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

  • Open access renewable projects at risk

    Let us discuss renewable energy. Recently, state governments increased the standard charges on open access renewable projects and incentives were cut back. So, what can be implications of such steps? Read to know…

    What open access power user mean?

    • Open access allows large users of power – typically those who consume more than 1 MW – to buy power from the open market.
    • These open access buyers don’t have to depend on a more expensive grid.
    • Through incentives given by state governments, these non-grid avenues of power purchase have been encouraged in renewable energy projects.

    Now, state governments increased standard charges on open access renewable energy projects or are cutting back on incentives.

    Reason given by state: Tariff competitiveness of wind and solar power has shown a significant improvement.

    Implications:

    • Credit rating agency ICRA said that with the changes in policy, the viability of open access – against grid-connected energy – is no longer as attractive.
    • The open-access charges applicable in case of third party sale of power have also increased highlights the rising regulatory risk for such independent power producers (IPPs).
    • Earlier,  concessions were available from levy of cross-subsidy surcharge, transmission and wheeling charges as well as favourable banking facilities to promote the renewable sector.
    • Now, the power policies in many states have either completely withdrawn or reduced incentives given to open access  customers.

    Issues for group captive projects

    • A group captive scheme is where someone develops a power plant for collective usage of many commercial consumers.
    •  At present, a power project is considered ‘captive’ if consuming entity or entities consume at least 51% of the power generated and owns at least 26% of the equity.
    • The State Electricity Regulatory Commission (SERC) in Maharashtra has recently approved the levy of additional surcharge on group captive projects in renewable sector.
    • Group captive consumers were earlier exempt from such levy in Maharashtra.
    • Risk of other state following holds.

    Challenges

    • The viability of power procured under the open access route depends on discount offered by the power producer as compared to the grid tariffs.
    • The applicable open access charges across the key states are estimated to vary quite widely from Rs.2.5 per unit to Rs. 5 per unit.
    • Open access projects have tenure (5-10 years) of the power purchase agreements (PPAs) under the third-party sale route as against the 25 year-tenure for PPA in case of utility scale projects.
    • Net tariff realised for such projects remains exposed to regulatory risk given the likelihood of revision in open access charges by the regulators.
    • It is also subject to tightening of energy banking norms being observed by SERCs across the states.

    Consider the question “Examine the implications of policy changes adopted by the state with regard to open access charges and phasing out of other incentives to Independent Power Producers (IPPs)”

    Conclusion

    Move by states could jeopardise many projects and also threaten the progress made towards the adoption of clean energy.

  • Indian Gas Exchange (IGX): the first nationwide online delivery-based gas trading platform

    India’s first gas exchange — the Indian Gas Exchange (IGX) — was launched by the Ministry of Petroleum. The exchange is expected to facilitate transparent price discovery in natural gas, and facilitate the growth of the share of natural gas in India’s energy basket.

    Note the following things with caution from the newscard:

    • IGX allows only imported LNG and not domestically produced natural gas.

    • India’s import of LNG

    • GAIL

    • Taxation of LNG

    What is IGX?

    • The IGX is a digital trading platform that will allow buyers and sellers of natural gas to trade both in the spot market and in the forward market for imported natural gas.
    • It will allow trading across three hubs —Dahej and Hazira in Gujarat, and Kakinada in Andhra Pradesh.
    • Imported Liquefied Natural Gas (LNG) will be regassified and sold to buyers through the exchange, removing the requirement for buyers and sellers to find each other.
    • The exchange also allows much shorter contracts – for delivery on the next day, and up to a month – while ordinarily contracts for natural gas supply are as long as six months to a year.
    • This will mean that buyers do not have to contact multiple dealers to ensure they find a fair price.

    Will domestically produced natural gas also be bought and sold on the exchange?

    • The price of domestically produced natural gas is decided by the government. It will not be sold on the gas exchange.
    • However, following appeals by domestic producers that the prices set by the government are not viable given the cost of exploration and production in India.
    • A new gas policy will include reforms in domestic gas pricing and will move towards more market-oriented pricing.

    Will this make India more import-dependent?

    • Domestic production of gas has been falling over the past two fiscals as current sources of natural gas have become less productive.
    • Domestically produced natural gas currently accounts for less than half the country’s natural gas consumption; imported LNG accounts for the other half.
    • LNG imports are set to become a larger proportion of domestic gas consumption as India moves to increase the proportion of natural gas in the energy basket from 6.2% in 2018 to 15% by 2030.

