20 miles of range per hour. Fine for parking at the office or overnight, these

are useless on a road trip. For charging to roughly 80% of a battery’s capacity in

about a half-hour, there are 3,300 DC Fast Charging locations with 12,000 charge

points. Many of these are proprietary Tesla chargers, however. A traditional car, of

course, can fill up at 168,000 gas stations across the country in the time it takes to

buy a Slim Jim and a Coke. The evolution toward electrics has given carmakers

freedom to play with design — picture Tesla’s jagged-edge pickup — while others

are sticking with tried-and-true sedans and crossovers, simply swapping out the

drivetrain. Here’s a look at some of the electric vehicles that are just reaching the

market, will soon be available or are expected to arrive in 2021.

Audi e-Tron Sportback: A four-door coupe version of the full-size Audi e-Tron sport

utility vehicle, introduced last spring, the Sportback is expected to be available this

spring. Designed to look and handle like traditional Audis, the e-Tron models will

feel familiar to anyone who knows the brand. The all-wheel-drive e-Tron SUV

charges to 80% of its 204-mile range in 30 minutes with a commercial fast-DC

charger. Better aerodynamics and battery efficiency should modestly increase the

Sportback’s range.

BMW iX3: BMW will start production of its electric SUV next year at its plant in

China. The rear-wheel-drive vehicle is expected to provide 286 horsepower and a

273-mile range, according to the European test cycle, which is more optimistic than

its American equivalent.

Ford Mustang Mach-E: Ford enlisted its Shelby designers to create a traditional-

looking electric SUV that would echo its Mustang sedan. Its first version, a 332-

horsepower all-wheel-drive model, will be available in late 2020. A 459-horsepower

GT version is expected 18 months from now.

The biggest changes, beyond fuel, are inside. A new version of the much-criticized

Ford Sync connect service will feature over-the-air updates. Artificial intelligence

will monitor a user’s habits and suggest appropriate actions. For example, it may

10

ask if you want to call your mother at a certain time if it notices you typically do

that each day.

Natural language comprehension will allow users to state commands in various

ways, such as “Take me to Santa Monica” or “I want to go to Santa Monica.”

The expected range will be 210 to 300 miles, depending on the model. In the

“frunk,” or front trunk, space usually occupied by an engine will offer space

designed to hold ice for tailgating; a drain plug will be included.

Mercedes EQC 400 4Matic: Originally expected to arrive in the States next year,

the first purpose-built all-electric Mercedes will be delayed until 2021, the

company recently announced. It blamed demand in Europe.

The all-wheel-drive vehicle, starting around $70,000, will feature its screen-based

MBUX infotainment system now used in a number of new Mercedes models. To

optimize the vehicle’s range, the MBUX system can calculate the most power-

efficient routes and direct drivers to high-speed charging stations. Time to charge

to 80% will be about 40 minutes with the fastest chargers.

Porsche Taycan 4S, Turbo and Turbo S: The “entry-level” version of Porsche’s first

electric vehicle, the 4S, will be available this spring, starting around $104,000. (The

imminently shipping Turbo costs about $151,000, and the Turbo S is $185,000.)

The two current models — available with 522 or 562 horsepower — will accelerate

from zero to 60 mph in 3.8 seconds. The Taycan has a range of just more than 200

miles, and it is one of the fastest-charging EVs around: A DC fast charger will juice

it to 80% capacity in 22 minutes. The company expects that by 2025, half of its sales

will be either fully electric or hybrid models.

Volvo XC40 Recharge: To cut costs and time to market, Volvo is equipping its

existing XC40 SUV with an electric drivetrain. Expected at the end of 2020, for

“under $48,000” after incentives, this vehicle is the start of a Volvo product road

map that will bring out one new EV model each year.

Over-the-air updates will be available for all vehicle features. The “completely

rethought” infotainment system is based on the Android operating system, with

Google Maps, Google Assistant and the Google Play app store embedded within

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the vehicle so they work without a phone. The 408-horsepower engine is expected

to provide 240 miles of range. A high-speed commercial charger will fill the XC40 to

80% capacity in 40 minutes.

Byton: Distinguished by many enormous wraparound screens, this Chinese-built

SUV will be sold in the United States, at a starting price of $45,000, beginning in the

second half of 2021. Sales in its home country will start at the end of next year.

Drivers can alter the screen display to account for whether the vehicle is moving or

not, and whether the driver or passenger is watching. Artificial intelligence is

combined with subscriptions to popular music and video services, and linked via

facial recognition, so it will know your favourite artists. If the driver allows, the

vehicle will have access to calendar events; knowing that you’re finishing up your

spin class, the system could cool the car before you arrive.

Available as a 225-mile or 300-mile range version, the Byton will be sold directly

and through dealers, with its first company store to open in Los Angeles by the

middle of next year.

Canoo: One of several hopeful startups, Canoo plans to sell its namesake model at

the end of 2021. Unlike several established marques, Canoo has taken advantage

of the lack of an internal combustion engine to rethink the look of a vehicle.

The symmetrical Canoo is positioned as “an urban loft on wheels,” the company

says, with the rear seats arranged more like a sofa. To increase interior space,

Canoo eliminates the traditional engine compartment and its protective firewall.

The use of “steer by wire,” an electronic rather than a mechanical system,

eliminates the need for various mechanical components, also allowing for more

freedom in the placement of the steering wheel. Infotainment will be provided via

a smartphone connection. The Canoo, with an anticipated 250-mile range, will be

available only through subscription, the price of which (undisclosed as of yet) will

cover the vehicle, registration, license and insurance. The subscription can be

canceled or rolled over into another model when available, at any time.

Faraday Future: Once left for dead after a splashy premiere three years ago, a

planned Las Vegas factory that never got built, and a Chinese founder and funder

who went bankrupt, the company is back with a new leader, the former head of

Byton; new funding; and a rethought vehicle.

12

Where once Faraday Future advocated the “bring your own device” approach to

infotainment now promoted by Canoo, the current version of the large SUV will

have 11 screens in its ultra-high-end FF91. The company claims that the FF91 will

accelerate from zero to 60 in an astonishing 2.2 seconds (although it’s not clear

why anyone would need to) and cost $150,000 to $200,000 when it comes out by

September. If there’s demand, the company can build up to 15,000 units annually

in a Hanford, California, plant that’s smaller than the ambitious one it abandoned

in Las Vegas. The company says it will make money at that volume by selling its

hardware and software to competitors. Plans for a smaller, more affordable FF81

exist, and the company hopes to enter “preproduction” by the end of 2020.

Volkswagen ID4 Crozz: VW’s first purpose-built EV, this compact SUV is due in the

States by the end of 2020, priced in the mid-$30,000s after tax credits. This will be

followed in 2021 by a larger, Passat-size SUV, the Space Vizzion, and then in 2023

by the Buzz, Volkswagen’s electric version of its iconic bus. The vehicles will at first

be imported and eventually built at the automaker’s factory in Chattanooga,

Tennessee. About the same size as VW’s Tiguan, the ID4 will have a range of 200 to

300 miles. Navigation commands will be shown in a windshield heads-up display,

with arrows overlaid on the screen to show when to turn.

*****

E-rickshaw is the low hanging fruit but a few sour spots

remain

Over the years, e-rickshaws have become a major mode of last-mile connectivity

for commuters in larger cities like Delhi andalmostanalternatemeans of transport

in smaller ones such as Gwalior, Udaipur, Siliguri, Coimbatore, Kochi, and many

others. The question often asked is whether the e-rickshaw actually helps in

reducing acity’s carbonfootprint, is it aviable transport medium for cities and towns

or is it an irritant on the road, whichcrawls at a mere25kmph and has a limited

range?

An assessment report by ICLEI - Local Governments for Sustainability and Shakti

Sustainable Energy Foundation on deploying e-rickshaws in our cities charts the

pros and cons and whether it can help in achieving the country’s Intended

Nationally Determined Contribution (INDC) promise that spells out a de-

13

carbonisation target of 3335 per cent with respect to GDP by 2030. It is estimated

that there are around1.5 million e-rickshaws on the roads. Every month another

11,000 are being added and by next year, a 9 per cent increase in these vehicles is

expected. So, e-rickshaws are here to stay and their positive characteristics of being

emission-free, comfortable for four passengers, including the driver, affordable and

accepted by commuters and low cost for owners gives them a big edge over fuel-

powered autos. E-autostooareaviablealternative, but a more expensive option.

There is an unprecedented increase in e-rickshaws in both big and small cities,

though a lot of them ply without licence or adequate safety features. This makesit

necessary that a regulatory framework be worked out to maintain and manage

their proliferation. Unfortunately, rules on how to deploy, manage and regulate e-

rickshaws, their manufacturing and infrastructure norms have not been given

enough focus although shifting to electric vehicle (EV) technology is being

promoted by the government since 2011. In 2013, a National Electric Mobility

Mission Plan (NEMMP) was formulated. In 2015, this was followed up with the

FAME I or Faster Adoption and Manufacturing of (Hybrid &) Electric Vehicles

scheme and in 2019 by FAME II.

Several States too seem to have recognised the usefulness of EV adoption policies

and some like Delhi, Tripura, Karnataka, Kerala, AndhraPradesh, Uttar Pradesh,

Maharashtra, Goa, Uttarakhand, and Telangana have put in place some kind of

regulatory frame work at the State level, but very few see the potential of the e-

rickshaw.

“Though EV sector includes modes of public transport, private transport and last-

mile connectivity with fast developing policies/initiatives, still, an example of an

often ignored mode for urban mobility is the modest e-rickshaw,” points out Ashish

Rao Ghorpade, Deputy Director, ICLEI, South Asia, one of the authors of the

assessment report. So, while work is on regarding the big picture on EV adoption

and clean transport, e-rickshaw due to its low life cycle cost can very well be the

“low hanging fruit” that canbetappedtomakeadifference to emission levels, as

pointed out in a report by Deloitte. One of the key issues with e-rickshaw is in its

manufacturing. Though there are specified rules and safety standards that have

been laid downin recent years, the cheaper e-rickshaws are often assembled by

manufacturers with lowquality parts manufactured locally or imported from China.

This makes them ineligible to be registered for operation, leading to their illegal

existence. The report quotes a 2018 study by TERI that found about 340 e-rickshaw

14

manufacturers in Delhi alone but very few manufactured models compliant with

official standards. Hence, there is a need at a national level to regulate vehicle

design?

andstandardstoensuresafetyof drivers, users andbetteroperationof the vehicle.

*****

Not Enough EV Sales Yet to Build Viable Finance Plan, Say

Lenders

Inadequate charging infrastructure,

reliance on battery imports, range

anxiety and high prices are not the only

problems in India’s EV industry.

Financing these cars isn’t too easy

either. At the core is viability – and

volumes. Financiers said electric car

sales must show up sufficiently on the

dashboard for them to build a viable

finance plan. For the personal buyer,

car prices range anywhere between

₹12 lakhs and ₹20 lakhs. Financiers

believe that the consumer would

default because of the high prices,

making it difficult for a financier to sell the attached vehicle. Ashok Khanna, head,

auto finance, HDFC Bank, is a veteran in the motor financing space. "Our bank will

finance as and when vehicles are introduced. However, we have to see how many

customers are eligible for a ₹15-lakh car,” said Khanna. He added that after a 5%

GST cut and reduced registration cost, amounting to total relief of more than 30-

35%, it is doubtful the government will extend any further benefit to the personal

EV space. Another leading auto financier said that it is looking to rejig its loan

schemes to make them a bit more attractive for potential EV consumers. “The

FAME 2 benefits are currently extended only to vehicles used for commercial

purposes and not personal use. Large electric fleet operators are able to get

finance. It's the small fleet operator or the personal buyer who is finding it difficult

to buy such cars,” said Neeraj Gupta, founder of the shared mobility cab company

15

Meru, in which Mahindra now has a majority stake. Gupta added that banks have

to play a vital role in opening up financing, which will see volumes expand in the

electric vehicle segment. Shailesh Chandra, head of electrical mobility of Tata

Motors, said the situation is easing out as more and more products with a value

proposition are being launched. "I think the challenge for banks is the new

technology and low resale value,” said Chandra. For its latest launch, the Nexon EV,

Tata Motors has extended the warranty to 8 years or 1.5 lakh km, something

Chandra believes will give more assurance to financing companies. Hyundai Kona

also offers a battery warranty for 8 years, or 1.6 lakh km, whichever is earlier. While

finance companies are ready to experiment with new products and new

technology, the high product cost is a deterrent. “The financier is keener on

assessing the creditworthiness of the individual than the product,” said Vikas Jain,

head, sales, Hyundai India.

*****

Govt. to Invite Bids for Reallocation of Subsidy for 2,000 E-

buses in Feb

The Centre will invite proposals from state transport departments for reallocation

of central subsidy for 2,000 electric buses under its Fame II scheme to promote

electric mobility, but will not allow participation of cities that defaulted in the first

round, people aware of the development said. The government is expected to issue

an expression of interest next month under the ongoing second phase of Faster

Adoption and Manufacturing of (Hybrid &) Electric Vehicles in India (Fame India),

but it is likely to be open to only state utilities that have awarded tenders or are

close to award tenders as per the scheme, they said. This means about 18 cities

that have not been able to initiate tendering to award contracts to bus companies

to avail subsidy under Fame II will not be allowed to bid, one of the people said.

The subsidies allocated to these cities to procure around 1,500 electric buses under

the scheme initiated in August last year will now be reallocated.

“This will ensure only serious players are allocated subsidies for buying electric

buses,” the person told ET. “The electric bus industry has been demanding to bar

cities that squat on allocated subsidies.”

16

About 30 cities have awarded contracts for 2,000 electric buses under the scheme

as the deadline expired on January 15, while another 20 cities are at various stages

of finalisation of contracts for about 1,900 e-buses. The cities that have not initiated

the tendering process under Fame II include Hyderabad, Agartala, Shimla, Srinagar,

Jammu and Raipur, the person said. As many as six cities in this list are from Andhra

Pradesh. Transport authorities of Bengaluru, Uttarakhand, Kochi, Kozhikode and

about eight cities in Tamil Nadu are in the final stages of awarding contracts and

will be able to avail allocated subsidy and also participate in the forthcoming

bidding, the person said. With proposed fund allocation of ₹10,000 crore, Fame II

aims to give a push to the government’s e-vehicle drive.

*****

TVS Motor Plans to Launch a Portfolio of Electric Vehicles

TVS Motor is working on a strategy to develop a

portfolio of electric products, top executives at

the two-wheeler company said.

“There will be a phased expansion,” joint

managing director Sudarshan Venu said, adding

that the company would have a portfolio of

products in the electric segment in the coming

years. On Saturday TVS Motor unveiled its first

electric scooter, the iQube Electric priced at ₹1.15

lakh, in Bengaluru. This comes soon after the

launch of the electric Chetak scooter by rival Bajaj

Auto. Sachin Bansal-backed Ather — the first mover in this lane of vehicles — is

about to drive in with its latest offering, the Ather 450x, in a market where

competition is expected to get stiff with the government too pushing for

electrification of vehicles. While TVS is charting out its plans for the EV market, it is

aware of the hurdles, mainly on charging infrastructure. “You have to get

somebody to install the chargers at home … hopefully, Bescom (the power

distributor in Bengaluru) will come up with some charging infrastructure that

everyone will use…,” Venu said. “We will have to gear up our dealerships for

service, the mechanics need to be trained; so, when we go in, we want to go the

17

whole hog and delight customers,” he added. Queried about the possible

challenges for Indian e-scooter brands from Chinese players, Venu said Indian two-

wheelers were globally competitive as the country “exports over 2 million units a

year”. TVS Motor will consider exporting the iQube, he added. While new launches

will help widen the market for EVs, the success of the products depends on factors

like affordability, how the manufacturer assuages concerns about the range and

whether the buyer can get a return on investment in, say, three years, Deloitte

India partner and automotive leader Rajeev Singh said. The iQube will be initially

available in Bengaluru and Venu is targeting to launch it in 3-4 more cities through

the next fiscal year. The company has a capacity to produce 1,000 units of the

scooter a month at its plant in Hosur, Tamil Nadu. The scooter comes with features

such as geo-fencing, battery status alert, navigation assist and speeding checks.

