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GS Paper: GS3-13.Infrastructure: Energy, Ports, Roads, Airports, Railways etc:

  • Why India needs a Ministry of Energy?

    Context

    The blame cannot be placed on the doors of any one entity or ministry for the shortage of coal.

    Ministries linked with coal shortage issue

    • The Ministry of Coal and Coal India must certainly accept that they slipped up somewhere — whether in managing the production process, planning supplies or leaving vacant crucial leadership positions.
    • The Ministry of Power/NTPC should also accept responsibility as they allowed coal inventories to fall below the recommended minimum in an effort to better manage their working capital.
    • But they can claim they had no other option because the state government electricity distribution companies do not pay their dues on time or fully.
    • The discoms will point a finger at their political bosses, who compel them to sell electricity to residential and agricultural sector consumers at subsidised tariffs.

    Structural issues

    • There is no one public body at the central or state government level with executive oversight, responsibility and accountability for the entirety of the coal value chain.
    • This is a lacuna that afflicts the entire energy sector.
    • It will need to be filled to not only prevent a recurrence of another coal crisis but also for the country to realise its “green” ambition.
    • The word “energy” is not part of the political or administrative lexicon.
    • At least not formally. As a result, there is no energy strategy with the imprimatur of executive authority.
    • The NITI Aayog may well challenge this statement.
    • For they have produced an energy strategy.

    Suggestions

    • Energy act: The government should pass an Act (possibly) captioned “The Energy Responsibility and Security Act.”
    • This Act should elevate the significance of energy by granting it constitutional sanctity; it should embed in law, India’s responsibility to provide citizens access to secure, affordable and clean energy.
    • The law should lay out measurable metrics for monitoring the progress towards the achievement of energy independence, energy security, energy efficiency and “green” energy.
    • Ministry of energy: Towards the fulfillment of this mandate, the government should redesign the existing architecture of decision-making for energy.
    • Preference would be for the creation of an omnibus Ministry of Energy to oversee the currently siloed verticals of the ministries of petroleum, coal, renewables and power.
    • The department would have a narrower remit than the other energy departments but by virtue of its location within the PMO, it would, de facto, be the most powerful executive body with ultimate responsibility for navigating the “green transition”.

    Benefits

    • It is important to stress the positive impact the above redesign will have on investor sentiment.
    • Several corporates have signaled their intent to invest mega bucks in clean energy.
    • Reliance has committed $10 billion, Adani $ 70 billion over 10 years; Tata Power, ReNew Power and Acme Solar have also placed their stakes in the ground.

    Conclusion

    Energy sector will be immensely benefited if the current fragmented and opaque regulatory, fiscal and commercial systems and processes were replaced by a transparent and single-point executive decision-making body for energy.

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  • A clean energy transition plan for India

    Context

    India has a long way to go in providing electricity security to its people since its per capita electricity consumption is still only a third of the global average.

    Ensuring energy security and role of coal

    • Energy security warrants the uninterrupted supply of energy at affordable prices.
    •  Thanks to the Electricity Act of 2003, the installed coal-fired thermal power plant (TPP) generation capacity in India more than doubled from 94 GW to 192 GW between March 2011 and 2017.
    • This sharp increase in the installed capacity has enabled the government to increase per capita electricity consumption by 37% while reducing peak demand deficit from 9.8% (2010-11) to 1.6% (2016-17). 
    • TPPs contributed 71% of the 1,382 billion units (BU) of electricity generated by utilities in India during FY 2020-21 though they accounted for only 55% of the total installed generation capacity of 382 GW (as of March 2021).
    • Coal, therefore, plays a vital role in India’s ongoing efforts to achieve Sustainable Development Goal 7, which is “to ensure access to affordable, reliable, sustainable and modern energy for all”.