    What regulatory change is required?

    • Currently, the pipeline infrastructure necessary for the transportation of natural gas is controlled by the companies that own the network.
    • State-owned GAIL owns and operates India’s largest gas pipeline network, spanning over 12,000 km.
    • An independent system operator for natural gas pipelines would help ensure transparent allocation of pipeline usage, and build confidence in the minds of buyers and sellers about neutrality in the allocation of pipeline capacity.
    • Experts have also called for natural gas to be included in the Goods and Services Tax (GST) regime to avoid buyers having to deal with different levies such as VAT across states when purchasing natural gas from the exchange.

  • International Convention for the Prevention of Pollution from Ships (MARPOL)

    The Ministry of Shipping has informed about the steps taken for prevention and control of pollution arising from ships in the sea and in the inland waterways under the MARPOL Convention.

    Aspirants must note the following things:

    1. If the convention is a subsidiary to the United Nations/IMO,

    2. Whether it is Legally binding?

    3. If India is a signatory or not …..

    MARPOL Convention

    • MARPOL is the main international convention aimed at the prevention of pollution from ships caused by operational or accidental causes.
    • The Protocol of 1978 was adopted in response to a number of tanker accidents in 1976–1977.
    • It is one of the most important international marine environmental conventions.
    • It was developed by the IMO with an objective to minimize pollution of the oceans and seas, including dumping, oil and air pollution.
    • The Convention includes regulations aimed at preventing and minimizing pollution from ships – both accidental pollution and that from routine operations – and currently includes six technical Annexes.
    • India is a signatory to MARPOL.
    • It has six annexes (I to VI) and it deals with prevention of (1) Pollution from ships by Oil, (2) Noxious liquid substances, (3) Dangerous goods in packaged form, (4) Sewage, (5) Garbage and (6) Air pollution from ships respectively.

  • The Deccan Queen Express

    The historic Deccan Queen train between Mumbai and Pune completed 90 years on June 1.

    Take the opportunity to revise some of reformative measure in the Indian Railways taken through these years.  Click here to read more .

    The Deccan Queen

    • The Deccan Queen was introduced between Mumbai and Pune on June 1, 1930 by the Great Indian Peninsula Railway (GIPR), the forerunner of the Central Railway.
    • This was the first deluxe train introduced to serve the two important cities of the region, and was named after Pune – also known as the “Queen of Deccan”.
    • It is among the rare Indian trains that have never been hauled using steam traction and were always electric-powered; on rare instances running on diesel.
    • The GIPR in the 1940s would run Race Special trains for Mumbai’s horse racing enthusiasts who would come to Pune on weekends and race days.
    • This train holds many a record, including that of being India’s first superfast train, first long-distance electric-hauled train, first vestibuled train, the first train to have a ‘women-only’ car, and the first train to feature a dining car.

    Back2Basics: Railways in India

    • Indian Railways started its service 164 years ago on 16 April 1853.
    • The first railway proposals for India were made in Madras in 1832.
    • The first train was run over a stretch of 33 kilometres from Mumbai to Thane and was hauled by three steam locomotives named Sahib, Sindh and Sultan.
    • Indian Railway now has the 4th largest rail network in the world after the United States of America, China and Russia.

  • Is India prepared for crude oil eventualities?

    The era we are living in is reigned by the uncertainties. And the oil market is not immune to these uncertainties. Against this background, India’s energy security is discussed in this article. Switching to the “just in case” needs with respect to crude oil is suggested by the author. But, that would require capital. So, how could the problem of capital be solved? Read the article to know…

    Switching from just in time to just in case

    • The post-COVID “world (will be) switching from just in time to just in case”  said economist Alan Kirman.
    • This is more so for the Indian petroleum sector.
    • The decision-makers of this sector should switch to a “just in case” policy mode.

    Oil market: Land full of uncertainties

    • The oil market is in no man’s land. Few speak with conviction about its future trajectory.
    • Last month, it dropped into negative territory for a day in the USA.
    • But today the price of the same crude quality is above $30/barrel.
    • If one reads the commentary of experts, some predict that prices will soon cross $50/barrel while some predict price-crash to below $20/barrel.
    • The fine print of these reports is always caveated with the disclaimer, “it all depends” on one or more of the comparably uncertain variables.
    • These variables include economic growth, geopolitics — US-China relations, the timing of the development of an anti-COVID vaccine or a combination of all these variables.
    • The fact is no one really knows how the petroleum sector will fare in the “new normal” of the post-COVID world.

