Economic Survey 2008-09-I: Feeling the effects of the meltdown

July 2: 8In the backdrop of the global recessionary trend, India posted a GDP growth of 6.7% in 2008-09. While lower than projections made by the Department of Economic Affairs and the Central Statistical Office, and much lower than the 9.0% seen the previous year, this figure was much better than that of the OECD countries. Even as the Indian economy, to some extent, was insulated from the global economic crisis because of the regulatory framework that restricted exposure of banks and financial institutions to risky financial products, inadequate infrastructure growth and a languid central government, which has a huge role in the Indian economy, continue to constrain the nation`s economic potential. The performance of six core industries related to infrastructure, comprising crude oil, petroleum refinery products, coal, electricity, cement and finished steel, grew at 2.7%, as compared to 5.9% in 2007-08. The index for crude oil declined by 1.8%, against an increase of 0.4% in 2007-08. There was a deceleration in the growth of cement and finished steel reflecting the negative sentiments in the construction and manufacturing sectors.
8All sectors, save mining and quarrying, and community, social and personal services, felt the effects of the slowdown. The electricity sector continued to be hampered by capacity constraints and the availability of coal, particularly during the first half of the year. This sector grew only by 3.4% over the fiscal, against the growth of 5.3% seen in 2007-08. As long as the coal sector remains a public sector monopoly, it would act as a bottleneck towards the accelerated development of the power sector.
8In addition, growth rates in the manufacturing and construction sectors decelerated to 2.4% and 7.2% respectively during 2008-09, from the corresponding figures of 8.2% and 10.1% in 2007-08. The slowdown in manufacturing can be attributed to lower exports, due to lower global demand, followed by a decline in domestic demand in the second half of the fiscal. Double digit inflation in the first half of the year, which contributed to extremely high input prices, and, consequently, the tight monetary policy followed by the Reserve Bank, which contributed to increased costs for credit, also adversely affected the sector. The construction industry, after going through a boom phase, with growth as high as 16.2% in 2005-06, has been, in more recent years, been impacted by increased construction costs due to a rise in the price of inputs, such as cement and steel, due to heightened demand from China. The rise in interest rates and the resulting slowdown in loans has also dented the industry.
8On the macroeconomic front, the growth in per capita GDP decelerated from 8.1% in 2006-07 to 4.6% in 2008-09, while the per capita consumption growth declined from 6.9% to 1.4% over the same period. The per capita income of the country, at constant 1999-2000 price levels, stood at Rs 31,278. More worryingly, the contribution of the more-efficient, private consumption to aggregate growth declined dramatically from 53.8% in 2007-08 to 27% in 2008-09. This decrease was cushioned by an increased contribution of government consumption. Consequently the overall contribution of consumption demand to growth was only marginally lower than that in 2007-08.
8Additionally, for the year as a whole, the nominal value of the rupee declined from Rs 40.36 per US dollar in March 2008 to Rs 51.23 per US dollar in March 2009, reflecting a 21.2 per cent depreciation during the fiscal. Due to the increase in government spending, and not enough growth in taxable income in the private sector, the gross fiscal deficit of the Union Government increased from a reasonable 2.7% in 2007-08 to 6.2%, an unsustainable level in the long run. This would, in the medium to long run, crowd out private investments in the economy. On the brighter side, Gross Domestic Savings, and, consequently, Gross Capital Formation, have, as a proportion of GDP, have been increasing steadily since 2002-03, leading to better long term growth prospects.
8The good: Growth was not as low as in some other similar countries and OECD
The bad: The infrastructure sector, which contributes to long term GDP growth rates, has slowed down considerably. Interest rates still among the highest in the world.
The ugly: Increased influence of the government in aggregate consumption will distort markets and lead to lower growth in the future. The substantial decline of the Rupee can cause further erosion in balance of trade and inflationary pressures. Fiscal deficit can lead to higher real interest rates, depressing investments.(Click on our "Reports" section to download a copy of the Survey). By Abir Mandal

Economic Survey 2008-09-II: A grim power situation

July 2: The pre-budget Economic Survey 2008-09 has painted a grim picture of the power sector, with the growth in electricity generation by power utilities during the fiscal being pegged at a piffling 2.7 per cent, against the target of 9.1 per cent. However, according to the Survey, there are good reasons for the poor performance. Shortage of coal and gas, shortfall in capacity addition, delays in commercial operations for, or full generation from, some newly commissioned units has hit generation, opines the Survey. Generation loss due to shortage of gas was estimated to be 33.7 billion units (based on a 90% PLF), up from 31.2 during the previous fiscal. Generation of power from nuclear power stations also registered negative growth, mainly due to fuel supply constraints. Meanwhile, the energy shortages in the country also increased, since the growth in requirement (5.1 per cent) was greater than the availability (3.8 per cent). Of all the regions, the western and northeastern of the country regions experienced the worst power shortages. (Click on our "Reports" section to download a copy of the Survey).

