Teesta-III set to ease North's power crunch; REC to pump in Rs 995 cr

GANGTOK: In a significant development that may see the power woes of Northern states easing from July next, REC has set the motion in rolling for early completion of the 1200 MW Teesta Hydel project in Sikkim by increasing its loan sanction to the project to Rs 3,095 crores.

Sikkim Government on its part has appointed a high powered committee to expedite the completion of the State’s hydro power projects, including Teesta-III, and has committed to fund its share of the equity for Teesta-III in an expedited manner.

About 12% of the power produced by Teesta-III will go to Sikkim (as free power per the contract) while the rest 85% supplied to four northern States – Delhi, UP, Haryana and Rajasthan - which recently witnessed serious power crisis due to overdraw from the grid by some states.

Teesta-III, the largest of the six hydel projects on the Teesta river, is being executed by an SPV called Teesta Urja in which the Sikkim Government has a 26% stake.

REC has approved the fresh lending of Rs 995 crores to the project on account of cost over-run. The original estimated cost of the project was pegged at Rs 5,700 crores but lenders like REC and PTC have agreed to increase infuse Rs 8,500 crores to meet cost over runs on account of a massive earth quake, which Teesta-III survived, and so on.

As per revised commercial operation dates, the first unit of Teesta-III will go on stream in July 2013 for Unit-1, thereafter all the six units will become operational one after the other with the sixth and final unit becoming functional by December 2013.

The Sikkim state government has also agreed to bring in its equity share of equity. It is significant that Sikkim Power Secretary Mr A K Giri attended a recent meeting convened by REC.

In a latest development Sikkim Government appointed a high powerered committee under the chairmanship of Chief Secretary Karma Gyatso. State Power Secretary Mr A K Giri is the member secretary of the panel. The government has issued a gazette notification to this effect stating that the committee report is to be submitted by August 10, 2012.

Sikkim government has also signed the share holder agreement with Teesta Urja Limited acquiring 26% stake in the SPV executing the project, apart from agreeing to contribute its share to the base cost as well as the cost overrun.

What comes a major relief to all stake holders is the fact that the State government has decided to end its legal dispute with Teesta Urja on share holding issue and accelerating the project execution.

All equity investors, including a group of six private equity partners, have also expressed their full support and commitment to bring in equity for the revised costs. REC and PTC are among the big lenders to the project.

Six PE players led by Morgan Stanley, who have already pumped in Rs 750 crore into the project through Asian Genco, will also raise their commitment, a source familiar with the development said. “They may have to chip in another Rs 400 crores or so, to proportionately match the cost increase,” the source said.

Besides Morgan Stanley, the group of investors includes Everstone Capital, General Atlantic, Goldman Sachs Investment Management and Norwest Venture Partners.

Cement industry cracks under cost burden; CCI hefty penalty adds to crisis

The cost of making cement in India has jumped by half over the last four years, and the rising prices of raw materials, energy and freight all indicate that manufacturers have a tough job on their hands to keep their plants ticking.

Ironically, almost all the costs related to the production of cement and its transportation are the monopoly of the government, leaving companies with no elbow room to control these factors. Adding to the problems, the growth in demand for cement has lost momentum due to the sharp slowdown in economic expansion, analysts say.

Cement is a bulk commodity and it needs to be shipped across vast distances to reach the consumer. Freight makes up a little more than a fifth of the total cost of cement. It has climbed more than a quarter on a compounded annual growth rate over the past seven years. This includes transportation costs of clinker, but excludes freight on raw materials which is usually added to the cost of raw materials.

So, the 30 per cent hike in freight rates in the March railway budget meant a stiff increase in costs. To move a 50 kg bag of cement from Andhra Pradesh, a key producing state, to Maharashtra the new rail freight rates added Rs.15 to each bag; to Kerala Rs.22 and as much as Rs.30 to the north east.

Cement Factory: A representative pic

Because the railways are state-owned and freight rates set by the government are not negotiable, cement producers have been using the improving highway network to move cement via road. About 35 per cent of cement produced in India is today carried by the railways, down from more than 60 per cent until a decade ago.

The railways are expected to ship at least 30 per cent of the cement in the years to come, given its predominance over longer distances. The economic size of a cement plant has risen to 5 million tonnes a year from 1 million tonnes, meaning larger long haul costs to get the stuff to the ultimate buyer.

It’s only a matter of time before the government raises diesel prices. This would have the potential to balloon transportation costs further. Again, this is out of bounds of cement producers.

The two other major costs are energy and raw materials. Stable supplies of power and coal, also mostly controlled by the state, have always been a challenge. In the absence of competition, the coal produced by government-run mines is of poor quality with high ash and low calorific value.

As a result, cement companies also depend on imported coal of high calorific value. However, the rupee’s sharp depreciation and Indonesia’s – a major coal supplier – recent moves to jack up prices and restrict exports pose huge risks to costs.

All these factors have resulted in a sharp rise in the cost of building a new cement plant over the past two years. With prices not keeping pace with the increase in input and other costs,  EBITDA (earnings before interest, tax, depreciation and amortisation) have plummeted to $1,000 per tonne from a greenfield cement plant, compared with $1,500 that was initially expected.

It is against this background that the punitive fines of Rs.63 billion imposed on 11 cement companies by the Competition Commission of India must be viewed. Although the penalty for alleged cartelisation is being appealed in a higher tribunal, the stated objective to control pricing without taking into consideration costs and slowing demand is bound to cause more harm.

India is the world’s second biggest producer of cement after China, with output soaring after the sector was completely decontrolled in 1989. But the emerging scenario is detrimental for the industry and the country. 

Competition Commission fine on Cement industry - Not so fine!

The Competition Commission of India (CCI) has imposed a fine of more than Rs 6,000 crore on 11 cement makers alleging cartelisation and price fixing from May 2009 to March 2011.

