RAMESH PATHANIA/MINT

GOING CRITICAL

KEEPING THE LIGHTS

FROM GOING OUT

T
he current state of the Indian energy sector is a story that has
many parts. On the power side, it marks the triumph of the private
sector’s tenacity to set up generation capacities and reach out to an
enormous market suffering under outages and thirsting for electricity.
But it’s also about the failings of the Centre and the states to make the
power sector viable even after 10 years of reform initiatives. All the
stakeholders are walking on thin ice. Will the reforms deliver results
before there are casualties? These and other questions are covered in
the first article in this comprehensive Mint Report on Power by
Balaji Chandramouli.
While renewable energy is viewed as “infirm” power, it’s nevertheless
gaining ground in India. The section on renewable energy explores the
issues that govern its viability, the difficulties involved in setting targets
that are too high, and the problems associated with harnessing the sun
and the wind.
While oil and gas exploration initiatives were launched with high
expectations, India seems to be back at square one as far as that
endeavour is concerned, says the next story.
In conclusion, the report looks at retailing, which has been marred by
populism for decades. And though the government has become gener­
ous with using the D­word (deregulation), there is little conviction
behind this. In the case of the gas distribution sector, the problem of
shortages has been compounded with the government deciding on its
pricing and allocation. We find out what it means and how it will play out.
([email protected])

CLOSING THE CIRCUIT THE SUN, THE WIND

The deteriorating health of state Good intentions are one thing,
utilities hasn’t put off private but harnessing solar and wind
sector power producers >E02 power will take some doing >E05

THE OIL, GAS HUNT THE RIGHT RATE

India’s experience with oil and Political considerations have by
gas exploration has been mixed and large been responsible for
so far. What of the future? >E07 dictating fuel prices >E10
 BLOOMBERG

Facing challenges: Cooling towers

at NTPC’s power station in
Dadri, Uttar Pradesh.