    The problems policy-makers face: some known, some unknown

    • Policy-makers know that irrespective of the twists and turns in the petroleum market, India will need fossil fuels (coal, oil and gas) to drive its economic growth for at least the next decade, if not longer.
    • And that a sizeable percentage of these requirements will have to be imported.
    • The country does not have the geology to expect gushers especially in an environment of volatile (and relatively low) oil prices.
    • What must also be discomforting is the “known unknown” of the post-COVID stress.
    • They know that COVID has knocked the props from under the Indian economy.
    • They also know that every petroleum company, irrespective of whether it is in the private or public sector, will face an increasingly uncertain and challenging future business environment.
    • What they do not know is the nature of these challenges, and therefore, the conditions, sine qua non, for managing them.

    Let’s look at some facts and figures of India’s crude oil requirements

    • India consumes around 50,00,000 barrels of crude oil every day.
    • Of that, it imports approximately 45,00,000 barrels/day making the country the third-largest crude market in the world.
    • Every month, on average, 70 loaded VLCC (very large crude carriers ) — accounting for 10 per cent of the global tanker market — bring crude oil to India.
    • Approximately 60 per cent of this oil is discharged in and around the Jamnagar area and then carried by pipelines to refineries in Jamnagar, Mathura, Panipat, Bina and Bhatinda.
    • And 50 per cent or so is sourced from Saudi Arabia, Kuwait, Abu Dhabi, Iran and Iraq.
    • It is against this background of post-COVID uncertainties and above facts India should consider switching to “just in case” policy mode.

    Why should India consider switching to “just in case” policy mode?

    We should analyse this by considering two scenarios

    • ONGC/OIL are strategically important PSUs.
    • Few have questioned the support to these two companies and the importance of harnessing our indigenous oil and gas reserves.
    • Until now, this support has been premised on the view that oil supplies are relatively scarce and that prices will trend upwards.

    1) Low oil prices scenario

    • 1) We now need to ask: What if, “just in case” the oil market is structurally oversupplied and prices fall to such low levels that it makes no commercial sense for ONGC/OIL to expend public resources on “ high risk, high cost” exploration?
    • Oil and gas are, after all, tradables and can be purchased on the high seas.
    • Should they not, given this possibility, contemplate redefining their core purpose and perhaps pivot away from oil and gas towards clean energy?

    2) Choking of supply lines scenario

    • Looked at through a different lens but with a “just in case” mindset, the preponderance of crude supplies sourced from countries facing deep political, economic and social tensions raises the question:
    • What if these domestic problems choked our access?
    • How would we manage the disruption?
    • Our decision-makers have worried about supply security for decades.
    • But the circumstances created by COVID are new.
    • The issue of strategic reserves could, for instance, acquire a different hue.
    • We have currently 11 days of reserve cover (5.33 million tonnes) with plans to increase it to 24 days (11.83 million tonnes).
    • Were we to decide to build up these reserves to levels comparable to other countries of between 70 to 100 days of import cover, the issue would be capital.
    • Given the slowdown of the economy and the pressures on the exchequer, the government would not have the financial resources to invest in the creation of additional facilities.
    • The only way this financial hurdle could be overcome is if the government and the private sector invest jointly.
    • This collaborative option would have to be considered to counter the “just in case” contingency of prolonged and major disruption.
    • And if indeed such an option were acceptable, it could be extended to cover trading, crude purchases, co-freighting, subject of course to anti-trust and competition rules.

    Consider the example to understand the importance of “just in case” thinking

    • An example to embed the importance of “just in case” thinking can be drawn from the geopolitics of our neighbourhood.
    • What if the relations between India/Pakistan/China took an ugly turn?
    • What security measures should we contemplate to protect the petroleum assets located in Mumbai and Jamnagar?

    Consider the question “Over the decades, India has been grappling with the issue of energy security. With the rising uncertainties around the world, the issue has gained more prominence. In light of this, suggest the ways to tide over the disruption in oil supplies.”

    Conclusion

    In the backdrop of COVID, when all hands on decks are needed to tackle the “urgent” task of reviving the economy, the government must not, in the process, lose sight of the “importance” of creating, if nothing else, the mindset of preparedness to respond to “just in case outcomes”.