It is a record penalty and is seen as an attempt by the ant-trust regulator to assert itself. But the last word has not been said on the issue, yet. The cement makers can go on appeal to the Competition Appellate Tribunal (COMPAT), and even to the Supreme Court.

Legal experts think the CCI is on slippery ground here. Cement companies say the CCI rules require the commission to establish the existence of a cartel only if there is a written agreement among the parties involved. That is not the case here and the commission has based its findings on circumstantial evidence.

Fact is, despite all the arguments about lower utilization at cement plants and higher prices that informants in the case -- the Builders Association of India -- has brought against the cement companies, it would be tough to prove that cement prices rose because of cartelisation. As the Cement Manufacturers Association (CMA) submitted before the commission, the report is based on surmises and conjecture.

The CCI ruling said its director general has submitted that the cement companies have enough scope to reduce the price of cement but have tried to earn better margins on sales instead of utilizing more capacity. The argument flies in the face of the very system of free market economics. The shareholders of cement companies want the managements to bring them the best possible returns. If cement demand has been going up despite rising prices, that means optimum pricing for the commodity has not been discovered and the managements did the right thing by raising prices further. If the builders thought the prices were too high to make their business unviable, then they would have stopped buying cement, and the prices would have come down naturally. That is how market economics works.

That it never happened possibly points to another interesting aspect -- by bringing the case to the CCI, the builders may have been trying to protect the fat margins that they had commanded at the height of the housing boom. As the CMA said, the third-parties from whom information was collected in this case by the CCI are builders and cement dealers, who all have their own vested interests. The CCI's very enquiry rests on thin ice here.

Another interesting observation made by the CCI was that the common platform of CMA was used for collection and dissemination of the information on prices of different companies. The CMA countered that it never collected prices by brand but only average prices for passing on to the Department of Industrial Policy and Promotion. Furthermore, it had been asked by the ministry of commerce and industry to collect the data on a monthly basis to calculate the Wholesale Price Index.

It is akin to penalizing an organization for following the orders of a government department. Besides, as the association said, the information is available publicly!

The CMA also said mere price parallelisms cannot be used to infer cartelization and it is bound to occur in cases where a homologous product is sold in the same market.

Overall, despite all the headlines the CCI made, it looks like the findings have not strong legal base and could be thrown out by higher legal institutions. Till then, however, the CCI’s action has introduced an element of uncertainty into the cement industry at a time of weak demand and slowing economy. The action will have the opposite effect to what the CCI intended under the current economic circumstances.

Indian Cement COs gear up to defend against CCI penalty

Opinion - BNK

The Competition Commission of India (CCI) has imposed a fine of more than Rs 6,000 crore on 11 cement makers alleging cartelisation and price fixing from May 2009 to March 2011.

It is a record penalty and is seen as an attempt by the ant-trust regulator to assert itself. But the last word has not been said on the issue, yet. The cement makers can go on appeal to the Competition Appellate Tribunal (COMPAT), and even to the Supreme Court.

Legal experts think the CCI is on slippery ground here. Cement companies say the CCI rules require the commission to establish the existence of a cartel only if there is a written agreement among the parties involved. That is not the case here and the commission has based its findings on circumstantial evidence. There are around 47 cement players and any sort of agreement or understanding is next to impossible. That too, when the industry has added around 100 million tons capacity in the last three years.

Cement factory: A representative Pic

Fact is, despite all the arguments about lower capacity utilization at cement plants and higher prices that informants in the case -- the Builders Association of India -- has brought against the cement companies, it would be tough to prove that cement prices rose because of cartelisation. As the Cement Manufacturers Association (CMA) submitted before the commission, that the capacity utilization is bound to be lower on account of higher capacity growth rate as compared to cement demand growth rate and that the report is based on surmises and conjecture.

The CCI ruling said its director general has submitted that the cement companies have enough scope to reduce the price of cement but have tried to earn better margins on sales instead of utilizing more capacity. The argument flies in the face of the very system of free market economics where the price of cement is determined by demand and supply in the market. Interestingly CCI has totally ignored the submission of the cement industry that cement manufacturers cost is more than the increase in the Wholesale Price Index as well as the cement price increase in the market.

 The shareholders of cement companies want the managements to bring them the best possible returns. But in fact, it is the government which wants to earn more from the cement sector, as government levies have gone up from Rs 49 per bag in FY07 to Rs 72 per bag in FY 12.  This adds to the cement price increase. The result is that despite increase in cement prices, costs, and government levies, PAT margins of companies have come down in FY 11.  

There is another interesting aspect -- by bringing the case to the CCI, the builders may have been trying to protect the fat margins that they had commanded at the height of the housing boom. As the CMA said, the third-parties from whom information was collected in this case by the CCI are builders and cement dealers, who all have their own vested interests. The CCI's very enquiry rests on thin ice here.

Cement factory: A representative pic

Another interesting observation made by the CCI was that the common platform of CMA was used for collection and dissemination of the information on prices of different companies. The CMA countered that it never collected prices by brand but only average prices for passing on to the Department of Industrial Policy and Promotion. Furthermore, it had been asked by the ministry of commerce and industry to collect the data on a monthly basis to calculate the Wholesale Price Index.

It is akin to penalizing an organization for following the orders of a government department. Besides, as the association said, the information is available publicly!

The CMA also said mere price parallelisms cannot be used to infer cartelization and it is bound to occur in cases where a homologous product is sold in the same market.

Overall, despite all the headlines the CCI made, it looks like the findings have not strong legal base and could be thrown out by higher legal institutions. Till then, however, the CCI’s action has introduced an element of uncertainty into the cement industry at a time of weak demand and slowing economy. The action will have the opposite effect to what the CCI intended under the current economic circumstances.

Sikkim’s Teesta-III hydel project to get Rs 8.5 K cr funding

Sikkim’s prestigious 1200 MW Teesta-III hydel project is all set to move ahead in full swing with lenders agreeing to infuse Rs 8,500 crore toward revised project cost.