LEAP OF FAITH

MAKING THE CONNECT

The health of
state­owned
distribution utilities
I n late July, Prime Minister
Manmohan Singh sounded
an alarm for the power sec-
tor. He cautioned that the state
worked.
All this created momentum
for Union government inter-
vention in state power sector
is deteriorating, but utilities’ financial health was reforms. In 1998, Central legis-
deteriorating, dragged down lation led the way for the states
that hasn’t discouraged by the low tariffs for certain and the Centre to set up regu-
private sector power consumer segments (read: lators. This set the tone, for it
producers. They are farmers), losses in the supply
of power (transmission and
allowed transparent tariff set-
ting, key to restoring the finan-
betting on the future, distribution, or T&D) and pay- cial health of the utilities. In
hoping the state units ment of bills (commercial loss- 2002, Central funds began
es). It wasn’t the first time such flowing to states as part of the
will fix themselves a warning was being delivered. Accelerated Power Develop-
They are, in fact, voiced at reg- ment and Reform Programme
ular intervals but with little ef- (APDRP). Over the next five
fect. Electricity is a concurrent years, around `14,000 crore of
subject, with the Centre having taxpayer money went towards
no role in the distribution of improving power distribution
power to consumers. infrastructure.
Moreover, it can hardly It helped. The government
claim the moral high ground said country-wide average
on the ills of populism. In the losses dropped from 38.86% to
petroleum sector, where its oil 29.24% between 2002 and
companies control 95% of 2007, but they were nowhere
sales, the Union government close to the target of 15%. It
last year provided subsidy sup- was only in 2007 that the Un-
port to the tune of around `1 ion government realized things
trillion, two-and-a-half times had gone wrong. They had
the losses that the states are gone about investing in the
likely to notch up this year. states without any credible
There are, however, a few fun- baseline data on the state of af-
damental differences. Oil com- fairs in the distribution busi-
panies are partially insulated ness—data that would have
from this burden by way of pinpointed the leakages in the
IOUs from the Union govern- supply wires. To that extent,
ment that are tradable in the the investments weren’t direct-
market, for the issuer is finan- ed with precision. It isn’t just a
cially well off. However, the matter of data collection but
states’ financial health can also that of reporting it, an
hardly support this profligacy; area of concern since the state
not now, or over the last three power agencies don’t have a
decades that this has been per- good record on this. Until the
petuated in terms of offering early part of the decade, they
free power to farmers or starv- passed off theft as agricultural
ing the utilities of funds for the consumption, a practice that
upkeep of the distribution net- was curbed only after the Elec-
work and for augmenting pow- tricity Act, 2003, nudged them
er capacity. The resource to “unbundle” the state’s elec-
squeeze finally led to the states tricity business into separate
inviting private companies to entities for generation, trans-
enter the generation business mission and distribution.
AHMED RAZA KHAN/MINT
in the 1990s. The lack of credible baseline
Most of these could hardly Finance Corp. Ltd (PFC) had in Maharashtra. confidence in the state govern- data was one of the key rea-
move forward, as the lenders already laid claim to it, in the Around this time, the Union ments, let alone their power sons for the failure of the Oris-
began to apply the brakes from event of default on their loans. government performed anoth- sector. In the event of a de- sa distribution privatization
early 1999. They argued that The reticence to lend was as er bailout. It allowed a one- fault, the deal allowed the programme. Launched in 1998,
the utilities charged tariffs that much about fear as the convic- time settlement of hefty dues Central power companies to as a part of the country’s first
hardly met costs; they received tion that investments needed owed by the state utilities to lay their hands not only on the state reform programme, the
payments for only half the to be secured. By the end of Central sector power compa- state’s Reserve Bank of India World Bank-funded initiative
power they sold, while the rest 2001, public sector financial nies such as NTPC Ltd and account, but also claim first assessed losses at a mere 35%,
were lost to theft or losses due institutions were in the middle NHPC Ltd. While past dues rights on resources that de- while in reality they were as
to the dilapidated distribution of Union government-bro- were liquidated at a discount, volved from the Centre to the high as 47%. To that extent, the
networks that required funds kered negotiations that finally future payments on the sale of state. That it was never in- state power regulator did not
for restoration. For the reve- led them to absorb losses on power were secured with iron- voked is another matter, but allow tariff revisions and end-
nues that were flowing in, ex- the loans given to the belea- clad guarantees, reflecting the NTPC did issue a few threats in
isting lenders such as Power guered Dabhol power project prevailing sentiment—a lack of the initial years and they TURN TO PAGE E3®
® FROM PAGE E2 effect it has had on private sec-
tor interest in the generation
ed up choking private compa- business cannot be denied.
nies, BSES Ltd and the US- With the planning process
based AES Corp., the second of working in five-year cycles, the
which quit in 2001. government expects
The correction in the Cen- 62,000MW of generation ca-
tre’s reform programme was fi- pacity to be added in the 11th
nally made in July 2008, with a Plan period (2007-2012), thrice
decision to invest `10,000 that added in the previous
crore in automated informa- five-year plans.
tion technology (IT) systems to The ownerships profile of
wire up the power networks in this fresh capacity shows a
towns having a population sharp rise in private power
larger than 30,000. The roll-out generation—four times that in
of this “investment torch” is the Ninth Plan, which has had
expected to commence only the best performance since
towards the end of this year. power was opened up to the
However, even this delayed private sector, and nine times
approach by the Union gov- the addition in the previous
ernment may not be good Plan period. Indeed, major
enough to stave off the crisis lenders such as PFC are bet-
brewing in the state power sec- ting big on private generation
tor. On the surface though, projects, not only now, but in
things look fine: State power the future as well. In the cur-
utilities aren’t defaulting on rent Plan period, the private
payments to power producers. power portfolio is expected to
Not one but two power ex- be around 23% of their lend-
changes have been set up and ing; this is projected to vault to
both function smoothly with Meeting demands: The Nava Bharat Ventures Ltd power plant at Palavancha in Kammam district of Andhra Pradesh. over 60% in the 12th Plan peri-
buyers and sellers doing brisk od.
business in short-term trades There is no respite from the es soar. Its neighbour Mahar- higher voltage. The political states as part of its reform ini- PFC has relaxed some of its
without any defaults. And, pri- farm segment either. As many ashtra, on the other hand, fac- yield on this technical invest- tiative, in which it expects to strict terms since the two bail-
vate sector companies are as three states—Tamil Nadu, es the wrath of the populace ment is significant, perhaps as spend around `50,000 crore outs in the early part of this de-
keenly responding to the Punjab and Karnataka—give despite the fact that overall much as that gained by offer- during 2007-2012, which in- cade—the Dabhol buyout as
states’ request for large-vol- free power to farmers, while power shortages are lower. ing free power to farmers. cludes the `10,000 crore IT well as the settlement of dues
ume, long-term power pur- the tariff for farm power in This is because Gujarat invest- It is only now that states programme—this is over three owed by state distribution util-
chase deals. A study by Prayas Andhra Pradesh is near zero. ed in a separate feeder net- with large agriculture loads times what the Union govern- ities to Central generation
Energy Group, a not-for-profit In 2008, on a countrywide ba- work to supply farmers power such as Andhra Pradesh, Pun- ment spent on state reforms in companies. It no longer insists
organization, reveals as much sis, utilities sold 28% of their for domestic use. As a result, jab, Haryana and Maharashtra the previous five years. on state government guaran-
as 41,000MW of private power power to the farm segment, in Gujarat’s farmers don’t flare are making large investments tees on power sales. While
is in the process of being con- return for which they received up when the ambient tempera- in the creation of separate The supply fix there are serious doubts about
tracted by states. 6% of their total revenues. In ture rises. Besides, they get feeder lines. Taking a cue from While the reduction in dis- the utilities’ quality of assets,
But there’s enough rot under effect, on an average, a utility better quality farm power this, the Union government is tribution losses over the last be it the revenue stream pro-
this veneer for the policy man- loses around a rupee for every since, given the separation, the exploring the possibility of decade is anything but impres-
darins at the Planning Com- unit of power it sells. In other farm feeder is energized at a funding such programmes in sive or accurate, the salutary TURN TO PAGE E4®
mission and the power minis- words, the more power the
try to wonder: Is India going to utilities sell, the more they
have another bailout in the lose. This equation might now
next few years? begin to hurt like never before.
Consider this: Over the last The Union government esti-
three years, there have been mates that the country will add
virtually no tariff hikes in most around 43,000MW in the next
of the states despite rising two years, as much as what has
power production costs. The been added in the last eight
regulators have not allowed years. What aggravates this sit-
hikes citing one reason or the uation further is the renewed
other. This may have some- pace of the Union govern-
thing to do with the appoint- ment’s rural electrification
ment of regulators, which is programme—the Rajiv Gandhi
carried out by the political Grameen Vidyutikaran Yojana,
class of the respective states. which aims to energize the
In Haryana, the regulator has homes of non-remunerative
gone so far as to deny even a consumers. Meanwhile, the
return on equity for the distri- extent of the cross-subsidy
bution utilities on the grounds burden borne by remunerative
that they have a negative asset consumers, the industrial and
base, an inheritance of the commercial sectors, leaves lit-
decades-old populist policies tle room for any further raise.
of the state government. Writ large in this poorly im-
Besides this, states force plemented, decade-long pow-
utilities to avert tariff hikes by er reform story is the lack of
seeking to create “regulatory political will in the states to re-
assets”, a euphemism for bun- vive the fortunes of the distri-
dling the additional revenue bution utilities. The Union
requirement into a fictitious government says it plans to
asset that it expects to extin- hold a meeting of chief minis-
guish over time. But the dam- ters in the coming months to
age that does is evident. build momentum that will
Take the help drive up
case of West farm tariffs.
Bengal. In the
last seven
The practice of But that will
not be easy, for
years, this avoiding tariff all the states
state has vast- must bite the
ly improved its hikes by creating bullet. If even
distribution one desists,
system. If in- regulatory assets competitive
centives
claimed under
has been on the rise populism will
spell doom for
the APDRP are the political
a yardstick to fortunes of
measure the effort made by whoever is running the neigh-
utilities to reform, then West bouring state.
Bengal ranks second only to However, dealing with farm
Gujarat. But the comparison power is not just about wooing
ends there. The weight of regu- the farmer with free power. In
latory assets, accumulated fact, in the desert state of Raja-
over the last few years, is of the sthan, in the early part of this
order of `3,000 crore. This has decade, farmers made it clear
choked the finances of the that they preferred to pay if the
West Bengal distribution com- quality of supply was right.
pany to the point, where, for Today there are two classes
the first time, in April, it had to of farmers—those who pay a
raise a `120 crore loan to meet fixed rate for unlimited power
working capital requirements. but are not assured of the
Where will it find the money quality, and those who are
then to improve the distribu- willing to pay for quality power
tion network? that gets metered. What is re-
The practice of evading tariff vealing is that the power distri-
hikes by creating regulatory bution utilities anticipate that
assets has been on the rise. farmers will make a steep mi-
Tamil Nadu, a relatively well- gration over the next four years
run power utility, created as- to metered supply connec-
sets worth around `7,000 crore tions.
in July this year, while the The other noteworthy exam-
neighbouring state of Karnata- ple is that of Gujarat, which
ka has sought to create assets does not face riots in peak
worth `2,550 crore this year. summer when power shortag-
 HEMANT MISHRA/MINT

Peak deficit: The generation capacity addition programme still suffers on one count—it’s not enough to meet surges in demand during certain times of the day.