    Renewable energy utilisation issue and implications for consumers

    • While variable renewable energy (VRE) sources (primarily, wind and solar) account for 24.7% of the total installed generation capacity, as of March 2021, they contributed 10.7% of the electricity generated by utilities during FY 2020-21.
    • However, the ramp-up of VRE generation capacity without commensurate growth in electricity demand has resulted in lower utilisation of TPPs whose fixed costs must be paid by the distribution companies (DISCOMs) and passed through to the final consumer.
    • The current level of VRE in the national power grid is increasing the cost of power procurement for DISCOMs, leading to tariff increases for electricity consumers. 
    • Therefore, India must implement a plan to increase energy efficiency and reduce the emissions of carbon dioxide (CO2) and airborne pollutants from TPPs without making power unaffordable to industries that need low-cost 24×7 power to compete in the global market.

    Way forward: time-bound transition plan

    • Phasing out: The plan should involve the progressive retirement of TPPs(unit size 210 MW and below) based on key performance parameters such as efficiency, specific coal consumption, technological obsolescence, and age.
    • Increasing utilisation: The resulting shortfall in baseload electricity generation can be made up by increasing the utilisation of existing High-Efficiency-Low-Emission (HELE) TPPs that are currently under-utilised to accommodate VRE and commissioning the 47 government-owned TPPs.
    • In addition, the Nuclear Power Corporation of India Limited (NPCIL) is also constructing 11 nuclear power plants with a total generation capacity of 8,700 MW that will supply 24×7 power without any CO2 emissions.
    • The combined thermal (220 GW) and nuclear (15 GW) capacity of 235 GW can meet the baseload requirement (80% of peak demand) during the evening peak in FY 2029-30 without expensive battery storage.
    • The optimal utilisation of existing and under-construction HELE TPPs with faster-ramping capabilities and lower technical minimums also facilitates VRE integration.
    • Since HELE TPPs minimise emissions of particulate matter (PM), SO2, and NO2, the transition plan offers operational, economic, and environmental benefits including avoidance of sustenance Capex and FGD costs in the 211 obsolete TPPs to be retired besides savings in specific coal consumption and water requirement leading to reductions in electricity tariffs and PM pollution.

    Conclusion

    The implementation of transition plan will enable India to safeguard its energy security and ensure efficient grid operations with lower water consumption, PM pollution, and CO2 emissions.

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  • Need for Strategic Reserves of Coal and Gas

    The Centre has stressed the need to build strategic reserves of imported coal and gas as was being done for petroleum products.

    Why need strategic reserves for Coal and Gas?

    • Many countries have started keeping strategic reserves, because when it comes to a crunch, every country will meet its needs first.
    • Russia has curtailed gas supply to Europe because they want more gas to be consumed within their country.
    • There is a surge in power demand combined with a fall in imports due to high global coal prices have led to supply disruptions.

    Do you know?

    In 1998, the AB Vajpayee administration proposed building petroleum reserves as a long-term solution to managing the oil market.

    What are Strategic Reserves?

    • Indian refiners maintain 64.5 days of crude storage, so India has overall reserve oil storage of 74 days
    • Indian Strategic Petroleum Reserves Limited (ISPRL) is an Indian company responsible for maintaining the country’s strategic petroleum reserves.
    • ISPRL is a wholly-owned subsidiary of the Oil Industry Development Board (OIDB), which functions under the administrative control of the Ministry of Petroleum and Natural Gas.
    • It maintains an emergency fuel store of total 5.870 million cubic meters of strategic crude oil enough to provide 9.5 days of consumption.

    SPRs in India

    S. No. Location Capacity
    1 Visakhapatnam, Andhra Pradesh 1.33 million tonnes
    2 Mangalore, Karnataka 1.5 million tonnes
    3 Padur, Karnataka 2.5 million tonnes and an additional 2.5 million tonnes under construction
    4 Chandikhol, Odisha 4 million tonnes (under construction)

     

    Why were SPRs created?