A decision to this effect was taken at a meeting of lenders called by REC in Delhi.

“We have approved in principle for the revised project cost of about 8,500 Crores,” a top official confirmed. 

All equity investors, including a group of six private equity partners, have also expressed their full support and commitment to bring in equity for the revised costs. 

The Sikkim state government has also agreed to bring in its equity share of equity. It is significant that Sikkim Power Secretary Mr A K Giri attended the REC meeting.

The project cost was originally estimated to be Rs 5,700 crores, but it has gone up due to delay in implementation partly because of a massive earthquake – which the project survived.

Teesta-III is expected to be back on track soon and the first unit is expected to begin to produce power by June next year.

Teesta-III, the largest of the six hydel projects on the Teesta river, is being executed by an SPV called Teesta Urja in which the Sikkim Government has a 26% stake.

About 15% of the power produced by Teesta-III will go to Sikkim while the rest 85% supplied to four northern States – Delhi, UP, Haryana and Rajasthan - which reel under chronic power shortages.

REC and PTC are among the big lenders to the project while a consortium of six PE players led by Morgan Stanley have pumped in Rs 750 crores signaling the FDI into country’s hydro power projects.

This was considered to be the largest PE transaction in the country’s power sector. Besides Morgan Stanley, the group of investors includes Everstone Capital, General Atlantic, Goldman Sachs Investment Management and Norwest Venture Partners.

Pipavav Defence scotches market rumours, says All is Well!

MUMBAI; Pipavav Defence and Offshore Engineering Company Limited today scotched market rumours leading to unusual volatile movements of its Stock Price, along with scrips of several other listed companies. 

"The Company would like to state that its business is as usual and that operations of the Company are in absolute order. No new development has occurred that can have impact on the Company’s operations or business," Pipavav Defence and Offshore Enginering said in its filing with BSE.

"The Company requests its investors to ignore market rumours that are speculative and mischievous, " it added.

Teesta-III dispute over Sikkim share ends; Power to flow from June 2013

GANGTOK: The stage is now set for resumption of work on the 1200 MW Teesta-III hydro power project in Sikkim with the Teesta Urja Limited ending a long standing dispute with Sikkim Government over allocation of shares to the latter.

“The Board of Directors of Teesta Urja Limited today passed a resolution to transfer 29,64,00,000 shares to SPICL,” a Teesta Urja top official confirmed.

The managing committee of Teesta Board has earlier approved the proposal to allocate the shares to SPICL and the company informed Sikkim Power Secretary Mr A K Giri.

“Now that the issue is settled amicably by the SPV partners and the Government, we expect the work on Teesta-III to be back on track and the first unit will begin to produce power by June next year,” the official said.

The work has been stalled a year ago following a dispute between the Sikkim Government and Teesta Urja over the share allocation issue. The state government had moved a Sikkim court seeking the share allocation. Teesta Urja’s argument was the SPV patners were more than willing to allocate the shares to Sikkim Government, but it was the latter that was dragging its feet in taking the stake. The dispute has led to the project being delayed by over a year.

Now, with the Teesta Board approving the share transfer to SPICL, the long standing dispute has ended. The Sikkim Government, through Sikkim Power Investment Corporation Limited,  gets 26% share holding in the SPV that is executing the 1200 MW Teesta-III hydro power project – the largest in the six cascade projects on the Teesta river run, a person associated with the development said.

Over 75% of work on Teesta-III has already been completed.

REC and PTC are among the big lenders to the project while a consortium of six PE players led by Morgan Stanley have pumped in Rs 750 crores signaling the FDI into country’s hydro power projects.

This was considered to be the largest PE transaction in the country’s power sector. Besides Morgan Stanley, the group of investors includes Everstone Capital, General Atlantic, Goldman Sachs Investment Management and Norwest Venture Partners.

The Teesta-III project will not only give power virtually free to Sikkim but supply electricity to four northern States – Delhi, UP, Haryana and Rajasthan - which reel under chronic power shortages.

Experts say Sikkim sets the new trend for developing hydel projects as the country is blessed with bounty of rivers flowing from Himalayan glaciers during summer when the power consumption is at its peak. Development of hydro power projects along the Himalayan river course, thus, could be a win-win situation for the people and the governments.

Leading analyst Mr. Sudip  Bandyopadhyay, MD and CEO of Destimony Securities, said: “With potential FDI availability, including possible World Bank support, many similar projects can be successfully established along the Himalayan rivers.”

Mr. Nilesh H Karani, Head of Research at Magnum Equity Broking, pointed out: “Himalayan glaciers melt in summer and the rivers supply adequate water for hydel projects in the region. Teesta stands out as good example of harnessing the hydro power.”

Mr Bandyopadhyay explained that “Hydro-electricity is one of the leading sources of clean energy.  For an energy starved nation like India which has been blessed with enough rivers, the potential of generating hydro-electricity in a cost effective manner is significant.

“At present with only 40% of Hydel power potential being tapped, India as a country has a huge scope of exponentially increasing hydel power capacity and reduce pollution through this clean and green power, he pointed out

Power produced to be transmitted till Kishenganj through 400 KV DC line to be constructed by Teesta valley Power Transmission, a JV between Teesta Urja Ltd and Power grid Corporation of India Limited (PGCIL). PGCIL is to wheel the power to the beneficiary states in the northern region beyond Kishenganj.

A World Bank report notes that severe power shortage is one of the greatest obstacles to India’s development.

Over 40 percent of the people -- most living in the rural areas -- do not have access to electricity and one-third of Indian businesses cite expensive and unreliable power as one of their main business constraints, it says.

Poor electricity supply thus stifles economic growth by increasing the costs of doing business in India, reducing productivity, and hampering the development of industry and commerce which are the major creators of employment in the country, it says.