MAKING THE CONNECT

retrievably as states could well
end up using this provision to
curb power transfers from
multi-state UMPPs. For states,
it’s not just a matter of maxi-
mizing supply, but also keep-
ing its paying consumers from
® FROM PAGE E3 projects. The competition in Central public sector compa- taking flight to other power

jected from the distribution ar-

the Sasan project was intense;
so much so, that it spurred a le-
nies is poor—the 11th Plan
projections have been halved Nuclear power a serious sources.
Tamil Nadu walks this thin
eas or their claimed invest-
ments, or, for that matter, the
accounting practices, the lib-
gal battle between the Anil
Ambani-controlled Reliance-
Anil Dhirubhai Ambani Group
primarily due to them—the
states’ hydel policies for pri-
vate investments are myopic to
contender after treaty line by allowing industry to
buy power from the two power
exchanges—the Indian Energy
eral lending approach does,
however, alleviate the power
shortage in the country. With
and the Tatas. Not only that:
the Tata group, which rarely
challenges a government deci-
the extent that they are skewed
towards promoting local de-
velopment and shoring up
A tomic power began to be considered seriously as a source of energy in
India in 2008, following the Indo­US civil nuclear agreement. It paved the
way for access to nuclear fuel from the world market after a gap of 34 years.
Exchange and the Power Ex-
change of India—that offer a
tariff for the power sale a day
the peak shortage still at sion, has done so over a bid in state revenues through large Until then, the industry needed to depend on covert purchases from friendly ahead, but no more. However,
around 13% of installed capac- which it did not even partici- allocations of unpaid power countries such as the erstwhile Soviet Union to fuel the 4,000MW, or 2 .5%, of the markets have little to re-
ity, and the off-peak shortfall pate. And, precisely for this from the projects. As a result, India’s installed generation capacity. joice about. The nature of in-
at around 10%, a robust capac- reason; it questioned the gov- private capacity addition dur- With fuel access now looking like it’s more or less in place, the government tervention by the states to
ity addition programme is es- ernment’s decision last year to ing the 11th Plan period that is considering the addition of 1,590MW in the 12th Plan period—2012­2017. To shore up supplies for their
sential to the growth and de- allow Reliance Power Ltd to concludes in 2012 is expected access the global equipment market, the government last month put in place consumers has only deterio-
velopment of the country. use excess coal from the cap- to be a mere 2,460MW. legislation that caps the liability of equipment suppliers in the event of an rated; they now issue informal
With aggressive lenders in tive mine-based Sasan project However, over the last two- accident. Armed with this, the state agency, Nuclear Power Corp. of India Ltd instructions to power plants
the game, promoters are not to fuel another greenfield proj- three years, besides the largest (NPCIL), is in talks with private companies such as General Electric Co., with spare capacity not to go
far behind. They have less to ect, and that too at a higher private hydro player, Jaipra- Hitachi Ltd and Alstom SA for the supply of equipment at five sites. outside and seek the highest
worry; for every `7 that the tariff. The Tatas contend that kash Hydro-Power Ltd, large While private ownership is not on the cards as yet, the government is look­ price for their power.
lender spends on the project, had they known about the private companies such as ing at options including that of floating a new company under the department To escape the tyranny of
the promoter forks out only `3. spare coal, which comes to GMR Infrastructure Ltd, GVK of atomic energy where it sells 49% equity or divests a stake in NPCIL. state power utilities, industry
Nevertheless, private compa- twice what the Sasan project Power and Infrastructure Ltd What has made nuclear power attractive is that it lasts twice as much as has, over the years, gone ahead
nies try to reduce the risk of needs, it would have partici- and Reliance have entered this coal­fired plants, has ecological merit since it does not emit greenhouse gases, and set up captive units. The
payment default by the distri- pated in the bid. Tata Power segment aggressively and the and offers a stable competitive tariff, drawing from low uranium costs as well installed capacity as of 31
bution utility by keeping a foot eventually won a UMPP—the capacities are expected to be as the charge to convert the commodity to fuel grade. However, with the West March 2008 was 25,000MW,
in the short-term trading mar- imported coal-based Mundra commissioned in the 12th Plan embracing nuclear power since it is the cheapest route to greenhouse gases close to 15% of the installed
ket where the prices are close project in Gujarat. period. As much as hydel pow- mitigation, the price of uranium ore has shot up in the last few years, rising as generation capacity in the
to twice long-term prices paid With an incremental de- er offers stable inexpensive high as $140 (around `6,400 today) per pound in 2007. The price today is country. However, with large-
by the utility. For example, mand of 100,000MW during tariffs, with free fuel (water), around $47. scale capacity additions expec-
Lanco Infratech Ltd has the the 12th Plan period, PFC is powering it, the projects are While the above strategy is one leg of the government civilian nuclear pro­ ted in the coming decade, the
freedom to sell 100MW of its currently working on eight fraught with risks. gramme involving conventional reactors, it is also moving ahead with fast­ utilities will have less room to
upcoming 1,200MW project in more of such projects. The ca- The construction risks owing breeder reactors and eventually thorium­based reactors. This strategy is built hold them to ransom.
Anpara, Uttar Pradesh. pacity addition programme to geological surprises in around the fact that India has large reserves of thorium.
Indiabulls, a group with in- has raised investor interest in mountainous terrain are good Transmission
terests ranging from real estate the equipment business: four enough to inflate project costs With fuel resources located
to power projects, is setting up new players are setting up do- considerably. The Union gov- large consumers access to al- draw at the penalty price of in one region of the country,
a 1,320MW coal-fired project mestic production facilities— ernment-prepared shoddy ternate power sources. Free- `8.75 per unit, especially dur- the coal belt in the east and
in Bhaiyathan, Chhattisgarh, Larsen and Toubro Ltd and project reports are partly to dom comes at a price. They ing the election season. hydro units in the north and
of which it plans to sell 300MW Mitsubishi Heavy Industries blame for this—it takes two need to pay the state utility the With the average trading North-East, a robust transmis-
in the open market, with the Ltd to produce critical boilers years to improve them and cross-subsidy borne by them price hovering around `5-6 per sion system holds the key to
rest locked up in a long-term and turbo generators (TGs), make them reliable, otherwise as well as the transmission unit, it is evident that the harnessing them and thereby
power sale agreement with the Bharat Forge Ltd and Alstom companies are likely to end up charges involved in carting states are feeling the pinch. To ensuring that consumers bene-
state. What sets it apart from Projects India Ltd to produce overshooting initial capital power from the new supplier. ensure that the delinking is ce- fit from correctly priced power.
the rest of the projects is the TGs, Toshiba India Pvt. Ltd and costs. In one of the large pro- Over the last few years, pow- mented, the Central Electricity Central to this theme is a ro-
extent of support it takes from Jindal Steel Works Ltd for TGs, jects (over 1,000MW capacity) er trading activity has risen to Regulatory Commission bust inter-state transmission
the trading portfolio—the and Ansaldo STS India and GB currently under execution in as much as 4% of the country’s (CERC) in May further raised system. Power Grid Corp. of In-
long-term tariff is as low as 81 Engineering Enterprises Pvt. the North-East, the capital cost annual generation. As much as the penalty to `12.25 per unit. dia Ltd has a virtual monopoly
paise per unit, well below the Ltd for boilers. has soared from `4.2 crore per the trades help reduce short- Power-deficit states such as in this business. The only pri-
cost of production even for a The generation capacity ad- megawatt to more than `7.5 ages and improve the produc- Karnataka, Andhra Pradesh vate participant is Tata Power
plant located at the mouth of dition programme, however, crore per megawatt precisely tivity of industry, they also re- Maharashtra and Tamil Nadu Ltd in the Tala transmission
the mine. still suffers on one count—in- for this reason. With less than flect the stresses of the utili- are resorting to invoking emer- system that hauls power from
For that matter, it compares adequate generation capacity modest demand for power in ties. Till two years back, the gency powers under section 11 Bhutan to the northern and
favourably even with the `1.19 to meet surges in demand dur- the North-East, these capaci- price of the power traded was of the Electricity Act to block western regions of the country.
per unit winning bid by Reli- ing certain times of the day, ties will need to find their mar- determined by a penalty levied the export of power from their The transmission business is a
ance Energy Ltd for the also called peak power. This is ket in other parts of the coun- by the regulator for over-draw- state. The latest case is that of low-risk game, insulated from
4,000MW Sasan ultra mega a role that coal, the staple try. This play, through spot ing power. Since power flows Karnataka, which applied the the vagaries of the distribution
power project (UMPP). That power fuel in India, funda- trades as well as long-term bi- like water, from a higher po- ban in April. One of the trig- business. In the 11th Plan peri-
project is one of the four mentally cannot fulfil since a lateral agreements, is still in tential to a lower potential, gers was Jindal Steel Ltd’s deal od, the transmission capacity
awarded by the Union govern- coal plant takes six-eight hours the works. and the states are all linked up to sell power to Tamil Nadu. As addition is well below target—
ment as part of its UMPP poli- to start up. Technically, hydel Trading as an activity in the through transmission high- a result, both the states went to 70% in the case of high-voltage
cy, an initiative to promote pri- and gas-based plants best fit power sector was born when ways called the grid, any devi- the Supreme Court before set- direct current lines and 48%
vate power generation. this role. Hydel is the preferred the electricity laws were con- ation from the utilities’ sched- tling on a compromise. for 765 kV lines. The shortfall
Under this policy, besides of- option in the Indian context solidated, spruced up with ule of power drawal set the The issue has far-reaching has little to do with Power
fering a tax holiday on invest- given the potential in the north some provisions for reforms, previous day endangers the consequences for the power Grid’s failings, but while trans-
ments, a Union government and north-eastern parts of the and introduced in 2003. A key grid. Rather than tightening sector; CERC, which regulates mission systems dovetail into
agency, PFC, obtains all the ap- country and the lack of large provision in the law that has their belt during shortages, the inter-state sale of power, generation capacity, the tar-
provals including captive coal gas finds in the country. helped nurture this business is utilities under pressure from has argued that the instrument geted generation capacity has
mining rights and auctions the While the track record of the one that pushes states to allow their political masters over- could hurt the power sector ir- failed to materialize.
HOLDING PROMISE

