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.

EIL offer to kick-start fresh PSU divestment

Mumbai, July 26, 2010: Public sector undertaking Engineers India Limited proposes to enter the capital markets tomorrow with its follow-on public offer of 33,693,660 equity shares of Rs 5 each. The Offer comprises a net offer to the public of 32,981,660 Equity Shares and reservation of 712,000 Equity Shares for subscription by Eligible Employees. 

The Offer marks a divestment of 10% in EIL by the President of India, acting through the Ministry of Petroleum and Natural Gas, Government of India.

The Offer is being made through a 100% book building process wherein up to 50% of the Net Offer will be available for allocation on a proportionate basis to Qualified Institutional Buyers. Further, not less than 15% of the Net Offer will be available for to Non-Institutional Bidders and not less than 35% of the Net Offer  will be available to Retail Individual Bidders.

The Selling Shareholder currently holds 90.40% of the pre-Offer paid-up capital of the Company. The object of the Offer is to carry out divestment of 33,693,660 Equity Shares held by the Selling Shareholder, wherein all proceeds of the Offer will go to the Selling Shareholder.

EIL has provided a range of engineering consultancy and project implementation services on more than 49 refinery projects, including eight greenfield refinery projects, seven petrochemical complexes, 35 oil and gas processing projects, 205 offshore platforms projects, 37 pipeline projects, 11 ports and storage and terminals projects, eight fertilizer projects and 26 mining and metallurgy projects. In the infrastructure space, it has provided a range of engineering consultancy services for more than 26 projects, including for airports, highways, flyovers, bridges, water and sewer management, as well as energy-efficient “intelligent” buildings. The Company has also completed 16 turnkey projects, including refinery and petrochemicals projects and offshore platforms.

About Engineers India Limited:

EIL was incorporated on March 15, 1965 under the Companies Act as a private limited company under the name Engineers India Private Limited pursuant to a formation agreement dated November 20, 1964 and in accordance with a memorandum of agreement dated June 27, 1964 between the GoI and Bechtel International Corporation. In May 1967, it became a wholly-owned GoI enterprise. In 1996, the GoI disinvested approximately 6.0% of its shareholding in the Company and it became a public listed company. It has two wholly-owned subsidiaries, Certification Engineers International Limited and EIL Asia Pacific Sdn. Bhd. incorporated in India and Malaysia, respectively, and two strategic joint venture companies, TEIL Projects Limited and Tecnimont EIL Emirates Consultores e Servico, LDA, incorporated in India and Portugal, respectively.

EIL is an engineering consultancy company providing design, engineering, procurement, construction and integrated project management services, principally focused on the oil and gas and petrochemicals industries in India and internationally. It also operates in a diverse set of other sectors including nonferrous mining and metallurgy and infrastructure. The Company is also a primary provider of engineering consultancy services for the Government of India's energy security initiative under its Integrated Energy Policy for strategic crude storages. EIL’s portfolio includes various technologies for petroleum refining, oil and gas processing and aromatics. It currently holds 10 patents and has 20 pending patent applications relating to various process technologies and hardware developed by the Company.

EIL’s services in these industries and sectors cover the entire spectrum of activities from concept to commissioning of a project. The Company's services include preparation of project feasibility reports, technology selection, project management, process design, basic and detailed engineering, procurement, inspection, project audit, supply chain management, cost engineering, planning and scheduling, facilitation of statutory and regulatory approvals for Indian projects, construction management and commissioning.

EIL has leveraged its track record in India to successfully expand its operations internationally, and has provided a wide range of engineering consultancy services on various international projects, particularly in the Middle East, North Africa and South East Asia. It has established strategic international offices in Abu Dhabi, London, Milan and Shanghai to expand its international operations.

The Company's total income increased at a CAGR of 47.28% from Rs.6,876.5 million for the year ended March 31, 2007 to Rs.21,969.6 million in the year ended March 31, 2010, while its profit after taxation, as restated, increased at a CAGR of 47.31 % from Rs.1,390.0 million in the year ended March 31, 2007 to Rs.4,443.4 million in the year ended March 31, 2010.

During the quarter ended June 30, 2010 of the current financial year, EIL recorded a net profit of Rs. 1,145.6 million as against net profit of Rs. 942.2 million for the the corresponding quarter ended 30^th June 2009 of the previous financial year. The Net Sales for the quarter ended June 30, 2010 was Rs. 6,060.3 million as against Rs. 3,914.3 million for the corresponding quarter ended 30^th June 2009 of the previous financial year.

