India plans to lift ailing electricity distributors

Market: Coal
03/02/20

India is set to renew efforts to revive ailing electricity distributors amid broader plans to boost the power sector and expand electricity provision.

State-owned electricity distribution companies—the weakest link in the electricity supply chain—have total dues owed to power generators nearing 800bn Rupees ($11.18bn) by the end of 2019, power minister Raj Kumar Singh said after the federal budget was presented on 1 February.

Efforts will review the existing programme for the distributors' debt reduction as well as launch new government initiatives after discussions with state governments. State-owned power sector lender Power Finance will set up an alternate investment fund to help the distributors repay their debt. "If you don't reduce loss, we will not be able to help you," the minister said, underscoring the conditional nature of the proposed plan.

Distributors have been forced to borrow heavily from state-run financial institutions over the years to pay the generators, given their inability to raise power tariffs and cover their costs. This has weighed on generation too because the distributors have been unable to increase electricity purchases, thus hurting the goal of providing power to all.

Last year, prime minister Narendra Modi extended the target for reaching India's goal of providing power for all to 2022, from 2019.

The government also hopes that efforts to replace the existing electricity meters with prepaid smart meters in the next three years would help to reform distribution companies, finance minister Nirmala Sitharaman said in her budget speech. But the budgetary allocation for the power ministry was left unchanged in the April 2020-March 2021 financial year from a year earlier.

Support for generators

The finance minister also announced a concessional 15pc corporate tax for new power plants that start operations by 31 March 2023, to help attract investment in the sector. Corporate tax for operational firms currently stands at 22pc. The move is in line with India's plan to boost its generation capacity, especially from renewable sources.

The government also plans to set up solar capacity on barren farm land as well as alongside railway tracks. Sitharaman's speech referred to some amendments to customs tax on solar cells, but there remains a lack of clarity over the potential plan to tax imported solar power equipment, although the rationale could be to boost domestic production.

The government did not heed the industry's request to remove a carbon tax on domestic and imported coal. The industry has called for the scrapping of this levy to cut costs and likely leave more money in the hands of coal-fired power stations to meet a government directive of installing emission cutting equipment.

More than half of India's generation capacity is coal fired with hundreds of power stations mandated to meet the regulatory requirement by 2022. India will shut at least 29 old and polluting power plants by 2022 as they will not be able to meet the pollution-curbing directive.

By Saurabh Chaturvedi

Related news posts

Argus illuminates the markets by putting a lens on the areas that matter most to you. The market news and commentary we publish reveals vital insights that enable you to make stronger, well-informed decisions. Explore a selection of news stories related to this one.

News

27/11/24

Australia's BOM forecasts severe cyclone season

Sydney, 27 November (Argus) — Australia's Bureau of Meteorology (BOM) expects the country to experience 11 tropical storms over the next few months, threatening the country's mineral-rich Pilbara region and coal infrastructure in Queensland. The number of storms is in line with historical averages, but BOM warns that rising ocean temperatures could increase their severity. The state weather agency believes that four of these storms will make landfall from late December, and that a La Nina event could start later this year, although it may not last very long. La Nina events are associated with high levels of cyclonic activity. BOM's forecasts suggest that five of the storms are likely to form around Western Australia's mineral-rich Pilbara region, which houses more than 40 operating iron ore mines and two lithium mines. Over the last three months, sea surface temperatures around Pilbara have exceeded historical averages by 1.2–2°C, warming more than in any of the country's other cyclone-prone regions. On the other side of the country, four tropical storms could form around Queensland's cattle and coking coal producing regions, although these are likely to be less severe than the Pilbara storms. Temperatures across most of Queensland are forecast to exceed historical averages by 0.4–1.2°C in October-December. Cyclonic weather in Pilbara could disrupt iron shipping and mining activity in the region. Australia's three largest iron export ports sit along the region's coast. In 2019, Cyclone Veronica forced the closure of Pilbara's three major ports and multiple mines operated by mining company Rio Tinto, prompting the firm to cut its production forecasts for the year. Harsh storms in Queensland have previously damaged vital coal transport links in the state, hampering exports. In 2017, Cyclone Debbie damaged rail lines linking coal mines to the ports of Gladstone, Hay Point, Dalrymple Bay, and Abbott Point, which handle most of the state's coking coal exports. More recently, severe weather also halted deliveries to Mackay port . Queensland and Pilbara are also home to major LNG terminals at Dampier and Gladstone ports that sit within cyclone-prone zones. The two terminals together export over 3mn t/month of LNG . By Avinash Govind Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Find out more