    • Gulf War, 1990: It caused a sharp rise in oil prices and a massive increase to India’s imports.
    • Forex fluctuations: During the subsequent 1991 Indian economic crisis, foreign exchange reserves could barely finance three weeks’ worth of imports while the government came close to defaulting on its financial obligations.
    • Price volatility: India was able to resolve the crisis through policies that liberalized the economy. However, India continued to be impacted by the volatility of oil prices.

    How are they constructed?

    • The crude oil storages are constructed in underground rock caverns and are located on the East and West coasts of India.
    • Crude oil from these caverns can be supplied to the Indian Refineries either through pipelines or through a combination of pipelines and coastal movement.
    • Underground rock caverns are considered the safest means of storing hydrocarbons.

     

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  • Lessons from the coal shortage

    Context

    Normally, the power-generating companies maintain around 30 days of inventory of coal, but, currently, this has come down to three days.

    Factors responsible for the crisis

    • Supply side issue: On the supply side, because of low investment, coal cannot be mined more than the capacity which exists today. Hence, the increase in supplies will be gradual.
    • High global prices: The global coal crisis has led to higher prices.
    • Here, too, a sudden resurgence in demand after the pandemic has exposed the supply limitations.
    • The international price has gone up by almost 40 per cent in the last month.
    • China factor: China – a major producer and consumer – has also faced this problem as it has tried to save coal for the future and imposed restrictions on mining to go green.
    • Emphasis on lowering the dependence on import:  In India, coal imports have been traditionally high.
    • Under its atmanirbharta drive, the government has voiced concerns on this issue and asked generators to be more self-reliant.
    • Coal dependency came down over time, which also coincided with a lower phase of economic growth.
    • The same has happened in China where the government has taken the greening concept seriously and asked coal producers to control production and power generators and move over to other greener fuels.
    • This has made coal producers less willing to increase investment.

    Why power companies are reluctant to import coal?

    • Ideally, power companies should import coal.
    • But that increases the cost of power production and power tariffs cannot be revised easily, like in the case of crops.
    • The power sector, however, already has its woes.
    • Distribution companies have been running losses due to their inability to cut down on transmission losses or increase tariffs.
    • As their losses mount, the amount overdue to the generators increases.
    • Therefore, the producers are not willing to increase their costs.

    How it would impact the economy?

    • The economy has been showing signs of recovering and the October-December period is crucial because there are expectations of pent-up demand helping to accelerate growth.
    • Any disruption in the power supply can push back this process.
    • The challenge is that today all the three sectors, agriculture, industry and households, are equally important.
    • A lot of business is being conducted from home after the pandemic, and power disruptions will come in the way of work.
    • If power companies start revising their tariffs, inflation will shoot up.

    Conclusion

    The coal shortage problem is very serious as it affects power supply, which is the backbone of all economic activity. All stakeholders – the Centre, states, miners and power generators – must work together and plan the strategy going ahead.

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  • [pib] Geospatial Energy Map of India

    The NITI Aayog has launched the Geospatial Energy Map of India.

    What is the GIS Energy Map?

    • NITI Aayog in collaboration with the Indian Space Research Organisation (ISRO) has developed a comprehensive Geographic Information System (GIS) Energy Map of India.
    • The GIS map provides a holistic picture of all energy resources of the country.
    • It enables visualization of energy installations such as conventional power plants, oil and gas wells, petroleum refineries, coal fields and coal blocks.
    • It also provides district-wise data on renewable energy power plants and renewable energy resource potential, etc through 27 thematic layers.

    Significance of the map

    • The map attempts to identify and locate all primary and secondary sources of energy and their transportation/transmission networks.
    • It is a unique effort aimed at integrating energy data scattered across multiple organizations and presenting it in a consolidated, visually appealing graphical manner.
    • It leverages the latest advancements in web-GIS technology and open-source software to make it interactive and user-friendly.

