COALGATE – Real Facts Versus Apparent Fiction CAG on a Sticky Wicket for Once!!!!

12^th September 2012

My Dear Colleagues, Bros & Sisters of India, Our Great Nation,

                                              Greetings from ENERTIA- Asia’s Premier Journal on Sustainable Energy & Power!!!

Sub: “COALGATE” – Real Facts Versus Apparent Fiction

The Issue of “Coalgate” has been engaged-in and flirted-with by all and sundry including some of my eminent media colleagues, especially on T.V. Media, without any in-depth knowledge of how Coal, Coal Mining and issues pertaining to Thermal Power, including environmental bottlenecks, land bank politics etc. -- which come on top of the already existing plethora of challenges faced by India’s Public and Private Sector companies -- operates in the Power and Energy space in India.

My “Letter Format Article” titled ““COALGATE” – Real Facts Versus Apparent Fiction” dtd: 11^th Sept, 2012 (Ref: Prof. A. G. Iyer / Coalgate / Rebutt/Sept 2012) as a representation to the “Eminent Parliamentarians of India”, I hope will be an eye-opener and engage them in the larger discussion of taking “India’s Power Generation capacity to level of 7,00,000 to 8,00,000 MW by 2022”.

If we fail to achieve this target for power generation then we can forget about the 8 to 9% economic growth rate for India and be prepared to write an obituary on the “India Growth Story”. The destiny of this country is in our hands. Time will try all the culprits who destroy this “India opportunity”. This includes the so called activists and disrupters of development, who now need to be dealt with a firm and decisive hand, while parallely allowing freedom of speech and expression to continue to prosper in this great democracy of ours.

May God give us all the Wisdom and Vision to clear the Muck in our Thinking and Understanding on such Critical National issues, than just playing to the galleries.

With Warm Regards and Best Wishes    

Sd/-

Prof. A. G. Iyer, Editor- in- Chief & Publisher,

ENERTIA-Asia's Leading Journal on Sustainable Energy & Power &

Author – India Brandished – The Branding of a Nation

Falcon Media

& President & Promoter Director

Renewable Energy Promotion Association, REPA

Encl/below: Article of 4 pages – titled “COALGATE” – Real Facts Versus Apparent Fiction

 11th September 2012

To,

1.    Dr. Manmohan Singh, Honourable Prime Minister, Government of India.

2.    Smt. Sonia Gandhi, President, Indian National Congress and Members of Parliament (Lok Sabha), Parliament of the Union & Republic of India

3.    Shri Lal Krishna Advani, Member of Parliament, Parliament of the Union & Republic of India and Chairman, BJP Parliamentary Board

4.    Smt. Sushma Swaraj, Leader of the Opposition - Lok Sabha, Parliament of the Union & Republic of India.

5.    Shri Shriprakash Jaiswal, Minister of Coal, Government of India.

6.    Dr. M. Veerappa Moily, Minister of Power (AC) & Corporate Affairs - Government of India.

7.    Dr. Montenk Singh Ahluwalia, Deputy Chairman - Planning Commission, Government of India

8.    Dr. Murli Manohar Joshi, Chairperson & Member of Parliament, Public Accounts Committee, Lok Sabha, Parliament of the Union & Republic of India

9.    Shri Kalyan Banerjee, Chairperson - Standing Committee on Coal and Steel and Honourable Member, Lok Sabha, Parliament of the Union & Republic of India

10. Shri Mulayam Singh Yadav, Chairman, Standing Committee on Energy and Honourable Member, Lok Sabha, Parliament of the Union & Republic of India

Dear Sir / Madam,

COALGATE – Real Facts Versus Apparent Fiction

CAG on a Sticky Wicket for Once!!!!

The "COALGATE" promoted by several of Indian TV Media as a “Scam” even before the last word and further facts rollout on a daily and sustained basis, will be perceived as the Worst ever irresponsible reporting seen on some sections of Indian Television, who are stooping below all grade to paint the entire Corporate India as “Sinners and Fixers”. While it is true that “Crony & Cranti (Crackpot – antinational) Capitalists” in the form of “fly-by-night operators” have entrenched India’s competitive - bidding space in several sectors like Power, Infrastructure, Telecom, Mining etc., painting everything yellow  with a common brush labelling the issue and related developments as “Scam and Corruption Nexus” is nothing short of sensational reporting.