News

Opinion: Bridging the divide

22/11/24

News

22/11/24

Opinion: Bridging the divide

Cop summits put the gap between developed and developing countries in stark relief and demand a strong moderator Baku, 22 November (Argus) — The UN's Cop climate summits always involve a high-stakes test of multilateralism. But the Cop 29 gathering that is crawling towards its conclusion in Baku this week has pushed this concept to its limit. The summit faced serious challenges even before it kicked off. Azerbaijan took on the presidency relatively late in the day and the country's president, Ilham Aliyev, irritated some delegates with an opening speech that lauded oil and gas as a "gift from God" and railed against "western fake news". His comments on European nations' Pacific island territories prompted France's energy minister to boycott the talks, while the Cop chief executive was caught on film trying to facilitate fossil fuel deals. And the broader geopolitical background for the gathering was, of course, "grim", as EU climate commissioner Wopke Hoekstra noted, even before delegates tackled the summit's key discussion topic — money. At the heart of this year's Cop is the need to agree a new climate finance goal — a hugely divisive subject at the best of times. Discussions start with countries' wealth, take into account historical responsibility for emissions, and often end up with accusations of neocolonialism and calls for reparations. Figuring out who pays for what is crucial to advancing any kind of meaningful energy transition — and is hence a regular Cop sticking point. Developing countries have long argued that they are not able to decarbonise or implement energy transition plans without adequate financing, and they are prepared to hold other issues hostage to achieve this. Equally, developed countries will not budge on finance until stronger emissions cuts are pledged. Cop summits throw the developed/developing world divide into stark relief as well as shine an unforgiving light on weak management and oversight of Cop debate — an event where every country has an equal vote and needs a strong moderator to bridge that deepening developed and developing world division. This year's summit falls between two much more heavily-hyped Cops, and next year's host Brazil has already taken centre stage, boosted by also holding the G20 presidency. Cop 29 president Mukhtar Babayev asked Brazil and 2021 host the UK to help ensure a balanced outcome, while a strong focus on climate at this week's G20 summit in Rio de Janeiro lent some support to discussions in Baku. More challenges loom. US president-elect Donald Trump has threatened to pull the US — the world's second-largest greenhouse gas emitter — out of the UN Paris Agreement for a second time, and there are fears that fellow G20 member Argentina might quit too. But the Cop process has dealt with some of these challenges before — it is built to withstand a term or two of an unsympathetic world leader, and any exits from the Paris accord could galvanise others to step up their policy commitments, several delegates in Baku suggest. And the issue overshadowing it all — and the reason nearly 200 countries still turn up each year — is not going away. The world has already warmed by around 1.3°C above pre-industrial levels and this year is set to smash last year's record as the hottest. Leaders from both developed and developing countries spoke of catastrophic floods, droughts, heatwaves and storms. It has become a truism, but when it comes to the tricky issue of money, the only thing more daunting than the cost of tackling climate change is the cost of ignoring it. Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

News

Japan’s Taketoyo to resume biomass co-firing in 2027

22/11/24

News

22/11/24

Japan’s Taketoyo to resume biomass co-firing in 2027

Tokyo, 22 November (Argus) — Japan's largest electricity producer Jera aims to resume coal and biomass co-firing at the 1.1GW Taketoyo plant in 2027's first quarter, after a fire halted plant operations in January. Jera announced on 22 November that the thermal power plant in central Japan's Aichi prefecture would resume co-firing wood pellets with coal at a rate of 8pc, around the end of the 2026-27 fiscal year ending in March. This will come after its safety measures are completed. The plant's co-firing rate was 17pc before the serious fire, which was caused by an explosion of dust from wood pellets. The company will consider increasing the co-firing rate again in the future, provided safety can be ensured. But the plant will restart coal-only combustion in early January 2025, operating mainly during the summer and winter seasons, when electricity demand is high. Jera will keep operation rates low at Taketoyo and other coal-fired plants when electricity demand is low and rely more on gas-fired generation, to achieve its initial plan to cut CO2 emissions through co-firing at Taketoyo. Taketoyo started co-firing operations in August 2022 and burned around 500,000 t/yr of wood pellets imported from the US and Vietnam. It will burn 200,000 t/yr after it resumes co-firing at 8pc. The plant will slow down the speed of wood pellet conveyors to reduce friction as a part of safety measures, which means it must also reduce its coal and biomass co-firing rate. It is also currently working on other safety measures, such as installing air pressure conveying facilities dedicated to wood pellets and explosion suppressor systems to inject fire extinguishing agents. The outage at Taketoyo has encouraged Jera to boost replacement gas-fired generation, with the extra gas-fired costs accounting for most of the estimated cost resulting from the shutdown, which could be tens of billion yen in the 2024-25 fiscal year ending in March. By Takeshi Maeda Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