    Benefits offered

    • The map would provide a comprehensive view of energy production and distribution in a country.
    • It will be useful in planning and making investment decisions.
    • It will also aid in disaster management using available energy assets.
    • This may also help in resource and environmental conservation measures, inter-state coordination on infrastructure planning including different corridors of energy and road transport highways.

     

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  • The coal crisis and role of CIL in mitigation

    Context

    In India, coal-based power plants have witnessed rapid depletion of coal stocks from a comfortable 28 days at the end of March to a precarious level of four days by the end of September. Coal India Ltd (CIL) has been unfairly attacked, even as it gears up to play a crucial role in fighting the power crisis.

    Reasons for crisis

    • The reasons for the crisis are structural as well as operational.
    • The Coal Mines Nationalisation Act (CMNA) in 1993 enabled the government to take away 200 coal blocks of 28 billion tons from CIL and allocate them to end-users for the captive mining of coal.
    • These end-users, mostly in the private sector, failed to produce any significant quantity of coal.
    • The cancellation of 214 blocks by the Supreme Court added to the problem.
    • Commensurate to the captive mines allocated to the end-user industries, the coal production today should have been at least 500 million tonnes per annum (mtpa).
    • In reality, this has never exceeded 60 mtpa.
    • On the operational side, power plants are required by the Central Electricity Authority (CEA) to maintain a minimum stock of 15 to 30 days of normative coal consumption.
    • The compliance with this directive by power plants has been severely lacking.
    • This enhances the vulnerability of power plants.
    • The persistent non-payment of coal sale dues by power plants to coal companies has created a serious strain on their working capital position.
    • A spurt in imported coal prices, mainly due to a major increase in coal imports by China, acted as a brake on imports of coal.
    • This escalated the demand for domestic coal.
    • The spurt in demand for coal is being linked to the post-Covid economic recovery.

    CIL’s role in mitigating the shortage crisis

    • Growth in production in short duration: Despite many constraining factors, it is to the credit of CIL that it has achieved a growth of 14 million tonnes (mt) or 5.8 per cent in coal production during the first half of 2021-22.
    • Yet, the offtake was higher than the preceding year by 52 mt or 20.6 per cent.
    • This was possible by drawing down on the opening inventory of coal from 100 mt to 42 mt during April to September.
    • With the monsoons behind us and the onset of a good productive season, CIL has already stepped up coal offtake to more than 1.5 mt per day.
    • With efforts on the part of the railways in moving the coal, the crisis should dissipate in the near future, at least for power plants that pay timely for coal supplies.
    • Besides meeting the growing coal demand of power plants, CIL has been able to significantly replace the import of highly expensive thermal coal.
    • Cheaper coal: Even after bearing the highest tax and transport cost globally, the landed cost of CIL coal continues to be much cheaper than imported coal at almost all destinations.
    • Saving of foreign exchange: The resultant benefits are savings of foreign exchange, and generation of power at affordable tariffs.
    • The coal price charged by CIL, expressed in energy units, is at a deep discount of 60-70 per cent of imported coal.

    Conclusion

    In brief, CIL has been unfairly blamed for the coal crisis. It has played a stellar role, standing like a solid rock between light and darkness. It is striving to build comfortable stocks at the power plants, not in default of payment.

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  • Electricity (Amendment) Bill 2020

    Context

    Most discoms are deep into the red as high aggregate technical and commercial (AT&C) losses are chipping into their revenues. Against this backdrop, the Electricity (Amendment) Bill of 2020 is a game-changing reform.