  • Char Dham Project

    The Chamba Tunnel constructed by the Border Roads Organisation (BRO) under Chardham Project was recently inaugurated.

    Make a note of all projects and circuits under Swadesh Darshan and PRASHAD Scheme.

    What is the Char Dham Project?

    • The Char Dham project consists of widening and repairing 889-kilometres of national highways leading to revered shrines of Kedarnath, Badrinath, Gangotri and Yamunotri.
    • It is a proposed two-lane expresses National Highway with a minimum width of 10 metres in the state of Uttarakhand.
    • The project includes 900 km national highways will connect whole of Uttarakhand state.

    Chamba Tunnel

    • The Chamba tunnel is 440 m long and is a Horseshoe type tunnel with 10-metre carriageway width and 5.5m vertical clearance.
    • The BRO achieved this major milestone by digging up a 440 m long Tunnel below the busy Chamba town on Rishikesh-Dharasu road Highway (NH 94).

    Back2Basics: Border Roads Organisation (BRO)

    • The BRO develops and maintains road networks in India’s border areas and friendly neighbouring countries and functions under the Ministry of Defence.
    • It is entrusted for construction of Roads, Bridges, Tunnels, Causeways, Helipads and Airfields along the borders.
    • Officers from the Border Roads Engineering Service (BRES) and personnel from the General Reserve Engineer Force (GREF) form the parent cadre of the Border Roads Organisation.
    • It is also staffed by officers and troops drawn from the Indian Army’s Corps of Engineers on extra regimental employment.
    • The BRO operates and maintains over 32,885 kilometres of roads and about 12,200 meters of permanent bridges in the country.

  • Proposed amendments could harm DISCOMs

    Despite several policy measures, DISCOMs continue to suffer from various issues. This article focuses on the comprehensive proposal to amend the Electricity Act 2003. But here’s a catch, we will be discussing some issues with proposed amendment. Let’s dive into our DISCOMs analysis.

    Two-part tariff policy

    • At the core of DISCOM woes is the two-part tariff policy.
    • Two-part tariff policy was mandated by the Ministry of Power in the 1990s at the behest of the World Bank.
    • As more private developers came forward to invest in generation, DISCOMs were required to sign long-term power purchase agreements (PPA).
    • Under PPA, DISCOMs were committed to pay-  1) a fixed cost to the power generator, irrespective of whether the State draws the power or not, 2) a variable charge for fuel when it does.

    How Over-optimistic projection led to losses?

    • The PPAs signed by DISCOMs were based on over-optimistic projection of power demand estimated by the Central Electricity Authority (CEA).
    •  The 18th Electric Power Survey (EPS) overestimated peak electricity demand for 2019-2020 by 70 GW.
    • The 19th EPS published in 2017, by 25 GW, both pre-Covid 19.
    • Thus, DISCOMs were locked into long-term contracts, ended up servicing perpetual fixed costs for power not drawn.
    • Due to the CEA’s overestimates, the all-India plant load factor of coal power plants is at an abysmal 56% even before COVID-19.
    • This means that coal power plants are generating electricity only 56% of what maximum these power plants are able to generate.

    Renewable energy factor

    • Renewable impacted the power sector in the following 3 ways-
    • 1) From 2010, solar and wind power plants were declared as “must-run”.
    • This required DISCOMs to absorb all renewable power as long as there was sun or wind, in excess of mandatory renewable purchase obligations.
    • This means backing down thermal generation to accommodate all available green power.
    • This resulted in further idle fixed costs payable on account of two-part tariff PPAs.
    • 2)  Power demand peaks after sunset.
    • In the absence of viable storage, every megawatt of renewable power requires twice as much spinning reserves to keep lights on after sunset.
    • DISCOMs, especially in the southern region, have had to integrate large volumes of infirm power, mostly from solar and wind energy plants.
    • These renewable energy plants enjoy must-run status irrespective of their high tariffs.
    • The tariff is  ₹5/kwh in Karnataka and ₹6/kwh in Tamil Nadu for solar power.
    • All this even as the demand growth envisaged in the 18th EPS failed to materialise.
    • 3) In 2015 the Centre announced an ambitious target of 175 gigawatts of renewable power by 2022.
    • This followed with a slew of concessions to renewable energy developers, and aggravating the burden of DISCOMs.
    • Incidentally, China benefited by as much as $13 billion in the last five years from India’s solar panel imports.

    So, what are the proposals in the Electricity Act-2020?