 Coal used in Power Generation for Captive purpose is the prime reason for “How competitive Tariffs were offered by Reliance Infra/Power, Tatas, Jindals, Adanis, etc.” in private bids, as Input (Coal) for Thermal Power Generation and its costs (major part of the Variable Tariff component), were in control of Power Producers (Private or Public), wherever “Captive Mining” capacities were available. These are projects using Indian Coal.

 Taking the case of imported coal based Coastal Power Plants-- Both Tata and Adani at Mundra in Gujarat are today not in a position to generate power due to the fact that Coal prices worldwide have gone up by 35-40% over the last 8-12months or so. Now tariffs from these UMPP's (Ultra Mega Power Plant’s) will have to be raised, as Fuel Prices (Coal) and its cost -escalation worldwide will have to be made "pass through" due to "Force Majeure" conditions “International Coal Price Variations”, which is deemed an uncontrollable factor. Expecting these plants and their developers to absorb global price shocks, is nothing short of wishful thinking and shows lack of business acumen and economic understanding of the geopolitics of coal and other energy resources.

Coal obtained from “Indian Mines” are under “Captive Price Control” of Power Producers, who have bid and been given mining rights. So is it now that with “Coal Auction”, we want the “Coal based Power Tariffs of Thermal Power Plants and UMPPs” to hit the roof sending most of India to an unaffordable zone as far as “Power Tariffs” are concerned --Spiralling further inflation - the way we have done with our food products affecting “India’s food security”-which keeps inflating while we continue our whopping “diesel subsidies” as a policy aberration."Coal Subsidy Regime"? --Are we moving towards this monstrous situation? We are de-facto jeopardising our “Energy Security” in a way no other country has done in the history of nations post World War II. Today we in Mumbai – MMR pays Rs. 6 per unit for domestic  power and Rs. 9.25 per unit for commercial power in MSEDCL (State Utility) territory like Thane in the region of 500 units p.m. or above. This could literally double & even go beyond if coal is sanctioned.

Remember, Coal India Ltd., sold over the last 5-years or so, Indian Coal at Rs.1000/-per ton average, whereas International Coal prices hovered in the region of Rs.3000-4000 per ton average. While Indian Coal has a Gross Calorific Value (GCV) of 3500Kcal/Kg - 3800Kcal/Kg with a high ash content--40%plus in many cases, that from Australia or Indonesia has 5000-6000Kcal/Kg with far lower and nominal ash content. Further, Coal used in Power Generation is a far Lower Grade of Coal compared to that used for steel production. So this time, CAG has got it all wrong in its report and the Honourable PM, Dr. Manmohan Singh seems to be Right perceptibly for the First time in recent months.

Why has the CAG not commented on Coal sold by Coal India Ltd., all these years at below market prices, which resulted in “Coal India” being poorer due to billions of rupee revenue loss on account of below par pricing than could have been realized on market price mechanism (MPM) through auction of its coal or competitive bid for distribution and sale of coal to power and steel sector etal? If we take that as benchmark, the Coal India production goes as follows—Year 2011-12-436 MT; Year 2010-11-431MT; Year 2009-10-431MT; Year 2008-09404MT; Year 2007-08-380MT. This makes it clear that on an average over the last 5-years Coal India including its subsidiaries produced 400MT of Coal per annum average. Considering the price differential (Read Under-realization) of Rs. 2000 per ton average, the total under-realization or lost revenue per annum is Rs.80,000 Crores. For the 5-year period using straight line calculations this is a whopping Rs.4,00,000 crores. Indeed perceptibly bigger Scam than the notional Rs.1,86,000crores attributed to the “COALGATE”. CAG is silent in its report on this issue of Coal India’s underselling of National Coal mined and consumed, speaks volumes of the single minded agenda of going after the private sector, while condoning the public sector Coal India, which by the same logic has lost a revenue opportunity of Rs.4,00,000 crores. One cannot assess two similar situations with different yardsticks.