    Why the Electricity (Amendment) Bill of 2020 is a game-changing reform

    • De-licensing power distribution: This will provide the consumers with an option of choosing the service provider, switch their power supplier and enable the entry of private companies in distribution, thereby resulting in increased competition.
    • In fact, privatisation of discoms in Delhi has reduced AT&C losses significantly from 55% in 2002 to 9% in 2020.
    • Open access for purchasing power: Open access for purchasing power from the open market should be implemented across States and barriers in the form of cross-subsidy surcharge, additional surcharge and electricity duty being applied by States should be reviewed.
    • Issue of tariff revision: The question of tariffs needs to be revisited if the power sector is to be strengthened.
    • Tariffs ought to be reflective of the average cost of supply to begin with and eventually move to customer category-wise cost of supply in a defined time frame.
    • This will facilitate a reduction in cross-subsidies.
    • Inclusion in GST: Electrical energy should be covered under GST, with a lower rate of GST, as this will make it possible for power generator/transmission/distribution utilities to get a refund of input credit, which in turn will reduce the cost of power.
    • Use of smart meters: Technology solutions such as installation of smart meters and smart grids which will reduce AT&C losses and restore financial viability of the sector.
    • The impetus to renewable energy: The impetus to renewable energy, which will help us mitigate the impact of climate change, is much needed.
    • Despite its inherent benefits, the segment has shown relatively slow progress with an estimated installed capacity of 5-6 GW as on date, well short of the 2022 target.
    • The Bill also underpins the importance of green energy by proposing a penalty for non-compliance with the renewable energy purchase obligations which mandate States and power distribution companies to purchase a specified quantity of electricity from renewable and hydro sources
    • Strengthening the regulatory architecture: This will be done by appointing a member with a legal background in every electricity regulatory commission and strengthening the Appellate Tribunal for Electricity.
    • This will ensure faster resolution of long-pending issues and reduce legal hassles.
    • Authority for contractual obligation: Provision in the Bill such as the creation of an Electricity Contract Enforcement Authority to supervise the fulfillment of contractual obligations under power purchase agreement, cost reflective tariffs and provision of subsidy through DBT are commendable.

    Conclusion

    Early passage of the Bill is critical as it will help unleash a path-breaking reform for bringing efficiency and profitability to the distribution sector.

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  • PM GatiShakti — National Master Plan

    The PM has inaugurated the GatiShakti — National Master Plan for infrastructure development aimed at boosting multimodal connectivity and driving down logistics costs.

    GatiShakti — National Master Plan

    • PM GatiShakti is a digital platform that connects 16 ministries — including Roads and Highways, Railways, Shipping, Petroleum and Gas, Power, Telecom, Shipping, and Aviation.
    • It aims to ensure holistic planning and execution of infrastructure projects.
    • The objective is to ensure that every department now has visibility of each other’s activities providing critical data while planning and execution of projects.
    • Through this, different departments will be able to prioritize their projects through cross-sectoral interactions.

    Notable features

    • Geospatial data: The portal will offer 200 layers of geospatial data, including on existing infrastructure such as roads, highways, railways, and toll plazas.
    • Protected areas management: It would also geographic information about forests, rivers, and district boundaries to aid in planning and obtaining clearances.
    • Realtime monitoring: The portal will also allow various government departments to track, in real-time and at one centralized place, the progress of various projects.

    Monitoring mechanism

    • The National Master Plan has set targets for all infrastructure ministries.
    • A project monitoring group under the Department for Promotion of Industry and Internal Trade (DPIIT) will monitor the progress of key projects in real-time.
    • It would report any inter-ministerial issues to an empowered group of ministers, who will then aim to resolve these.

    Need for such Project

    • Avoiding poor infrastructure planning: Examples of poor infrastructure planning included newly-built roads being dug up by the water department to lay pipes.
    • Creating a multi-modal network: The government expects the platform to enable various government departments to synchronize their efforts into a multi-modal network.
    • Timely completion of infra projects: It is also expected to help state governments give commitments to investors regarding timeframes for the creation of infrastructure.
    • Inefficient connectivity: Currently, a number of economic zones and industrial parks are not able to reach their full productive potential due to inefficient multi-modal connectivity.
    • Easy clearance: The portal allows stakeholders to apply for these clearances from the relevant authority directly.