*****

Hyundai bets on diesel to narrow gap with Maruti

Hyundai Motor India Ltd, the country’s second-largest carmaker, is betting on

diesel vehicles to narrow the sales gap with market leader Maruti Suzuki India Ltd,

which will stop offering diesel vehicles from 1 April in line with the implementation

of stringent Bharat Stage VI (BS-VI) emission norms. Despite its more than two

decade-long presence, Hyundai is yet to mount a serious challenge to the market

dominance of the Suzuki Motor Corp. unit in India. Maruti has been able to control

about half of the domestic market due to a slew of fuel-efficient and affordable

compact cars. This may change after the introduction of BS VI norms as Suzuki has

announced plans to cease production of diesel cars due to the high costs of

developing them. The Hamamatsu-based manufacturer is instead betting on

compressed natural gas (CNG) vehicles. Hyundai, on the other hand, has invested

significantly in small diesel engines and is expected to price its offerings

aggressively to hold on to customers inclined towards diesel vehicles. SS Kim,

managing director and chief executive of Hyundai Motor India, said that as long as

prices of diesel vehicles remain affordable and acceptable for the customer, there

will be significant demand. He said the company’s product offerings with diesel

engines will be reasonably priced and that research and development as well as

procurement teams are working towards reducing the cost.

18

“If diesel vehicles meet the BS VI regulation, I strongly believe that it is a very good

solution in terms of fuel efficiency. In this segment (sedan), Maruti used to get 30-

40% of the total volumes from diesel. For (the) time being, Maruti does not have

plans to continue in diesel vehicle (space),” Kim said.

Hyundai on Tuesday launched its new compact sedan Aura, with a 1.2 litre BS VI

compliant diesel as well as two petrol engines—1.0 litre and 1.2 litre—at the ex-

showroom price range of ₹5.79-9.03 lakh. The Aura is Hyundai’s second and most

ambitious attempt to wrest control of the segment from Maruti’s Dzire model.

*****

Audi India to drop diesel from April

Audi will stop selling diesel models in India from April this year as it switches to BS6

norms. The company is shifting focus to petrol and electric drivetrains on existing

and new models. With this, there will no diesel options for models such as Q3 and

Q5 SUVs and A3, A4 and A8 sedans. The company, which has seen a contraction in

demand over the past few years, is now working on a fresh revival strategy,

including launch of eight new models this year, apart from a greater push towards

sustainable and greener vehicles.

“We have a very clear strategy. As we upgrade our models to BS6, and drive in new

cars, these will be only petrol or electrified versions,” Balbir Singh Dhillon, head of

Audi in India, told TOI. “The focus for us will be electrification, including hybrids and

19

full electrics. The first full-electric will be launched later this year in the eTron

premium SUV.”

Dhillon said there is a push towards petrol and electrified vehicles across the world,

and “thus it is only natural for Audi India to work in the same direction”. “Looking

at these trends, we have decided to keep diesel in abeyance for now. It’s a

conscious decision, and a tough and bold one for us.”

Dhillon said this year will be challenging, though some positives seem to be building

up. “This year may still be flat for us. Any growth that will come for us is expected

only in 2021.”

Audi is planning a series of launches in the upper end of the market, including A8

luxury saloon, an RS (high-performance) version of the Q8, and the eTron electric.

Dhillon said the company has also plans to drive in “a few more electric vehicles”,

though refusing to give further details.

*****

A new green future waiting to take root

Scientists at The Energy and Resources Institute (TERI) have been researching

nutrients for agricultural crops for several decades and have achieved several

breakthroughs. The successes range from the possibility of reclaiming wastelands

20

to rejuvenating degraded soil and delivering nutrients to plants with utmost

precision to enhance plant growth. The research has led to several biofertiliser

formulations — Mycorrhiza as well as nano agri input products, some of which the

premier institution has been able to develop for end-users and subsequently

commercialise. Take Mycorrhiza, a fungi form biofertiliser that has an intimate,

mutually beneficial relationship with higher plant roots. The efficacy of Mycorrhiza

has been proved without doubt. According to research, it increases the absorbing

area of the roots by hundred to thousand times and also makes unavailable and

other tightly-bound soilessential nutrients available to the plants, thereby

facilitating the ability of the plants to utilise soil resources more efficiently. Through

extensive research over the years, TERI’s Centre for Mycorrhizal Research has

mastered ‘In Vitro Mass Production Technology’ and produces genetically pure,

high-quality Mycorrhiza in a sterile lab environment. The product has broad

spectrum application and can be used for 85 per cent of plant species on Earth. It

also has many more pluses and has clearly been proved a natural alternative to the

agrochemicals available in the market which, due to by sheer extensive use, are

decreasing in their efficacy, increasing soil toxicity and creating havoc for the

environment. Today, apart from domestic use, Mycorrhiza is being exported to

Europe and North America in tablets, granules and powder form. “Being a biological

product, its shelf life is a major issue as it survives in minus 10 degrees centigrade

to 60 degrees centigrade. In developed countries the cold chain takes care of the

product, but in India, many times the cold chain is not available to farmers so, with

its efficacy lost, farmers have not taken to it as they should have,” says Dr Alok

Adholeya, Senior Director, Sustainable Agriculture at TERI, and the force behind the

research on Mycorrhiza and nano biofertilisers.

*****

Air pollution, an emergency

Eleven of the 12 most polluted cities in the world on the World Health Organization

list of 2018 are in India. This is borne out by an air pollution emergency being called

out every summer and winter in many cities, with Delhi being one of the worst. To

combat this, in January last year, the country rolled out its National Clean Air

Programme (NCAP) through which actions will be taken to prevent, reduce and

control air pollution and improve air quality in the entire country. The promise is to

reduce fine particulate (PM2.5) and particulate (PM10) air pollution by 20 per cent

21

to 30 per cent by 2024. As a significant step, in June, India joined the global Climate

and Clean Air Coalition (CCAC), becoming the 65th country to join the partnership.

Through this, the country hopes to gain in solutions and technologies to combat air

pollution and learn from best practices followed in other nations and also share

with them what is being innovated in the country. An integrated approach is

required to reduce air pollution, hence the country’s effort at encouraging clean

energy and reducing vehicular emissions — the latter is being achieved by raising

vehicle standards to BS VI and giving a push to an electric vehicle ecosystem.

However, clearly, these measures may not be enough. In March last year, an

independent study by the International Institute for Applied Systems Analysis

(IIASA) in Austria and the Council on Energy, Environment and Water (CEEW) in

New Delhi cautioned that over 674 million Indian citizens are likely to breathe air

with high concentrations of PM2.5 in 2030 even if India were to comply with its

existing pollution control policies and regulations.

Legal mandate- The researchers said, “a significant share of emissions still

originates from sources associated with poverty and under-development, such as

solid fuel use in households and waste management practices”. Their suggestion is

that NCAP be backed by a legal mandate for ground-level implementation of

emission control measures and also that, in the long term, the programme be

“scaled up significantly”.

*****

Green Nods Waived for Distilleries Planning to Hike Ethanol

Production

The environment ministry has decided to waive green clearance requirements for

distilleries planning to produce up to 50% more ethanol than their nameplate

capacity without increasing pollution. The decision will enable sugar mills to divert

more raw material towards producing ethanol this season, helping them fight sugar

supply glut and provide more ethanol for blending with petrol without having to

wait for green clearances, which could have taken six months to a year and, in many

cases, forced units to miss the opportunity of additional ethanol output this sugar

year.

22

“I’m happy that sugar industry is responding positively to the initiative of central

government to encourage ethanol blending as it provides opportunity to diversify

and also aids in increasing farmers’ income,” environment minister Prakash

Javadekar told ET. “This decision has been taken in view of ensuring ‘ease of doing

business’.”

The country’s sugar industry is facing a glut this season, prompting the government

to enhance sugar export subsidy and permit mills to use sugar, sugarcane juice and

B-heavy molasses to produce ethanol, which oil marketing companies can buy.

Mills could earlier use only C-molasses, which contain comparatively less sugar.

With the use of sugarcane juice and B-heavy molasses, the distilleries are able to

produce more ethanol with the same quantum of raw material. But a production

that’s higher than the nameplate capacity created a new challenge for mills – the

need for a new green clearance. For capacity expansion, distilleries must obtain

environment clearances, which involve public hearing and environment impact

assessment and can take up to a year. By waiving off such requirements, the

government is aiming to make it easier for industry without hurting the

environment.

*****

A unique technology to clean the air in cities

Name of the company: ShudhVayu Technologies Pvt Ltd Set up in: 2018 Based in:

New Delhi Founder: Amit Bhatnagar Funding received: Discussions are on with

investors

Whatit does: It offers a patented innovation with high potential to clean the air in

a city. Has the capacity to clean the air pollution in Delhi in just two days.

As a test run, the ShudhVayu prototype was attached to the roof of a private car.

The car was then taken on a 200-km long drive at up to 140 km/hr speed. Under

real environmental conditions of AQI 250 and PM10 particles at 400g/m3, the car

was driven on the Delhi-Gurugram stretch. ShudhVayu prototype weighed 2342.5

gm when installed. Its crosssectional area is 1500cm2. After completing the test

run, the ShudhVayu Innovation was removed from the car and weighed again. It

weighed 2357.5 gm. Upon subtractions, it was obtained that 8.7 gm of PM10

23

particles were trapped inside the innovation. i.e. ~4g carbon particles removed

from the air over a distance of 100 km.

How it does it: The technology uses the motion of the vehicle to clean the city air.

There is zero electricity cost involved. Delhi vehicles alone have the capability of

removing 40 tonnes of PM10 in one single day. The wind speed over the car roof,

which is flowing against the speed of the car, is used as the energy and this passes

in the form of pressure and filters the particulate matter. The filter it uses is

multilayered with the capacity of filtering all kinds of dust — from PM 2.5, PM 10

to dust generated from stubble burning.

Big moment: As probably the only technological innovation that has been able to

capture 4gm PM10 by the motion of a vehicle, it was a matter of pride to be

incubated under IIT Delhi, supported by the Department of Science and Technology

and patented under the Office of the Controller General of Patents, Designs &

Trade Marks. Also, when Olympic medalist, wrestler Sushil Kumar, became

ambassador and supporter for the start-up.

Impact: It has been installed in more than 500 vehicles in Delhi. If the innovation is

implemented on a large scale at a policy level in North India, it will reduce the PM10

levels by a significant amount within two days from 500 to 100. Delhi has a total

load of 30 tonnes of PM10. And a total of 31,25000 vehicles are needed with this

innovation on the car roof to clean Delhi air in two days.

Vision: The start-up’s tag line says it all: ShudhVayu sab ka adhikar ( Clean Air is

each one’s birth right) — Ensuring better air quality for every city and fewer deaths

caused by air pollution. The ShudhVayu prototype attached to the roof of a private

car during a test run

*****

Affordable green is way to go

From baby steps in 2001, India has come a long way in the green building

movement. The Indian Green Building Council (IGBC) aims to make India a global

leader in energy-efficient buildings by 2025. Earlier last year, India crossed the

magical 7 billion sq ft of green building footprint and aims to go past 10 billion sq ft

by 2022, potentially seeking to displace the US and China to take pole position. The

24

7 billion sq ft green footprint covers 1.4 million homes (1.9 billion sq.ft), over 250

factories, 1,800 offices, 48 townships, 12 cities and even 24 villages. In going green,

these have contributed to energy savings of 15,000 MW of energy per million sq ft

per annum, reduced Co2 emissions by 12,000 tonnes per million sq ft per annum,

brought about savings of 4,50,000 kilo litres of water per million sq ft and diverted

450 tonnes of construction waste from landfills every year, according to IGBC data.

CII-IGBC is exploring GreenPro certification for industrial and consumer

products/technologies.

Construction cost down- Most green building products are available in India at a

competitive price, leading to reduction in cost of construction. By 2025, CII-IGBC

estimates that the market potential for green building products/ technologies will

grow to about $300 billion. The incremental cost of a green building is 2-3 per cent,

down from about 15 per cent two decades ago. And the pay-back for additional

costs is within 2-3 years. While the estimates for green buildings and products have

been made for 2022 and 2025, their contribution towards the SDGs is likely to be

significant by 2030.

*****

Diseases, allergies stalk residents of India’s most polluted

city

Arshad Jamal, 48, has been battling a skin disease for four years in addition to

asthma. Doctors have advised him to remain indoors, drink clean water and avoid

dust pollution. There is, however, little he can do to heed the advice for Jharkhand’s

Jharia, Jamal’s home for 35 years, continues to be among India’s most polluted

cities. According to Greenpeace India’s Airpocalypse-IV annual report released last

week, Jharia was India’s most polluted city in 2018.

“I sell clothes on a footpath... to feed my five-member family. If I do not work, what

would my family eat?” asked Jamal. He added the doctors have blamed pollution

in Jharia for his woes. “Life is no less then hell for us here,” said Jamal, who visits a

doctor almost weekly

Jamal is not alone. Many like him in the city of half-a-million known worldwide for

its underground coal fires suffer from pollution-induced diseases. Shatia Bhuniya,

50, a local resident who suffers from regular chest pain, said she can feel coal dust

25

and ash inside her body. Babita Devi, a housewife, said they cannot even dry their

clothes in the open because of dust that stick to them. In Dhanbad that was second

on the list of most-polluted cities in 2018 as per the report, Patliputra Medical

College and Hospital’s (PMCH)’s Dr Bibhuti Nath Mittal said most patients from

Jharia they treat suffer from pollution-related diseases. “... [They] complain of skin

allergies, burning sensation in eyes and allergic bronchitis. Pollution plays a

significant role in aggravating such diseases,” said Mittal.

*****

Petroleum Ministry launches Saksham 2020 for fuel

conservation

The month long fuel conservation campaign of Petroleum Conservation Research

Association (PCRA), Saksham 2020, was launched on Thursday. This is a flagship

program of PCRA and Oil public sector undertakings under the guidance of the

Ministry of Petroleum and Natural Gas. This initiative aims to add values to the

various efforts being made in the country for saving fuel. Launching the campaign,

Secretary, MoPNG, M M Kutty said that there is a dire need for actions leading

towards fuel conservation. He stressed upon the importance of programs like

Saksham wherein general public is involved in various activities and gave away

prizes to the winners of Essay, Quiz and Painting competitions for the National Level

Competition-2019, a PCRA statement said. It is estimated that more than 1.48 crore

students from schools of all education boards of the country participated in the

competitions. The awards were also given to the oil companies and their state level

coordinators for their contribution in the fields of fuel conservation.

*****

Bharat Stage-VI compliant fuel may come at a premium

Consumers will have to shell out a premium for Bharat Stage-VI compliant petrol

anddiesel that will be made available nationwide from April 1.

“Under the present pricing regime, auto fuels are benchmarked to the international

price of comparable fuels. While there is no exact grade of fuel with the same

quality as BS-VI, we will be indexing the price to the closest grade of fuel. The new

26

pricing would be effective from the nationwide rollout of BS-VI grade fuel,”

IndianOil, Chairman, Sanjiv Singh said after company’s third-quarter results.

According to IndianOil, refineries have switched over to production of BS-VI fuels

byimplementingcleanfuel projects at a combined cost of about ₹17,000 crore. The

projects completed include installation of new units like diesel hydro-treater,

gasoline isomerisation, hydro-desulphurisation and revamp of existing process,

offsite and utility facilities at all refineries.

“There will be a premium that will be charged for the fuel,” Singh said, hinting that

the consumers will have to bear the burden.

In response to a query on whether this premium will be charged in one go or will

be staggered, Singh said: “We don’t think the premium will be very large to be

charged over a staggered period.”

IndianOil said that the implementation of the majority of the BS-VI projects has

been completed and all its refineries have started production of BS-VI fuels, except

for the Guwahati refinery. The Digboi refinery was the first refinery to produce 100

per cent BS-VI compliant fuels followed by Gujarat, Barauni, Paradip, Panipat,

Mathura and Haldia refineries.

Profit zooms- The company has reported consolidated net profit of ₹2,695.09 crore

for the third quarter of financial year 2019-2020. This is over three times the

₹767.66 crore net profit reported in the same quarter the previous financial year.

The higher profit was on account of inventory gains totalling ₹1,608 crore in the

quarter under review compared with the ₹8,523 crore inventory loss reported in

the previous quarter of the fiscal. For the nine-month period in the current fiscal,

the company has clocked a net profit ₹6,689.22 crore against ₹11,269.89 crore in

the same period last fiscal. Gross refinery margin (gain per barrel of crude oil

processed) during the third quarter of fiscal 2019-2020 stood at $4.09 a barrel, up

from $1.15 a barrel reported in the comparable quarter.

Total income declined 9.92 per cent to ₹1,47,431.05 crore during the period under

review from ₹1,63,658.84 crore in the comparable period of fiscal 2018-2019.

“The volumes are very close to last year; the income decline and fall in gross

refinery margin is because of lower cracks,” Singh said.