THE SUN AND THE WIND

There’s no doubt that
TIBOR BOGNAR/AFP

renewable energy
needs to be a key
B elladonna, also known
as nightshade, is a plant
with bell-shaped flow-
ers and shiny black berries
power source in the that’s been of use to human for
centuries. In large doses, it is a
future. But harnessing poison that can kill; in lesser
the sun and the wind dosages, it has a hallucinogen-
efficiently is going to ic effect that made it a thing of
great utility in witchcraft and
take some doing devil-worship in medieval Eu-
rope. Highly diluted, it serves
as a homeopathic drug to rem-
edy headaches and fever.
Solar energy in the Indian
context is a bit like nightshade.
Energy from the sun costs
around `13 per unit, over five
times that of conventional
power. In large doses, it will
drown the financially fragile
state power utilities that are
reeling under heavy losses of
at least `40,000 crore per year.
Yet, its virtues cannot be dis-
missed, nor can its backers. On
the eve of the inter-govern-
mental climate change confer-
ence in Copenhagen in De-
cember 2009, the Indian gov-
ernment launched its pro-
gramme, Solar India, to boost
solar generation capacity to
20,000MW by 2020. The gran-
diose plan has been started
with a modest first phase of
1,000MW in the first year. The
government has invited bids
for 650MW as a start.
Of this, 150MW of capacity is
to be based on solar photovol-
Huge potential: Wind turbines in Rajasthan. Wind energy is the taic panels, with each player
largest component of renewable energy capacity in the country.
TURN TO PAGE E6®
 HEMANT MISHRA/MINT