Further, “Jindal Steel and Power” has come under severe attack for booking indecent profits across its Raigarh, Madhya Pradesh 1000MW coal based Merchant Power Plant for which Captive mines were allocated by the government. The position in most media is that MP, Navin Jindals group made windfall profits from this power plant. This is more of an imagination good for fiction and not a legally tenable position. As the very nature of Merchant Power Plant (MPP)is that it is open to freely sell its produced power in the market and does not necessarily depend on a PPA. So, Jindal sold most of the power from this facility in open market taking risks thereof via exchanges and trading options making legitimate profits from the plant on a “risk and return” principle, a perfectly legitimate business strategy. This is very different from PPA backed IPPs. Merchant power may be costlier than PPA based IPP power, but encourages Captive producers to expand and sell excess capacities via exchanges or other power trading routes in an open-access regime making electricity a market based commodity. Jindals Raigarh project is unique as the captive coal is mined for both power and steel production and is a classic example of efficient operations in the country. Not to forget the Pilot Coal gasification project taken up by the group as the first of its kind repeat project in the country. By the way the power plant uses 4 BHEL BTG sets of 250MW each and are one of the best performing machines in India for use in thermal power generation.

The fact of the matter is that for indigenous Coal based Thermal power, the cost of input Coal cannot be competitive on auction and will simply render thermal power uncompetitive in India. Instead, there must be a price discovery formula using Coal India’s benchmark scale and comparing with international prices and gross calorific value (GCV) of Indian coal vis-a-vis imported coal for global price parity of input coal in thermal power generation, a formula, which will be more scientific and render the power sector and coal sector more efficient. Another factor that must be looked at is that the payment for coal supplied to all utilities public and private, should be strictly on the basis of Coal analytics like Gross calorific value (GCV), Moisture content, Ash content etc., which will need quality analytics measurement techniques mandatory for all coal based power plants in the country and for all coal-washeries and coal supply companies to ensure the right grade and quality of coal supply. This presently is not done in the country, resulting in complete variance from batch to batch. Mahagenco, the country’s second largest utility after NTPC has rightly hauled Coal India Ltd. to the court recently for inconsistent and poor grade of coal supplies which affected power generation of this apex state utility in Maharashtra. Can all this inefficiencies be sensationally labelled as Scam and Fraud just because the CAG or any other agency brings them to the notice of the government and public at large?

Hence, this "COALGATE" --alleged Scam is a non-starter and CAG's competence comes under sharp radar of criticism and its report on Mines Allocation-Coal audit report, seems to demean the neutrality of the office of CAG and position-with potential to send India to Chaos-With the disruptive forces leaving no stones unturned in achieving the “Chaotic India Objective”. Is this a planned Economic Agenda based attack from Overseas forces on India??Time will prove My point - That it is Indeed!!!!

The Country’s leading Political Parties must come on a common platform and on war footing address the core issues minus politicking. We must remember that for richer economies like USA, Australia, Canada, Russia and even Indonesia do not resort to auctioning Coal. It is mined on a cost plus strategy predominantly in joint – sector model (Governments & Private Companies Co-operation) as mining involves complex technology issues and knowhow for best yields.  

However, fly by night operators must be disallowed and their licences be cancelled but without affecting the core movement of the power sector failing which India will be sent to irreversible chaos. Not to forget the kind of opposition to Hydro Power, Nuclear Energy etc. which is already threatening India’s march forward in Power Generation, as this sector is in the worst state of paralysis at this moment and needs national consensus, maturity and co-operation amongst the Government, Policy  Makers, Opposition & Stakeholders including the public at large. 

Sd/-

Prof. A. G. Iyer, Editor- in- Chief  & Publisher,

ENERTIA-Asia's Leading Journal on Sustainable Energy & Power &

Author – India Brandished – The Branding of a Nation.

You can contact me on +91-9223207245/09029007245 or

Email: enertia.falcon@gmail.com tweet@ENERTIAjournal