Kcr Says No To Private Power Producers

[ParmQ]

Is privatization the solution in every case? Of course not. Esp utlities can be a very touchy issue. For example Water, electricity and Sewer service is considered a natural monopoly; there is no competition or consumer choice. Without regulation, a private monopoly would charge exploitative rates. In theory, rate regulation is supposed to substitute for market forces, but in reality, this regulation is inadequate and has problems of its own. In the United States, we have what is known as rate-of-return regulation, which allows investor owned utilities to earn a rate of return on their investment base.  In the United Kingdom, regulators use an different model known as price-cap regulation, which incentivizes corner cutting and service deterioration. In India we have neither, consider how Reliance jacked up the per barrel pricing in KG basin by 10x fold by strong arm holding tactics and money politics. If one or a group of companies has a monopoly  then can easily control supply AND demand.....its like blackmailing an end cutomer or government saying we'll supply as long you pay what we demand. It's always good strike a fine balance..

 

You read my message man. That's what exactly I said. Prices should be regulated and set by the Govt. Tell me one simple thing. In India, do you see the quality in Govt sector or in the PVT sector? Public services and unities prices should be regulated by Govt. Govt can prevent the monopoly. There is something called HHI index. It indicates the competition factor in the market. Govt should consider that into account when the new player comes into the market to check the monopoly and the volatility.  Some Govt across the world don't give permission based on this value.

[ParmQ]

Can you elaborate on your above notion, that you see it as "liability" when managed by Govt, versus it works "best" when managed by Private company? Whats the basis?

 

P.S: Be specific about power generating companies. Kindly don't reuse your bus charges example...

 

I have given example of electricity itself. Earlier in United AP, the state used to produce the electricity through its own sources and used to regulate the prices. It has always become burden and each Govt started increasing the electric prices in order to keep the electricity boards keep running. When AP was doing this, TN has outsourced some % electricity generation to the Pvt players and started buying from them, there are many Pvt windmill operators if go towards Nagarcoil. (Pvt companies can't produce from hydro and coal easily). And the TN electricity board which is under the Govt used to regulate the prices. The electricity prices has been always low in TN compared to what we had in united AP. There was huge difference. Later AP govt started welcoming the Pvt players due to the excessive demand.

 

About my notion of liability, take an example of IDPL in Hyd. Do you think thats asset to the Govt? Compare the IDPL with Dr Reddy Lab. Anji Reddy was also an employee of IDPL. It was during the Vajpayee Govt (Arun Shourie) started the disinvestment of many such companies (which they felt are liability), even the MMS govt has dis-invested thousands of crores worth of Govt companies. They are still struggling to get rid of companies like Air India.

[athletics]

You read my message man. That's what exactly I said. Prices should be regulated and set by the Govt. Tell me one simple thing. In India, do you see the quality in Govt sector or in the PVT sector? Public services and unities prices should be regulated by Govt.

 

nuvvu cheppedi in general but utilities kuda privatize cheste dani nundi vache problems vere unnavi, our country is a poor country with a lot a lot of farm sector and other subsidies involved, even in countries like US and UK a lot of cities are taking back the control of utilities from regulated private entities and even there they are not 100% private controlled not even 60%. Delhi is a classical example how TATA and Relaiance Infra have absolute monopoly and jacked up the prices which led to extreme resentment among people there. IMO we should have a right mix of private and public in utilities sector.

[ParmQ]

nuvvu cheppedi in general but utilities kuda privatize cheste dani nundi vache problems vere unnavi, our country is a poor country with a lot a lot of farm sector and other subsidies involved, even in countries like US and UK a lot of cities are taking back the control of utilities from regulated private entities and even there they are not 100% private controlled not even 60%. Delhi is a classical example how TATA and Relaiance Infra have absolute monopoly and jacked up the prices which led to extreme resentment among people there. IMO we should have a right mix of private and public in utilities sector.