HARIKRISHNA KATRAGADDA/MINT

THE SUN AND THE WIND ® FROM PAGE E5

allowed to apply for 5MW ca-

pacity. In the case of the more
conventional solar thermal
technology, the government is
bidding out 500MW, with a
single player allowed up to
100MW.
This homeopathic dose is
unlikely to hurt the utilities
since it will be “diluted” with
inexpensive coal-fired power
belonging to state-owned
NTPC Ltd and sold by its trad-
ing arm, NTPC Vidyut Vyapar Bright future: (top) Engineers optimizing the solar panel configuration
Nigam Ltd (NVVN), which is at GE’s Green Lab; (above) Suzlon windmill power generation plant in
also undertaking the bidding Jaisalmer, Rajasthan.
process.
If the response to the pre- ing up to 3% in 2022. nored. States such as Karnata-
bid conference held on 28 Au- The private sector has ka, Gujarat, Andhra Pradesh
gust is any indicator—around evinced a fair amount of inter- and Rajasthan have immense
300 companies came forward est in the solar business owing untapped potential. And un-
for a mere 650MW, with sever- not only to the renewable RPO like solar power, which boasts
al of them making their first regulations, but also strong fis- of higher potential but is still a
pitch in the power sector—it cal incentives such as acceler- distance away from the mar-
appears to be a gold rush. Per- ated depreciation. ket, wind has made the cut. In
haps, that’s not far from the Furthermore, the Central the 11th Plan period, wind en-
truth—the solar companies government is working on a ergy is expected to record a ca-
are insulated from the risk of system to create Renewable pacity addition of 9,000MW of
directly selling power to the Energy Certificates (REC). The the total renewable kitty of
distribution utilities. Besides, REC system that is currently 11,829MW.
the Central Electricity Regula- being developed allows for re- Indeed, regulation drives re-
tory Commission (CERC), the newable energy to be sold in newable energy business like
power sector regulator, has two components—a green at- few others. However, the busi-
approved a very generous tar- tribute and the electrical ener- ness of creating new capacity
iff cap of over `19 per unit. gy. For instance, while a state could well prove to be as re-
The bidding process is expec- such as Tamil Nadu has huge munerative as saving it. The
ted to bring about a more so- wind resources, Delhi does government is working on a
ber tariff. not. So, once the REC system is mechanism to create a market
Nevertheless, the entry of in place, Delhi can buy the for energy efficiency called
solar power is today grounded green attribute certificate of perform, achieve and trade
in subsidies. In this case, the renewable plants located in (PAT). The agency which is de-
burden will be borne by NTPC, Tamil Nadu to meet its RPO veloping this mechanism, the
a state-owned company listed obligations. National Mission for Enhanced
on the stock exchanges. Going Wind energy is the largest Energy Efficiency (NMEEE),
forward, the solar mission is component of renewable ener- shares a common parent with
relying on two factors to cata- gy capacity in the country. Its the solar mission, the National
lyse the growth of solar power growth has come about, to a Action Plan on Climate
in the country. First, a reduc- large extent, because of the Change (NAPCC), which was
tion in the price of equipment preferentially higher tariff that unveiled by the government in
and second, a stiff dose of reg- regulators have allowed it. In- 2008.
ulation to support forced pur- dustry too has embraced it. PAT is expected to be imple-
chases by the utility until solar Kalyani Forge Ltd, an engi- mented sometime in June and
fares favourably against coal, a neering firm that is energy in- industries will be given time
point that the solar mission tensive, has wind farms—while till 2014 to implement the
hopes will be achieved by the tariff is more than the aver- standards set by the Bureau of
2022. age cost of purchase for a utili- Energy Efficiency, the imple-
Regulation in this direction ty, it is still lower than the menting organization. If they
is already in operation. Power higher tariff charged by the exceed the benchmarks, they
regulators in as many as 16 utility from industrial and are rewarded with energy sav-
states have specified renew- commercial consumers. ing certificates, and, if they
able purchase obligations Wind energy has one major don’t, they need to buy them
(RPO) on the utilities—this drawback—it is not reliable. In from the two energy exchang-
leaves the choice of renewable Spain, where wind accounts es, the Indian Energy Ex-
energy to the utility. The solar for close to 40% of capacity, change and the Power Ex-
mission is seeking to carve out forecasts mitigate this risk. The change India Ltd (PXIL),
a separate 0.25% RPO for solar potential for wind energy in where the high achievers can
AHMED RAZA KHAN/MINT projects in the initial years go- India, however, cannot be ig- sell their units.
ON THE BLOCK

THE HUNT FOR OIL AND GAS SANTOSH VERMA/BLOOMBERG

India’s experience with
oil and gas exploration
has been mixed thus
T he story of enterprise
and entrepreneurship in
the Indian oil and gas
business begins with the eco-
far. The country is still nomic crisis of 1991, when In-
dia hardly had enough foreign
on the learning curve exchange to pay for three
months of imports. Nudged by
the World Bank, a key lender
during this troubled period,
the government accelerated
the pace of private participa-
tion in the oil exploration busi-
ness. As a result, producing oil
and gas fields owned by state-
owned Oil and Natural Gas
Corp. Ltd (ONGC) were farmed
out to private companies. Even
though private companies had
been invited to develop oil and
gas fields in India since 1982,
this was the first time that In-
dian companies could actually
enter the sector.
While Videocon Industries
Ltd, a company founded only a
few years before, in 1987,
joined hands with Command
Petroleum Ltd, an Australian
exploration company, and Building infrastructure: Two
bought 25% equity in the Rav- workmen walk from an oil
va field in 1993, a consortium platform under construction for
of Reliance Industries Ltd and ONGC at a Larsen and Toubro
yard at Hazira, Gujarat.
TURN TO PAGE E8®
Successful scorecard: A Reliance Industries petrochemical plant at Jamnagar in Gujarat. In 2010, it had an impressive scorecard—41 discoveries from 29 blocks acquired in eight rounds of Nelp auctions.
AHMED RAZA KHAN/MINT

