The Independent Power Producers Association of India (IPPAI), in association with knowledge partner Agarwal Law Associates, are organising a conference mapping the “Economic Impact of judicial Decisions”, on 22nd November 2014 at the Theatre Hall, India Habitat Centre, New Delhi.

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Powering Growth
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2. for Private Sector, Entrepreneurs & Landers in India’s Infrastructure Sector?
Powering Growth
Powering Growth
RECOMANDATORY SESSION
What is the Way Forward?
Is there a Need of Intervention – Example of CPP
Few Root Causes of discontentment Seeking
Interventions
Way Forward - Out of Box Thinking
All the views expressed in this presentation may not be official views of ICPPA

3. Powering Growth
Powering Growth
 ICPPA is an Apex Body of Captive Power Producers
 ICPPA members are from diverse industries i.e. Steel & Iron,
Aluminum & Metals, Cement, Chemicals, Pharma, Fertilizer,
Paper, Textile, Sugar, Engineering. etc.
 ICPPA exchanges constructive views with ministries and has
been invited by Coal Ministry for participation in policy framing:
 Formation of New Coal Distribution Policy (NCDP’07)
 NCDP review by H’ble Coal Minister in 2011
 sub-committee for 13th 5-Yr. Plan,
 ICPPA vouch for equitable distribution of Natural Resources

4. Powering Growth
Powering Growth

5. Powering Growth
Sustaining TTwwoo DDeeccaaddeess
of National Economic Growth:
Employment Generation, GDP, Forex, Tax Revenue
Despite Power Deficits
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6. Powering Growth
 CPP provide Cost effective Uninterrupted Quality-power for global
competitive industries not possible through Grid
 CPP installation =20%of Grid connected Capacity
 CPP capacity equates 71% of industrial consumption
 CPP growth in past decades from 1992
in 1st decade = 88% i.e. 9000MW to 17000MW; in 2nd decade = 300% to 50,000MW
from 13% to 20% of Grid capacity; from 53% to 71% of equating industry power
 CPP have very deep Cascading & Bull-whip effect on growth statistics
as “first link in the national value chain” by converting natural raw
materials into goods used by innumerable down line industries.
 Stand-by CPP can immediately meet National peak power deficit
 Rs. 2.5 lac Crore Investment is tied up that supports another Rs. 50-60
Lac Crore investment in Manufacturing End Use Plants (EUP)
 INR 2 Lakh Crores CPP Investments already made / planned / idling /
differed, while awaiting coal for last 5-8 years (excluding EUP investment)

7. T & D Losses
 National Avg > 23%
 Best of City Discom > 12%
 International Avg 9%
Captive Generation is Higher Efficiency Model
Powering Growth
India: 2010-11 2011-12
CPP: Zero T&D Loss
 Large, Mega, UMPP Plant Efficiency = 35% – 41%
 CPP overall efficiency for “Coal to Power Consumption” = 39%-45%
 Co-Generation Plant Efficiency = 45% – 75%
 Save huge cooling water Qty + Power consumed
 Waste Heat Recovery CPP increase efficiency by 5-15%
 Smart Grid Ready – as distributed power source

8. Powering Growth
 Govt’s unidirectional rhetoric of 24x7 power – at what cost
Coal import (170 mMT @70 = 11.9 b$) = FDI in 5 months (12.8 b$)
=3.6+1.9+3.5+1.3+2.5(sep’14)
For growth, focus must be on productive consumption i.e. to increase
share of Industrial Power Consumption (India 44.87% v/s China 68.47%)
 Govt. forcing CPP to shut down in the name of common man and
forcing them to buy power from grid
 390 CPP applications for 43,000MW linkage are pending from 2010 in
MoC/MoP/CEA
 It is estimated that 15,000-20,000MW CPP are already operative or are at
advance stage but produce low / no power in absence of coal linkages
 Nation is deprived of Investment of approx. Rs. 30 Lac Crore (+resultant
economic growth) due to differed projects / End Use Plants that were to
get quality-power from 23,000 MW CPP that are shelved in the absence
of coal linkages

9. Powering Growth
Powering Growth

10. Powering Growth
Discrimination with CPP manifested in many ways in past 5-8 yr:-
 Today CPP is 20% of grid but get only 6-7% coal dispatch
 Some reports suggest that during pre-NCDP in SLC(LT), CIL pointed to future coal
projections being much higher than achievable but allocations to one section
continued thus leaving little or no coal for CPP and rest of nation?
 NCDP & all other policies placed all power producers at par
 NCDP implementation in 2008 : From day-one discrimination started. CIL forced
CPP to accept 50% of Linkage, though other producers got 100% coal.
 During 2013-FSA renewal additional 25% cut leaves only 37% coal with CPP
 From 2011 CIL calls CPP as “non-power producer” to charge 35% higher
 Very efficient co-generation CPP plants get linkage only for 40-60%
 As per NCDP, CIL was required to fix norms for balance consumption but
norms were never declared to prevent linkages
 First time in the history, for 2 months in a row, F-grade coal dispatches to CPP
were stopped by SECL and further dispatches are only 30-40%.
 Railway lapses CPP monthly linkage quantity for diversion of coal
 Reduced e-Auction has exhausted market stocks & plants are closing