    1. Sub-franchisees and  issues with it

    • The amendment proposes sub-franchisees, presumably private, in an attempt to usher in markets through the back door.
    • Issue:  Private sub-franchisees are likely to cherry-pick the more profitable segments of the DISCOM’s jurisdiction.
    • The Electricity Bill 2020 containing the proposed amendments is silent on whether a private sub-franchisee would be required to buy the expensive power from the DISCOM or procure cheaper power directly from power exchanges.
    • If it is the first, the gains from the move are doubtful since the room for efficiency improvements is rather restricted in the already profitable regions attractive to sub-franchisees.
    • If it is the second, DISCOMs will then be saddled with costly power purchase from locked-in PPAs and fewer profitable areas from which to recover it.

    2. Concession to renewable

    • The amendment proposes even greater concessions to renewable power developers.
    • This would have a cascading impact on idling fixed charges, impacting the viability of DISCOMs even more.

    3. Elimination of cross-subsidies

    • The most controversial amendment proposed, seeks to eliminate in one stroke, the cross-subsidies in retail power tariff.
    • This means each consumer category would be charged what it costs to service that category.
    • Rural consumers requiring long lines and numerous step-down transformers and the attendant higher line losses will pay the steepest tariffs.
    • The proposed amendments envisage that State governments will directly subsidise whichever category they want to, through direct benefit transfers.
    • Cross-subsidy is a fact of life in even private industries, soap, newspapers, or even utilities such as telecom.
    • But eliminating them in one stroke is bound to be ruinous to State finances.
    • There are also myriad problems with Direct Benefit Transfer.
    • This proposal is practically infeasible; if forcibly implemented, it will lead to chaos.

    4. Selection of the State regulator

    • State regulators will henceforth be appointed by a central selection committee.
    • The composition of which inspires little confidence in its objectivity.
    • This could result in jeopardising not only regulatory autonomy and independence but also the concurrent status of the electricity sector.

    5. Electricity Contract Enforcement Authority

    • Its members and chairman will also be selected by the same selection committee referred to above.
    • The power to adjudicate upon disputes relating to contracts will be taken away from State Electricity Regulatory Commissions and vested in this new authority.
    • This is being done ostensibly to protect and foster the sanctity of contracts.
    • This is also to ensure that States saddled with high-priced PPAs and idling fixed costs, yet forced to keep increasing the share of renewables in their basket, have no room for manoeuvre.

    Consider the question “Despite various policy interventions, DISCOMs continue to suffer from financial woes. Analyse the reasons for their woes. Examine the proposals in the Electricity Act (Amendment) Bill 2020.”

    Conclusion

    Beyond a doubt, the Electricity sector requires change but we must try to bring holistic and participatory approach to find solutions.

    Back2Basics: Electricity Act 2003

    • The act covers major issues involving generation, distribution, transmission and trading in power.
    • Before Electricity Act, 2003, the Indian Electricity sector was guided by The Indian Electricity Act, 1910 and The Electricity (Supply) Act, 1948 and the Electricity Regulatory Commission Act, 1998.
    • The Electricity Act 2003 consolidates the position for existing laws and aims to provide for measures conducive to the development of electricity industry in the country.
    • The act attempted to address certain issues that have slowed down the reform process in the country and consequently had generated new hopes for the electricity industry.

     

  • Fiscal support to the power sector

    Part of the package announced by Finance Minister was a Rs 90,000-crore liquidity injection into power distribution companies (or discoms).

    Practice question:

    Ujwal DISCOM Assurance Yojana (UDAY) has failed to turn around the precarious financial position of state power DISCOMs in India. Discuss.

    Fiscal push for DISCOMs

    • The move is aimed at helping the discoms clear their dues with gencos (or electricity generation companies), who in turn can clear their outstanding dues with suppliers, such as coal miners, easing some of the working capital woes of Coal India Ltd and contract miners.
    • This is subject to the condition that the Centre will act as guarantor for loans given by the state-owned power finance companies such as PFC and REC Ltd to the discoms.

    Why was this needed?

    • The primary trigger is the poor financial condition and revenue collection abilities of most state discoms.
    • This is despite several interventions, including a scheme called UDAY that was launched in 2015 to fix the problems of a sector where the upstream side (electricity generation) was drawing investments even as the downstream (distribution) side was leaking.

    How do the DISCOMs work?

    To understand how the sector works, we have to imagine a three-stage process.