THEHUNTFOR OIL AND GAS

® FROM PAGE E7 recovery of oil and gas or dril- was similar, except that the en- ing up most of the blocks. Why
ling to locate more of it. trepreneur was a Scottish ex- did this happen? To begin
Enron Oil and Gas India Ltd Reliance got to work on the plorer, Cairn Energy Plc. When with, a brief look at the two
(EOG) won a 70% stake in the big haul of eight deep-water it took over Command Petro- companies offers some insight.
Panna, Mukta and Tapti (PMT) blocks in the Nelp 1 auction leum in 1997, beside a pres- For Reliance, the aggression
fields in 1994. with a motley crew of ONGC ence in Ravva, it also had a sig- was justified—it had demon-
All the stakeholders pros- geologists, choosing Ravi Bas- nificant holding a field in Bar- strated performance with the
pered—estimates of reserves tia as the chief. Before he came mer, Rajasthan, where its part- KG basin D6 find and beyond.
swelled as private explorers on board, Bastia had been lan- ner, Royal Dutch Shell Plc, was In 2010, it had an impressive
bettered ONGC’s finds. The guishing at ONGC, in charge of busy studying the geological scorecard—41 discoveries
PMT and Ravva experience its data room at Houston, Tex- maps and looking in the south- from 29 blocks acquired in
boosted private sector interest as, among other such tasks, far ern reaches of the field. Shell eight rounds of Nelp auctions
in the exploration business in removed from the hot job of did strike oil in Barmer, but that are at various stages of ap-
India. identifying drilling locations in the reserves were not promis- praisal and development. It is
Meanwhile, Bill Gammell, a search of oil and gas reserves. ing enough to warrant invest- not as if all of them will con-
Scottish entrepreneur who had What followed was a period ments to raise the crude oil vert to producing fields; in
entered the exploration busi- during which the prospects of from below the ground. some cases, it might not be
ness as recently as 1980, was finding oil and gas in the coun- Cairn bought out Shell over commercially viable to lift the
on the lookout for acquisitions try heightened, accompanied the next two years. Its chief ge- reserves to the surface. How-
in Asia after selling out his by events that defied conven- ologist Mike Watts held a view ever, the prospects are promis-
North Sea assets. India was on tion. that was contrary to that of his ing. Reliance has informed the
his radar and he went about it In 1994, Chevron Corp. exit- former colleagues at Shell, a government that it expects to
by acquiring Command Petro- ed an exploration block in the company with a grand legacy— achieve 35 mscmd of gas pro-
leum in 1997. He backed Com- Krishna-Godavari (KG) basin, it started in 1897, a mere 38 duction from these discoveries
mand Petroleum geologists declaring it to be a failed ba- years after oil production com- in 2016. If you add this to the
who did not share ONGC’s sin. In 2001, three years after it menced in the modern world D6 production, Reliance would
modest outlook on the block. won a KG basin block in Nelp and on average had produced account for close to half the
Two years later, Cairn India 1, Cairn struck gas, 38km off a 10th of global oil production. country’s domestic production
Ltd met with its first success in the coast of Andhra Pradesh. The Barmer hydrocarbon that year.
India, striking gas in the Ravva This doubled its reserves and chase was reduced to a simple ONGC, on the other hand,
“satellite” fields. boosted the stock, which out- question in geological par- has had little or no success
Seizing this underlying bull- performed the UK oil sector in lance: what was the direction since 1985, when it discovered
ish sentiment, the government 2001 by 25%. In 2002, Reliance of the millennia-old geological gas in the South Bassein fields,
began auctioning out explora- struck gas in an adjacent field rivers? That held the key to the in the western offshore regions
tion blocks in in the KG ba- sediment deposits that get of India. As a result, ONGC’s
1998 under the sin that converted into hydrocarbon domestic gas production has
New Explora-
tion Licensing
For Reliance, the proved to be
no less than
reserves. Watts argued that
they flowed in the opposite di-
been stagnant at around 55
mscmd over the last two-and-
Policy (Nelp). aggression has been the largest gas rection, from north to south. a-half decades.
It had plenty of discovery in And he was right. In 2004, It wasn’t a case of lack of
tax incentives justified—it has the world that Cairn drilled in the northern funds; the deregulation of
for investment year at 15 tril- reaches of the field and struck crude oil prices in 2002 left the
in the sector demonstrated lion cu. ft (tcf) oil. It was a significant find: In company awash with capital.
besides an ele-
gant produc-
performance with of reserves,
enough to fire
2009, when production com-
menced, it accounted for 20%
So much so that its chairman
in 2002, the late Subir Raha,
tion-sharing
contract with
the KG basin D6 a 15,000MW
generation ca-
of the country’s domestic pro-
duction that has seen, if any-
billed the company’s explora-
tion programme, Sagar Sam-
the state that find and beyond pacity that thing, stagnant domestic sup- riddhi, as the world’s largest
mitigated con- could meet ply since ONGC’s mega find off services contract that year. It
tractual ambi- the power the coast of Mumbai in 1985. primarily involved hiring rigs
guities, trans- needs of three The Reliance and Cairn suc- to scour the ocean floor for oil
lating into lower investment large states in the country. It cess stories drove up investor and gas.
risks. This was badly needed to dramatically altered the gas interest in the exploration The company’s best perfor-
attract investments in a busi- supply-demand equation in business in India. This was re- mance in the Nelp blocks is
ness fraught with risks, so the country. In the year of its flected in the subsequent Nelp hardly a reflection of good
much so that lenders don’t discovery, against a domestic rounds. Large established technical skills in the explora-
provide funds at the drilling supply of a mere 66 million firms such as BP Plc, BG Group tion business—it bought into
and exploration stage. standard cu. m per day (msc- Plc and BHP Billiton Ltd made the block in the KG basin
Sure enough, Cairn partici- md), demand was as high as a beeline for the auctions. where Cairn struck gas in 2001
pated and won a few blocks. So 117 mscmd. In 2009, when the Crude oil prices, which began and hopes to bring the gas to
did Reliance, having entered gas finally reached consumers, their steep ascent in 2002, also shore by 2016. If anything, this
the business with the PMT the gap narrowed—against a helped. offers a comparison: Reliance
fields. However, that didn’t demand of 225 mscmd, supply However, the sentiment did struck gas in an adjacent block
give it the experience needed was to the tune of 142 mscmd. not last long, even though in 2002 and got into produc-
as the company wasn’t ap- Of this, Reliance accounted for crude oil prices kept firm tion in 2009, which itself is just
pointed as the operator of the 60 mscmd, with production through most part of the de- about par for the course for a
fields. That would have given it scheduled to rise to 80 mscmd cade. Auctions were largely re- field located in harsh terrain.
technical experience, be it de- in 2012. duced to a two-legged race,
lineating the fields for efficient In the oil sector, the story with ONGC and Reliance pick- TURN TO PAGE E9®
® FROM PAGE E8 by explorers. The policy listed ronment for the poor re-