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Powering Growth

12. Hierarchies
Indian Constitution
Laws
Policies
Rules
Propensity to act in the “National Interest”
Administrative decisions
Push & Pulls to refine / redefine decisions
Expectation that some should sacrifice in National interest
The expectation turns to suppression while still swearing of Nation
Unrest  Not Revolutions but Seeking Interventions
Powering Growth

13. CPP, Industry await LOA
(2007-2009-2012 Freeze)
Auction, Dispatch reduced
Powering Growth
Hierarchies
Promissory Estoppels
Promise of Constitution (Justice, Liberty, ‘Equality of Status & Opportunities)
Promise of Law (MMDRA, Coal Mines Nationalization Act, Electricity Act)
Promise of Policies (2005: Elect. & Tariff, 2007:NCDP)
Propensity to act in “National Interest” (Power for All, Block allotment)
Administrative decisions (reverse calculation of power demand)
Push & Pulls (2005-07 SLC over-rule CIL forecast, Mad rush for IPP & Blocks)
Promise by Govt. (IPP LOA, Blocks allotted)
Contract (Post Presidential Directive forced FSA)
Unrest  No coal left for others (Some one Seeks Intervention)
New IPP @50% coal, Rest with 0%-10%-25% ना खुदा ही िमला ना िवसाले सनम

14. Hierarchies
Economic Impact Bearers
Elections are fought using:
•Religion & divides
•Muscle Power
•Money Power
Sufferers of Intervention:
•Themselves
•Other Business
•Banks (Public’s saving)
Outside Support
Involvement
Themselves Fighting Election
Generating Clout & Money
Plowing in business
Higher efforts to stake claim
on those very resources
Powering Growth

15. Powering Growth
Hierarchies
BCG Matrix – Two Ingenious Interpretations
IPP CPP
Holy Cow
(PPA)
Dogs
merchant
Govt.
Private
5-Star
 
Star
Banished
Use of BCG matrix is good for business
strategy – Problem starts when Markets
are made to Make Share High
The Oligopoly may trigger seeking
intervention
Present coal distribution
by Govt. is contrary to
policies of Equitability

16. Hierarchies
Equitability of Coal & Power Policies
Linear Equitability Giving raise to discrimination of Priorities
Govt. IPP Govt. CPP Pvt. IPP Pvt. CPP
Planer Equitability Solution to the mess
Govt. IPP
Pvt. IPP Pvt. CPP
Govt. CPP
Powering Growth

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Powering Growth

18. Powering Growth
Out of Box Thinking
Need to Take some hard decisions:
 Self Restraint in seeking resources v/s Accumulation
 Give full needs of coal to CPP to increase share of industrial power and trigger
& sustain national growth. For make in India initiative also it may be crucial.
 Let the coal be available to all users by taking voluntary Cut in place of
banishing other coal users
 For 2-3 years / till production from Blocks starts or till incremental quantity is
given by CIL, may Government give moratorium for defining the assets as NPA
and for payingback
 By rotation operate power plants for few months at a stretch so that operation
is at high PLF and all plants can earn / pay back some thing to Banks / Lenders
Power on Tap Through CPP
 Immediately power can be made available to any industry that want to start
production if they are assured coal for CPP
 This will boost investor confidence and exposure of banks is also secured
because CPP need neither go back to them for re-cast nor to Govt. for revising
PPA rates citing any reasons

19. Powering Growth
Out of Box Thinking
Reverse Auction of Coal Blocks
 Allow bids only for operating capacities and not for yet to start plants. Make
bidding in two parts – Actual assessment of demand & controlled bidding
 Merge smaller blocks for efficiency, common rail / road links
 Allow only 30% - 70% coal for self use – depending on block size and balance
coal goes to the nation
 The bidder should quote that at what cost he is ready to give the balance coal
to the nation. If he find that his business can absorb higher cost than a
situation can come where for higher quality coal, bidder is ready to even pay
some amount to nation
 The such received 30-40% coal be transferred to a central agency for
distribution against linkages
 No blocks be given to states – the benefit should be available to all & not a
restricted section influencing state govt.
 Fractional ownership be given to smaller business so that they also can get
benefit of fixing coal cost – that can otherwise be done only by large companies

20. Powering Growth
INDIAN
CAPTIVE
POWER
PRODUCERS
ASSOCIATION