Economic Survey 2008-09-III: Implementation of open access regime

July 2: The Economic Survey also provides an update on the open access regime in the country as March 31, 2009. According to the survey, inter-state transmission transactions increased from 778 MW in 2004-05 to 5,933 MW in 2006-07. The figure further increased to 9,560 MW in 2007-08. This figure, however, declined to 9,347 MW in the fiscal 2008-09. Pertinently, a total of 174 applications were received by the states from various distribution companies for wheeling a total of 17,474.1 MW of power, out of which 116 applications for 14,462.7 MW power have been approved. Nevertheless, only 76 open access proposals have been materialized, wheeling around 1,394 MW power.
8Open access is considered as a vital initiative to promote competition in the power sector. The regulations on open access for inter-state transmission, together with intra-state trading guidelines, are issued by the Central Electricity Regulatory Commission (CERC). The responsibility for the implementation of open access at the distribution level rests with the State Electricity Regulatory Commissions (SERCs). The Electricity Act, 2003 defines, open access as "the non-discriminatory provision for the use of transmission lines or distribution system or associated facilities with such lines or system by any licensee or consumer or a person engaged in generation in accordance with the regulations specified by the Appropriate Commission. (Click on our "Reports" section to download a copy of the Survey).

Economic Survey 2008-09-IV: Amid economic downturn, power sector garners more debt

July 2: 8Defying the liquidity crunch and high cost of funds, the power sector raised substantial capital during the fiscal 2008-09. According to the Economy Survey 2008-09, the sector raised as much as USD 1518 million as external commercial borrowings during this financial, as compared to USD 865 million a year ago. Moreover, the power sector absorbed Rs 12738.1 of debt through private placements, for building capacities. In addition, the inflow of foreign direct investment to the power sector increased, from USD 968 million in 2007-08, to USD 984.8 million in 2008-09. Not surprisingly, such northward trends were not exhibited by the equity portion of project financing, predominantly, due to the wounded investor confidence that was a direct outcome of the global financial meltdown. Equity infusion in power sector slumped to Rs 958 crore in 2008-09, from Rs 13,709 crore the previous fiscal.
8In view of the global financial crisis, the government has, rightly, initiated a series of measures to sustain the impetus in investments in infrastructure, the Survey noted. Notably, foreign borrowing rules have been eased by removing "all-in-cost` ceilings on such borrowings, the definition of infrastructure sector for availing external commercial borrowings (ECBs) has been expanded and NBFCs, dealing exclusively with infrastructure financing, are likely to be permitted to access ECB from multilateral or bilateral financial institutions, among other things. (Click on our "Reports" section to download a copy of the Survey).

Economic Survey 2008-09-V: Progress of RE and APDRP programmes

July 2: The Economic Survey 2008-09 also throws light on the progress of implementation of the power ministry's flagship scheme, the Rajiv Gandhi Grameen Vidyutikaran Yojana (RGGVY), or the Rural Electrification (RE) programme. It was observed that 59,882 villages have been electrified and connections to 53.78 lakh BPL households have been released, as of March 31, 2009. Notably, 327 projects, envisaging electrification of 49,704 un-electrified villages and electricity connections to 161.76 lakh BPL households, have been sanctioned for implementation during Phase-I of the 11th Plan period, at a sanctioned cost of Rs 16,254.12 crore, of which, 280 projects have been awarded, as of March 31, 2009. Besides, 235 other such projects that slipped from the 10th Plan period are also being executed during this Plan period. The Survey also took note of the progress made towards the implementation of the Accelerated Power Development Reforms Programme (APDRP), another flagship scheme of the power ministry that was launched in 2002-03, in the form of additional central assistance to states for strengthening and upgrading sub-transmission and distribution systems related to high-density load centres. The central government hopes to reduce AT&C and commercial losses and to improve quality and reliability of supply via this plan. So far, Rs. 7,646.35 crore has been released to the states under the investment component of the scheme, and another Rs. 2,879.73 crore for cash loss reduction under the incentive component. (Click on our "Reports" section to download a copy of the Survey).