However, the failures dwarf a

critical sectors of the economy
that enjoyed supply preference
sponse—out of 70 oil and gas
blocks and 10 coal bed meth- The search for hydrocarbon assets abroad
larger problem that it created over others, such as fertilizers ane blocks on auction, the gov-
as a consequence of its partici-
pation in the Nelp auctions—
one of reckless bidding that
and power.
What hurt investor sentiment
more was the finance minis-
ernment received bids for only
44 blocks. It argued that de-
spite this, the minimum invest-
W ith global crude oil prices rising since 2001, the hunt
to acquire oil and gas acreage has intensified like
never before. In this domain, only Oil and Natural Gas
turned away several foreign try’s decision in the 2008 bud- ment in Nelp 8 at $1.34 billion Corp. Ltd (ONGC) and Reliance Industries Ltd have been
companies. The Confederation get to decision to “clarify” and (`6,164 crore today) surpassed active.
of Indian Industry (CII), a lob- retrospectively take away the Nelp 7 at $1.36 billion. ONGC has mainly shopped for discovered assets, hoping
by group, has raised this issue seven-year tax break given to The recession did its bit, but the gains will come from the operator finding new
with the government on several exploration companies when the poor investment environ- discoveries in the asset, or the lure of a discount owing to
occasions in a veiled man- the Nelp policy was formulated ment played havoc as well. the disturbed political environment—as in Sudan, in 2002,
ner—it has sought a cap on the in 1998. Foreign companies in- Things may not have changed where the asset was bought from a US­registered explorer
number of blocks that public cluding BP protested to the much. who found the risk too high. The Sudan property was one
sector companies can bid for. government while the Nelp 7 Regarding Vedanta Re- of two assets (the other one being in Sakhalin, Russia)
Even V.K. Sibal, a former head round was delayed thrice on source Plc’s plans to buy a bought before crude oil prices firmed up.
of the Directorate General of this count. Queering the pitch controlling stake in Cairn India Its recent acquisition of Imperial Energy Corp. Plc, a
Hydrocarbons, the petroleum further was the delayed rig for $9.6 billion, petroleum min- UK­based company that had assets in Russia worth $2.58
ministry’s technical arm, made moratorium policy— with ister Murli Deora’s initial re- billion (`11,868 crore today) in 2009, has attracted much
the same point. crude oil prices rocketing well sponse was that the London- criticism—it is coming to terms with the lower estimates
There were other issues as above the three-figure mark, a based company did not have and the stifling regulatory environment in Russia that
well. Towards the middle of the shortage of drilling rigs gripped any prior experience in the oil forbids a market price for gas. Moreover, the deal was
decade, ONGC complained the international market, af- and gas sector, an argument negotiated when crude oil prices were hovering around
that the blocks were not big fecting work programme com- that could have been used the $140 mark, but finally consummated at the same
enough to hold its interest. mitments that were given by against other companies as valuation when prices were around $50 per barrel. ONGC is
While initial blocks such as Re- contractors. A delayed policy well. currently looking to acquire BP Plc’s assets in Vietnam in a
liance’s KG-D6 block were over saw three leading players turn While the government is joint venture with Vietnam Oil and Gas Group
6,000 sq. km in size, area fell their backs on the Indian mar- drawing comfort from the ris- (Petrovietnam).
with the passage of every Nelp ket—Petroleo Brasileiro SA ing financial commitment of The decade­long investment in overseas oil acreages
round. Moreover, the pace of (Petrobras), Statoil ASA and bidders in the Nelp rounds, has earned it 9.5 million tonnes (mt) of oil equivalent of Acquisition spree: A control and raiser platform at
seismic studies offering credi- ENI SpA, Italy. what is more relevant to stri- which a good part is sold in the international markets. Reliance’s field in the Krishna­Godavari basin.
ble data needed by exploration Despite this, the Nelp 7 re- king oil and gas is an environ- Reliance, on the other hand, has shopped for
companies to help make their sults were only marginally low- ment that fosters entrepreneur- undiscovered oil and gas properties, where the yield State­owned NTPC Ltd, the largest power producer in the
bets was lethargic. er in outcome than the Nelp 6 ial abilities of the kind demon- investment is the highest when discoveries are made. It country, expects to import around 15 mt of coal this year,
Amid all this, foreign compa- round in terms of bids per strated by Reliance and Cairn has, however, not met with much success in its overseas enough to fuel around 4,000MW of its installed coal­fired
nies also saw a major hurdle block. This was primarily be- in the early part of the last de- ventures. Recently, it bought into three shale gas capacity of around 32,000MW. NTPC failed to buy out any
that clouded their outlook on cause the government offered cade. companies in US, a marked departure from its earlier coal company despite trying in several African countries as
the Indian exploration busi- “S-type” blocks that were locat- In the Ambani gas row case, approach. Though at a nascent stage, the exploration of well as Indonesia.
ness. The fight between the ed in discovered areas and the courts have endorsed the shale gas is a high­technology business since it seeks to Meanwhile, Adani Enterprises Ltd, the country’s largest
Ambani brothers over gas from which saw very high investor government decision to ap- suck out gas that is well dispersed. That said, this frontier importer of coal, made its second acquisition in August this
the D6 block spilled over into interest. prove price and allocate gas, a technology game is as serious a business as finding oil and year, when it purchased the coal assets of Linc Energy Ltd,
government policy, giving birth The Nelp 8 rounds held last decision that may not go down gas in the deep waters of the ocean. an Australian firm, for $2.7 billion. With this, Adani hopes to
to a gas utilization policy in year were a disaster. However, well with investors who will At a broader energy level, Indian companies have been fuel 13,000MW of capacity that it is currently
2008 that implicitly limited the the government has chosen to participate in the forthcoming scouting for coal mines overseas for quite some time. implementing in India.
free pricing of gas discovered blame the recessionary envi- Nelp round.
 ANKIT AGRAWAL/MINT

FUEL RETAILING

GETTING THE PRICE RIGHT

Regulatory hurdles: Though retailing gas is a very lucrative business, the allocation policy curbs the entrepreneur’s intent to pursue this business or any other that offers higher returns.

