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TheIndian EXPRESS
www.indianexpress.com

l FRIDAY l SEPTEMBER 14 l 2012

A SPACE MARKETING FEATURE

Regulatory and policy bottlenecks hampering coal production are not yet cleared
fe Bureau OWER is a critical economic sector, given the close correlation between economic growth and electricity consumption. Mindful of this, the central government has undertaken various measures to reform the sector and attract private investment. The Centres efforts seems to have paid off, with record capacity addition achieved in the 11th FiveYear Plan. However, the state power sector, which is the sole source of revenue for the industry, continues to languish due to the lack of political will to undertake tariff reforms, and this threatens to derail the flow of investments into the power generation business. A total of 54,000 MW capacity was added during the 11th Plan, which is close to the accumulated capacity addition during the previous three Plan periods. Meanwhile, the government has envisaged capacity addition of 86,000 MW during the current 12th Plan period. But choke points have already started emerging, with the coal sector unable to step up supply to meet the fuel demand of the power sector. Growing difficulty of land acquisition for power projects is compounding the problemsof developers. The government has failed to address regulatory and policy bottle-

necks hampering growth in coal production. While deregulation of the coal sector remains a farfetched idea, even a relatively modest proposal in 2008 for appointing a regulator to supervise pricing and mining costs has not acted upon so far. Meanwhile, the gap between domestic demand and supply of coal is rising unchecked. The Planning Commission has

POWER SECTOR
suggested some bold measures like openingupthecoalsectorforprivate players to tackle the growing fuel shortage for power producers in the 12th Plan approach paper. Given the strong growth in thermal generation projected in the Twelfth Plan, the aggregate demand for coal at the end of the Twelfth Plan is likely to be between 900 and 1,000 million tonnes depending upon the pace of implementation of power capacity. As against the projected demand of 9001,000 million metric tonnes (mt) by the end of the Twelfth Plan, the domestic output is unlikely to exceed 750 mt, leaving more than 200 mt shortfall to be met from imports. Even this assumes that domestic output will be able to increase by over 200 mt from current levels, saysthePlanPaneldocument.

FUEL CRISIS THREATENS

The paper has also suggested encouraging underground mining to avoid the problem of large-scale displacement of local population encountered in open cast mining, which has traditionally been the preferred way of coal mining in India. But promoting underground mining will require investment and useof latesttechnologybesidespolicy support from the Government.

Where possible, it may be advisable to encourage underground mining as against strip mining (open cast), technological improvement and perhaps create different regulatory costs in favour of underground miningwherefeasible,theapproachpaper says. However, mobilising adequate financial resources might not be possible without the involvementof theprivatesector. The approach paper has also suggested addressing environmental concernstoexpeditecoalexploration in unexplored areas. The paper says: Prospecting of coal in new areas must be energetically undertaken. It is planned that the exploration of all knowncoalbearingareasbecompleted during the Twelfth Plan. This will result in expansion of the inferred/proven category and thereby the overall availability Environ. mental concerns regarding these, particularly limitations in undertaking this work effectively in forest areas,willbeaddressed. While implementation of these suggestions looks difficult in the absence of a broader political consensus, the Plan Panels suggestion on pooling of imported and domestic coalpriceshasfoundtraction. The state power sector remains in badshape,withoutstandingdebtsestimated to cross R2 lakh crore. The Centre is preparing a debt recast packagefordiscoms,whichisexpected to go a long way towards resolving their cash flow problems. Meanwhile, state electricity regulatory commissions have shown determination on tariff revision after being pulled up by the Appellate Tribunal for Electricity The situation might . improve soon. But the question is if this is enough to ensure long-term viability of the state power sector or a radically different approach like privatisationwouldberequired? ADVERTORIAL