27

IndianOil also aims to raise up to ₹3,000 crore by April 2020 in the domestic market

to fund capital expenditure. Shares of the company closed 0.97 per cent lower at

₹117.15 a scrip on the Bombay Stock Exchange on Thursday.

*****

Govt. must divest stake in oil PSUs early

The strategic disinvestment of Bharat Petroleum Corporation Ltd (BPCL) was

announced in November 2019. As there is not enough time this fiscal year, it would

probably be carried out in FY 2020-21. Some have raised concerns about the

government not meeting the targeted disinvestment for FY 2019-20, stating that if

the government is not ready to slip on the fiscal deficit of 3.3 per cent of GDP, it

could dent government spending and, thereby, not stimulate consumption growth.

When a party forms the government after electioneering, the financial year is

shortened to almost six months as the next Budget is to be presented by February

1. Thus, the government failing to achieve its disinvestment target in FY 2019-20

cannot be faulted. However, FY 2020-21 is a different ball game. The government’s

execution of disinvestment is critical for diverse reasons. It must compensate for

the shortfall in the disinvestment of FY 2019-20. The government’s commitment to

strategic disinvestment will be there for the investors to see and gain confidence.

The receipts from disinvestment from the early years of Modi 2.0 dispensation

could help the government consolidate its spending on infrastructure that would

stimulate economic growth. According to the definition of strategic disinvestment

by the Department of Investment and Public Asset Management (DIPAM), a

28

strategic disinvestment takes place when the block of shares (50 per cent or higher)

to be disinvested are transferred to a private partner, so that the government

transfers the management control to the private player. One of the key objectives

for transferring management control to the private player is to ensure that the

receipts received through disinvestment are significantly higher than when the

disinvestment of shares is thinly spread across multiple players. For instance, if the

receipt from BPCL disinvestment as per the current market prices is about ₹60,000

crore, disinvestment to a single private player may fetch the government ₹80,000

crore, including an additional fee for control premium. Whenever a strategic

private partner or institutional investor looks to invest in a business (assuming risk

factors are comparable), it seeks a higher Return on Capital Employed (ROCE) than

the Next Best Alternative (NBA). For a strategic investment to succeed, the

government should disinvest its PSUs well before the signal goes to the markets

that these PSUs may lose their competitive advantage and register minimal or even

negative growth.

*****

Crude oil price decline may be temporary

Crude oil market has come under considerable pressure as demand concerns have

come to the fore following the outbreak of Wuhan coronavirus in the world’s

largest import market, China. Notwithstanding output cuts, the world market is

already seen adequately supplied in the first half of the year as a result of which

prices have been slipping from their recent highs. And, now with parts of China

29

being shut down and travel activity substantially reduced because of halting public

life, demand for energy is coming down. Worse, the disease is reportedly spreading

to other countries as well. On Monday, Brent crude declined below the

psychological $60 a barrel towards $58.50, a multi-month low. WTI followed suit at

$52 a barrel. Falling crude prices are seen putting huge pressure on the oil

producers’ cartel OPEC+ which is reportedly considering an extension of the

production cut agreement till the end of the year in order to neutralise the current

price softness. The next OPEC meeting is scheduled in early-March where even

additional output cuts could be considered.

Although the market is reacting, as of now, the economic effects, especially the

energy demand effects of coronavirus, are unclear. How long the outbreak will last

and how much of economic activity will be affected is still a matter of conjecture.

If the epidemic is contained soon – say over next three months or so – there is

strong likelihood of the market bouncing back. The macro picture suggests that

though subdued, global growth in 2020 will show an uptick which should augur well

for many commodities including the energy market. Higher growth will support oil

demand. Reducing trade war tensions between the US and China following the

Phase One agreement is also a positive factor. There is expectation a second

agreement – a more significant one – may be struck in the second quarter.

Geopolitical stresses – USA-Iran stand-off, for instance – also have the potential to

rear their head in the course of the year. Market participants should watch out for

early signals and take appropriate steps. Simply put, on current reckoning, although

the world crude oil market reasonably well supplied this quarter and the next, any

rise in geopolitical tensions can lead to a spike in oil prices. At the same time, if

growth concerns continue to haunt, the market will face a downside risk. It is

precisely in such uncertain times that a major importer of crude oil such as India

should exercise utmost caution. We cannot get carried away by short-term price

movements; but have a view for at least two quarters ahead for strategically

planning the import programme. The current price fall should be seen as fortuitous

for India. It should make commercial sense to buy at every dip. If crude prices were

to rise, it will put additional pressure on the already weak rupee and stoke inflation

which is already beyond the RBI’s tolerance limits. The writer is a policy

commentator and commodities market specialist. Views are personal.

*****

30

LNG Imports Increase 7% as Demand Grows

The import of liquefied natural gas (LNG) increased 6.8% year-on-year in the nine

months to December 2019 as local output declined and demand expanded. LNG

import expanded to 23.58 billion cubic meters in April-December 2019 when gross

production shrank 3.2% and total consumption climbed 3.9%. The share of LNG in

total domestic consumption expanded to 51.6% during this period from 47.9% in

the year-ago period. In December, the rise in LNG import was much sharper at

22.8% as local production fell 7.9% and consumption expanded 5.9%. A collapse in

the global LNG market, resulting in spot prices for Indian buyers falling below $4

per million metric British thermal unit (mmBtu), has also led to an increase in gas

imports. Many buyers, locked in long-term contracts where prices are linked to

crude oil, are unable to benefit though. India has been seeking to renegotiate long-

term LNG purchase contract with its biggest gas supplier, Qatar, to bring down

prices so that the fuel becomes more affordable for Indian consumers. Qatar has

rejected the demand but Indian officials feel the doors are not yet fully shut.

Industry executives say a big jump in LNG demand can come once stranded gas-

based power plants start operating. The government has been planning to pool

tariff from gas-based plants and renewable facilities to make the blended tariff

affordable, and revive gas-based generators. Falling local gas production is

increasing India’s dependence on imports. A jump in local output is expected from

the middle of this year when gas fields, operated by Reliance Industries and BP, will

31

begin production. During April-December, ONGC’s gas output fell 2.7% from a year

earlier but Oil India’s rose 0.8%. Private players’ production fell 7.6%. In December,

ONGC’s output declined 9% due to lower gas production from Vasistha/S1 wells

due to sand incursion, protests in Assam and lower offtake by some consumers. Oil

India’s output declined 2.87% mainly due to lower offtake by consumers. Private

players’ production shrank 4.7% due to lower offtake by some consumers and

weaker performance in some fields.

*****

Harvesting More Oil from Fields

India needs to double down on extracting the full potential of its producing oilfields

by reforming the older exploration and production regimes even as it continues to

improve the policy framework for new acreage. Hydrocarbon licensing policies

since 2016 have progressively jettisoned redundant layers of approvals and

introduced improved fiscal terms. Unfortunately, bureaucratic processes and

onerous taxation continue to burden older production-sharing contracts (PSCs)

that account for most of the country’s oil and gas output. Securing all the approvals

for a field development plan in a PSC can, on average, take up to 20 months,

resulting in costly delays in commercialising discovered fields. Crude imports

continue to rise to keep up with domestic fuel consumption. India imported 226.5

million tonnes (about 4.5 million barrels per day) of crude in 2018-19, a 38%

increase over 2009-10, according to the government’s Production Planning and

Analysis Cell. In the same period, annual domestic production of crude and

condensate slipped from 37.7 million tonnes to 34.2 million tonnes, or about

684,000 barrels per day, catering to 13% of the total consumption in 2018-19.

Several of India’s older producing fields are in natural decline. A variety of new

technologies can prolong the life of these fields but the acquisition, testing and

application of these technologies is capital-intensive, and the fiscal framework

must ensure adequate returns for producers. The approvals process needs to be

efficient to encourage adoption. There are two ways to unfetter PSC operators.

First, the current approval processes must be simplified with stipulated timelines

for each sign-off, thereby avoiding cost escalations due to delays. Second, allow

self-certification of accounts that are already subject to government audits. The

October 2018 proposal of fiscal incentives for the use of enhanced recovery and

improved recovery (ER/IR) methods in oil and gas fields is a start but does not go

32

far enough. It moots a 50% cess waiver on use of these techniques, which would

yield around 5% return on revenue, which according to producers’ estimates is

unviable for most projects. The benefit of lower cess will be partly eroded in the

blocks predating the New Exploration Licensing Policy (Nelp) under which

producers split profit oil with the government. On the other hand, eliminating the

cess in the pre-Nelp blocks would boost the contractor’s returns to a healthier 9%.

Reducing the contractor’s costs, which are deducted from profit petroleum, would

boost the government’s share of profit oil by 64% and collection of income tax by

71% vis-à-vis a 50% cess-waiver regime. Widespread application of ER/IR could

increase production volumes by around 20%, benefiting the contractor, the

government and the country. Pre-Nelp blocks currently pay 60-65% of income to

the government cumulative of royalty, cess, profit petroleum and income tax.

While India should continue striving to attract explorers into new blocks, the

importance of shoring up existing fields with supportive policies cannot be

overstated. Upstream investment has subsided globally since the 2014 oil price

crash. Amid a consensus view of ‘lower-forlonger’ prices, global majors to national

oil companies have cut upstream spending, slashed breakeven costs in existing

projects, and divested ventures with low or slow returns. Mounting pressure due

to climate change is prompting oil and gas players to diversify into clean energy.

This, together with the US shale sector attracting a large share of investments, will

mean a decline in capital flows into conventional exploration and production. That

poses a major challenge for India, especially when competing with bigger or more

promising petroleum provinces elsewhere. Given the slim chance of a major new

oil find in India and a minimum of five years needed to bring a discovery into

production, there is no time to lose. Speeding up commercialisation of existing

discoveries and maximising the extraction from producing fields across all licensing

regimes would be the leap from aspiration to action.

*****

33

Gas exchange will be operational this year itself, says

regulatory board chief

The Chairperson of the Petroleum and Natural Gas Regulatory Board (PNGRB),

Dinesh Kumar Sarraf, is confident that the country’s natural gas exchange will

become operational in 2020 itself. “We have made substantial progress on the

gas trading hub,” he told BusinessLine in an interview. On natural gas prices,

Sarraf said that they are expected to remain soft due to abundance of supply.

Excerpts:

What is the status of the natural gas trading hub?

Crisil has been appointed for recommending the structure of the trading hub,

including drafting the regulations required for operationalising the hub. We would

now need to initiate the process of issuance of the regulations, including

consultation with the stakeholders. We will initiate this process once we have the

government approval on creation of the natural gas trading hub. Before this, the

government also appointed another consultant — KPMG — for recommending the

pre-requisites and enablers as well as the way forward for establishing the gas hub.

It would be operational during 2020 itself.

34

Is the gas infrascturcture here well developed?

We have 16,800 km of operational natural gas pipelines and another 14,000 km

under various stages of construction, in addition to some under bidding. In the next

few years, we should have about 35,000 km of gas pipelines. Most of the existing

cross-country gas pipelines are well connected to form the natural gas grid. We

require many more gas pipelines to continue strengthening the gas grid given the

size of our country. It is not necessary that the grid has to be completed before the

gas trading hub is created, as development of the grid is a continuous process,

which is a function of creation of further demand. In fact, once the gas exchange

starts functioning, it would create more gas demand and thereby further push for

more pipeline to come...as I said, it’s a continuous process.

What role will PNGRB play in the gas hub?

We are focussing on how to increase gas consumption in the country through

strengthening of infrastructure and bringing more transparency in the gas markets;

the creation of a gas trading hub is an important step towards that. From a

regulatory stand point, PNGRB’s role in the gas exchange is likely to be akin to

Securities and Exchange Board of India’s role vis-a-vis the stock exchanges, or the

role of the Central Electricity Regulatory Commission (CERC) in the case of power

exchanges. In essence, PNGRB’s responsibility would be to regulate the gas

exchange to ensure its smooth and transparent working for establishing a

transparent and vibrant gas market.

Will there be separate gas exchange companies similar to the power exchanges

in the country?

Yes, there would be some companies which would operate the gas exchange like

in the securities and power markets. These companies would be authorised to

operate the gas exchange. PNGRB’s role would be to monitor and regulate the

working of the exchange. On price, the function of the exchange would be discovery

of natural gas price.

What is your outlook for natural gas availability and price?

Presently, the prices of natural gas are low; today, the gas price in the US market is

at its 4-year low. Prices of LNG are also ruling quite low — the LNG spot market is

around $4.5 per million British thermal units (mBtu). The projections for the LNG

35

prices even in the mid-term to long-term are on the softer side. LNG is expected to

be available in plenty as new LNG liquefaction plants are coming up. The demand

side is expected to be softer as China has constructed new gas pipelines across its

Russian borders, reducing its demand in the LNG market. On the other hand, crude

prices are expected to remain either at the current levels or increase slightly.

Because of these two things, comparatively speaking, gas has been and would

remain cheaper as compared to crude oil. This opens up an excellent opportunity

to the consumers to migrate to the use of natural gas from the liquids. In addition,

the country could save on foreign exchange. Besides gas is more environment

friendly. On the policy front, lower gas prices provide a window to the government

to deregulate gas prices.

What is the progress on setting up ‘city gas distribution (CGD) geographical

areas’?

During the financial year 2018-19, we authorised 136 GAs (geographical areas)

under the 9th and 10th bid rounds in addition to 16 other GAs of previous rounds

and those of GAIL under Section 42 of the PNGRB Act. In total, we have presently

227 GAs spread over more than 400 districts. With this, about 71 per cent of Indian

population and 53 per cent of the geographical area are covered by the CGD

authorisations. Construction of physical infrastructure would be spread over eight

years, but the time has already started ticking.

How many compressed natural gas (CNG) stations would be completed in 2020

itself?

The entities which were awarded geographical areas in the 9th and 10th rounds

have already started commissioning CNG stations. The industry has committed to

complete 8,181 CNG stations in 8 years in the 9th and 10th rounds. Of these, about

1,500 should be completed in the financial year 2020-21 itself. More CNG stations

are also coming up in the GAs awarded prior to the 9th round. Based on the

industry’s commitment, we expect the number of CNG stations to go up from 1,900

in December 2019 to about 3,500 by March 2021.

*****

36

Mega campaign on fuel conservation 'Saksham' inaugurated

in New Delhi

Secretary, Petroleum and Natural Gas MM Kutty has called for putting earnest

efforts for petroleum conservation to bring down the huge import burden for

energy requirements. Mr Kutty inaugurated fuel conservation mega campaign -

Saksham of Petroleum Conservation Research Association, PCRA in New Delhi

today. Speaking on the occasion, the Petroleum Secretary said, India's share of

primary energy demand is set to double to 11 per cent by 2040 and to address this

huge demand, not only petroleum conservation but creation of sustainable

development model will be a pivotal step. Highlighting the major advantages of fuel

conservation, Mr Kutty said, it will help in progressively reduction of carbon

footprint and lead to fulfilling government's commitment for greener environment.

He said, foreign exchange can also be saved with this move. AIR correspondent

reports that the one-month long annual event Saksham aims at creating mass

awareness among public about conventional fuel conservation. On the occasion,

the Secretary also flagged-off the publicity vans of PCRA which will visit states

spreading the message of fuel conservation.

*****

37

Fuel conservation mega campaign of PCRA Saksham 2020

launched

‘Saksham’, an annual one-month long fuel conservation mega campaign of

Petroleum Conservation Research Association (PCRA) under the aegis of Ministry

of Petroleum and Natural Gas, was launched today by Dr. M.M Kutty, Secretary,

Ministry of Petroleum& Natural Gas in a function held in Delhi. Dr. M.M Kutty,

during his address, emphasized the importance of petroleum products for our

country and the dire need for actions leading towards fuel conservation. He

stressed upon the importance of programs like Saksham wherein general public is

involved in various activities. He said “Prosperity and higher living standards are

driving energy demand in India. By mid 2020s India will be the world’s largest

growth market accounting for 25% of global energy demand growth. Today 83% of

India’s crude oil requirement is met through import. The earnest efforts for

petroleum conservation can help us to reduce the huge import burden. Every drop

of oil saved will contribute to saving of foreign exchange. We also require to

address the issues of climate change. Through SAKSHAM we intend to deliver a

strong message that sustainable future demands conservation of natural

resources. “

The Secretary gave away the prizes to the winners of Essay, Quiz and Painting

competitions for the National Level Competition-2019 which has seen a

38

phenomenal record participation of more than 1.48 Crore students from school of

all education boards of the country. The winners get Japan Study tour, Laptops,

Tablets &Cash prizes and the win may help in motivating the youth of our country

towards understanding their critical role in spreading the awareness about fuel

conservation. The awards were also given away to the oil companies and their state

level coordinators for their contribution in the fields of fuel conservation. The

winning entries of the painting competition displayed in the gallery on the occasion

amazed the dignitaries for the wonderful ideas and creativities depicted in the

paintings.

