Government moves to fix energy sectors problems

Written by fe Bureau | New Delhi | Updated: Jun 21 2014, 06:38am hrs
The government on Friday took stock of an energy sector fraught with issues of clearances and pricing bottlenecks and came out with a short-term plan to boost coal output prompt environmental clearances for additional mining from existing Coal India mines and diversion of e-auction coal to power producers needing the fuel urgently to augment generation.

Taking an expedient and investor-friendly decision on the issue of natural gas price, a revamped public-private partnership model for the coal sector and building rail connectivity to coal-bearing areas in northern and central India also figured prominently in a series of meetings on the energy sector on Friday.

While PM Narendra Modi discussed energy-related issues with petroleum minister Dharmendra Pradhan and coal and power minister Piyush Goyal, Goyal had earlier met heads of PSU and private power companies on issues concerning the sector.

The coal ministry is also set to commence the auction of 14 captive coal blocks with about 8.3 billion tonnes of reserve that could fire nearly 30,000 MW of power capacity. But Goyal has made it clear that the government has no plans right now to break up or restructure CIL.

We've taken certain decisions in terms of requesting the environment ministry to allow additional mining for the coal mines which are already operational, Goyal said. He added that power projects which are in position to start generation should be given coal first.

In many cases, existing coal mines require further green clearances to expand the mining area and raise output. The idea is to provide these approvals to a large number of such mines to jack up output within a short span of time. CIL, which accounts for 80% the country's coal output of 563 million tonnes, has recurrently failed to meet its production targets, leading to the country's increasing reliance on expensive imported coal. We hope that a good amount of additional coal can be mined at least as an interim measure for a few years till we are able to sort out the problem which the sector has faced over the last five to six years, Goyal said.

Anil Ambani, Gautam Adani, Naveen Jindal, Prashant Ruia and Tulsi Tanti were among the industry leaders who called on the power minister. They apprised him of the prevalent fuel crisis, transmission bottlenecks and also environmental and land acquisition hurdles. These heads of private power companies along with Goyal later met finance minister Arun Jaitley and discussed issues including taxation, sources said.

CIL has already identified projects that could be offered under PPP for development. The coal ministry, sources said, is working on the model concession agreement for engagement of mine developer-cum-operator (MDO) for these projects. In the power sector, the PM is learnt to have been informed about the need to relax the bidding conditions for two new ultra mega power projects in Tamil Nadu and Odisha.

In the meeting with Modi, Pradhan is learnt to have highlighted the pending decision of new gas prices, the impact of the turmoil in Iraq, issues with various states and the road map for increasing domestic production of oil and gas.

The UPA government failed to implement the new pricing regime based on the Rangarajan formula as the Election Commission played spoilsport. Had the decision been implemented, the gas price would have nearly doubled from $4.2 per million British thermal units now to $8.4per mBtu.

The oil ministry has drawn a blueprint to accelerate oil and gas exploration in the country. As reported by FE earlier, the next round of auctions under the New Exploration Licensing Policy would be done only after making the terms more attractive to investors given that the past nine rounds have failed to augment the country's oil and gas output significantly.

It has been observed that there is lack of flexibility in several timelines prescribed in the production-sharing contract (PSC) regime. Such rigidity in the PSC provisions is jeopardising the objectives of E&P, and thereby undermining the energy security of the country, a senior petroleum ministry official told FE.