 

I have updated my message. Read it.

 

When it was implemented successfully in TN, why not in TG? Why do you think the last 4 Govts at the center are going for dis-investment mode? I didn't recommed the Delhi model. I recommended the TN model.

 

Read again, what I said was the pricing control needs to be under the Govt, production needs to be under Pvt players.

[quaysideGuy]

SUPER 

[quaysideGuy]

lol do you know how much burden it will be on govt? Private aithey govt will have the right to buy the plant at marker rate. Time ki complete chesthaaru

TS is a rich state

[athletics]

I have updated my message. Read it.

 

When it was implemented successfully in TN, why not in TG? Why do you think the last 4 Govts at the center are going for dis-investment mode? I didn't recommed the Delhi model. I recommended the TN model.

 

Read again, what I said was the pricing control needs to be under the Govt, production needs to be under Pvt players.

 

are you being naive here or what?, yes it is the Gov which always regulates, I need not explain you how corurpt is our Government and machinary, ofcourse we will not being seeing so many scams of late because divinvestment (coal, spectrum, mining and what not). for example take Relaince in KG basin, here is a snippet stating facts (atleast read highlighted portions)  and I will leave it up to you how you view divinvestment aspect and the looters like Reliance fleecing the general public who has no clue.

 

 

 

What's the big noise on Mukesh Ambani, KG gas pricing, Rs. 25,000 crores loss and Gujarat all about?

Let me take a little time to set down the facts. Of course, you can come to any opinion after reading what follows, but that is always the case in such contentious matters. So here goes:

1. In the late 90s, an oil company, Cairn, made discoveries of significant gas in the Krishna Godavari (KG) basin. In an effort to create a level playing field to allow private and public companies to bid for the same projects - all on lands and seas owned by the government, the government created a New Exploration and Licensing Policy (NELP)

2. Under the first NELP plan, bids were called for contractors to explore and develop these Government-owned potential oil fields. Reliance Industries teamed up with a Canadian firm, Niko Resources (90% Reliance, 10% Niko) and won the right to explore and develop 12 out of 24 blocks offered. (You can find details on the Indian govt website here: Page on petroleum.nic.in).

3. Since then there have been several more NELP bids, and Reliance has won a few of those.

4. Reliance-Niko outbid ONGC, Cairn and others to these blocks.

5. The basic bidding criteria - and you can read a sample bid document herehttp://petroleum.nic.in/nelp91.pdf if you have the interest and patience - was the amount of profit share offered to government of India by the bidder, and the lowest operating cost the bidder commits to that it can adjust every year. These bidding criteria have changed slightly since - but that is not germane to the issue.

5. Here's a simple way to understand it. The government owns the fields: some are on ground, some are in shallow water and some are in deep water but all in Indian territory. The winning bidder would explore and develop those fields at its cost. It would bid what its cost was - the lower the better. Once the gas was found, it was allowed to first recover its stated costs, and then pay revenue share to the government. If gas was not found, it would simply return the fields to the government - indeed 13 of those initial 24 fields were returned to the government. These two factors: committed low operating cost and committed high revenue share to government helped government determine who would win the fields - in each case, government calculated the most valuable economic option to itself.

6. In effect, the winning bidder merely had a contract to operate on government property, then apply some fixed costs for equipment and some variable costs of manpower and ops - and produce gas for all of us.

5. The first contracts were awarded in 2000, Reliance found gas, and signed its first long term contract in 2002 - for 17 years - with NTPC - another government undertaking - to provide it gas at US$ 2.34 per million British thermal units - or mBTUs. This is the price they committed to charge from 2002 to 2019 - which catered for all their present and future anticipated costs.

6. A little after this time the Ambani brothers split - remember that? -and the big bone of contention then was that Anil wanted gas from RIL for his energy project RNRL and finally the agreement was that he would get it at the same price that RIL was giving it to NTPC at: $2.34 per mBTU

7. During this time, the price of natural gas globally went up significantly. This wasn't due to increased costs - it's perhaps closer to supply and demand and also to how a cartel like OPEC operates - you set the price you think you can get away with, regardless of input costs.