On this occasion, the secretary also flagged-off the publicity vans of PCRA which

shall visit different states covering the rural side as well, spreading messages about

fuel conservation awareness through interactive audio, video creatives and print

displays. During Saksham-2020, various interactive programs and activities are

being planned by PCRA. Public Sector upstream/downstream Oil & Gas companies

under the able guidance of Ministry of Petroleum and Natural Gas are conducting

various activities like ‘Saksham’ Cycle Day, Cyclothons, Workshops for drivers of

commercial vehicles, Seminars for housewives/cooks on adopting simple fuel

saving measure, Nationwide campaign through Radio, TV, Digital Cinemas, Outdoor

etc. with a focus on reaching out to various segments of fuel users. PCRA is

effectively utilizing the social media platforms for various customized campaigns

through Facebook, Twitter, MyGov platform an endeavour to spread its reach

amongst the masses. ‘Saksham’ a flagship program of PCRA and Oil PSUs under the

guidance of Ministry of Petroleum and Natural Gas is an initiative for adding values

to the various efforts being made in the country for saving fuel.

*****

Qatar rejects India’s request for renegotiating existing LNG

contracts

Qatar will not be renegotiating any existing long-term liquefied natural gas (LNG)

contracts with India, according to Qatar’s Minister of State for Energy Affairs Saad

Sherida Al-Kaabi. He said this while speaking to reporters after a meeting with

Minister of Petroleum and Natural Gas and Steel Dharmendra Pradhan. Al-Kaabi’s

comments came in response to queries from journalists on a possible renegotiation

of long- term LNG supply contracts between India and Qatar. He said, “We do not

39

renegotiate existing contracts. Contracts are contracts for the duration we sign

them. And we as businesses understand that sanctity of contract is very important

for both sides.”

India has been demanding a renegotiation of existing long-term LNG contracts with

Qatar in view of the fall in prices in the spot market. India currently imports up to

8.5 million tonne of LNG per annum from Qatar under two contracts. India

imported 21.7 million tonne of LNG during 2018-2019 from around the world.

Pradhan said, “We have put forward a 3point presentation citing availability,

accessibility, and affordability. The current formula of benchmarking gas prices

with crude oil is not correct. Our longterm contracts are facing challenges. We have

put forward our situation and analysis. India believes that there should be

independent pricing formula for gas.”

He said that the price of natural gas should be delinked from the price of crude oil

and independent benchmarks need to be developed. According to estimates, the

current landed price of LNG from Qatar is $9-10 per million British thermal unit

(mBtu) while gas is available at the spot market at around half this rate. Al-Kaabi

refused to disclosewhether Qatar sees any merit in Pradhan’s recent suggestions.

He also maintained that the price of natural gas would vary between contracts.

India is looking at ways to make gas more affordable for domestic consumers, said

Pradhan. In a statement after the meeting, Pradhan tweeted that the two also

explored ways to make LNG more affordable for a price sensitive market like India,

especially in long-term contacts. The price of natural gas should be delinked from

the price of crude oil and independent benchmarks need to be developed, said Oil

Minister Dharmendra Pradhan

*****

The oil and gas industry today

Mapping out the oil and gas industry: National oil companies- The oil and gas

industry includes a very diverse mix of corporate structures and governance

models, from small enterprises to some of the world’s largest corporations. The

risks and opportunities of energy transitions vary widely across this spectrum. For

the purposes of this analysis, oil and gas companies are grouped into four main

categories: two of these categories cover companies that are fully or majority-

40

owned by national governments and the other two relate to privately owned

companies. Among the former, this report distinguishes between national oil

companies (NOCs) that concentrate on domestic production and a second group of

international NOCs (INOCs) that have both domestic and significant international

operations; the classification is done on the basis of upstream operations. NOCs

include the largest companies both in terms of production and in terms of reserve

size. They have a mandate from their home government to develop national

resources with a legally defined role in upstream development. Some NOCs are

active in the downstream and even may operate outside their home country, but

the home country upstream represents the vast majority of their asset base. The

largest of these NOCs are in the Middle East (notably Saudi Aramco, National

Iranian Oil Company, Basra Oil Company, Qatar Petroleum), but there are also

companies in this category in the Russian Federation (“Russia”) and the Caspian

(e.g. Rosneft, Uzbekneftegaz, SOCA R, KazMunayGaz), Latin America

(Petrobras, PEMEX, Petróleos de Venezuela, S.A. [PDVSA]), and many parts of Africa

(Nigeria National Petroleum Corporation [NNPC], Sonatrach, Sonangol). INOCs are

similar to NOCs in terms of governance and ownership but have large upstream

investments outside the home country, usually in partnership with host NOCs or

private companies. INOCs include large players in global gas markets. For oil, in

most cases INOC production is sold into the international market either by

companies own marketing arms or by the associated NOC. On rare occasions, it

may be transported back to the home country if this makes sense economically.

INOCs are often dominant in the refining sector of their home country. Companies

in this category include Equinor, the China National Petroleum Corporation (CNPC),

Gazprom, Sinopec, the China National Offshore Oil Corporation (CNOOC), Petronas,

India’s Oil and Natural Gas Corporation (ONGC) and Thailand’s PTTEP.

Mapping out the oil and gas industry: Privately owned companies - The “Majors”

(sometimes referred to as international oil companies [IOCs]) are integrated

companies listed on US and European stock markets. Their upstream division

represents the majority of the financial value, but in physical terms most of these

companies are net buyers of oil for their refining operations, where throughputs

generally exceed the company’s crude production. The decoupling of the marketing

of their upstream production and supply to their refineries makes them active

players in the international oil market. They have historically focused on large,

capital-intensive projects (often in partnership with other NOCs and INOCs), taking

both market and project management risk, although many are increasingly

41

investing in shorter-cycle investments. Natural gas, especially liquefied natural gas

(LNG), represents an increasing share of their production and capital investment.

In this report’s classification, the “Majors” grouping includes seven companies: BP,

Chevron, ExxonMobil, Shell, Total, ConocoPhillips and Eni. “Independents” are

either fully integrated companies, similar to the Majors but smaller in size, or

independent upstream operators. They may focus on assets of less interest to the

Majors such as medium-size declining fields or frontier areas. As with the Majors,

they often outsource drilling, well completion and logistics operations.

Independents encompass a wide range, including Russian companies such as

Lukoil; Repsol in Europe; a large number of North American players such as

Marathon, Apache and Hess; and diversified conglomerates with upstream

activities, such as Mitsubishi Corp. This group also includes North American shale

independents, a relatively new group of companies that almost exclusively focus

on developing shale gas and tight oil resources. These companies have a high

reliance on debt finance and financial leverage. In addition to these four categories

(NOCs, INOCs, Majors and Independents), there are three other company types –

typically privateowned – that play significant roles in the oil and gas industry, and

whose response is important in energy transitions:

• Service companies (e.g. Schlumberger, Baker Hughes). Most oil and gas

companies rely on specialist engineering services for drilling, reservoir

management and construction of infrastructure. Some of the most important

technological innovations unlocking new resources were developed by service

companies. Service companies tend to be highly exposed to the cyclicality of capital

spending.

• Pure downstream companies (e.g. Marathon Petroleum, Phillips 66). These are

companies operating refineries and retail networks; their capitalisation and

balance sheet position is usually considerably weaker than the Majors.

• Trading companies (e.g. Vitol, Glencore). Companies that are active in the

physical trading of oil products and LNG. They sometimes invest in transport,

refining, distribution and storage assets but their business models tend to rely on

owning only those physical assets that help optimise their position in the market.

They play a major role in ensuring the smooth, flexible functioning of markets.

*****

42

GSPC LNG terminal at Mundra Port goes onstream; 3rd

facility in Gujarat

The Mundra port on Wednesday berthed its first Liquified Natural Gas (LNG) cargo

at its terminal, multiple sources informed. This marks the commissioning of the

India’s fifth and Gujarat’s third LNG terminal, which is jointly developed by Gujarat

Government-run companies and Adani Group, through GSPC LNG Limited, an SPV.

Neither the government nor the co-promoter Adani’s officially made an

announcement with regards to the achievement of this major milestone. The

sources in the know confirmed that a 140,000-tonne LNG cargo from Qatar Gas

arrived on Wednesday morning at Mundra LNG terminal.

“The terminal will soon be functional with initial operational capacity of about 1.5-

2 MTPA,” informed a source privy to the development. The LNG received at the

terminal would be supplied to Gujarat State Petronet Ltd’s pipeline to feed it into

the market. Queries sent to Adani Group remained unanswered till the time of

print. The existing operational LNG terminals in Gujarat include Petronet LNG’s 17.5

MTPA terminal at Dahej and 5.2-MTPA terminal at Hazira by Hazira LNG Pvt Ltd, an

arm of Shell Gas B.V. As per the Union Petroleum Ministry’s website data, there are

currently six operational LNG regassification terminals operational with capacity of

about 38.8 MMTPA. Apart from the three in Gujarat, two are operational at Kochi

and one at Ennore in Tamil Nadu. The Mundra terminal was inaugurated in October

2018 by the Prime Minister Narendra Modi, but commercial operations couldn’t

start till now. Insiders claim a dispute between the promoters had delayed the

43

berthing of the cargo. Interestingly, last year another LNG cargo for commissioning

was not allowed to berth due to differences between the promoters. The terminal

built with a total cost of approx ₹5,000 crore has a total 5 million metric tonnes per

annum (MTPA) capacity for storage of LNG and sale of re-gassified LNG. The State

owns 75 per cent through different state government companies including the

petroleum giant, Gujarat State Petroleum Corporation (GSPC), ports regulator

Gujarat Maritime Board among others, and the remaining 25 per cent is held by

Adani Group.

*****

Draft policy to push CNG, PNG in cities

A draft city gas policy for states suggests standardised

charges and time-bound permission for setting up CGD

(city gas distribution) networks, conversion of public

transport fleet to CNG, creation of green corridors for

intercity traffic and fiscal incentives for gas-driven

mobility akin to electric vehicles to push natural gas as

automotive fuel. The policy is part of the Centre’s

strategy to ensure a smooth passage in states for the

Narendra Modi government’s plan to help 400 districts,

provide clean-burning CNG and PNG services at an

estimated investment of Rs 90,000 crore. Oil minister Dharmendra Pradhan is

scheduled to release the draft policy for discussion at a national workshop on CGD

schemes. City gas licences are auctioned by the Centre, but the utilities need a slew

of permissions from the state government agencies before they can start work.

Availability of land and securing RoU (right of use) for laying pipelines are the

biggest challenge. These affect project economics and expose licence holders to

the possibility of regulatory penalty or cancellation. The draft is also expected to

suggest reduced taxes, waiver of registration and toll charges for gasdriven

transport.

*****

44

Government set to double crude oil imports from US

India plans to double crude oil imports from the US as part of its effort to reduce

dependance on the volatile West Asia region, three officials with direct knowledge

of the matter said. Oil purchases from the US, which started in 2017-18, have

already crossed about 6 million tonnes a year. India is also keen on long-term oil

supply contracts with Russia and oil producing countries in Africa, the officials said

on condition of anonymity.

“We can easily double our crude oil imports from the US to 12 million tonnes. We

are in talks with the US government and private oil firms as petroleum is an

unregulated business in that country. We expect good rates and better terms from

American firms that would compensate for our transportation costs. In return, we

can offer them an assured market,” one of the three officials said.

India is heavily dependant on oil imports from West Asia. Its top three suppliers in

2018-19 are from the area: Iraq, with about 46.6 million tonnes (MT) in 2018-19, is

the number one supplier, followed by Saudi Arabia (40.3 MT) and the UAE (17.5

MT). Kuwait supplied 10.8 MT. Together, these countries supplied about 51% of the

total of 226.5 MT of oil worth $111.9 billion or Rs 7.83 lakh crore that India

imported in 2018-19, they said. According to the Petroleum Planning and Analysis

Cell (PPAC), the data-keeper of the oil ministry, India’s crude oil import dependency

on the basis of consumption was 83.8% in 2018-19.Put otherwise, 8.38 of every 10

litres of crude consumed in the country was imported. Officials said the

diversification of India’s crude basket is necessary because unlike other importers,

it neither has its own resources nor has bought significant oil and gas assets abroad.

India is the third-largest consumer of oil after the US and China. India’s efforts in

recent years have resulted in diversification of energy sources with the focus on

secure, stable and predictable supplies, a third official said, also on condition of

anonymity. Efforts have also been made to change the energy mix, with a push for

including more renewable sources, he added. Besides increasing oil and gas

purchases from the US to diversify imports, there have also been shifts among

traditional sources, especially in the case of supplies from Venezuela and Iran

because of US sanctions and other domestic factors, the officials said. Importance

is being given to Russia as an energy source, especially after the meeting between

Prime Minister Narendra Modi and President Vladimir Putin at Vladivostok last

September, the third official said. The two also signed a road map for cooperation

45

in hydrocarbons for 2019-24. A joint statement issued after the meeting welcomed

the success in cooperation between Russia’s JSC Rosneft Oil Company and the

Indian consortium of state-owned oil and gas firms. Modi and Putin said they would

forge cooperation in joint development of oil and gas fields in Russia and India,

including offshore fields, and develop ways to deliver energy resources from Russia

to India, including a long-term agreement for sourcing Russian crude.

“Our key interest is securing long-term supplies though there could be spot

(purchases) in the European markets. We are also helping Indian oil companies to

acquire stakes in offshore operations,” the third official said. “Work is also being

done with players such as Saudi Aramco to create strategic reserves.”

*****

Oil, the World’s Oyster

The current crisis in West Asia hangs by a fine balance — and held by the stability

of oil prices. That alone makes it possible for several countries like India to hold

their nerve for the time being. But will that continue to be the case? The US, as of

now, seems to be indicating that it will ensure that it will remain this way. Oddly,

this is exactly the sort of guarantee many would have not expected US President

Donald Trump to offer, given his political stand against Washington’s burdening

global responsibilities that accrue no benefit to the American people. That’s the

logic which informs his government’s approach to draw down US military presence

across the globe. It forms the basis of his protectionist approach to trade, to China,

and develop ‘America First’ options. Yet, we now have a Washington backstopping

46

oil prices. It has done so, quite consistently, throughout Trump’s term largely on

the back of record-breaking US domestic crude production. In fact, between the

drone attacks on the Saudi Aramco oil facilities in September and until December

last year, the US ensured there was hardly any fluctuation in oil prices, with supplies

kept available at about the same price. The same trend has followed the US drone

strikes near Baghdad International Airport on January 3 that killed Iran’s powerful

Quds commander Qasem Soleimani. After the initial shock, the prices have held,

much to the relief of big importers like India, Japan and South Korea. The Iranian

military response has not moved the price needle either. This is quite unlike the

first Gulf War, which saw prices spike by about $15 between August and October

1990. Even in 2003, prices rose quite sharply compared to the recent trend. The big

change has been the emergence of the US as a major oil producer. Indian oil

imports from the US have quadrupled over the last couple of years. Conventional

economic wisdom would suggest that in such a scenario, US companies only stand

to benefit if there’s a surge in prices. But then, the price of oil has always been a

political question, just as has been its rate of production.

*****

Govt. Seeks ₹19,000 cr. Dividend from Oil cos

The government is seeking a record ₹19,000 crore in dividend from state oil

companies — about 5% more than last year— to shore up its finances, according

to people familiar with the matter. ONGC and Indian Oil, the biggest in the club,

have been asked to pay about 60% of the total. The finance ministry has demanded

that oil companies should maintain or increase the dividend payout this year.

47

Company executives say the demand is being made even though profits have have

fallen from last year. Executives also complained that the government is seeking

high dividend even though its stake in the companies have come down. While

ONGC has been asked to pay a dividend of about ₹6,500 crores, Indian Oil is

expected to shell out ₹5,500 crores, BPCL ₹2,500 crore, GAIL ₹2,000 crore, Oil India

₹1,500 crore and Engineers India ₹1,000 crore, according to people with knowledge

of the matter.

Cos Resisting Move

Companies are resisting the move and negotiating with the government to bring

down these targets and so the final outgo may be a bit lower, the persons said.

Companies may have to borrow to pay high dividends, executives said. “What they

are asking for is not in sync with the profits reported so far this year,” said a

company executive. Except EIL (4%), all state oil companies have reported a drop

in half-yearly profit: ONGC (-15.5%), Indian Oil (-59%), Oil India (-20%), BPCL (-21%)

and Gail (-27%).