Power sector analysts say hydro power projects are zero pollutant, as compared to thermal projects which reportedly contribute to half of global carbon emissions and India relies on thermal power to the extent of 60% of its consumption today. Even the cost of raw material – water – is nil.

Some may even call it Water Gold! Look at this HSBC Global Research that says increasing hydro power generation capacity would help in strengthening India's energy security. "Given India's tight domestic coal supply and increasing reliance on imported coal, hydro capacity provides the country with greater energy security,” the report says.

The government admits India’s failure to tap hydel power. In a written reply to a question in Lok Sabha, the Minister of State for Power Mr K.C. Venugopal said out of the identified capacity, 33320.8 MW i.e. 22.93% has so far been developed and another 15130 MW i.e.10.41% of is under development. He said that about 66.66% of the identified potential is yet to be developed

CCI order on cement: punishes performers, say analysts

MUMBAI, July 08, 2012: The Competition Commission of India’s recent order on eleven Indian cement companies imposing a whopping Rs 6,000 crore penalty for alleged cartelization is bound to have a crippling the industry – the world’s second largest after China - leading analysts said.

"It's a classic case of performers being punished,” said Mr Sudip Bandyopadhyay, MD and CEO of Destimony Securities. 

“In some cases the penalty imposed is higher than a year’s earning for many players and this could negatively affect the health of the company jeopardizing shareholder interest,” Mr Bandyopadhyay said and wondered: “Penalty seems to have been imposed on circumstantial evidence and not on the basis of concrete proof of cartelization.”

“As it is, the Indian economy is already suffering from negative developments on account of retrospective amendment in the Income Tax laws and the reverberations of the 2G scam. Further, penalties on core sectors like cement will weaken the FII confidence, as well as that of the domestic investor which will go on to hamper growth and destabilize the economy even further," he added.

The Competition Commission of India had imposed penalty of over Rs 6,000 crores on 11 cement manufacturers based on a complaint filed by Builders Association of India. The Commission has also imposed penalty on the Cement Manufacturers Association

In its report titled "CCI bites hard; Industry ready to fight back", Anand Rathi Share and Stock Brokers Limited says the order is largely based on “circumstantial evidence and less concrete or direct evidence” for an industry with a relatively large number of players.

Emkay Global Financial Services Ltd said in its report after analysing the CCI order that “Though some of the evidence presented by CCI could be strong, we believe they may not be strong enough to prove the charge of cartelization.”

“Collection and circulation of data by CMA has been considered as anti-competitive practice. However CMA has argued it collects data under instructions from DIPP for computation of wholesale price index and, hence, no adverse inference can be drawn from this. Further, data collection and dissemination activities of CMA mentioned by CCI are pretty much the activities carried by any trade/business association,” Emkay said.

“We also observe that CCI has provided strong circumstantial and statistical evidence like date and venue of CMA’s ‘High Power Committee’ meeting and subsequent movement in cement prices indicative of coordinate price actions by cement manufactures. However the limited period and price analysis of such meetings and that too for specific season (particularly construction season when cement prices usually witness seasonal up tick) could lead to lot of subjective inference and weakens statistical assessment. For eg .Commission gave instances of CMA meeting held on Jan-11, Feb-11 and April-11 and no specific explanation of why only these three meetings have been referred to when meetings of its High Power Committee take place periodically,” it added.

According to BRIC Data, an emerging markets intelligence company, India is ranked as the second-largest producer of cement in the world, only behind China. The Indian cement industry increased in value at a compound annual growth rate (CAGR) of 13.14% during the review period (2007–2011), and is projected to grow at a CAGR of 10.64% over the forecast period (2012–2016). This growth is primarily attributed to the government’s high level of infrastructure spending, and the country’s increasing number of residential and commercial construction activities, BRIC Data says.

The Indian government invested US$500 billion on infrastructure during the Eleventh Five-Year Plan (2007–2012) and revealed plans to invest a further US$1 trillion on infrastructure during the Twelfth Five-Year Plan (2012–2017).

The large-scale investment on various infrastructure projects, including roads, railways, bridges and ports, will generate a huge demand for cement over the forecast period, BRIC Data says.

Credit rating agency CRISIL said the penalty on the four CRISIL-rated cement companies is unlikely to impact their credit quality. “CRISIL believes that the financial risk profiles of these cement manufacturers are strong enough to offset the impact of the penalty. The penalty is sizeable at 75 per cent of the aggregate net profits of the four rated cement players for 2011-12 (refers to financial year, April 1 to March 31),” the agency said.

CRISIL, however, said robust liquidity and low gearing will cushion the credit risk profiles of these companies against the impact of the penalty. Moreover, cash outflows on account of the order are unlikely immediately, given that the players may appeal against it at the Competition Appellate Tribunal.

“The credit risk profiles of these companies are, therefore, expected to remain unchanged in the near term,” it said.

Indian cement industry makes rapid strides

Emerges 2nd largest globally

MUMBAI, July 02, 2012 (BusinessNewsbank): The Indian cement industry has registered a phenomenal growth contributing handsomely to the exchequer.

Starting with a mere 1.47 million tonne capacity s at the time of the independence, the Indian Cement industry is now globally competitive in technology, quality and cost of production, with a capacity of 320 million tonnes, emerging as the world’s largest cement producer after China.

It is the fourth largest contributor to the Union Excise duties and employs 10 million people directly or indirectly.

India has a cement capacity of about 320 million tonnes distributed amongst 47 players, not including mini cement plants.

In the last three years, around 100 million tonne of capacity has been added. It is pertinent to note that for every new plant, it takes at least three years to ramp up the capacity to 100% percent.

In the first two years, new plants could typically operate at about 45% and 65 % of their capacity. Hence capacity utilization numbers could be misleading unless read with the age of the plant.

So if 20 million ton capacity is added in one year, it could mean that only 45 per cent of that, i.e. 9 million tonnes can actually be produced in that year.