Political considerations
had by and large
dictated fuel pricing
E lection manifestos offer
an invisible subtext to
those who come to pow-
er and plan to hold on to their
portation fuels—petrol and
diesel. The political class
would not let go of the controls.
Nevertheless, public sector
marketplace, the two firms ha-
ven’t been fence sitters, except
during very stressful periods.
This includes 2008, when
supplies. It cut deals with
trucking companies to offer
them competitive prices on
bulk purchases, well below
half-way mark, giving it less
room to take hard decisions.
However, deregulation in
the only transportation fuel,
until recently when positions. Petroleum minister oil companies that control 95% crude prices soared above the what the state-owned oil-mar- aviation turbine fuel, has done
Murli Deora understands this of the market, were allowed to three-digit mark. If anything, keting companies charged. little to improve competition.
petrol was decontrolled. well. When his officials prompt raise prices of fuels; in the case they got the public sector re- Essar on the other hand, In a recent bid for aviation fuel
Diesel, however, is a him to push for fuel price hikes of petrol, it came close to what tailers to pull their socks in the preferred a low-cost “fill and at the privatized Delhi airport,
different proposition to stem the financial bleeding
that oil marketing companies
it would otherwise cost to im-
port the fuel, or the import par-
first two years of operations,
with RIL notching up a diesel
fly” model which served small-
er cities and towns across In-
all the firms, Hindustan Petro-
leum Corp. Ltd, Bharat Petro-
suffer, he goes on the defen- ity price. For sure, this raises market share of more than dia. This meant no-frill gas sta- leum Corp. Ltd and Indian Oil
sive and quotes the Congress the hopes of the only two pri- 10%. Not only that, the adul- tions unlike the full-featured Corp. Ltd, quoted the same fig-
manifesto, which promises en- vate retailers, Reliance Indus- teration of fuels sold by the outlets that RIL set up to pull ure, provoking the Competi-
ergy supply to poor families at tries Ltd (RIL) and Essar Oil state-owned companies de- in customers. tion Commission of India to is-
“affordable prices”. His direct Ltd, that are interested in the clined and the service im- All this worked fine till crude sue the firms a notice.
efforts to reduce prices are re- domestic retail market. The proved—with the gas station oil prices began their climb, Ironically, the cooperation
stricted to letters to state gov- third, Shell, is looking to sell its attendants donning uniforms reaching as high as $148 stops there and not where it
ernments, asking them to re- outlets. RIL and Essar, which in some instances for the first (around `6,882 today) per bar- ought to be. The petroleum
duce the incidence of taxation, have large refineries and a time and greeting customers. rel. The retail outlets only re- ministry is visiting issues in-
which adds up to as high as strong foothold in a healthy Essar and RIL, however, opened early last year, when volving sharing of the oil com-
20%. domestic market would like to went about the business differ- crude prices softened. Essar panies’ infrastructure such as
He prefers to foist such sen- improve their profits. They pre- ently. RIL spent a good sum of claims that its low-cost ap- tankages, for in several cases,
sitive decisions on a group of fer the domestic market to ex- money, spruced up its outlets proach helped them quickly they share the same boundary
ministers. On 25 June, an em- ports provided the state-owned that flanked the national high- restart their operations in less wall. This is symptomatic of a
powered group of ministers retailers are not forced to sell ways and linked up the sta- than a month and gain from larger malaise where the gov-
(eGoM) met. The debate was a at subsidized prices. tions with technology that al- the higher retailing prices that ernment, in the first place, has
larger one: decontrol of trans- Despite the rigours of the lowed online monitoring of the state-owned oil-marketing not let these companies func-
RAMESH PATHANIA/MINT companies were charging, be- tion freely and has treated
ing slow to correct them in line them as a subsidy sharing in-
with the falling market. strument.
As a result, they could re- In the case of the gas sector,
claim 60% of losses. Such tales until RIL commenced com-
of minor gains in times of tran- mercial gas supplies last year,
sition, however, pale before the shortages were severe. Re-
the larger policy issue of the tailing of city gas was driven
deregulation of the price of the largely by the judiciary which
mass transportation fuels that insisted that public transport
petrol and diesel are. in large cities such as Delhi
While the companies are and Mumbai should operate
chanting the deregulation on compressed natural gas
mantra, the hard reality is that (CNG) to reduce pollution.
with diesel accounting for 40% Currently, even with RIL’s 60
of petroleum products sold in mscmd gas supplies, the sup-
the country, there is little room ply at 142 mscmd is well short
to allow it a free float, especial- of the demand of 225 mscmd.
ly given its knock-on effect on But while retailing gas is a very
inflation, among other aspects. lucrative business, the alloca-
Of the total volume of diesel tion policy curbs the entrepre-
consumed in the country, neur’s intent to pursue this
trucks account for 40%, follow- business or any other that of-
ed by passenger cars at 15%, fers higher returns. RIL, which
buses and agriculture at 12% has pursued a three-decade
each. And if the government long policy of backward inte-
has to gather its courage and gration, wherein it travels the
bite the bullet on this issue, it chains of input materials, had
has limited time. Another year to contend with less than 3
down the line, the govern-
Freeing markets: A file photo of people queuing up at a petrol pump in New Delhi. The Union government deregulated the price of petrol recently. ment’s tenure will go past the TURN TO PAGE E11®
 PRADEEP GAUR/MINT

Discovery programme: After RIL’s D6 find, there have been no large discoveries. Also, the largest addition in the next five years will come from D6.
® FROM PAGE E10 The projection paints a rath- petroleum ministry as late as ing in the petroleum sector.
er dismal picture—after RIL’s July this year, forwarding Anil The government expects a slew
mscmd of gas against its re- D6 find in the Krishna-Goda- Ambani’s application for more of pipelines to be commis-
quirement of 20 mscmd, even vari basin, there have been no than 26 mscmd of gas, enough sioned that will result in con-
though it produces the gas. large discoveries. Not only to generate 6,000MW of power. necting states that have had
Till July this year, regulation that, the largest addition in the The eGoM on gas allocation, little or no gas supplies so
too stood in the way of growth next five years will again come which met in late August, de- far—Tamil Nadu, Kerala, Kar-
in the pipeline from the D6 cided to put in place a formal nataka, Punjab, Haryana, Raja-
business. Al- block where, framework for applications sthan, Orissa, West Bengal, Bi-
though set up
in 2006, the
The larger Reliance is ex-
pected to in-
and utilization. It has asked
the petroleum ministry to in-
har and Jharkhand.
Meanwhile, with new gas
government question before the crease produc- form the fertilizer and power discoveries, though less mod-
allowed the tion from 60 ministries of the gas available est than the Reliance D6, likely
Petroleum and government is mscmd to 80 “in the coming years” and for to take place in the coming
Natural Gas mscmd in the the consumer ministries to set years, the government is plan-
Regulatory that of allocating next two years. out their priorities. The final ning to frame a mechanism
Board, the pe-
troleum regu-
gas in the future Beside this,
Gujarat state-
decision will be taken by the
eGoM.
that insulates consumers from
the shocks of fresh pricing.
lator, to issue owned GSPC However, there is a larger At the end of the day, given
licences only will be chip- impending issue that is facing that a fuel such as natural gas
in July. ping in with around 8 mscmd the government, which is akin can replace the liquefied pe-
The larger question before of gas from its block adjacent to what’s happening in the troleum gas (LPG) cylinders in
the government is that of al- to that of RIL in the KG basin. power sector. The govern- homes, the issue of being able
locating gas in the future. The The challenge for the gov- ment’s rural electrification to substitute one fuel for an-
production estimates are fairly ernment now lies in allocating programme is double- other comes down to its pric-
reliable on a five-year horizon, the additional gas without edged—it raises the aspira- ing, which, in turn, depends on
the time it takes for an explorer seeming to be partisan. The tions of rural India when it the subsidy and the taxes that
to get into a block, make a dis- rumblings are already being comes to power supplies, the the government levies. But
covery and bring the hydrocar- felt. Anil Ambani is also in the absence of which will trigger these are just the two things
bon molecules to the surface queue for the resource. The serious discontent. that the government seems to
for commercial sale. power ministry wrote to the A similar situation is brew- have little control over.
AHMED RAZA KHAN/MINT