    Logistics costs in India

    • Studies estimate that logistics costs in India are about 13-14% of GDP as against about 7-8% of GDP in developed economies.
    • High logistics costs impact cost structures within the economy by making it more expensive for exporters to ship merchandise to buyers.

    Benefits offered by PM-GatiShakti

    • Collaborative planning: It would incorporate infrastructure schemes under various ministries and state governments, including the Bharatmala and inland waterways schemes, and economic zones.
    • Logistics boost: It would boost last-mile connectivity and thus bring down logistics costs with integrated planning and reducing implementation overlaps.

     

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  • How Sensible is it Use Food Grains to Produce Ethanol?

    India is planning to use surplus rice, besides sugarcane, to meet its biofuel target of blending 20% ethanol with petrol.

    Could this impede India’s crop diversification goals or worsen nutritional indicators? Let us see!

    Govt’s plan to promote ethanol

    • India is estimated to achieve about 8.5% blending with petrol by this year, which it plans to increase to a mandatory 20% blending by 2025.

    Sources for ethanol

    The plan is to divert its excess sugar production to produce ethanol, 3.5 million tonnes in 2021-22 and 6 million tonnes the next year, in addition to grains like rice, corn, and barley.

    • Using surplus rice: The government’s food department revealed its plans to divert 17 million tonnes of surplus rice from its food stocks of 90 million tonnes to produce ethanol.
    • Sugarcane: This is in addition to the 2 million tonnes of sugar which is already being diverted to produce ethanol.

    How would this benefit the country?

    • Cost saving: A successful biofuels programme can save India $4 billion or about ₹30,000 crore every year by lowering import of petroleum products.
    • Emission cut: Ethanol is also less polluting and offers equivalent efficiency at a lower cost than petrol.
    • Biofuel’s policy boost: Rising production of grains and sugarcane and feasibility of making vehicles compliant to ethanol-blended fuel makes its biofuels policy a strategic requirement.
    • Early rollout: Towards this, govt has put in place interest subsidies for distilleries to expand capacity while auto firms have agreed to make compatible vehicles.

    What are the unintended effects of the policy?

    • Unsustainability of cash-crops: Increasing reliance on biofuels can push farmers to grow more water-intensive crops like sugarcane and rice.
    • Huge water requirement: Currently use 70% of the available irrigation water, negating some positive impact on the environment of using more ethanol.
    • Food and nutrition security: The move could impact India’s hunger situation by limiting the coverage of the food security schemes.
    • Food inflation: Diversion of mass consumption grains can also push food prices up.

    How will it impact crop diversification?

    • Monotonous crops: Although the biofuels policy stresses on using less water-consuming crops, farmers prefer to grow more sugarcane and rice due to price support schemes.
    • Water stress: Growing more of them can lead to an adverse impact in water-stressed areas in states.

    What about food security?

    • It is unethical to use edible grains to produce ethanol in a country where hunger is rampant.
    • India is already a poor performer in Global Hunger Index.
    • Although about 80 crore people are now receiving subsidized food grains, calculations show that over 10 crore eligible households are still excluded.

     

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  • [pib] Automated fuelling technology- UFill

    The Bharat Petroleum Corporation Limited (BPCL) has launched an automated fuelling technology -UFill- to ensure that its customers have a better experience at outlets.

    What is UFill?

    • UFill functionality, which has been described as swift, secure and smart, has been launched in 65 cities and will soon be launched across the country.
    • It does not need any app download, and is payment app agnostic.
    • Customer can use any payment app already downloaded on his/her phone.
    • It offers real time QR and voucher code through SMS and is accepted at all BPCL Fuel Stations where the functionality is enabled.

    Key features

    • UFill aims to improve customer’s turn-around time (TAT) at fuel outlet and increase transactional transparency, thereby providing enhanced retail like experience.
    • The technology provides the customer with control of fuelling as well as touch less pre-payment solution.
    • There is no need to check zero before fuelling or final reading, the dispensing unit will automatically dispense the exact quantity of fuel.

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