Teesta-III largest hydel project in Joint sector

While Sikkim and parts of North wait with  bated breath for completion of Teesta-III hydel project, here are some of its interesting aspects:

• Teesta Stage III is the largest HE Project under construction in Joint Sector in the country.
• Best and most unique HE Project with high head of 800 m against short HRT length of 13.3 km.
• Best studied and investigated project in the country by agencies like CWC/CEA, GSI, NHPC and TUL.
• Most dependable hydrology with data of over 30 years period for arriving at the dependable flow.
• Environment friendly project – Major project components underground, minimum impact on environment.
• Despite the size of the project no Resettlement and Rehabilitation issues leading to no local/ R & R issues.
• Sikkim is politically most stable, peaceful and investor friendly state.
• Govt. of Sikkim has 26% Equity resulting in pro-active attitude of the Government and smooth implementation of the Project.
• Local people are pro-development leading to smooth implementation of the project.
• Less implementation time as most of the infrastructure works are in place 

(Source Teesta Urja Limited)

Hydro power with FDI may hold key to India’s energy security

NEW DELHI: With coal supply and prices being erratic and ever increasing controversies over nuclear energy, hydro power holds a big promise for ensuring energy security to India while bringing in FDI, experts say.

"Given India's tight domestic coal supply and increasing reliance on imported coal, hydro capacity provides the country with greater energy security,” says a latest report by HSBC Global Research.

One the one hand, thermal power producers are yet to come to terms with Coal India Limited for uninterrupted fuel supply, while on the other nuclear power projects in Maharashtra and Tamil Nadu are faces with prolonged uncertainties, power sector analysts say.

Hydel projects could also attract FDI as demonstrated at the 1200 MW Teesta-III Hydel project on the river Teesta in Sikkim where in six PE players have invested Rs 750 crores. As much as 70% of the project work has been completed in a record time of five years and the first unit from Teesta-III may start generating power in a year, an official associated with the project said.

Leading analyst Mr. Sudip  Bandyopadhyay, MD and CEO of Destimony Securities, said: “With potential FDI availability, including possible World Bank support, many similar projects can be successfully established along the Himalayan rivers.”

Mr. Nilesh H Karani, Head of Research at Magnum Equity Broking, pointed out: “Himalayan glaciers melt in summer and the rivers supply adequate water for hydel projects in the region. Teesta stands out as good example of harnessing the hydro power.”

Mr Bandyopadhyay explained that “Hydro-electricity is one of the leading sources of clean energy.  For an energy starved nation like India which has been blessed with enough rivers, the potential of generating hydro-electricity in a cost effective manner is significant.

“At present with only 40% of Hydel power potential being tapped, India as a country has a huge scope of exponentially increasing hydel power capacity and reduce pollution through this clean and green power, he pointed out.

On harnessing hydro power, Minister of State for Power Mr K.C. Venugopal recently said in a written reply to a question in the Lok Sabha, out of the identified capacity, 33320.8 MW i.e. 22.93% has so far been developed and another 15130 MW i.e.10.41% of is under development.

He admitted that about 66.66% of the identified potential is yet to be developed.

A World Bank report said that severe power shortage is one of the greatest obstacles to India’s development. Over 40 percent of the country’s people -- most living in the rural areas -- do not have access to electricity and one-third of Indian businesses cite expensive and unreliable power as one of their main business constraints.

“Poor electricity supply thus stifles economic growth by increasing the costs of doing business in India, reducing productivity, and hampering the development of industry and commerce which are the major creators of employment in the country,” it said.

On assisting India in Hydel projects, the World Bank said it aims to assist the Government of India in meeting its targets for hydropower expansion in a sustainable manner. This entails not just ensuring financial, economical, and technical soundness but also meeting social practices which have been developed by the industry in recent years, and safeguarding environmental assets for future generations.

The Bank has been engaged in hydropower in India since the late 1950s. Several of its past engagements have been difficult, with Bank support for a number of potential hydropower projects, including the Sardar Sarovar project on the river Narmada, being cancelled before they were commissioned. The two most recent Bank engagements, the Nathpa Jhakri and Koyna IV projects which were completed in 2002 and 1998 respectively, have benefited from the lessons (FAQs) of earlier hydropower development, including more socially and environmentally sensitive safeguard policies.

At the request of the Government of India, the World Bank is supporting one hydropower project in the country -- the Rampur Hydropower Project downstream from Nathpa Jhakri on the River Satluj in Himachal Pradesh and is currently evaluating proposals for supporting two more hydropower projects in the country - the Vishnugad Pipalkoti Hydropower Project on the River Alaknanda in Uttarakhand and the Luhri Hydro Electric Project on the River Sutlej in Himachal Pradesh. While the Rampur Project is under construction, the Vishnugad-Pipalkoti and Luhri Projects are in varying stages of preparation.

The World Bank is also assisting the state governments of Himachal Pradesh and Uttarakhand adopt a river-basin approach in the planning and development of cascaded hydropower systems. The two mountain states that have made hydropower generation a significant development priority, had asked for Bank assistance in initiating a River Basin Development Optimization Study that uses the Satluj and Alaknanda rivers as case studies which has been completed and discussions are ongoing on how to take this work forward. The Study also aimed at forging effective and equitable systems of cost-and benefit-sharing among all stakeholders, including developers and operators, affected local communities, and host states.

Teesta & Sikkim may provide succor to power-starved North

The tiny Himalayan state Sikkim may well provide the much needed succor to part of North India which reel under chronic power crisis.

Sikkim, which taken up the challenge to harness hydro electric power from its running rivers like Teesta with Teesta Urja series of six projects, is well on its way to complete the largest among them – Teesta-III next – year.

With this, experts say, Sikkim sets the new trend for developing hydel projects as the country is blessed with bounty of rivers flowing from Himalayan glaciers during summer when the power consumption is at its peak. Development of hydro power projects along the Himalayan river course thus could be a win-win situation for the people and the governments.

