Lydia Powell, Akhilesh Sati and Ashish Gupta, Observer Research Foundation
Oil & Gas
Energy cooperation is among the many items that is listed as a strategic issue for discussion when Indian leaders visit other countries that either have energy, energy technology or just a fat purse. The visit of the Prime Minister to Iran is not an exception. Iran is among countries that have a long and positive energy history with India and so the anticipation on energy benefits that are likely to flow through a renewed relationship with Iran filled the pages of the print media. It is difficult to highlight the benefits of cooperation in a world that is run primarily on commercial terms that do not necessarily place a value on cooperative friendship. However all are entitled to optimism and hope. For his part the Minister of Petroleum declared that India will slowly move towards becoming an oil economy. Among other issues that was reported was the issue of settling $6.4 billion due to Iran towards oil imports through European banks. Out of this MRPL alone is said to owe Iran over $2 billion. In domestic news there wasn’t much to report on except the fact that the promise of a level playing field by the new Director General of Hydrocarbons. The commerce Minister declared that Petrol prices were slashed 32 times and hiked only 21 times probably to show that this government has decreased the prices more than it has decreased prices or to show that volatility in prices were on account of the market. State elections and the announcement of prohibition by many potential rulers of States is reported to be a benefit to the oil industry which has not been able to meet the target on ethanol blending. Not many are convinced that the oil industry was waiting for its quota of booz.
The Cabinet Committee on Economic Affairs, chaired by the Prime Minister was reported to have approved the Pradhan Mantri Ujjwala Yojana scheme for providing free LPG connections to women from BPL Households. Rs 8000 crore is said to have been earmarked for providing 50 million LPG connections to BPL households. A financial support of Rs 1600 for each LPG connection to the BPL households is reported but it is not clear if this is for the stove or for the LPG. Curiously this newsletter made a plea to state governments and the Central government that India’s daughters need a dowry of LPG connections and not clean cook stoves in an article dated published in 20 November 2015 (ORF Energy News Monitor Volume XII, Issue 23). The point made by the plea was that if you want to give away something for free let it be LPG and not a clean cook stove. We are grateful that our recommendation has been converted into policy in a matter of months!
Coal & Power
Thus far 35 Schedule II coal blocks have been auctioned under the provision of the Coal Mines (Special Provisions) Act, 2015. 10 coal blocks have commenced production as mine opening permission has been granted. The rest of the 25 Schedule II coal blocks are in the process of starting mining operations after obtaining necessary statutory clearances as well as appointment of mining contractor. How many coal blocks will sustain production given the cap on output price is not clear.
As most companies have lost interest in coal block auction the coal Ministry is trying to hold coal linkages auction for the non-regulated sectors such as cement, steel/sponge iron and aluminium with a view to encourage off-take. The ministry is said to be hopeful that there will be demand of coal from the steel sector because duties have been imposed by the government on imported steel. But given the falling imported coal prices it is not clear if this auction process will bring intended benefits.
The ministry also passed an order directing Coal India to provide full quantity of coal committed to the power plants under Fuel Supply Agreement. This move appears to be driven more by the need to reduce stock piles of coal rather than the need to enforce contractual terms on CIL.
The Coal Ministry also launched a portal for Contract Labour Payment Management. The web portal has been created for monitoring compliance of labour payment and other benefits to the contract workers under the Contract Labour (Regulation & Abolition) Act, 1970. The system has in-built mechanism to validate minimum wages paid, generate wage slips and employment card etc. of contract workers as required under the Act. The portal provides access to all contract workers, through a Workers Identification Number (WIN), to view their personal details and payment status. The move will enhance proper monitoring of legal compliance under Contract Labour (Regulation & Abolition) Act, with regard to the payment of correct wages to the contract workers and PF deductions and deposit and other statutory obligations. The opening of NTPC’s Pakri-Barwadih coal mining project after a series of hurdles was an important development reported in May.
In the power sector soaring demand for power in Delhi which crossed a new high of 6000 MW in May was widely reported. Soaring temperatures and the growth in the number of air conditioners must be behind this figure as most of the electricity demand in Delhi comes from homes and businesses (as opposed to industries). The possibility of a penalty for power outages that last longer than 2 hours by the Delhi government was reported.
In the renewable sector the news was mostly optimistic with new projects being initiated almost on a daily basis. On a more realistic note Bridge to India which tracks the solar industry observed that solar manufacturing was yet to take off in India. The biggest roof top project in the world is said to be launched in Punjab. More importantly India was declared as the biggest solar energy lab in the world.
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