    • First stage: Electricity is generated at thermal, hydro or renewable energy power plants, which are operated by either state-owned companies or private companies.
    • Second stage: The generated electricity then moves through a complex transmission grid system comprising electricity substations, transformers, and power lines that connect electricity producers and the end-consumers.
    • The entire electricity grid consists of hundreds of thousands of miles of high-voltage power lines and millions of miles of low-voltage power lines with distribution transformers that connect thousands of power plants to millions of electricity customers all across the country.
    • Third stage: This last-mile link is where discoms come in, operated largely by state governments. However, in cities such as Delhi, Mumbai, Ahmedabad, and Kolkata, private entities own the entire distribution business or parts of it.

    Why there is a problem?

    • Discoms essentially purchase power from generation companies through power purchase agreements (PPAs), and then supply it to their consumers (in their area of distribution).
    • The key issue with the power sector currently is the continuing problem of the poor financial situation of state discoms.
    • This has been affecting their ability to buy power for supply, and the ability to invest in improving the distribution infrastructure. Consequently, this impacts the quality of electricity that consumers receive.

    There are two fundamental problems here:

    1) Lack of competitiveness

    • One, in India, electricity price for certain segments such as agriculture and the domestic category (what we use in our homes) is cross-subsidised by the industries (factories) and the commercial sector (shops, malls).
    • This affects the competitiveness of the industry.

    2) Transmission and distribution losses

    • There is the problem of AT&C (aggregate transmission and distribution losses), which is a technical term that stands for the gap in the bills that it raises and the final collection process from end-consumers.
    • As a result, the discoms are perennially short of funds, even to pay those supplying power to them, resulting in a cascading impact up the value chain.

    Back2Basics: UDAY Scheme

    https://www.civilsdaily.com/news/uday-scheme-for-financial-turnaround-of-power-distribution-companies/

  • Ensuring the take off of aviation industry

    Primarily the major driver of connectivity, the aviation industry is one of the worst affected industries in the corona crisis. It is in the need of relief package from the government. The article discusses the contribution of the industry in the economy. Finer details of the operation of the industry are also explained. In the end, details of the measures expected from the government relief package are discussed.

    Significance of aviation industry in Indian economy

    • The air transport industry, including airlines and its supply chain, is estimated to contribute directly or indirectly $72 billion of GDP to India.
    • India being the fastest-growing domestic market in the world at 18.6 per cent per annum, followed by China at 11.6 per cent. (IATA report)

    Impact of Covid-19 crisis

    • The same IATA report says that in India, 29.32 lakh jobs in the aviation sector are at risk.
    • Airlines in the Asia Pacific region may see the largest revenue drop.
    • The air transport business along with its supply chain may see a near wipeout of approximately 40 per cent of business volume in the current financial year.
    •  The two-month-long shutdown has eroded the capital of most airlines.
    • The cost of maintaining Aircraft on Ground (AoG) is extremely high, and with nil revenues, this is a sure-shot recipe for disaster.

    Economics of running airlines profitably

    • You should be flying your entire fleet, with no Aircraft on Ground. (Airbus A-320 or similar)
    • Every plane must fly for 11 hours a day.
    • Which will be possible only if you have a turnaround time of 30-45 minutes.
    • And you have an average Passenger Load Factor (PLF) of around 65 to 67 per cent.

    Now, consider this:

    • Forty per cent of your fleet is grounded.
    • Due to social distancing and other hygiene protocols, an aircraft can fly only eight hours because of the elongated turnaround time.
    • One-third seats are to be kept vacant.
    • And finally, you are flying with a reduced 50 per cent PLF.
    • The break-even ticket price in such a scenario would be astronomical.

    Demand for  financial relief package

    • The Asia Pacific division of the IATA has corresponded with the Indian government, citing the case of some of the other nations which have announced financial relief packages for the sector.
    • As per reports, countries like Australia, New Zealand and Singapore, have announced relief packages for airlines.
    • FICCI has urged the government to immediately provide direct cash support to Indian carriers whereby the airlines can meet their fixed costs.

    What relief measures could be provided?