The 1200 MW Teesta-III is the largest of the six and it will not only give power virtually free to Sikkim but supply electricity to northern and eastern states which reel under chronic power shortages.

As much as 99.2% of Tunneling Works was already completed (around 34.4 Km out of total 34.6 Km). The Excavation of 13.824 Km of Head Race Tunnel is also complete. 

Power produced to be transmitted till Kishenganj through 400 KV DC line to be constructed by Teesta valley Power Transmission, a JV between Teesta Urja Ltd and Power grid Corporation of India Limited (PGCIL). PGCIL is to wheel the power to the beneficiary states in the northern region beyond Kishenganj.

A World Bank report notes that severe power shortage is one of the greatest obstacles to India’s development.

Over 40 percent of the people -- most living in the rural areas -- do not have access to electricity and one-third of Indian businesses cite expensive and unreliable power as one of their main business constraints, it says.

Poor electricity supply thus stifles economic growth by increasing the costs of doing business in India, reducing productivity, and hampering the development of industry and commerce which are the major creators of employment in the country, it says.

With the issues like irregular coal supply, volatile price fluctuation and increasing pollution hazards casting uncertainty over thermal projects, hydro power clearly stands out as one of the best suited alternatives.

Power sector analysts say hydro power projects are zero pollutant, as compared to thermal projects which reportedly contribute to half of global carbon emissions and India relies on thermal power to the extent of 60% of its consumption today. Even the cost of raw material – water – is nil.

Some may even call it Water Gold! Look at this HSBC Global Research that says increasing hydro power generation capacity would help in strengthening India's energy security. "Given India's tight domestic coal supply and increasing reliance on imported coal, hydro capacity provides the country with greater energy security,” the report says.

The government admits India’s failure to tap hydel power. In a written reply to a question in Lok Sabha, the Minister of State for Power Mr K.C. Venugopal said out of the identified capacity, 33320.8 MW i.e. 22.93% has so far been developed and another 15130 MW i.e.10.41% of is under development. He said that about 66.66% of the identified potential is yet to be developed

As World Bank says, Hydropower plants can also start up and shut down quickly and economically, giving the network operator the vital flexibility to respond to wide fluctuations in demand across seasons and at different times of the day.

This flexibility is particularly important in a highly-populated country like India where household electricity demand is a significant portion of total demand and this demand in concentrated in a short period of time (usually in the evening).

As an illustration, if the approximately 150 million households in India were to turn on two 100 watt light bulbs at 7 pm, the power system would experience an instantaneous surge in demand of about 30,000 MW! 

APGENCO set to shelve Teesta-III

APGENCO, which planned to invest in Teesta Urja project in Sikkim, is having second thoughts on investing in equity outside the State.

APGENCO had bagged the O&M Contract for the prestigious 1200 MW Teesta Stage III Hydro Electric Power Project in Sikkim in March 2005 with a possibility of investing in the project. At 3829.40 MW, AP GENCO has the second highest hydel generation in the country

According to original plans, APGENCO was to also participate in equity for the Teesta-III after receiving the techno-economic feasibility of the project.

But now experts have advised APGENCO against going ahead with the non-AP equity plans since in the State itself it would have to invest heavily into power generation. “Better sense should now prevail on APGENO,” said a top power sector analyst.

Meanwhile, the Discom came under increased pressure with AP Chief Minister Mr N Kiran Kumar Reddy asking them to ensure that under any circumstances 7 hours of power supply to farmers. This should be strictly adhered to and there should be constant monitoring on this, he told the Discom officials.

Major Industries in the State are having 30 % power cut as of now, though the officials are making efforts to maintaining power supply to emergency services and small scale units.

APGENCO had also received offers for O&M and equity participation for Rolep (36MW), Ralong (48MW) & Chakung Chu(63MW) projects in Sikkim and some other gas-based projects in South India which is under examination of APGENCO Board.

Government official say APGENCO has now emerged as a National Player for the O&M operations in Hydel Sector extending its boundaries outside the state of Andhra Pradesh for the first time.

Expert opinion, therefore, is that APGENCO should concentrate only on providing its expertise in O&M for other States rather than frittering away its precious resources in equity outside.         

This assumes significance in view of the growing power shortages which could go up to 3900 MW (93 million units) in the peak season. The Discoms in the State have floated a tender for purchase of 2000 MW (48 mu) from June to May next year. The Discoms could contract for purchase of only 742 MW, media reports said.

The average demand during May, 2012 was 262 MU per day against 227 MU per day during the same period last year registering an increase of 15.41%. Presently Discoms are supplying around 239 MU/day with a shortfall of 29 MU per day. The Peak demand met during May, 2012 (up to 28th) is 11099 MW against 10474 MW during the same period last year registering an increase of 5.97%.

During 2011-12, as against requirement of 91730 MU, 85149 MU was met resulting in a deficit of 6581 MU (7.2%).  Officials said power supply position in Andhra Pradesh is far better compared to many other States in the country. 

Harnessing ‘Water Gold’ – Teesta Urja shows the way

NEW DELHI: As the rest of India struggles to meet perennial power shortages, the tiny Himalayan State of Sikkim has taken steps to emerge surplus in power by the next year with the execution of Teesta Urja cascade projects.

Work is in rapid progress at Teesta-III, part of the Teesta Urja’s six-stage cascade projects. The 1200 MW Teesta-III is the largest of the six and it will not only give power virtually free to Sikkim but supply electricity to northern and eastern states which reel under chronic power shortages, particularly during the summer when the consumption is also at its peak.

Sikkim which is endowed with vast hydro power potential and Teesta is the main river stream in Sikkim and its potential is being harnessed through a cascade of six Hydro projects.

Setting an example for Hydro Power generation capability of India, the Teesta Project was conceived as part of cascade development of river Teesta by CWC in 1974. An SPV called “Teesta Urja Limited” was formed in April 2005 and Implementation agreement signed with the Sikkim Government in July 2005.