News

Cost of government support for fossil fuels still high

21/11/24

News

21/11/24

Cost of government support for fossil fuels still high

London, 21 November (Argus) — The cost of government measures to support the consumption and production of fossil fuels dropped by almost a third last year as energy prices declined from record highs in 2022, according to a new report published today by the OECD. But the level of fiscal support remained higher than the historical average despite government pledges to reduce carbon emissions. In an analysis of 82 economies, data from the OECD and the IEA found that government support for fossil fuels fell to an estimated $1.1 trillion in 2023 from $1.6 trillion a year earlier. Although energy prices were lower last year than in 2022, countries maintained various fiscal measures to both stimulate fossil fuel production and reduce the burden of high energy costs for consumers, the OECD said. The measures are in the form of direct payments by governments to individual recipients, tax concessions and price support. The latter includes "direct price regulation, pricing formulas, border controls or taxes, and domestic purchase or supply mandates", the OECD said. These government interventions come at a large financial cost and increase carbon emissions, undermining the net-zero transition, the report said. Of the estimated $1.1 trillion of support, direct transfers and tax concessions accounted for $514.1bn, up from $503.7bn in 2022. Transfers amounted to $269.8bn, making them more costly than tax concessions of $244.3bn. Some 90pc of the transfers were to support consumption by households and companies, the rest was to support producers. The residential sector benefited from a 22pc increase from a year earlier, and support to manufacturers and industry increased by 14pc. But the majority of fuel consumption measures are untargeted, and support largely does not land where it is needed, the OECD said. The "under-pricing" of fossil fuels amounted to $616.4bn last year, around half of the 2022 level, the report said. "Benchmark prices (based on energy supply costs) eased, particularly for natural gas, thereby decreasing the difference between the subsidised end-user prices and the benchmark prices," it said. In terms of individual fossil fuels, the fiscal cost of support for coal fell the most, to $27.7bn in 2023 from $43.5bn a year earlier. The cost of support for natural gas has grown steadily in recent years, amounting to $343bn last year compared with $144bn in 2018. The upward trend is explained by its characterisation as a transition fuel and the disruption of Russian pipeline supplies to Europe, the report said. By Alejandro Moreano and Tim van Gardingen Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

News

Cop: Australia backs no new coal power call: Correction

20/11/24

News

20/11/24

Cop: Australia backs no new coal power call: Correction

Corrects missing word in headline London, 20 November (Argus) — Major coal producers Australia and Colombia, along with the EU and 23 other countries including the UK, have pledged not to allow any new unabated coal-fired power generation in their energy systems at the UN Cop 29 climate summit in Baku, Azerbaijan. This comes a day after Colombia, New Zealand and the UK joined a Netherlands-led international coalition focused on phasing out incentives and subsidies for fossil fuels. Most of the coal pact signatories are members of the Powering Past Coal Alliance, under which some countries have committed to phasing out existing unabated coal power generation. Australia is not listed as a member of the alliance, but the cities of Sydney, Melbourne and Canberra are. Unsurprisingly, the list of signatories did not include China or India, the two world's largest coal importers. It also does not include the US, although the country is part of the Powering Past Coal Alliance. "There is no space for new unabated coal in a 1.5°C or even 2°C aligned pathway, yet coal capacity rose by 2pc last year," the pact signatories said today. The pledge focuses on coal-fired generation and does not mention the phasing out of exports or imports. Australia, is the world's second-largest seaborne coal exporter. The country is looking to host Cop 31 in 2026 by outbidding Turkey for the spot. But no realistic policy changes in coal exports is expected from Australia, which will have a federal parliamentary election by May 2025 and winning votes from key coal mining regions in New South Wales and Queensland has proven to be crucial in recent elections. Turkey is on track to overtake Germany as Europe's largest coal-fired generator this year and was not among the signatories of today's coal pledge. Amid calls for a faster phase-down of unabated coal-fired power generation, global coal trade is set to reach a record high of more than 1.5bn t this year , surpassing last year's 1.38bn t, according to IEA data. Coal consumption will probably remain resilient, supported by higher electricity demand growth in China and India. China has not set a new climate plan since 2021, but it is expected to ramp up its ambitions in a new plan due by February 2025. India and Indonesia are strongly encouraging higher coal production to ensure energy security. The US Energy Information Administration (EIA) in September lowered its forecast for US coal-fired generation in this year but raised its expectation for 2025 . By Shreyashi Sanyal Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Business intelligence reports

Get concise, trustworthy and unbiased analysis of the latest trends and developments in oil and energy markets. These reports are specially created for decision makers who don’t have time to track markets day-by-day, minute-by-minute.

Learn more