Attn: Media Barons across the world......

The Government of India had issued Guidelines for (i) Publication of Newspapers and Periodicals dealing with news and current affairs; and (ii) Publication of Facsimile editions of foreign newspapers on 31st March 2006. Preamble (ii) of said guidelines is hereby clarified as under:

“Foreign Direct Investment (FDI) is permitted in case of publication of facsimile edition of foreign newspaper(s). However, when the facsimile edition proposed to be published by the owner of the original foreign newspaper(s), the limit of FDI is upto 100%. In all other cases in facsimile edition of foreign newspaper(s), the FDI limit continues to be upto 26%”.
The said clarification has already been notified by the Department of Industrial Policy and Promotion, Ministry of Commerce & Industry vide their Press Note No. 1 of 2009 Series.

Giving up on India? U wl repent: Kamal Nath

NEW DELHI: Union Commerce Minister Kamal Nath today said that world would benefit tremendously from a stable, large and growing consumer market provided by India and added that this is not the time for foreign investors to give up on India.

"Foreign investors who withdraw equity investments or shelve FDI plans in India will find themselves behind the curve as our economy picks up its 9-10% pace once again," he said addressing the Plenary Session on “Securing Opportunities for Inclusive Growth in India” at the India Economic Summit here.

Kamal Nath pointed out that India’s reform process has allowed millions of poor people to cross the poverty threshold and added that there is still a lot of room for further reforms in key areas such as public private partnerships, financial sector, and taxation, among others. He said that much action remains on the agenda table for integrating further with the global economy and becoming a vital link in the international supply chain of goods and services, funds and capital, and resources and talent.

The 3-day (16-18 November) Summit is being jointly organized by the Confederation of Indian Industry (CII) and World Economic Forum.

Kamal Nath emphasised that inclusive growth ultimately depends on the productivity of the overall workforce, which in turn is dependent on its education, skill development, technical and professional education, and talent resource levels. India’s workforce numbers around 500 million people and is expected to expand by about 20 million each year for the next ten years. “But 600 million people continue to depend on agriculture as a source of livelihood. While agriculture has been expanding at close to 3% annually, there is need to move people off the land in order to enhance their productivity and increase their incomes”, he added.

Speaking about India’s engagement with the world, he said that India’s total exports in 2004-05 was at $ 83.5 billion, whereas in 2007-08, it exceeded the targets and achieved a doubling of trade to $163 billion and this year, for the period April to September export growth was 31% over the same period last year. At the same time, we continue to be a solid market for overseas goods, he underlined and added that India’s imports have gone up from $ 112 billion in 2004-05 to $ 251 billion in 2007-08 and non-oil imports increased at a rapid clip of 43%. “When we include export and import of services, our external engagement can be placed at over $ 525 billion for the past year, which adds up to more than half of GDP. This is unprecedented in India’s modern economic history”, he said

Indian Economy can survive global crisis

by S. Sethuraman**

India has taken an array of monetary and fiscal measures, in quick succession, to contain inflationary pressures - with the annual rate already moderating from around 13 per cent in August to 10.72 per cent by the end of October - and, more importantly, to make available adequate domestic resources to maintain growth in the face of an unprecedented international financial crisis and global economy drifting into recession.

The Reserve Bank had, within four weeks in October, lowered reserve ratios and reduced a key interest rate to provide some 250,000 crores of liquidity for banks to finance businesses and consumers. These measures, welcomed by the industry and other productive sectors, have helped to impart a sense of confidence about India‘s ability to weather the global storm.

Growth Momentum:Prime Minister Dr Manmohan Singh remains focussed on seeing that the Indian economy does not get unduly affected by the adverse developments abroad. He has appealed to the industry and the country in general to turn the crisis in the world economy into an opportunity to ensure that India comes out of the global crisis with its fundamentals unimpaired, protecting employment.

What gives confidence and strength to the Indian economy is its sound financial sector with its well-regulated and well-capitalised banking system, the sustained growth in deposit accretion and credit flows, and assured safety for depositors, the global competitiveness of its manufacturing and services, high savings and investment rates and a comfortable level of foreign exchange reserves which could be drawn to make up for any shortfalls in capital inflows.