The project received all statuary clearances in Record time.  The construction is being executed under EPC by a consortium led by M/s Navayuga Engineering Company Ltd.

As much as 99.2% of Tunneling Works was already completed (around 34.4 Km out of total 34.6 Km). The Excavation of 13.824 Km of Head Race Tunnel is also complete. 

Power produced to be transmitted till Kishenganj through 400 KV DC line to be constructed by Teesta valley Power Transmission, a JV between Teesta Urja Ltd

and Power grid Corporation of India Limited (PGCIL). PGCIL is to wheel the power to the beneficiary states in the northern region beyond Kishenganj.

The positive news about the progress of Teesta-III comes as a big relief to the people of Sikkim who are bracing themselves to pay higher tariff.

Power Secretary Mr AK Giri recently said that the state currently is procuring electricity from NTPC and thermal power is subject to vagaries of coal supply and prices. As such the price per unit Rs 3 will be applicable from this month itself, Mr Giri said.

Thus, Teesta-III will bring much-needed relief to Sikkim and power tariff hike will be part of history next year.

The success of Teesta also stands out as a shining example as many of the other hydel projects are not making much progress in north or north-eastern States.

Meanwhile, a World Bank report notes that severe power shortage is one of the greatest obstacles to India’s development, says a World Bank report. Over 40 percent of the country’s people -- most living in the rural areas -- do not have access to electricity and one-third of Indian businesses cite expensive and unreliable power as one of their main business constraints, it says.

Poor electricity supply thus stifles economic growth by increasing the costs of doing business in India, reducing productivity, and hampering the development of industry and commerce which are the major creators of employment in the country, it says.

With the issues like irregular coal supply, volatile price fluctuation and increasing pollution hazards casting uncertainty over thermal projects, hydro power clearly stands out as one of the best suited alternatives.

Power sector analysts say hydro power projects are zero pollutant, as compared to thermal projects which reportedly contribute to half of global carbon emissions and India relies on thermal power to the extent of 60% of its consumption today. Even the cost of raw material – water – is nil.

According to a latest report by HSBC Global Research increasing hydro power generation capacity would help in strengthening India's energy security.

"Given India's tight domestic coal supply and increasing reliance on imported coal, hydro capacity provides the country with greater energy security,” the report says.

Estimates are that India harnesses just about 25% to 30% of the hydro power capacity and give the Nation is blessed with a bounty of water resources, much of it goes literally down the drain.

In a written reply to a question in Lok Sabha, the Minister of State for Power Mr K.C. Venugopal said out of the identified capacity, 33320.8 MW i.e. 22.93% has so far been developed and another 15130 MW i.e.10.41% of is under development. He said that about 66.66% of the identified potential is yet to be developed

The World Bank acknowledges that the Indian power sector has made significant improvements in the maintenance and operation of its existing power systems. However, there is a limit to how much benefit in terms of additional power can be had from just these improvements. With the demand for electricity continuing to rise, the country needs also to look to additional and efficient generation.

The Government of India has decided to acquire an increasing portion of this additional power from the country’s vast untapped hydropower resources, only 23 percent of which has been harnessed so far. India’s energy portfolio today depends heavily on coal-based thermal energy, with hydropower accounting for only 26 percent of total power generation. The Government of India has set the target for India’s optimum power system mix at 40 percent from hydropower and 60 percent from other sources, the World Bank notes.

Advantages of hydropower:

As World Bank says, Hydropower plants can also start up and shut down quickly and economically, giving the network operator the vital flexibility to respond to wide fluctuations in demand across seasons and at different times of the day. This flexibility is particularly important in a highly-populated country like India where household electricity demand is a significant portion of total demand and this demand in concentrated in a short period of time (usually in the evening).

As an illustration, if the approximately 150 million households in India were to turn on two 100 watt light bulbs at 7 pm, the power system would experience an instantaneous surge in demand of about 30,000 MW!

Today, this peak demand is often met by households turning on small gasolene and diesel generation units, which, in addition to being polluting, are a serious health hazard in congested areas. And, with rising wealth, households are switching on a lot more than two light bulbs. Although hydropower plants are subject to daily and seasonal variations in water flows (which affects the production of electricity at that point in time), they are not subject to the fluctuations in fuel costs that trouble thermal power plants.

While hydropower plants have large up-front capital costs, they also have long and productive lives, which significantly help reduce costs over time. For example, the Bhakra Nangal plant, now more than 40 years old, has operating costs of only Rs 0.10 or US$ 0.002 per unit. Hydropower plants are thus generally cheaper in the long run than natural gas-based plants, which are constantly at risk from fuel price increases in the global market.

While India plans to develop mainly run-of-the-river projects, multipurpose hydropower plants with water storage facilities can help manage critical water resources in an integrated manner by serving as flood controllers as well as sources of irrigation and much-needed drinking water. The Tehri Dam in Uttarakhand, for instance, which was commissioned in 2006, today caters to one-third of the drinking water needs of Delhi, India’s capital.

Besides which, India’s hydro-resources are largely available in some of the least-developed parts of the country and hydropower plants, if designed appropriately offer significant potential for regional development and poverty alleviation. Hydropower projects that forge equitable systems of benefit-sharing and implement targeted local area development can help local communities improve the quality of their lives quite significantly, says the World Bank.

On assisting India in Hydel projects, the World Bank says it aims to assist the Government of India in meeting its targets for hydropower expansion in a sustainable manner. This entails not just ensuring financial, economical, and technical soundness but also meeting social practices which have been developed by the industry in recent years, and safeguarding environmental assets for future generations.

The Bank has been engaged in hydropower in India since the late 1950s. Several of its past engagements have been difficult, with Bank support for a number of potential hydropower projects, including the Sardar Sarovar project on the river Narmada, being cancelled before they were commissioned. The two most recent Bank engagements, the Nathpa Jhakri and Koyna IV projects which were completed in 2002 and 1998 respectively, have benefited from the lessons (FAQs) of earlier hydropower development, including more socially and environmentally sensitive safeguard policies.