8. While this could be good news for countries like India with large oil and gas reserves - it shouldn't really make much difference to an operator who has taken a government field on a lease - after all, his costs - of rig equipment and people's salaries were reasonably fixed - or move in a slow band.

7. Of course, this was a great opportunity - and Mukesh didn't use it just screw the government-owned NTPC here, he screwed over his own brother too. He followed in his dad's footsteps of "fixing" government to change all the norms once he had won the contract - and went and worked hard to break the contract in 2009.

8. They asked Jaipal Reddy, the then concerned minister, to raise the price to $4.20 per mBTU and he told them to sod off. Their ostensible reason was increased cost of production - but, interestingly, at the same time, Reliance said in writing (that note here:http://articles.economictimes.indiatimes.com/2009-06-18/news/27646349_1_mmbtu-block-kg-d6-fertiliser-and-power-units : that their actual cost of extracting the gas and bringing it onshore was $0.8945 per mBTU - i.e. not even 90 cents - so while they were earlier making a profit of $1.44 per mBTU, they wanted to screw over the Government and Anil by making a profit of $3.30 per mBTU - more than double as much)

9. Undeterred by the minister asking them to bugger off, Mukesh did the classic Reliance gambit - he got Jaipal thrown out of the Ministry and shunted elsewhere and replaced by South Bombay buddy Murli Deora. This dude in turn got Pranab Mukherjee - yes, our current President - to call some meeting of some temporary committee called the Empowered Group - to rubber-stamp Mukesh's demand to charge $4.20 per mBTU - remember this is for gas produced on our land not Reliance's - from now on.

10. So Anilbhai and NTPC went to court about this. The case is still dragging through courts - and the Government isn't backing its own company NTPC in the fight. Anil was likely neutralised elsewhere and hasn't moaned too much about it lately.

10. That's what Mukesh is being paid now. And that price, for our gas produced from our land and our seas, is what we pay from our taxes - and that impacts the prices of the inputs to our fertiliser plants, and impacts the price of our foods, our transport systems - and our monthly expenditure. But, hey, that's not enough. Senior Ambani found a way to screw us over again.

11. Remember, there was a clause which allowed the operator to first take back the money equivalent to their set-up costs, and then deliver profits to the government after that? When Mani Shankar Aiyer was Minister, in 2004, Reliance had asked for and got approval to spend Capex of $2.39 billion to produce 40 million metric standard cubic meters of gas per day. (That's MMSCMD for you, if you're a fan of abbreviations.). This basically meant that Reliance was first allowed to claim this $2.39 billion - some Rs. 10,000 crores - before it paid a paisa of revenue share to the government.

12. In just two years, however, they managed to find friend Murli Deora in the seat of Oil and Gas power in 2006 after poor Mani Shankar Aiyar was shunted out - and magically got him to approve almost 4 times the earlier approved amount of Capex - US$8.80 billion - or Rs. 50,000 crores for just twice the capacity. One would expect that the relative cost of Capex would go down and efficiency would go up as you simply double the capacity on existing wells - as happens everywhere else in the world. Especially in a fanatically-cost-efficient organisation like Reliance (we all know how they never pay their suppliers on time.)