“Higher dividend outgo means you either cut down on your own planned spending

or borrow more, which raises your finance cost,” said another executive whose

company plans to raise debt for dividend.

However, an executive at another company, which too will have to borrow to pay

dividend, says it’s okay for the government to demand steep dividend.

“Shareholders have expectations of certain return on their investments and the

management should try and meet that, irrespective of the annual profit. For large

oil companies, borrowing some amount to pay dividend is not a bad idea,” he said.

Since March 2018, the government’s stakes have fallen in all oil companies,

including ONGC (-5%), Indian Oil (-5%) and Oil India (-6.5%) but its demand for

dividend has only risen, executives say. “You are asking for more or demanding the

same amount year after year even while selling stake each year,” an executive said.

The government has been selling shares to meet divestment target. Last year, the

government forced ONGC, Indian Oil and Oil India to undertake a combined Rs

9,500 crore share buyback programme in which the state’s shares were offloaded.

Some shares were sold via exchange-traded funds.

*****

48

India Exploring Ways to Source Crude Oil from Russia:

Pradhan

India is exploring ways to source crude oil from Russia, Oil Minister Dharmendra

Pradhan has said. “We are working on the strategy to diversify our crude oil supply

sources and we are now exploring ways to import crude from Russia as well,”

Pradhan told a Russian media delegation. Indian refiners have been seeking crude

oil from different parts of the globe to reduce their dependence on the conflict-

prone Middle-East region that currently makes up about 60 percent of its imports.

“We are keen to explore the new sea route to source crude oil and LNG through

Russia’s Arctic. The route has the potential to cut the cost and time for transporting

LNG from Russia to India, " Pradhan said. Pradhan told the media delegation that

relations between Russia and India would reach new heights in times to come.

“2019 was a landmark year which boosted the bilateral relations between India and

Russia to hitherto unscaled heights, " he said.

*****

Green nod for oil, gas exploration waived

The Environment Ministry has exempted oil and gas firms, looking to conduct

exploratory drilling, from seeking an environmental clearance. The clearance is for

both on-shore and offshore drilling explorations and the process is an ecologically-

intensive exercise that involves digging multiple wells and conducting seismic

surveys offshore.

49

Until today, even exploratory surveys have merited the highest level of

environmental scrutiny — called category ‘A’ — that required project proponents

to prepare an environment impact assessment (EIA) plan, have it scrutinised by a

Centrally constituted committee of experts and subject the proposal to a public

hearing involving the local residents of the proposed project site. While public

hearings, even for category A projects are frequently exempted if they are offshore,

the new amendments demote exploratory projects to the category of ‘B2’. This

means it will be conducted by the States concerned and will not require an EIA. The

move is part of a larger process of ‘decentralisation’ by the Centre in that it seeks

to farm more regulatory actions to State and local units. Environmentalists aver

that this can mean lax oversight.

Developing an offshore or onshore drilling site as a hydrocarbon block will however

continue to merit a “category A” treatment, the Ministry notification, made public

on January 18, clarifies.

In 2019, the ONGC and the Vedanta group were granted permission to conduct

exploratory oil surveys in Tamil Nadu and Puducherry and this had led to protests

led by the Opposition DMK and the Congress, which argue that the exploratory

drilling will lead to destruction of agricultural fields in the Cauvery delta.

Chennai-based environment activist Nityanand Jayaraman has argued that

offshore drilling operations can possibly effect fish, lead to a build-up of heavy

water contaminants, disorient whales and sea life that rely on sonar for navigation

and exacerbate the risk of oil spills.

“This is part of a continuing trend by the larger lack of oversight by the Environment

Ministry,” said Debi Goenka, of the Conservation Action Trust and who deals with

coastal ecology issues.

The government in 2019 relaxed rules that incentivises companies conducting oil

exploration surveys in less-explored oil fields to keep a greater share of revenue if

they chance upon viable hydrocarbon blocks. This has led to a spurt in interest in

oil and gas exploration with the Cauvery basin registering a spurt in activity.

*****

50

Oil posts biggest yearly rise since 2016

Oil prices fell 1 per cent on Tuesday, the last trading day of the decade, but notched

the biggest annual gain in three years, supported by a thaw in the prolonged US-

China trade war and ongoing supply cuts from major oil producers. Brent gained

about 23 per cent in 2019 and WTI rose 34 per cent, their biggest yearly gains in

three years, backed by the recent breakthrough in US-China trade talks and output

cuts pledged by the Organization of Petroleum Exporting Countries (OPEC) and its

allies. Forecasters do not expect oil prices to move sharply in either direction next

year. Brent crude is expected to hover around $63 a barrel, a Reuters poll showed

on Tuesday, down modestly from current levels, as OPEC production cuts offset

weaker demand. Over the past year, increased US oil output offset the supply

reductions undertaken by OPEC, led by Saudi Arabia and stemming from US

sanctions on Venezuela and Iran. Lackluster demand, including in developed

economies, remains a primary concern headed into 2020. “Oil prices, though

largely expected to trade positive, will face headwinds from subdued global growth

momentum and robust US shale output levels in the first quarter (of 2020),” said

Benjamin Lu, an analyst at Phillip Futures. US crude oil production in October rose

to a record of 12.66 million barrels per day (bpd) from a revised 12.48 million bpd

in September, the US government said in a monthly report. The pace of growth is

expected to slow in 2020. Brent crude fell 67 cents, or 1 per cent, to settle at $66.00

a barrel. US West Texas Intermediate (WTI) crude fell 62 cents, or 1 per cent, to

settle at $61.06 a barrel. On Tuesday, trade volumes were low with many market

participants away for year-end holidays, amplifying the market's moves. US

President Donald Trump said the Phase-1 trade deal with China would be signed on

January 15 at the White House. The deal has boosted factories' output and Chinese

manufacturing activity expanded for a second straight month. China's Purchasing

Managers' Index (PMI), which tracks economic trends in the manufacturing and

service sectors, was unchanged at 50.2 in December from November, just above

the 50-point mark separating growth from contraction. Investors were nervous

about the Middle East, where thousands of protesters and militia fighters gathered

outside the US embassy in Baghdad to condemn US air strikes against Iraqi militias.

Security guards inside the US embassy fired stun grenades at protesters. The US

ambassador and staff were evacuated due to security concerns.

“Considering that Iraq is the second-largest OPEC producer with production around

4.6 million barrels per day, market participants may add a risk premium to oil

51

tension if tensions last for longer,” UBS oil analyst Giovanni Staunovo said. “That

said, we need to see if the latest protests spread also in the south of the country,

where most of the crude is exported.”

*****

The geopolitical rise and fall of crude and gold

It is well recognised that the crude oil and gold markets are always susceptible to

geopolitical developments. More often than not, rather than an actual event,

rhetoric from adversaries impacts the sentiment. We have seen umpteen times in

the past that the rise and fall in the prices of the two commodities are directly

related to escalation and de-escalation in geopolitical tensions. Alongside, we find

the flow and ebb of speculative capital, as is its wont. It is no different this time.

Set pattern

Both crude and gold markets rallied following the US drone attack on the Iranian

general and Iran’s retaliatory action. Tensions spawned by such events peter out

either quickly or gradually, unless the actions result in an escalation towards

conflict. This time the change in sentiment has been dramatic, much against the

expectation of bulls. After spurting to over $68 a barrel on Tuesday, Brent quickly

shed the gains to move down to around $65 a barrel the next day. This followed

the market’s belief, based on certain political statements, that the situation may

not deteriorate. For the time being, a stronger military response from the US

appears unlikely. In other words, oil has pared almost all the gains it made since

52

the start of the new year. Reports of the US inventory build-up added to the selling

pressure.

Gold volatility

Gold, the punters’ eternal favourite, suffered a greater pounding. After rallying to

well over $1,600 a troy ounce – the highest since March 2013 – on Tuesday, the

precious metal registered one of the sharpest falls the following day, to trade at

some stage at around $1,540/oz, a collapse of $70/oz. Profit-taking, as evidenced

by the outflow from ETFs, contributed to the slump. All this happened just when

speculative investors in the yellow metal thought there would be a further rise in

price. But that was not to be, demonstrating once again the fickle nature of this

market.

Price stabilisation

So, where do we go from here? From a fundamental perspective, the crude oil

market appears reasonably well supplied in the first quarter of this year. So, with

the risk of supply outages waning, the crude oil market should stabilise. The risk

premium will evaporate. Brent is likely to trade in the $60-65 a barrel range. While

geopolitical tensions may not be simmering or boiling over, the risks have not

completely gone away; the situation is simply less grave than before. We cannot

ignore the undercurrents. Despite some profit-taking, bullish bets on crude are

likely to continue. The situation needs a close watch for early signals of new

developments. As for gold, the massive slump in prices should unnerve punters.

Tensions in West Asia are decidedly easing. Instead of military conflict, the US

President may impose additional economic sanctions on Iran.

Gold may not glitter

Together with positive labour data and the firming dollar, investors’ risk appetite is

set to improve. Central bank purchases, too, have turned few and far between.

These do not augur well for gold. One can expect a further price correction in the

yellow metal towards $1,500/oz. Silver’s fortunes have followed gold, but with

greater pressure. Silver did not outperform gold on the way up, and on the way

down, finds itself under increasing pressure, having dropped $17.8/oz.

*****

53

How Oil Market Lived with a West Asia in Flames

A dramatic US drone strike kills Iran’s most important general. Tehran vows

retribution and oil prices jump almost 5% as traders rush to cover the risk of a

Middle East war. Then the selling starts. It’s a trading pattern that would have been

unthinkable a decade ago, but has become increasingly familiar. The threat of

conflict loomed over the heart of the global oil market this past week, but the usual

panic buying by traders and consumers was met quickly by a wave of US shale

drillers grasping the opportunity to lock in prices for future production. The sudden

price spike was blunted, and when the dust settled the plunge back down was

steep. These trades, known as hedges, combined with a massive expansion of oil

stockpiles in Asia and surging US crude exports, are the recipe for a market that’s

capable of quickly shrugging off disruptions that until recently were considered

nightmare scenarios.

“When prices spike in response to geopolitical events, producers tend to lay on

more hedges,” said Ed Morse, global head of commodities research at Citigroup Inc

in New York. “The higher the price the more they hedge,” which makes any increase

short-lived, he said. West Texas Intermediate crude, the US benchmark, has slipped

back below $60 a barrel as the last of the gains from President Donald Trump’s

standoff with Iran faded. That didn’t just reflect the easing tensions after Tehran’s

retaliation for the killing of General Qassem Soleimani inflicted no US casualties. It

was a manifestation of how the shale revolution has changed the psychology of the

market. The same day that American missiles killed Iran’s most important military

leader near Baghdad airport, the US Energy Information Administration announced

record net oil exports of 1.73 million barrels a day. That’s a historic change for a

54

country that a decade ago was one of the world’s biggest importers, and it has

changed the way the market responds to a crisis. The shale boom that triggered

this shift has been led by a multitude of independent drillers that are less able to

absorb the financial impact of price swings than giants such as Exxon Mobil Corp or

Royal Dutch Shell Plc. Unlike the era that was dominated by the supermajors, any

oil rally today finds a natural seller as smaller companies minimise their risks by

hedging. Crude prices are in the “sweet spot” for many North American producers,

RBC Capital Markets analysts including Michael Tran wrote in a note. Many of them

had been waiting, or hoping, for a chance to lock in WTI prices for 2020 at $60 a

barrel, a level that was pierced after the Soleimani killing. Occidental Petroleum

Corp., one of the largest drillers in the prolific Permian basin in Texas and New

Mexico, revealed this week it had increased its production hedges for 2020 from

300,000 to 350,000 barrels a day with the help of Wall Street banks.

*****

IEA Seeks Adoption of Long-Term Energy Plan

The International Energy Agency on Friday suggested government adopt a long-

term energy plan for the country with focus on rationalising the energy prices,

building energy infrastructure needs, energy security and access to affordable

energy even as the government strives to open up the sector for private players

and move towards cleaner fuels across sectors.

55

“The draft National Energy Policy by NITI Aayog, currently under consultation, is an

excellent framework and should be adopted swiftly to guide policy making,

implementation and enforcement across central and state governments,” IEA said

in its India Report 2020 released on Friday.

The draft National Energy Policy of NITI Aayog has been in works for years and has

been under consideration since 2017 but hasn’t seen the light of the day because

of several inter-ministerial differences. Commenting on the energy prices in India,

IEA suggested government should continue to rationalise pricing methodologies,

subsidies and cross-subsidies across the energy sector. “Continue reducing and

consider phasing out fossil fuel subsidies through the reform of the LPG scheme in

favour of cleaner fuels,” it said.

According to IEA, India spent $25 billion in 2018 on subsidies for the consumption

of fossil fuels, mostly supporting oil consumption in the form of LPG ($17 billion)

and gas ($4 illion). While the diesel subsidy ended in 2014-15, government is

gradually increasing the prices of kerosene and cooking gas (LPG to phase out the

subsidies, it noted. Citing the government data, IEA said the oil subsidy accounted

for $3.5 billion in 2018-19, a continuous decrease from the level of $14 billion in

2012-13 and $11 billion in 2014-15. Hailing India’s energy sector reforms, including

the opening up of coal mining to private sector, IEA said India now has the

institutional framework it needs to attract more investment for its growing energy

needs. “The creation of functioning energy markets will ensure economic efficiency

in the management of the coal, gas and power sectors, which is critical to achieving

energy security and supporting the country’s economic growth,” it said.

Emphasizing on the need for a strong monitoring, implementation and compliance

of policies and regulations in the sector, IEA suggested India needs to improve the

collection, consistency, transparency and availability of energy data across the

energy system at central and state government levels.

“Improve the collection, consistency, transparency and availability of energy data

across the energy system at central and state government levels,” it said, adding

there is a need to adopt co-ordinated cross-government strategy for energy RD&D,

which enables impactoriented measurement and dissemination of results.

56

According to IEA, energy research, development and deployment (RD&D) can be a

strong enabler of India’s energy policy goals while also contributing to broader

national priorities such as the “Make in India” manufacturing initiative. “It would

also support the engagement of private and public industry actors,” it said.

*****

Refining to the Petro-Rupee

Even though the centre of gravity of global oil trade has shifted from the West to

Asia, the oil trade is still managed on western exchanges. That means prices are set

using western benchmarks — Brent and West Texas Intermediate — and the

medium for exchange remains the dollar. This anomaly puts Asian countries at a

disadvantage that will only grow worse with time as trade becomes increasingly

skewed toward Asia. But a solution is within reach. India needs to push for a bigger

role for its exchanges and currency in the oil trade. This will help improve its energy

security and create a bigger international role for the rupee. China is already

pushing its own commodity exchanges and currency as an alternative to the

petrodollar. India, with its open markets and transparent regulation, has a distinct

advantage over China. But it must seize the opportunity soon. The benefits of

exploiting India’s strengths are considerable. Widespread use of the dollar as the

international medium of exchange has long kept down borrowing costs for the US

government and consumers. It also has given the US enormous geopolitical

leverage, as demonstrated most recently by its ability to impose and enforce

sanctions against Iran, Venezuela and Russia.

57

Many governments, including India, have publicly said that they don’t recognise

these unilateral sanctions. But companies in these countries comply as they

otherwise could lose access to the US financial system, which would be

catastrophic for any large commercial entity. Financial trade in oil is increasingly

out of sync with the physical trade. Due to its increasing shale oil production, the

US is no longer the top importer of oil, China is. Four of the five top importers —

China, India, Japan and South Korea — are in Asia. And India is expected to be the

major driver of future growth in oil demand at a time when oil consumption in

western countries is flat or declining.

*****

ONGC corners all seven blocks on offer in Open Acreage Bid

Round IV; signs contract

Oil and Natural Gas Corporation Ltd (ONGC) has bagged all the blocks on offer in

the Open Acreage Bid Round IV. ONGC had bid for all the seven blocks on offer

while Oil India (OIL) had bid for just one block. Speaking at a ceremony to mark the

signing of contracts for these awarded blocks, Minister for Petroleum and Natural

Gas Dharmendra Pradhan said, “In the last two years, with completion of four India

OALP bidding rounds, 94 explorations blocks covering an area of around 1,37,000

sq km have been offered to leading exploration and production companies. Prior

to 2014, around 90,000 sq km of acreage had been bid out.”