Growth trajectory of GAIL

The company has grown organically by building a large network of natural gas pipelines covering 9,500 km
HE Global Platts ranking 2011 rates GAIL (India) Ltd as the worlds No. 1 company in downstream operation and had the distinctionof theonlycompanyfrom Asiatoberecognisedforsuchacoveted position. GAIL was also ranked as the number two gas utility in Asia in thePlattsTop250EnergyCompanies. IncorporatedinAugust1984asaCentralPublicSectorUndertaking(PSU) under the Ministry of Petroleum & Natural gas (MoP&NG), GAIL (India)Ltd,whichstarteditshumblebeginnings as a pipeline company, has nowbecomeaR40,281-croreintegrated gas company with a market capitalisation of R58,000 crore in 2011-12. Growing in its trajectory, the companyhasregistered,inthefirstquarter of 2012-13, a 25% increase in its turnover (R11,089 crore against R8,867 crore in the corresponding previous year) and a 15% increase in its net profit (R1,134 crore against R985 crore in the corresponding previousyearquarter). By the 2011-12, consolidated financial statements, the total group sales of the company (net of excise duty) were R44,058 crore. The consolidated gross margin was R7,762 crore, the profit before tax was R6,355 crore and groupprofitaftertaxwasR4,444 crore. The earning per share (EPS) was R28.80 in the year 2011-12 as against R28.07 in the year 2010-11. The EPS as per the consolidated statement was R35.03asagainstR31.70intheprevious year. The GAIL group of companies companytodayaccountfor: About three-fourths of the natural gas transmitted in India through pipeline More than half of the natural gas soldinIndia Almostone-fifth(21%)of polyethyleneproducedinthecountry LPG produced for every 10th LPG cylinderinthecountry Pipeline transmission of around one-fourth of the countrys total LPG Gas supply for about half of countrysfertiliserproduced Gas supply for about half of countrys gas based power generation Operating more than two-thirds of countrysCNGstations More than half of the countrys pipednaturalgassupply GAIL,havingstartedasagastransmission company during the late eighties, has grown organically by building a large network of natural gas pipelines covering 9,500 km and has a market share of 74% in natural gas volume. GAIL embarked on a pipeline network augmentation programmeforlayinganother7,500kmof pipelines at an investment of R30,000 crore, out of which around 2,500 km have been completed so far. These pipelinesarebeingbuiltonacommon carrier principle and when commissioned the total length of the pipeline networkwillbeover14,500kmswitha total transmission capacity of about 300 MMSCMD. GAIL has two LPG pipelines covering 1,900 km. It is also playing a key role in developing a 5 MMTPA LNG Terminal through its JV at Dabhol and is going to commissionitshortly . GAIL has seven gas processing plants for production of LPG and other liquid hydrocarbons, with a productioncapacityof 1.4MMTPA,anda gas based integrated petrochemical plant of capacity 450,000 TPA of polymer, which is further being expanded to a capacity of 900,000 TPA. The company also has 70% equity share in Brahmaputra Cracker and Polymer Limited (BCPL) which is setting up a 280,000 TPA polymer plant in Assam. Further, GAIL is a co-promoter with 17%equitystakeinONGCPetro-additions Limited (OPaL) which is implementing a greenfield petrochemical complex of 1.1 MMTPA Ethylene capacityatDahejinGujarat. Keepinginmindtherequirementof growth and consolidation arising out of New Exploration Licensing Policy (NELP) of Government of India, the companyhasintegratedupstreaminto the business of exploration & production as well as downstream into the high growth and return city gas distribution business both in India andabroad.

E&P business, GAIL has participatinginterestintwooffshoreblocks(A-1 & A-3) in Myanmar. Commercial production of gas from Myanmar shall startfromMay2013.Inadditiontohaving two wholly owned subsidiaries namely GAIL Global (Singapore) Pte Ltd&GAILGlobal(USA)Inc.formanaging investments abroad, GAIL also has a representative office in Cairo, Egypt to pursue business opportunitiesinAfricaandMiddleEast.

GAILs endeavour is to constantly keep up the momentum of growth while focusing on business sustainability. Maintaining a balance between growth and environment has been and will continue to be the underlying philosophy of GAIL. GAIL is making efforts to provide access to affordable, efficient and low-carbon energy to meet the growing energy demand of an emerging India. It is also setting up LNG import infrastructure and focusing on growing areas like city gas distribution, expanding downstream business like petrochemicals, diversifying into high margin downstream business in gas value chain and also creating a portfolio of renewal businesses. Foreseeing the immense potential in the Indian gas sector, GAIL developed a well conceived strategic blueprint with ambitious goals for its growth and has accordingly started executing various pipeline projects, covering 16 different states to establish a truly pan Indian presence. GAIL has also started execution of project for doubling its petrochemical capacity at Pata. This, along with pipeline and other projects, will entail a capital investmentof aroundR400,000mninthe next4-5years. Movingbeyondgas,GAILisventuring into renewable energy sources.To harness the natural convergence between gas and power business, diversification into gas based plants and distributedpowergenerationisinthe process.GAILs motto of value beyond business is intrinsically linked to its business philosophy and it pridesitself inbeingasociallyresponsiblecorporate.TheCSReffortsof the company are focused at enabling inclusivedevelopmentof thecommunities in and around its work centres through engaging, partnering, and empoweringthelocalpopulation.

VISION

FUTUREGOALS

INTERNATIONALFORAYS

GAIL is slowly but steadily building up its overseas presence and is currently present in five countries. In