13. But no - Reliance apparently wanted to eat more money for itself - maybe Antilla was being built - before we got our own money back from our own oil fields. This basically means that we the people see nothing from our own property till Mukesbhai gets his Rs. 50,000 crores first. When asked about this wonderful generous gift of Rs. 40,000 additional crores to Reliance, Murli Deora claims no memory - see the interview at 09.00 onwards herehttps://www.youtube.com/watch?v=xtAy1Y7Lv9I if you want to see his apparent innocence where he says "You don't expect Ministers to remember small details" (like 40,000 crores here or there I suppose)

13. Further proof of padding or "gold-plating" came in the CAG report - and in an investigation done by the Indian Embassy in Singapore, about a mysterious organisation called Bio Metrix which was a beneficiary of Reliance's inflated costs which suddenly invested Rs. 6,500 crores into Reliance from Singapore based on loans given to it by an Indian back on no declared collateral. Imagine that - walking into an Indian bank as an unknown company in Singapore and asking for Rs. 6,500 crores in loans to invest in equity of Indian companies. And getting it  Of course, the company was controlled by known Reliance network figures - and seems to be a clear case of over-billing in India, having your own benami company as a vendor, paying it overseas and then circling the money back into India, into your own companies. Sweet, na?

14. And you know what happened after that - the investigation by India's own embassy goes nowhere and the CAG Vinod Rai was shunted out and replaced by Shashi Kant Sharma - the prior defence secretary, well-known in arms circles for routing kickbacks. Our man's ability to fix governments is amazing.

13. Oh, but it doesn't end there either. The Ambani greed and ability to fix the Congress government continued. Reliance jockeys for a higher price than the $4.20 - from our own wells, mind you. And to show it means business, it suddenly claims a huge drop in production - in other words, it's a threat. "Give us a higher price, or we'll go on strike, on your wells".

14. The government, as always, is very accommodating - it dusts off a well-meaning bureaucrat, Rangarajan - and he does some laughable calculations and determines that the new price should be $8.40 per mBTU - an exact 100% hike. Imagine this - paying 4 times more for gas from our own fields - when the capex was long-invested and gone and opex hasn't gone up anywhere near this much. In fact, in the only gas market in the world, the US, the price is even currently well below $5 per mBTU, including all profits from owned wells. But we want to pay our man more than twice that for gas he is getting out of our wells. (You can see how much more we are paying by looking at all historical prices here: Henry Hub Natural Gas Spot Price (Dollars per Million Btu))

15. Once this is lined up, Reliance magically discovers and announces that its capacity will go back up in the future - its stock price nudges up. By now our man has BJP and Congress on his side. But when the AAP problem happens and the unspeakable occurs - all these people and Monseiur Ambani included have FIRs registered against them for gross theft and corruption, he pulls the strings and both the BJP and Congress collude to make the AAP government fall in 72 hours after the FIR.

16. That doesn't stop the process though. The ministries push for a price hike from $4.20 to $8.40 per mBTU starting April 1 - a clear attempt to push the change before the elections and before the public makes a big deal out of it, who knows what the results will be.

17. Arvind Kejriwal and the AAP pick up on it, petition the Election Commissioner - and he sees sense in the complaint and orders a halt to the hikes for another 60 days. Pretty much till June 1. But guess Ambani isn't much worried - he has moved his focus from Congress to Modi now - and I guess he feels it'll be pushed through after the polls.

18. But $8.40 isn't where it ends either. You can glimpse the master plan in little bits. The puppet-master has now moved his strings to Modi - as is now apparent, with a Gujarat government-owned gas company now petitioning the government that the price be raised to - believe it or not - $14 per mBTU. That's 4 times the international market price. Copies of the documents from the Gujarat government body are available for you to see athttp://www.aamaadmiparty.org/gas...

This is an additional Rs. 25,000 crores a year from our tax money we have to donate to the owner of Antilla, because he is now the guy in the shadows behind Modi. (Heaven knows how much more we have to donate to Adani, the man who flew Modi all around India.)

 

[lol_lolbob]

you are all over the place here, athletics.

 

govt buying from private producers is the best option, but when its without a power purchase agreement under ppp. that is what, distorts the prices.

 

why can't govt stay away from power sector altogether, and let producers compete to provide the govt power at the lowest possible tariff?