“In the next OALP round, bids for around 20,000 sq km of acreages have been

received. We hope that the Directorate General of Hydrocarbon completes the

bidding process before the current financial year ends,” Pradhan said. There were

five blocks from Madhya Pradesh and one each from Rajasthan and West Bengal

on offer in the fourth round. The block in Rajasthan was the only one to get more

than one bid in this round. The blocks awarded in these rounds follow the fiscal

regime defined by the Hydrocarbon Exploration and Licensing Policy. This includes

reduced royalty rates, zero oil cess, a uniform licensing system, marketing and

pricing freedom, a revenue sharing model and exploration rights on all the retained

areas for the full contract life, according to the DGH.

*****

58

US Shale Producers to Tap Brakes in ’20

Vastly slower US oil growth this year and the prospect of a plateau for the world’s

top oil producer have signaled a new and unfamiliar era of self-restraint for the go-

go shale industry. Spending cuts and production declines common to shale wells

mean US output growth is expected to brake from 2019’s pace that pushed

domestic production past 13 million barrels per day (bpd). Some analyst forecasts

for next year call for growth to slow, potentially to a rate of just 100,000 new bpd.

Over the latest decade, the shale revolution turned the United States into the

world’s largest crude producer and a force in energy exports. Yet the revolution did

not translate to higher stock prices. The S&P 500 Energy sector only gained 6% for

the decade, far less than the 180% return for the broader stock market. The

decade-long oil expansion failed to boost profits, which has discouraged investors.

The shale industry was squeezed by an Opec price war that began in 2014, sending

US crude prices below $30 per barrel at one point. Production temporarily slowed,

but accelerated into the end of the decade as companies cut costs and grew more

efficient. Now, with investor returns flagging, the industry no longer believes in

drilling its way to success even at higher prices.

*****

59

Govt. okays ₹5,559-crore booster for N-E gas grid

The government on Wednesday approved viability gap

funding (VGF) of Rs 5,559 crore for a gas pipeline

network proposed to be built in the northeast, the

second instance of public funding for making an energy

lifeline economically viable. Oil minister Dharmendra

Pradhan said the VGF amount sanctioned by the

Cabinet’s panel on economic affairs will cover 60% of

the Rs 9,265-crore project. The 1,656-km pipeline will

connect Guwahati in Assam to major cities in the region such as Itanagar, Dimapur,

Kohima, Imphal, Aizawl, Agartala, Shillong, Silchar, Numaligarh and Gangtok. He

said the pipeline will enable to pipe cooking gas to households and supply CNG

(compressed natural gas) for automobiles in the northeast “just like in Delhi” as

well as to fuel industry. The government had in 2016 sanctioned a capital grant of

Rs 5,176 crore, or 40% of the cost, for Urja Ganga, the 2,655-km Jagdishpur-Haldia

and Bokaro-Dhamra (JHBDPL) gas pipeline being built by state-run GAIL. All other

pipelines have been funded by public or private companies. The northeast pipeline

grid is to be implemented by Indradhanush Gas Grid, a joint venture of GAIL,

IndianOil, ONGC, Oil India Ltd and Numaligarh Refinery Ltd. The consortium had

told the government the project would not be viable in the absence of government

funding as there were not enough large customers. GAIL is also laying a 750-km line

from Barauni to Guwahati as part of the Rs 12,940 crore JHBDPL project, which is

also known as the Pradhan Mantri Urja Ganga project. This is proposed to be

connected to the Northeast via the Indradhanush grid. Pradhan said the project is

critical for implementing the Hydrocarbon Vision 2030 for the northeast, which

entails leveraging the region’s hydrocarbon potential for enhancing access to clean

fuel and accelerating economic growth. “About 20% of India’s natural gas

production comes from the northeast. Out of about 75 million cubic meters per day

of gas output, 15 come from northeast... Currently Assam, Arunachal Pradesh and

Tripura have established gas production potential while there are possibilities for

the same in Nagaland and Manipur,” Pradhan said. The funding support to the gas

grid is part of the government’s goal to raise the share of natural gas in the

country’s energy basket to 15% by 2030 from 6% at present.

*****

60

Oil PSUs Start Payments for Mozambique LNG Project

Oil and Natural Gas Corp, Bharat Petroleum and Oil India have begun making their

share of payment of about $2 billion towards the much-delayed Mozambique

liquefied natural gas (LNG) project. Three state-run firms have a combined 30%

participating interest in the Mozambique gas project, which made a final

investment decision last year to spend about $15 billion on developing gas fields

and liquefaction project. About 60% of the project cost is planned to be funded by

debt while the balance 40% would be shared as equity contribution by all

stakeholders proportionately. Of the $6 billion equity component, Indian firms will

contribute about 30% or a little less than $2 billion. ONGC, which owns 16%

participating interest in the project, will have to pay about $1 billion while BPCL and

Oil India with their 10% and 4% interest, respectively, will contribute a little less

than $1 billion together, according to people familiar with the matter. The cash calls

have started and companies have begun transmitting their contributions, they said.

The full contribution will have to be made over four years. Total, the French energy

giant, is the operator of the project with 26.5% stake, which it acquired last year

for $3.9 billion. Japan’s Mitsui holds 20% while the balance is split between ENH

(15%) and PTTEP Mozambique Area 1Ltd (8.5%). The current project involves

development of the Golfinho and Atum fields located within Offshore Area 1 and

the construction of a two-trains liquefaction plant with a capacity of 12.9 million

tonnes per year. The Area 1 contains more than 60 trillion cubic feet (Tcf) of gas

resources, of which 18 Tcf will be developed with the first two trains. The project

will start production by 2024, according to Total. The project was initially expected

to start production in 2018. A collapse in the oil and gas market that began in 2014

contributed towards the delay in the Mozambique project. A supply glut in LNG

market made it harder for the project operators to find buyers. But the project has

now been able to sell almost 90% of its production through long-term contracts

with LNG buyers in Asia and Europe. The project would also provide gas for

consumption in Mozambqiue. The LNG market is currently oversupplied as

liquefaction projects have proliferated across the globe. Analysts do not expect

LNG prices to recover quickly.

*****

61

Crude spike: Govt. may need to set aside more for LPG,

kerosene subsidy

The number crunchers of Finance Minister Nirmala Sitharaman’s Budget team may

have to do some jugglery to allocate more funds for domestic LPG (liquefied

petroleum gas) and kerosene oil subsidy, if the current volatility in global crude

prices continues. The subsidy — the difference between the selling and the

purchase price of domestic LPG and kerosene — is paid by the government to

public sector oil marketing companies, for selling the product below market prices

to poor households. Higher crude prices mean that the basic cost price of LPG also

goes up. To insulate LPG customers from higher prices, the government has the

subsidy mechanism. Currently, consumers of domestic LPG in Delhi pay ₹714 for a

14.2-kg cylinder refill. Pradhan Mantri Ujjwala Yojana (PMUY) and other subsidised

customers get ₹178.86 as subsidy. In 2018, when LPG prices had hit new highs, the

subsidy amount touched ₹450 for every 14.2-kg cylinder. Although, the current

prices are not expected to rise to those levels, the possibility of the subsidy amount

rising above ₹178.86 cannot be ruled out.

The subsidy allocation for

LPG in the Budget has zoomed from ₹13,000 crore in 2017-18 to over ₹29,000 crore

during the current fiscal. With more emphasis on Ujjwala, the number of subsidised

domestic customers is expected to cross 8.03 crore. This along with higher prices

will necessitate a higher subsidy allocation in the coming Budget. The allocation for

kerosene subsidy has been stagnant during 2018-19 and 2019-20. Now, even if

consumption remains stable but cost prices go up, more money will have to be

provided for subsidy.

27.44-crore LPG customers

As on November 1, 2019, there were 27.44 crore LPG customers in the country, out

of which nearly 25.82 crore get direct subsidy into their bank accounts, through

direct benefit transfer (DBT). The total consumption of kerosene oil was 34.60 lakh

tonnes in 2018-19, while for the first eight months of this fiscal, it was 17.44 lakh

tonnes. Most of the kerosene is sold through fair price shops under the public

distribution system (PDS) at a subsidised price. With the escalation of tensions in

the Gulf region, crude oil prices have turned volatile. During the first seven trading

62

days of January (2-7), the price of the Indian basket of crude — the rate at which

Indian refiners buy crude oil — was between $68.18 and $69.99/barrel.

Though, it is lower than $71/ barrel at the beginning of the current fiscal, it is still

higher than $59.27/barrel of January 2019. The composition of the Indian crude

basket represents the average of Oman and Dubai for sour grades and Brent

(Dated) for the sweet grade. One key issue here is that the rupee has also been

depreciating against the US dollar, and this also impacts prices of petroleum

products for consumers in India.

*****

No duty cuts to soften fuel spike

The government has ruled out an immediate cut in taxes on petrol and diesel to

soften the impact of the geo-political tensions, which have triggered a spike in

global crude oil prices. Brent prices crossed the $71-a-barrel mark early Wednesday

morning after Iran launched a missile attack, but softened later in the day. Since

last year, Brent prices have jumped nearly 15% and were trading around $68 a

63

barrel. Over the past year, the increase in pump prices of diesel and petrol has been

around 10%. “There is no need to panic,” said a high-ranking government source,

adding that prices had softened a little after a spike due to Qassem Suleimani’s

killing last week but rose again after Iran fired missiles at American bases in Iraq on

Wednesday. Petroleum minister Dharmendra Pradhan told reporters that the

government is keeping a close watch on the developing geo-political situation,

while also preparing itself to face any eventuality arising out of the crisis. Pradhan

has had detailed discussions with external affairs minister S Jaishankar, who has

spoken to his counterparts in oil-producing countries stating India’s concerns. A

sharp rise in oil prices has the potential to adversely impact the Indian economy

with inflation facing the first round of impact. An increase of $10 a barrel in crude

prices affects inflation by a 0.1 percentage point. With India importing 80% of its

crude requirement, the rupee also comes under pressure due to a higher import

bill. This, in turn, affects the trade balance and current account deficit. During 2018-

19, India’s oil import bill was estimated at $140 billion. Both retail and wholesale

inflation have shown a rising trend on the back of high food prices and any increase

in oil prices could stoke inflation at a time when growth is estimated at an 11-year

low of 5%. Besides, a reduction in duties will impact the already strained

government finances, especially when net tax revenue has gone up by 2.6% against

a budgeted 11% increase (after transfer to states).

*****

Fuel Prices Set to Fall as Virus Scare May Hit Demand

Local rates of petrol and diesel are set to fall further, after declining about ₹1.5 a

litre in thirteen days, as crude oil slid 4% this week to about $62 a barrel on fears

that China’s coronavirus outbreak may hit demand amid copious supplies. The

virus, which has infected more than 800 people so far and killed 25, has spread to

at least seven other countries. Markets fear the outbreak would hurt travel, oil

demand and economic growth in China, the world’ fastest-growing oil consumer.

Oil steadied on Friday, rising 0.5% to $62.35 a barrel, but was still down 4% for the

week. A surprise 405,000-barrel decrease in US crude stockpiles helped push up

price on Friday. Domestic rates of petrol and diesel are based on the 15-day moving

average of the international rates of respective fuels – which helps spread spikes

and falls over several days. In Delhi, petrol and diesel were retailed for ₹74.43 and

₹67.61 a litre, respectively, on Friday. Since January 11, the price of petrol is down

64

₹1.58 per litre in the capital while diesel is down ₹1.56/litre. The shadow of

coronavirus would stay on the oil market for days to come as more information

emerges from China on the extent of the outbreak. The World Health Organisation

has declared the situation an emergency.

“(The) selloff on the...flu scare was mollified by a timely decline in US crude

inventories,” Stephen Innes, market strategist at AxiTrader, said in a Reuters

report. “Oil prices could remain on a slippery slope as traders remain incredibly

twitchy about the effects the coronavirus outbreak could have on Chinese GDP and

air travel more broadly.”

*****

ईधंन बचाओ अभियान 'सक्षम 2020' लॉन्च

पेट्र ोलियम और प्राकृलिक गैस मंत्रािय के अंिगगि पेट्र ोलियम कंजरे्वशन ररसर्ग असोलसएशन (PCRA) की

िरफ से एक महीने का ईंधन बर्ाओ मेगा अलियान सक्षम 2020 िॉन्च लकया गया। मंत्रािय के सलर्र्व डॉ

एमएम कुट्टी ने इस अलियान का आगाज लकया। इस दौरान उन्ोनें ईंधन बर्ाने के महत्व के बारे में बिाया।

उन्ोनें पीसीआरए पब्लिलसट्ी रै्वन को िी झंडी लदखाकर रर्वाना लकया, जो जगह-जगह घूमकर ईंधन बर्ाने

के िौर िरीको ंके बारे में बिाएंगी।

*****

Power generation, demand continue to slide for fourth

straight quarter

Power demand and generation declined across the country for the fourth quarter

in a row because of the economic slowdown. The trend was seen across both

65

conventional and renewable energy (RE). According to a Motilal Oswal report,

conventional electricity generation in December declined 2 per cent from the same

period last year. This was similar to the November data, when total conventional

power generation, which is mainly powered by coal, was down 6 per cent on a year-

on-year basis. Further, on a year-to-date basis, generation was down 0.1 per cent.

Overall power generation was also down 2 per cent YoY for December, according

to the report. RE generation increased a mere 3 per cent on a yearly basis, even as

capacity addition continues to increase. On a year-to-date basis, solar capacity

addition went up by 5.5 GW. In December, the capacity addition was 1.2 GW. The

decline in power demand was particularly pronounced in the northern and eastern

regions, where power demand was down 4 per cent on a yearly basis. Coal-based

generation declined 4 per cent YoY, said the report. Thermal power was down 4.3

per cent in December 2019 over the previous year. However, hydro and nuclear

generation increased 14 per cent and 16 per cent YoY, respectively. Coal stocks,

which were hit by heavy rains last year, are now seeing signs of revival. Production

by Coal India increased 1.6 per cent in December but continues to be down 5.8 per

cent on a year-to-date basis. “The pick-up in production should improve demand

slightly going ahead,” said Rupesh Sankhe, Vice-President, Elara Capital. But this

increase in production resulted in higher stocks, as demand was not proportional

to the increase. Coal stocks at power plants increased to 18 days in December 2019

over December 2018.

*****

Tata Power: May not be Able to Run Mundra After Feb

Tata Power will be forced to stop operating its imported coal-based Mundra ultra-

mega power project after February unless its five consumer states allow pass-

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through of additional fuel cost to consumers, the company has told the Union

power ministry. The ministry, in turn, told Gujarat, Haryana, Rajasthan, Punjab and

Maharashtra, which buy power from the ₹18,000-crore plant, to decide on the

matter latest by January 15, or deal with power shortage without Centre’s support,

people aware of the development told ET. Tata Power managing director and CEO

Praveer Sinha declined to comment on the development. The company had said it

would be difficult to operate the plant beyond February 29 due to extreme liquidity

crunch at a meeting held by Union power secretary Sanjiv Sahai last month.

Industry sources said the 4,000-MW Mundra plant — one of the first four ambitious

UMPPs in the country — has not been able to generate working capital for

operations, and made cumulative losses of about ₹11,000 crore, which has been

funded by Tata Power and equity financing of ₹5,000 crore. Sahai advised the five

states to expedite their decision-making on revising power purchase agreements

(PPAs) to allow the plant to recover fuel costs through consumer tariffs as the

Centre does not have excess capacity from its share of electricity from central

power plants to help them overcome an electricity shortage, said the sources cited

earlier. Representatives of Haryana, Rajasthan, Punjab and Maharashtra expressed

willingness to rework the PPAs, but they have not yet obtained approvals from their

Cabinets, they said. Only the Gujarat government has approved the revised PPA.

The five states need to approach the Central Electricity Regulatory Commission

(CERC) once they approve the revised PPAs. A senior bureaucrat in Maharashtra

told ET that the state was keen on allowing pass-through to Mundra plant due to

the low cost of power. A decision was delayed due to assembly elections. He said

electricity from the project will be cheaper at about ₹3.10 per unit against the

average power price of the state at ₹3.80 per unit. At the power ministry meeting,

a Maharashtra representative had said the new government is yet to take up the

issue for discussion, while officials from Haryana and Punjab said their

governments are actively considering the matter, sources said. Tata Power’s

Coastal Gujarat Power that operates the Mundra plant has offered additional

concessions to the Punjab government that are being studied by the state. The

Supreme Court had in October 2018 asked the CERC to decide on changes to the

PPAs for three imported coal-based plants in Gujarat to let them pass on fuel costs.

CERC had in April last year approved compensation by Gujarat and Haryana for

imported coal costs to Adani Power’s 4,620-MW plant. The three projects,

including Essar Power’s Salaya plant, have been fighting for compensation since

2010 after Indonesia introduced benchmark sale price, raising prices of imported

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coal. In 2017, the three companies had even offered majority stakes in their plants

in Gujarat to the state government at ₹1 each.