    • First, a moratorium for the next 12 months on all interest on the principal amount of loans without limitations of size or turnover through a direction to all financial institutions.
    • Second, VAT on ATF by state governments, which ranges from 0-30 per cent, should be rationalised with immediate effect to a maximum of 4 per cent across all states for the next six months.
    • Third, aviation turbine fuel needs to be brought under the ambit of 12 per cent GST, with full input tax credit on all goods and services.
    • Fourth, a waiver for private airport operators space rentals and AAI, royalty, landing, parking, route navigation and route terminal changes for the next one year.
    • This should be done not only for the airlines but all aviation-related businesses.
    • Fifth, all airlines and aviation-related business must be treated as priority sector lending.
    • Sixth, no loans to airlines and other aviation-related business should be classified as NPAs and no collateral enforced or enhanced during this moratorium.
    • Finally, support the airlines and other-aviation related companies by paying or taking care of salaries of the employees for a period of six months.
    • This will allow employee retention and is being done in a lot of countries.

    A question was asked by the UPSC in 2017 related to the development of Airports in India under PPP model. This shows the importance of the aviation sector from UPSC point of view. Consider the question asked by the UPSC “Examine the development of Airports in India through joint ventures under PPP model. What are the challenges faced by the authorities in this regard?”

    Conclusion

    Recovery from this crisis is going to be a long and uphill task. It will take effort, planning and, most importantly, coordination between the aviation industry and the government.

    Back2Basic: IATA-International Air Transport Association

    • IATA was founded in Havana, Cuba, on 19 April 1945.
    • It is the prime vehicle for inter-airline cooperation in promoting safe, reliable, secure and economical air services – for the benefit of the world’s consumers.
    • The international scheduled air transport industry is more than 100 times larger than it was in 1945.
    • Few industries can match the dynamism of that growth, which would have been much less spectacular without the standards, practices and procedures developed within IATA.

     

     

     

  • Global Energy Transition Index, 2020 and its highlights

    India has moved up two positions to rank 74th on a Global ‘Energy Transition Index (ETI)’ with improvements on all key parameters of economic growth, energy security and environmental sustainability.

    Possible prelim question:

    Q. The Global Energy Transition Index recently seen in news is released by:

    a) International Energy Agency (IEA)

    b) World Economic Forum (WEF)

    c) International Renewable Energy Agency (IRENA)

    d) International Solar Alliance

    Energy Transition: What does it mean?

    • Energy transition refers to the global energy sector’s shift from fossil-based systems of energy production and consumption — including oil, natural gas and coal — to renewable energy sources like wind and solar, as well as lithium-ion batteries.
    • The increasing penetration of renewable energy into the energy supply mix, the onset of electrification and improvements in energy storage are all key drivers of the energy transition.

    What is the Energy Transition Index (ETI)?

    • The ETI is a fact-based ranking intended to enable policy-makers and businesses to plot the course for a successful energy transition.
    • The benchmarking of energy systems is carried out annually across countries.
    • Part of the World Economic Forum’s Fostering Effective Energy Transition initiative, it builds on its predecessor, the Energy Architecture Performance Index.
    • The ETI is a tool for energy decision-makers that strive to be a comprehensive, global index that tracks the performance of energy systems at the country level.
    • It also incorporates macroeconomic, institutional, social, and geopolitical considerations that provide enabling conditions for an effective energy transition.

    Global rankings

    • Results for 2020 show that 75 per cent of countries have improved their environmental sustainability.
    • Sweden has topped the ETI for the third consecutive year and is followed by Switzerland and Finland in the top three.
    • Surprisingly, France (ranked 8th) and the UK (7th) are the only G20 countries in the top ten.
    • The scores for the US (32th), Canada (28th), Brazil (47th) and Australia (36th) were either stagnant or declining.

    India’s highlights

    • India is one of the few countries in the world to have made consistent year-on-year progress since 2015.
    • India’s improvements have come across all three dimensions of the energy triangle — economic development and growth, energy access and security, and environmental sustainability.
    • The WEF said that the emerging centres of demand such as India (74th) and China (78th) have made consistent efforts to improve the enabling environment.
    • For India, gains have come from a government-mandated renewable energy expansion programme, now extended to 275 GW by 2027.
    • India has also made significant strides in energy efficiency through bulk procurement of LED bulbs, smart meters, and programs for labelling of appliances.

    Threats posed by COVID-19

    Beyond the uncertainty over its long‑term consequences, COVID-19 has unleashed cascading effects in real-time:

    • The erosion of almost a third of global energy demand
    • Unprecedented oil price volatilities and subsequent geopolitical implications
    • Delayed or stalled investments and projects
    • Uncertainties over the employment prospects of millions of energy‑sector workers