At the request of the Government of India, the World Bank is supporting one hydropower project in the country -- the Rampur Hydropower Project downstream from Nathpa Jhakri on the River Satluj in Himachal Pradesh and is currently evaluating proposals for supporting two more hydropower projects in the country - the Vishnugad Pipalkoti Hydropower Project on the River Alaknanda in Uttarakhand and the Luhri Hydro Electric Project on the River Sutlej in Himachal Pradesh. While the Rampur Project is under construction, the Vishnugad-Pipalkoti and Luhri Projects are in varying stages of preparation.

The World Bank is also assisting the state governments of Himachal Pradesh and Uttarakhand adopt a river-basin approach in the planning and development of cascaded hydropower systems. The two mountain states that have made hydropower generation a significant development priority, had asked for Bank assistance in initiating a River Basin Development Optimization Study that uses the Satluj and Alaknanda rivers as case studies which has been completed and discussions are ongoing on how to take this work forward. The Study also aimed at forging effective and equitable systems of cost-and benefit-sharing among all stakeholders, including developers and operators, affected local communities, and host states.

Hydropower stations are capable of instantaneous starting and stopping and are able to accommodate various loading alternatives. They help to improve the reliability of power systems and are ideal for meeting demand during peak times.

Thus, it is abundantly clear water emerges as the most precious resource – much more precious than even gold - to empower India

Engineering marvels at Teesta-III; Teesta Urja in full swing

·         South African giant Shaft Sinkers achieves wonders

GANGTOK: In an engineering marvel at ongoing Teesta-III hydro electric project, Shaft Sinking method has been deployed to save as much as 15 months in the Project schedule.

The technique is being executed by Shaft Sinkers of South Africa and this is their first such assignment in India.

Official sources say the results are “very much encouraging”. Shaft Sinking method was adopted when all other traditional methods are found either unsuitable or unfeasible.

This method usually applied in Mines. With Teesta-III Shaft Sinkers diversified into hydro-electric schemes.

Teesta Urja is environmental friendly and has got the most dependable hydrology as the major project component is underground, having minimum impact on environment.

On winning the Sikkim contract, Shaft Sinkers MD, Rob Schroder said the challenges involved in this project were immense: “For one, the road is a single narrow track in the Himalayas and it will take more than 14 hours to move equipment 15 kilometres to the site and the laydown area is extremely narrow. It is similar to the conditions we worked in previously at a job in Laos.

Shaft Sinkers has been sinking shafts through every type of rock strata for more than 47 years and has achieved worldwide acclaim helping cement South Africa’s reputation as one of the world’s most advanced countries in shaft sinking and mining technology.Projects include not only vertical shaft sinking but also a variety of excavations for underground winders, pump chambers, rock silos, loading stations, settlers and dams. The company is also involved in hydro-electric schemes, road and railway tunnels and other major civil engineering projects.

Shaft Sinkers has been active internationally in Lesotho, Zambia, the DRC, Namibia, Tanzania, Botswana, Ghana, Sierra Leone, Mali, Zimbabwe Swaziland, Israel, Ireland, England, France, Switzerland, Laos, Indonesia, Tasmania, Chile, Argentina, and Brazil.

Teesta Urja set to bring relief to Sikkim

GANGTOK: Men and machines are racing against time to complete the work on the Teesta – Stage III Hydro Electric Project which is expected to mitigate the ongoing power crisis in the tiny Himalayan State.

Sikkim which is endowed with vast hydro power potential and Teesta is the main river stream in Sikkim. The potential of Teesta River is being harnessed through a cascade of six Hydro projects.

The 1200 MW Teesta-III is part of this cascade development – the highest capacity power project in Sikkim. 

The Teesta Project was conceived as part of cascade development of river Teesta by CWC in the year 1974. An SPV called “Teesta Urja Limited” was formed in April 2005 and Implementation agreement signed with the Sikkim Government in July 2005.

The project received all statuary clearances in Record time.  The construction is being executed under EPC by a consortium led by M/s Navayuga Engineering Company Ltd.

As much as 99.2% of Tunneling Works completed (around 34.4 Km out of total 34.6 Km). The Excavation of 13.824 Km of Head Race Tunnel was also completed. 

Power produced to be transmitted till Kishenganj through 400 KV DC line to be constructed by Teesta valley Power Transmission , a JV between Teesta Urja Ltd

and Power grid Corporation of India Limited (PGCIL). PGCIL is to wheel the power to the beneficiary states in the northern region beyond Kishenganj.

The positive news about the progress of Teesta-III comes as a big relief to the people of Sikkim who are bracing themselves to pay higher tariff.

Power Secretary AK Giri had said that the state currently is procuring electricity from NTPC and thermal power is subject to vagaries of coal supply and prices. As such the price per unit Rs 3 will be applicable from this month itself, Mr Giri said.

Latest updates of Teesta-III

• The Project is conferred with Mega Project Status by the Ministry of Power, Government of India on 2nd June 2010.
• River Diversion achieved on 15th January 2010.
• Around 99.4% of cumulative tunneling completed in the project.
• 71% of the Rock filling completed in Concrete Face Fill Dam (CFRD).
• Cut off Wall Excavation works commenced in Dam Site.
• HRT Excavation achieved on June 4, 2011. Till date 5856 m of overt lining completed.
• Surge Shaft - Break Through achieved between the pilot hole and sinking face on July 8, 2011.
• Vertical Pressure Shaft 1 (645 m): Excavation completed.
• Vertical Pressure Shaft 2 (645 m): Break Through achieved between the pilot hole and sinking face on July 30, 2011.
• Electro-Mechanical works commenced in all six units.
• Steel liners erection commenced in Pressure Shaft.