*****

Two Schemes Floated to Revive Stranded Gas-based Power

Units

The power ministry has finalised two schemes to procure 4,000 MW from gas-

based power plants to rescue stranded units put up at a cost of about ₹1,00,000

crores. The schemes include procuring 2,000 MW from gas-based plants

through auction and bundling it with an equal capacity of solar power. Another

2,000 MW will be procured through online reverse auction, on a model similar

to previous such schemes. Power producers welcomed the long awaited

scheme, saying it will bring almost 11,000 MW of stranded gas assets out of

NPA situation.

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“The scheme should be quickly implemented with all waivers,” Association of

Power Producers director general Ashok Khurana said. “The key to success of

this scheme would depend on sourcing gas at competitive rates.”

He said with the prevailing subdued price of RLNG, gas-based power producers

should be able to market their power on a standalone basis without even

needing solar as bundled power. “But on a long-term basis, if India has to move

towards clean energy, renewable energy and gas-based power has to co-exist,”

Khurana said. A senior government official said a draft cabinet note is being

prepared for the two schemes to procure total 4,000 MW from the stressed

gas-based projects. Under the bundling scheme, the solar capacity will be given

priority to run. Gas-based capacity will run at times when solar power is not

available and producers will have the option to sell produce in spot market in

times of back down by distribution companies. Both schemes are proposed to

be run without subsidy for a minimum of three years. The other scheme

proposes to select bidder through an online reverse auction where bids would

be put in by the developers based on incentives to be provided by the central

and state governments to reduce end tariffs. Developers will have the option

to buy gas on their own or through state-run gas transporter GAIL (India) Ltd.

The proposed haircuts include waiver of state and central taxes on imported

LNG, waiver of GST on regasification and transportation of the fuel, reduction

of pipeline tariff charges and marketing margin by GAIL.

*****

Over 150 GW of renewable energy projects installed or in the

pipeline

India now has over 150 gigawatt (GW) of renewable energy generation capacity

either installed or in pipeline according to data shared by the Ministry of New and

Renewable Energy. An official statement said 84.40 GW of renewable energy

generation capacity has been installed in the country. Another 36.68 GW is

currently under implementation while 29.58 GW has been tendered. This takes the

total installed and in the pipeline renewable energy generation capacity to 150.66

GW. In 2015, it was decided that 175 GW of renewable energy capacity will be

installed by 2022. This includes 100 GW from solar, 60 GW from wind, 10 GW from

69

biomass and 5 GW from small hydro power. To help achieve this target, the Centre

has proposed setting up Ultra Mega Renewable Energy Power Parks (UMREPPs)

under the existing Solar Park Scheme. The objective of the UMREPP is to provide

land upfront to the project developer and facilitate transmission infrastructure for

developing Renewable Energy (RE) based UMPPs with solar/wind/hybrid and also

with storage system, if required. Till now, the Centre has received proposals from

Public Sector Enterprises to set up 42,000 MW of UMREPPs across the country.

*****

ICRA revises wind energy sector outlook from stable to

negative

Wind energy capacity addition will be subdued in FY2020 amid challenges with

payment delays from discoms and tight financing environment. Rating agency ICRA

in its outlook for the wind energy sector has revised it from stable to negative. ICRA

observed that there is increasing preference towards third-party open access and

group captive projects by a few IPPs (Independent Power Producers).

Challenges- In its report, ICRA stated that the wind power sector is facing significant

challenges because of delays in making payments by the State distribution utilities

and execution delays in projects bid out by the Central nodal agencies and State

distribution utilities. This apart, the tariff uncertainty for wind power projects in

Andhra Pradesh has affected investor sentiments in the sector. This is also reflected

in the slowdown in the tendering activity of wind power projects by 67 per cent to

2.3 GW in CY2019 from 6.9 GW in CY2018. Moreover, many of the bids called by

Central nodal agencies remained under-subscribed.

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While capacity addition is likely to improve on a fiscal year basis, to about 2.5 GW

in FY2020 from 1.6 GW in FY2019 on the back of large project backlog, achieving

the 60 GW target set by the Centre by December 2022 remains a challenge. In this

context, ICRA has recently revised the outlook for the wind energy sector from

stable to negative.

Execution delays- Girishkumar Kadam, Sector Head & Vice President – Corporate

Ratings, ICRA, said, “Against the 5 GW to be commissioned as of December 2019,

as per the timelines provided under the bids awarded by the SECI, NTPC and State

utilities, only about 2 GW is estimated to have been commissioned. Thus, the actual

execution on the ground has been hampered by delays in completion of land

acquisition, securing transmission connectivity for inter-state projects, financing

challenges due to concerns over bid tariff viability and delays in approval for tariff

adoption from the regulators.”

Further, the bid tariff discovered in the recent wind power auctions continue to

remain at less than ₹3 per unit and highly competitive against the conventional

energy sources. The viability of these projects remains dependent upon the ability

of the developers to identify locations and using wind turbine generator (WTG)

machines having the potential to generate power at annual PLF of 35 per cent or

higher.

Plant load factor- On the PLF (plant load factor) trend of the new turbines of MW

class with hub height greater than 100 metres, Vikram V, Associate Head &

Assistant Vice President - Corporate Ratings, ICRA, said, “Our study of a sample set

of projects commissioned over the past one to two years indicates that there are

projects, which have been able to achieve annual PLF in the range of 33-38 per

cent; thus providing a comfort on PLF assumption, which is critical for the viability

of projects bid at tariffs lower than ₹3 per unit. Such projects typically have higher

hub height and rotor diameter of more than 100 metres and are concentrated at

windy locations in Gujarat and Tamil Nadu. However, the long-term sustainability

of such performance also remains critical.”

With significant decline in bid tariffs for wind power projects and ongoing

challenges in turn affecting the return expectations, few developers are exploring

the open access market to sell power to industrial consumers either through group

captive route or third party PPA route, given the relatively better project

economics.

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Tariff concerns- This has been prevalent in Karnataka and Tamil Nadu in the past,

supported by a favourable regulatory support. However, the projects in the open

access market face challenges in the form of delays in securing open access

approvals from the State utilities, risk of revision in open access regulations and

imposition of cross-subsidy surcharge and additional surcharge. Also, in the recent

past, some of the States have put restrictions on availability of banking facility for

wind power projects, which leads to mismatch between supply and demand, given

the seasonal nature of wind power generation.

*****

Optimise India’s renewable energy and reforestation

projects, by making land planning a key part of the policy mix

As a nation seeking to achieve rapid economic growth in an era of climate change,

India has committed itself to advancing renewable energy and promoting

reforestation. Both these approaches provide multiple benefits for our people and

environment, and they will also contribute to the effort to keep global average

temperatures under 2°C. Further, some analysts have projected that renewable

energy can generate an additional 2,30,000 jobs by 2022 and improve air quality –

two critical issues for our country.

*****

SB Energy on Track to Achieving Solar Target in India

SoftBank’s arm SB Energy Global will meet the target of setting up 20 GW of

capacity in the next five years in India despite challenges, Raman Nanda, CEO, SB

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Energy Global, told Rachita Prasad. The next target would be to become a global

100 gigawatt-company.

Edited Excerpts: SoftBank committed to invest $20 billion to set up 20 gigawatts in

India. How has the journey been so far? Is that target achievable given the

challenges?

In 2015 Masayoshi Son, along with Sunil Mittal, made a commitment that we would

do 20 GW. Today, we are a little over 5.5 GW. We have built a strong team. We

won and executed large-scale solar projects which helped us create a robust

playbook for building a big solar plant — right from the auction stage to the

commercial operations. We entered the industry when building scale was possible.

We have done construction on time and met budgets. Our investors are satisfied

with our financial results. This is a young industry that’s changing fast. Before we

entered India, solar tariff was over ₹6; we won our first auction at ₹4.60, and now

it’s a little more than half of it. With such rapid change, such hungry demand for

land, there's a lot of challenges for an industry that moves that fast. With our great

team and the resilient playbook, we are on track to execute 20 GW in the next five

years.

*****

India’s energy challenges for the decade

What should our ambitious energy goals for the new decade be? What policy

instruments are needed? The big achievement of the last 15 years has been the

completion of village and household electrification. As many as 1,25,000 villages

and about 600 million people have got access to electricity. Funding from the

Central government made this possible. There is also sufficient generating capacity

for the first time due to large private investments. The immediate challenge is to

73

get the State governments to turn around the finances of their electricity sector.

This can be done by a combination of improved governance, higher tariffs and

timely provision of subsidies for free/highly subsidised electricity for agriculture. If

improving governance appears difficult, getting the private sector to manage

distribution is a proven solution. The success of the private sector in distribution in

Delhi has enabled the Delhi government to give subsidy from the budget for free

supply of 200 units of electricity per month.

Major bailouts- Two massive bailouts by the Central government for the power

sector have been given since 2001. These became unavoidable as public sector

banks and the Power Finance Corporation kept providing loans liberally to

distribution companies without what should have been the normal precondition —

that the revenue realised per unit of electricity supplied should be higher than the

average cost of supply. Such lending needs to stop.

Further, if generators, including NTPC, supplied electricity only on Letters of Credit

as the Power Ministry has stipulated, this hard budget constraint would force the

States to act. The Central government and its financial institutions need to be firm.

The comfortable position of generating capacity being in excess of demand at

present is the result of substantial private investment in generation. But further

new investment, which would certainly be needed, would take place only if markets

see a financial turnaround in the sector.

Subsidies the poor- The UJWALA programme has acquired momentum and every

household should be having a cylinder and a gas cooking stove in the next few

years. But the poor households cannot afford the price of the cylinders and are,

therefore, not able to do all their cooking on gas. The big decision that needs to be

taken is to give gas cylinders to poor households at a subsidised rate of, say, ₹300

per cylinder. This would lead to the full transition to clean cooking with enormous

benefits to the health of poor women. Indoor air pollution would end. Overall air

pollution would be reduced by about 25 per cent. Clean energy for cooking should

have a very high claim for subsidy in the Budget. It could be plausibly argued that

this claim should be higher than for, say, piped water supply. If funds cannot be

found in the Budget, then the oil companies should be made to cross subsidise, by

raising the price of petrol and diesel to recover the cost of subsidised supply of gas

cylinders to poor households. Though cross-subsidy has been out of favour for good

74

reasons, this a case where the benefits would be enormous and the distortions

marginal.

When the sun shines, solar power is the cheapest source of electricity. Wind energy

is cheaper than electricity from coal. India should, therefore, target raising the

share of renewables in electricity generation from the present level of less than 10

per cent to 50 per cent within this decade. Germany, with modest sunshine, has

already achieved 46 per cent. This would need a clear policy direction.

Feed-in tariff- Distribution companies would need to invite bids for larger and

larger quantities of supply of solar power. They also need to go in for a feed-in tariff

of, say, ₹4.50 per unit for decentralised solar power. This means that they should

offer to buy solar power on a first-come basis, up to 1MW, from any supplier in

rural areas and from rooftops of their customers. The distribution companies would

gain financially as their average cost of supply of power is usually ₹7-8 per unit,

which is much higher than the suggested feed-in tariff. With just 1MW of

generation in a village, over 600,000 MW of solar power could come up with private

investment. This would not need any subsidy from the Budget. Farmers’ incomes

would rise. Electricity would be provided for agriculture in the day and that too at

a lower cost. For all new investment in generation, be it below 1 MW for a feed-in

tariff, or, for a bid for supply for large capacities, a credible power purchase

agreement with the distribution company for at least the duration of the loan for

the generation project is an essential prerequisite. This could be put in complete

jeopardy if the separation of carriage (the wires business) and content (the supply

business) is attempted through an amendment in the Electricity Act.

There would then be no distribution company to assess demand growth, ensure

reliability of supply and the transition to renewables. The anchor of the distribution

company is essential. The major cost of electricity consumed is in generation. India

has benefited considerably from competition in generation through the Electricity

Act. The benefits of retail competition, where it has been introduced in the

developed world, have been at best marginal. What is usually not appreciated is

that retail competition was first introduced only in the 1990s in the UK when

demand had stopped growing. India, on the other hand, needs to quadruple its per

capita consumption. To summarise, India needs to first restore the financial health

of the power sector. It must also avoid the counter-productive shock of attempting

separation of carriage and content in electricity. It should be getting all its

75

households to use clean cooking energy in the next few years by subsidising the

poor directly or through cross-subsidy. And, it should have the ambition of being a

global leader in the transition to renewables by taking their share in generation to

50 per cent. All this is feasible.

*****

How Selco Solar is helping create livelihoods for people in

Karnataka

Laptop printers may not be directly connected to solar energy. However, solar

energy is one of the main reasons petty shops in rural areas are installing laptop

printers to make photocopies. Also, production of traditional earthen pots may be

on the decline in many parts of the country. However, a solar-powered potter’s

wheel is helping revive this profession in some areas of the country. These

products, along with others such as solar-powered milking machines, roti rollers

and sewing machines are helping Selco Solar Light quietly script a change in the

lives of micro entrepreneurs in Karnataka. Guruprakash Shetty, Assistant General

Manager of Selco Solar Light Pvt Ltd, told BusinessLine that Selco has come out with

such solar-powered solutions to help generate more than 60 livelihood options.

Selco Solar, a social enterprise, is observing a ‘livelihood month’ (from December

19 to January 20). Some of the solar-powered livelihood solutions include sewing

machines, blowers for blacksmiths, rope-making machines, roti-rolling machines,

milking machines, salon trimmers etc. These solutions have been designed to meet

the requirements of the region/profession in a cost-effective manner. Citing the

laptop printers, he said many petty shops in rural areas have installed these printers

for photocopying work. Regular photocopiers require a huge investment and

regular maintenance; which micro entrepreneurs cannot afford. Moreover, these

76

photocopying machines have to be run on generators when there is a power cut.

The laptop printers have proved to be a cheaper option for micro entrepreneurs.

Indeed, this solar-powered livelihood option is among the most sought-after

options in rural areas, said Shetty. Around 480 persons have benefited from solar-

powered laptop printers in rural areas over the 2-3 years. Of them, nearly 150 took

up this option during the ‘livelihood month’ campaign that began on December 19.

Roti roller- Selco Solar, in association with Karaseva (a student NGO of the

Mangaluru-based Yenepoya Medical College), is also assisting a government

Kannada-medium school in setting up a roti-rolling machine. Parents of a couple of

students studying in the school are being trained in roti rolling. By installing the

solar-powered roti-roller in the school, Selco has provided another technology-

backed livelihood option. Stating that the market is also assured for rotis prepared

in the school, he said canteens of the medical college hospitals, around 15 km from

the school, will be the main customers for the rotis. Though rotis are not the staple

food of coastal Karnataka, medical college hospitals in the vicinity get numerous

patients from northern Karnataka, accompanied by family and attendants. Roti is

the staple food of many people in this region.

Shetty said the most preferred livelihood options are solar-powered laptop

printers, milking machines, roti rollers, and sewing machines. Stating that the

‘livelihood month’ campaign has been getting good feedback, he said it has helped

generate 434 employment avenues until now. A total of 1,000 new employment

avenues are likely to be created during the month, as many of these options are in

various stages of implementation, he said. Shetty says Selco Solar will not stop with

these 60-plus solar-powered livelihood options — the target is to come out with a

new option every month.

*****

Clean power push: Govt. adds over 50,000 MW in 5 years

The renewable energy sector has made rapid strides under the Modi government

with 50 GW plus of new capacity coming into the grid in the last five years. This is

despite the doubts being raised over the government’s target of achieving of 175

GW by 2022. The December quarter of 2019 saw India’s cumulative clean energy

capacity cross 85,000 MW, of which more than 50,000 MW of new capacity

addition was achieved in the past five years. As on December 31, 2019, the total

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grid-connected installed renewable power capacity in India stood at 85,908 MW,

aided by support of several policy measures in recent years, according to Ministry

of New and Renewable (MNRE) energy data. Five years ago, India’s cumulative grid-

interactive clean energy installed capacity was about 33,792 MW. Though the wind

segment is still leading now with a total installed capacity of 37,505 MW as of

December 31, 2019, solar is fast growing and is likely to overtake the wind sector

in the next fiscal. The solar segment’s (which includes ground-mounted and

rooftop) total capacity was 33,730 MW as of December 2019. To achieve the 175

GW target by 2022, the sector has to set up 90 GW capacity.