The Finance Minister Shri P Chidambaram has urged banks to lower interest rates, in the light of the steps taken by RBI both on liquidity and interest rate, and several public sector banks have already announced plans on reducing their prime lending rates. Banks have been asked to increase credit for productive purposes and ensure credit quality. RBI has also suggested to banks to restructure the dues of small and medium enterprises on merits.

There is general expectation that inflation would continue to moderate - especially now that global prices of oil (though still volatile) and commodities have sharply declined from their high levels in the first half of 2008 - and RBI projects that the annual rate of inflation would be down to 7 per cent by March 2009. India can well maintain growth at not less than 7 to 7.5 per cent, as the Prime Minister pointed out, despite some adverse impact on trade and capital flows which all countries have begun to experience in these uncertain times. Even at 7.5 per cent, India will remain the second fastest growing economy.

Given the unsettled conditions in global markets, the Prime Minister has set up an high-powered group chaired by him to closely monitor the evolving macro-economic situation so that growth momentum is sustained at reasonable rates. A committee of senior officials would keep a day-to-day track of trends.

Monetary & Fiscal Measures: The Reserve Bank of India had vigorously moved in October to bring down the cash reserve ratio from a peak of 9 per cent to 5.5 per cent, reduce the key policy interest rate (repo) from 9 to 7.5 per cent and also the statutory liquidity ratio by one percentage point to 24 per cent of their net demand and time liabilities. These were all designed to inject massive doses of liquidity to the banking system which in any case has been recording a higher credit growth in the current year. Nevertheless, when there was some liquidity constraint experienced by money markets and the foreign exchange market also coming under demand pressures, RBI had to intervene with remedial measures.

As part of measures to minimise the adverse impact of global crisis on domestic economy, the Finance Minister has reduced certain duties to give relief to some of the affected sectors like steel and aviation. On the budgetary side, higher allocations for social sectors and rural employment and other flagship programmes should generate consumption which contributes to economy’s growth. Most corporates including in the I T sector and banks have managed to maintain profitability, though somewhat lower than expected, in the second quarter (July-September), and the recent government measures on liquidity and interest rates should help to sustain business confidence.

Monetary policy has moved away from continued tightening, in the days of inflation climbing during 2008, to a significant easing of curbs with the steady moderation in the annual rate of inflation after peaking at 12.65 per cent in August. It had since been coming down over recent weeks and stood at 10.72 per cent in the week ended October 25. While the fall in inflation rate has been facilitated by the sharp drop in global prices of oil, food and other commodities as well as domestic supply management, the oil market remains volatile. Taking crop prospects and other domestic factors into account, RBI continues its monetary policy stance of maintaining growth with price stability as well as orderly conditions in financial markets.

Macro-Economic Management: India has to summon all its abilities at macro-economic management because of the extraordinary global situation in which there is weakening of global demand and likely interruption in external capital flows. So far, there have been only ripple effects on the economy and exports in the first half of the fiscal year (April-September) have recorded a robust 35 per cent growth. But oil imports at higher prices have pushed up the import bill and trade deficit is widening. There was some ‘knock-on’ on financial markets but there is no longer any sign of liquidity tightening with the measures taken.

Many developing and leading emerging economies including China and Korea have come under strain and some of the poorer countries face risks of economic disruption because of fiscal and balance of payments difficulties. China’s growth, largely export-led hitherto, has also slowed down and it is reorienting its policies to promote greater domestic consumption with the weakening of external demand especially from USA and Europe due to recessionary conditions there. India’s exports can be maintained without loss of momentum in the latter half of the year with greater focus on products and growth markets, especially with the exchange rate which has depreciated in relation to the dollar.

While there has been an outflow of foreign portfolio investments of the order of 10 billion dollars, India continues to attract foreign direct investment which totalled an impressive 17.66 billion dollars in the first six months, April to September, compared to 7.25 billion in the corresponding period of last year. There has been some draw down on our reserves to meet imports and other payments. With its sound management and continued liberalisation, India continues to be an attractive investment destination, especially if investors have to seek avenues away from the recession-hit developed nations. (PIB Features)

*Freelance Journalist

Disclaimer : The views expressed by the author in this feature are entirely his own and do not necessarily reflect the views of PIB.