[lol_lolbob]

nuvvu cheppedi in general but utilities kuda privatize cheste dani nundi vache problems vere unnavi, our country is a poor country with a lot a lot of farm sector and other subsidies involved, even in countries like US and UK a lot of cities are taking back the control of utilities from regulated private entities and even there they are not 100% private controlled not even 60%. Delhi is a classical example how TATA and Relaiance Infra have absolute monopoly and jacked up the prices which led to extreme resentment among people there. IMO we should have a right mix of private and public in utilities sector.

 

yeah, govt monopoly is better than private monopoly.

 

but encouraging competition is better than govt monopoly.

 

since govt solely owns distribution lines down south. It makes good sense to stop signing stupid PPPs in power sector that promise a producer purchase of power at a certain rate.

 

then the govt can have a variety of producers to chose from.

[lol_lolbob]

building their own power plant seems a bit useless.

[lol_lolbob]

TS is not a rich state, btw. It just has a budget surplus this year. and if it doesn't have a deficit next year, it means TS has made no progress. Its always helpful to have some deficit just to be sure that all the revenue is used up one way or the other.

[athletics]

yeah, govt monopoly is better than private monopoly.

 

but encouraging competition is better than govt monopoly.

 

since govt solely owns distribution lines down south. It makes good sense to stop signing stupid PPPs in power sector that promise a producer purchase of power at a certain rate.

 

then the govt can have a variety of producers to chose from.

 

its all political game at this point, I need not explain you how contracts are made or won at the state level. SEZs scam, look at politician owned power plants  like LANCO, T Subbiram reddy's, Kurnool's politico (forgot his name), they are not there to compete but just to make quick money and not even at that level to monopolize anything, what they have done is made PPA during their period which gaurantees them of certain fixed rate for a period of XX years, when they feel it is no longer a money maker they will ditch it without a second thought which will put state Gov in a fix again searching for another source.

[lol_lolbob]

its all political game at this point, I need not explain you how contracts are made or won at the state level. SEZs scam, look at politician owned power plants  like LANCO, T Subbiram reddy's, Kurnool's politico (forgot his name), they are not there to compete but just to make quick money and not even at that level to monopolize anything, what they have done is made PPA during their period which gaurantees them of certain fixed rate for a period of XX years, when they feel it is no longer a money maker they will ditch it without a second thought which will put state Gov in a fix again searching for another source.

 

so, stop signing those ppp's with those aholes. anthe kadha.

 

enduku antunna ante. power should be like telecom. completely private and highly competitive. investing public money in building power plants seems a bit pointless.

 

ofcourse TG maatrame kaadu, anni states kooda same thappe chesthunnai. i don't understand why.

[just2deal]

People who are talking here in support of private power production should note that as per regulations/agreements if the government does not buy power from them due to any reasons or the power plants are not utilized to 100% due to no demand or shortage of fuel / electricity demand or even if they are shut down,the electricity board/govt should pay them fixed charges to cover their loss

 

The PPAs are longterm and be cancelled even if the state does not need electricity or want to buy from another source

Instead distribution should be privatized ,which has losses due to transmission and defaulters

 

Check this : http://articles.economictimes.indiatimes.com/2013-04-25/news/38817143_1_adani-power-tata-power-appellate-tribunal

[lol_lolbob]

People who are talking here in support of private power production should note that as per regulations/agreements if the government does not buy power from them due to any reasons or the power plants are not utilized to 100% due to no demand or shortage of fuel / electricity demand or even if they are shut down,the electricity board/govt should pay them fixed charges to cover their loss

 

The PPAs are longterm and be cancelled even if the state does not need electricity or want to buy from another source

Instead distribution should be privatized ,which has losses due to transmission and defaulters

 

Check this : http://articles.economictimes.indiatimes.com/2013-04-25/news/38817143_1_adani-power-tata-power-appellate-tribunal

 

its just laughable how power is organized in India. All because govt has monopoly on distribution.

 

Those agreements are a joke.

 

what percentage of power does TG buy from private producers?