Concerns and issues- However, industry analysts have warned that capacity

additions in renewable energy may fall short of the 2022 goal due to headwinds

facing the sector. A couple of months ago a Crisil report stated that tariff caps

should be relaxed to improve the viability and attract new players. Also, it

underscored the need for a consistent and stable policy environment, especially as

prolonged disputes can hamper the projects’ debt-servicing ability, impacting

player-level interest and denting investor confidence. More cooperation between

the Centre and State authorities was sought with a mutual resolve to promote clean

energy, given that it now costs significantly less than conventional power. ICRA

recently revised the year-end outlook for the renewable sector recently from stable

to negative due to delays in payments from Discoms, execution delays on account

of challenges in land acquisition and availability of evacuation infrastructure,

among others.

Growth continues- But amid such concerns, the capacity addition in the clean

energy sector continues to grow. During April-December 2019 period, the

renewable energy segment added 7,592 MW of new capacity when compared with

5,002 MW of new capacity in the year-ago period, an increase of 52 per cent. The

solar energy segment continues to be the key driver of new capacity growth with

an addition of 5,013 MW of new capacity through ground-mounted projects and

537 MW of capacity by way of rooftop projects. The wind sector doubled its

addition to capacity at 1,879 MW when compared with 993 MW. The MNRE has

fixed a total capacity addition target of 11,802 MW for 2019-20 (15,602 MW in

2018-19) and solar is expected to be the highest contributor with about 8,500 MW

(ground-mounted 7,500 MW and rooftop 1,000 MW), followed by wind (3,000

MW), biomass (250 MW) and small hydro (50 MW). Though ICRA has estimated

total capacity addition in the range of 8.5-9 GW for this fiscal, the sector may

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achieve more given the trend in recent years when most of the capacity addition

happened during the last quarter. Also, it has achieved more than 7.5 GW in the 9-

month period itself. Brushing aside all criticisms, the MNRE has said the

government will achieve its ambitious targets, saying that 37 GW worth of projects

are in the implementation stage, while another about 30 GW worth projects have

already been tendered out.

*****

Renewables look for project push

As India works towards achieving various Sustainable Development Goals (SDGs)

by 2030 and meet commitments under the Paris Agreement, energy efficiency and

renewables become key factors. At a recent meeting of BRICS energy ministers, it

was disclosed that India has an installed capacity of 83,000 MW and about 31,000

MW is under execution; a capacity of about 35,000 MW is under the bidding

process. Along with an installed capacity of about 45,000 MW of hydel power and

another 12,000 MW under construction, India has the potential to cross the

2,00,000 MW of renewable energy capacity, thereby surpassing the target set for

2022. This is significant as the government had set a total renewable installation

target of 175 giga watts (GW) by 2022 and as of mid-2019, the total renewable

installed capacity is nearly 80 GW and projected to soon cross 100 GW.

Wind, solar scene- According to a mid-year review by the Central Electric Authority,

solar and wind power generation capacity is expected to constitute about 440 GW

watts of the total expected/projected capacity of 831 GW by about 2030. As against

72 per cent of the current power generation coming from fossil fuel power

generation plants, by 2030 it is expected that renewables would contribute nearly

79

50 per cent of total generation capacity. While there have been headwinds for wind

energy, solar power generation too faced numerous problems, including dumping

of solar modules from China and other markets, and issues of payments and

defaults by discoms There is some sort of parity in terms of costs when one

evaluates renewable energy projects and fossil fuel projects. The cost has

progressively come down to ₹2.40-₹2.50 per unit. Even if one were to peg it at, say,

₹3 a unit, it works out to just about the same that fossil fuel power costs. The

current electric grid manages total installed capacity of about 362 GW, with

renewables at 82.5 GW, accounting for about 23 per cent of total installed capacity.

India needs to take up development of renewable energy in a concerted manner

and push implementation of projects.

*****

Brookfield, Actis Eye Acme Solar Assets

Bulge-bracket global investors, including Canada’s

Brookfield and the UK’s Actis, are in separate

discussions to acquire some solar energy assets from

Acme Cleantech Solutions, a cash-strapped Indian

power producer. Acme has 2.5 GW of operational

assets and 3 GW under construction. Although Acme

does not want to totally exit the business, selling a

part of its portfolio of around 300 MW will help fund

additional capacity and pay off debt obligations. In

2017, Piramal Finance Ltd, a subsidiary of Piramal

Enterprises Ltd, sanctioned ₹700 crore in debt to

Acme Solar. This line is expected to be due shortly, a

person aware of the proposed sale process told ET. Acme, Brookfield and Actis

declined to comment. The ₹1,200-crore likely deal would be Brookfield’s second

buyout in India’s clean energy space. At present, Brookfield has a total renewable

portfolio of 510 MW here. It is a leading global investor in renewable power, with

18,000 megawatts of generating capacity and $47 billion worth of assets under

management. Actis, which has a strong presence in the Indian renewable energy

space through its platform Sprng Energy, plans to acquire Acme assets through its

global infrastructure vertical, said an industry source aware of the negotiations. Its

infrastructure vertical in India is headed by Sumit Sen, former executive director

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with the Goldman Sachs Principal Investment Area and a key man behind GS’

investment in Renew Power. Earlier, Actis was in talks to buy solar assets of

debtladen Essel Infraprojects Ltd, although the discussions didn’t result in a

purchase. The assets were sold to Adani Green Energy later. Sprng Energy has a

capacity of 750 MW (AC) solar projects, 797 MW of wind power projects under

execution and 194 MW (AC) solar projects under operation, totalling 1.7 GW in

India. The government has a target to add 175 GW of renewable energy into the

grid by increasing solar power generation to 100 GW and wind to 60 GW by 2022,

and the rest through small hydropower and biomass-based projects. Tapping the

potential in the clean energy sector, global and domestic investors have been

looking at M&As. However, the renewable energy sector has been facing multiple

challenges due to regulatory hurdles and lower tariffs. There are long delays in

payments by state distribution utilities, execution delays for projects bid out over

two years due to completion issues, land acquisition difficulties, and transmission

connectivity and financing challenges, said a December report by ICRA.

*****

NTPC to be consultant for 300-MW solar power projects in

West Africa

NTPC will be the Project Management Consultant (PMC) for the development

of about 300 MW solar power projects in Togo. An official statement said that

a letter of engagement for the same was handed here on Tuesday by Togo

government’s representatives to NTPC.

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Minister of State (Independent Charge) for Power and New and Renewable

Energy, RK Singh said that RE projects offer cheaper power. “This resource must

be harnessed by ISA member countries as RE makes it possible to supply

electricity to people living in far flung areas through distributed power supply

model,” he said.

ISA members

Togo is a Member of the India and France led International Solar Alliance (ISA)

and is the first to avail NTPC’s services.

“NTPC had submitted a proposal to ISA requesting endorsement of ISA to

Member Countries to give Project Management Consultancy (PMC) to the

member countries for implementation of solar projects. As per NTPC’s

proposal, in ISA member countries where solar Projects are implemented

through competitive bidding, NTPC may act as a project Management

Consultant (PMC),” the statement said.

It added, “NTPC will carry out various activities for selection of Solar Project

developers (SPDs) on competitive basis for setting up Projects on ownership

basis and enter into Power Purchase Agreement with government-designated

entities.”

“The scope of PMC includes presentations to the concerned ministries and

other stakeholders in ISA countries for structuring of projects, assistance to

bring out enabling policy and regulatory framework for competitive

procurement of solar power, bid process management for selection of Project

developers on competitive basis, among others,” the statement added.

In February 2019, BusinessLine reported that NTPC is eyeing nearly 1,000 MW

of solar power projects in Africa through the ISA. This push for overseas projects

is in line with the NTPC’s strategy to gain from the $1-million contribution it

made to the ISA fund corpus last year.

*****

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Renewable energy start-up Carbon Masters receives second

round of funding

Complete end-to-end waste management solutions provider Carbon Masters has

started making waves by changing the way we look at waste and driving the ‘Clean

India, Clean Energy’ movement. This Bengaluru-based renewable energy start-up,

which has pioneered the development of India’s first bottled bio-CNG (compressed

natural gas) under the brand ‘Carbonlites’ has received a top-up investment of ₹3

crore. Carbon Masters is the brain-child of Som Narayan and Kevin Houston. This

investment was led by Native Angel Network, the investment arm of Nativelead,

with earlier investors Indian Angel Network, clean-tech VC Sangam Ventures and

other board members joining the round. Nagaraja Prakasam, founder-Chairman,

Nativelead, who is a lead investor and board member of Carbon Masters, told

BusinessLine that the investment reflected Nativelead’s commitment to support

ventures that focus on sustainability.

“Dumping of waste is a huge menace, be it at street corners or dump yards. If only

this could be segregated, treated and converted into renewable energy, it would

help tide over several problems. This is exactly what Carbon Masters is focussed

on, in their quest for a ‘Clean India’”, said Prakasam adding that “the daily

generation of wet waste is estimated at over 1.60 lakh-tonnes.”

After seeing the growth potential of this clean energy venture, Senthil Sankar of

Nativelead Karur Chapter has made investment of an undisclosed sum in the

second round of funding.

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Railway gives push to green energy projects

The Railways is accelerating its efforts to install and use renewable energy as part

of its objective to reduce carbon footprint and reduce its power costs. It aims to

source about 1,000 MW of solar power and about 200 MW of wind power by 2021-

22. Currently, it consumes 200 MW of clean energy. The Railways’ total power

requirement is estimated at about 2000 MW. Railways is working on solar rooftop,

ground-mounted and wind power projects on railway buildings, stations, hospitals

and vacant railway land lying with different zones. The renewable energy projects

are being implemented by the Railway Energy Management Company Ltd (REMCL),

a joint venture of Indian Railways and RITES Ltd.

Solar rooftop- Railways is planning to install 500-MW solar plants on the roof top

of railway buildings through the public-private partnership mode with 25-years

agreements, which will be used to meet non-traction loads at railway stations. Of

this, 96.84 MW of solar plants have already been installed and 16 stations have

been declared green railway stations across zones. These green stations meet their

entire energy needs either through solar or wind power. Work is in progress in

about 111 MW Solar plants, while tenders for 93 MW solar plants have recently

been awarded by REMCL. It has also floated tenders for 45 MW rooftop solar

capacity. The remaining 154 MW is under different stages of planning, according to

an official document.

Land-based solar projects- Railways is also planning about 500 MW ground-

mounted solar plants to meet traction and non-traction requirements. Of this

about 3 MW has already been installed at the Modern Coach Factory, Rae Bareilly.

A 50 MW solar power project on a 300-acre vacant railway land in Bhilai,

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Chhattisgarh is being installed and is expected to be commissioned by March next

year. Railways is also planning to source power from the upcoming solar park in

Madhya Pradesh which is being developed by Rewa Ultra Mega Solar (RUMS) Ltd,

a joint venture between Solar Energy Corporation of India and Madhya Pradesh

Urja Vikas Nigam Ltd. The proposed capacity of the solar park will be 1500 MW and

of which 400 MW will be supplied to the Railways in Gujarat, Maharashtra,

Rajasthan, UP-ISTS (interstate transmission system), UPSTU, Haryana, Jharkhand,

DVC and Bihar. The power from the solar park will be supplied under optimum

scheduling method and limited to 207 MW (equivalent to 400 MW solar plant

capacity). This proposed state-wise distribution of solar power will help the

Railways meet its Solar Power Obligation targets, according to the latest annual

report of REMCL. REMCL has floated tenders for two hybrid plants (solar + wind) of

140 MW (35 MW solar + 105 MW wind) and 109 MW (27 MW solar + 82 MW wind)

capacity.

Wind power- In the wind energy sector, the Railways has already installed 103.4

MW of the targeted capacity of 200 MW. Windmill plants of 21 MW (for non-

traction) capacity in Tamil Nadu, 26 MW (for traction) capacity in Rajasthan, 6 MW

(for non-traction) and 50.4 MW (for traction) capacity in Maharashtra have been

installed.

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IIT Bombay efficiently removes heavy metals from water

Simultaneously removing heavy metals such as arsenic, chromium, cadmium and

mercury from waste water with very high efficiency now appears possible, thanks

to the work of researchers at the Indian Institute of Technology (IIT) Bombay. The

carbon-based nanostructure that the team fabricated shows 80-90% adsorption

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efficiency for all the four heavy metals studied. No electricity is required for the

nanostructure to remove heavy metals from water as it allows for gravity-driven

purification of the water. The nanostructures can be recycled and reused multiple

times. While there is an initial drop of about 8% after the first cycle, the efficiency

remains constant at 75-85% in the subsequent cycles. The carbon nanostructure is

able to adsorb the heavy metals in the wide range of pH conditions — pH 2 to 13.

The results were published in the journal ACS Applied Nano Materials.

To fabricate the carbon-based nanostructure shaped like a marigold flower, the

team led by Chandramouli Subramaniam from the Department of Chemistry at IIT

Bombay used dendritic fibre nanosilica spheres as template. The nanostructure is

obtained through a single-step process of chemical vapour deposition followed by

removing the silica template.

Marigold-like structure- “What we get is a marigold-like nanostructure made of

carbon that has high specific surface area, optimal porosity and pore volume. The

nanostructure has 15-20% micropores (less than 2 nanometre) and 80-85%

mesopores (2-50 nanometre),” says Prof. Subramaniam. “The reason it shows very

high adsorption efficiency is its hydrophilic [water-loving nature] nature that allows

for extensive and rapid interaction between the heavy metal-containing water and

the carbon nanostructure.” Also, unlike activated carbon, the surface area of our

nanostructure is easily accessible for heavy metals. So the adsorption is high.

When the water containing the heavy metals comes in contact with the

nanostructure, majority of adsorption first takes place in the micropores. “It is

energetically more favourable for the heavy metals to bind to the nanostructure in

the micropores. Once the micropores get saturated then the heavy metals are

captured by the mesopores,” says Maku Moronshing from IIT Bombay and one of

the first authors of the paper. For the four heavy metals to get adsorbed on the

nanostructure the water has to be in contact with the nanostructure for at least 32

seconds. The team used a 1 cm long column of the nanostructure to make sure that

minimum contact time is maintained.

Recovering heavy metals- “Since the heavy metals chemically react and bind to the

surface of the nanostructure, they do not leach back into the water. They can be

recovered by treating the nanostructure with mild acid (hydrochloric acid and nitric

acid),” says Ananya Sah from IIT Bombay and the other first author of the paper.

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“The heavy metals have greater affinity for acid and so they leach out into the acid.

This allows us to reuse the carbon nanostructure multiple times,” says Prof.

Subramaniam. There is about 10% drop in efficiency after the first cycle as the

metals trapped in the micropores do not get leached out when treated with acid.

But there is complete recovery of metals trapped in the mesopores.

The team tested the ability of the structure to adsorb heavy metals in industrial

effluent over a range of pH conditions (pH 2-13). The industrial effluent was

simulated by mixing 100 ppm of each metal. “Adsorption was as effective as the

test case for all the four heavy metals. At very acidic pH of 2, some metals did not

get adsorbed. But between pH 5-10 the adsorption was very good for all the four

metals,” he says.

Most of the adsorbents known are effective against either one or two heavy metal

ions. Even the chemisorptive scavenging ones need to have longer treatment

column as they need to be multifunctionalised adsorbents. Also, the inlet pressure

has to be more. However, the carbon nanostructure was able to scavenge all four

metals simultaneously without the need for these.

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Coal India’s Double-digit Output Growth to Shore Up Stocks

at Power Plants

Coal India’s output grew in double digits for the first time in this financial year this

month, a development which will allow it to increase fuel stocks at power plants to

last up to 30 days and fully meet the requirement of customers in other sectors by

March. The state-run miner’s output increased 10.7% year-on-year this month

while supplies grew 6.2%. It produced 54.17 million tonnes (mt), or 2 mt a day, until

January 27 and supplied 48.07 mt of coal.

“After almost three years, no NTPC or NTPC’s joint venture plants have super-

critical stock,” said a Coal India executive, who did not wish to be identified. “There

is no shortage of coal.”

Total coal stock at pit heads has increased to 31.41 mt while power plants have

34.25 mt of coal, enough for 19 days, because better management of supply

logistics ensured that coal stock at various power stations was maintained

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throughout the year, said the Coal India executive. Production increased mainly

because Mahanadi Coalfields increased output 21.5% and South Eastern Coalfields

registered a 14.4% growth. With power plants sufficiently stocked, Coal India was

able to liquidate more than 78% of pending supplies to the non-power sector

pertaining to 2017-18 and 2018-19. It quantifies pending volumes in terms of rakes,

or number of goods trains required to send the coal. Beginning with 5,143 pending

rakes as of April 1, 2019, the miner brought down the number to about 1,116 after

clearing 4,027 rakes. It is hopeful of clearing the rest by the end of this fiscal, said

the executive cited earlier.

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