Economic Survey 2008-09-VI: Coal production jumps by close to 8 per cent

July 2: 8The Economic Survey 2008-09 released today, on July 2, has painted a picture of some good tidings for the power sector. Raw coal production, during 2008-09, registered a growth of 7.90 per cent, to reach 493.20 million tonnes (MT). The corresponding figure during the previous year was 457.08 MT. Coking coal production during the April-February period of 2008-09 was 29.76 MT, as against the 29.70 MT reported in the corresponding period of last year. On an average, the growth rate of raw coal production has increased from around 6 per cent during the period from 2003-04 to 2007-08 to about 8 per cent during 2008-09. This increase is mainly due to enhanced production by all the players, especially holders of captive blocks and large public sector undertakings (PSUs), like Coal India Limited (CIL) and Singareni Collieries Company Limited (SCCL).
8Meanwhile, coal imports also soared to 60 MT in 2008-09, compared to about 20 MT in 2003-04. While the import of coking coal increased from 12.99 MT in 2003-04 to 27.00 MT during the fiscal, the import of non-coking coal leapt up even more, from 8.69 MT to 33 MT, which is primarily to meet the increasing demand from the power sector.
8Under its e-auction scheme, initiated in 2007-08, CIL offered 13.06 MT of coal for sale in 2008-09, against which, only 5.32 MT was actually allocated, while SCCL sold 2.99 MT. Whereas CIL managed to secure a 43 per cent gain over the notified price under e-auction, SCCL secured a 100 per cent advantage, in 2008-09. (Click on our "Reports" section to download a copy of the Survey).

GoNCT seeks MoC's intervention to grant PL for Mara-II and Mahan coal blocks

July 2: The Government of National Capital Territory of Delhi (GoNCT) has called on the Ministry of Coal (MoC) to expedite the grant of prospecting license (PL) to Yamuna Coal Company Private Limited (YCCPL), for the development of Mara-II and Mahan coal blocks, allocated jointly to Indraprastha Power Generation Company Limited (IPGCL) and Haryana Power Generation Corporation Limited (HPGCL).
8In its missive to the ministry, the GoNCT has stated that both the power companies had, in November 2006, separately submitted the necessary applications for PL as well as for topographical and geological surveys, to the erstwhile district authority of Sidhi, Madhya Pradesh. Furthermore, following the constitution of the newly formed Singrauli district, where the coal blocks are located, the companies had resubmitted the required documents to the authorities of the Singrauli district.
8Reportedly, Mineral Exploration Corporation Limited (MECL), the contract agency for the topographical survey, has  already instigated the necessary investigation work and the Government of Madhya Pradesh has also applied to the Ministry of Environment and Forests (MoEF) seeking permission to undertake the geological survey of the coal patch. However, the matter is still pending for consideration of the Expert Committee of MoEF. In a similar missive, the Madhya Pradesh government had earlier requested the coal ministry, seeking issuance of individual license to IPGCL and HPGCL, prior to the formation of YCCPL, for the development of Mara-II and Mahan coal blocks.
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Indo-Australian collaboration in coal sector-I: MoC awaits Aussies' response to finalize joint task force

July 2: There seems to be a delay on the part of the Australian Government with regard to the formation of the joint task force, as per the provisions of the joint action plan signed by the two countries, to augment bilateral cooperation in the coal sector. The MoC has already finalized the composition of the Indian side of the task force with six nominations, which also includes one representative from the private sector. However, the Department of Resources, Energy and Tourism, under the Australian Government is yet to communicate the status of the composition of their side of the task force. This is despite the calls from the MoC for such reciprocal steps, in a letter dated May 1, 2009, in which the MoC had also intimated the former about the composition of the Indian side of the task force.
8Notably, in the joint action plan on coal, signed during the 6th meeting of Indo-Australia Joint Working Group (JWG) on Energy, held on March 16-17, 2009, at New Delhi, it was envisaged to establish a task force for speedy development of bilateral opportunities and continuity of all key areas, as enumerated in the said action plan. The yet-to-be set-up task force is also due to undertake various other activities, such as proposing further networking meetings to promote opportunities in India, offering one to one appointments to participants with each other and mine visits, besides other networking functions.
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Indo-Australian collaboration in coal sector-II: Work programme for 2009-11

July 2: The website carries here, a joint work program, agreed to be undertaken by India and Australia during the period from 2009-11, as part of the "Joint Action Plan" signed between the two nations to augment bilateral tie-ups in the coal sector. Pertinently, the "Joint Strategic Action Plan" was initially signed on November 5, 2008, at New Delhi, when the Australian delegation visited India, but, it was only at the  6th meeting of the Indo-Australia Joint Working Group (JWG) on Energy, held on March 16-17, 2009 at New Delhi, when a "Joint Action Plan" on coal was further finalized and signed, with an objective to enhance awareness of trades between India and Australia. Various activities along with their respective time frames have been listed in the work program, in order to achieve the following three broad objectives of the joint action plan:
8Enhancing awareness of opportunities in two-way trade and investment.
8Increasing bilateral cooperation and collaboration on the coal sector, including coal mining services.
8Identifying and addressing barriers to trade and investment opportunities.
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3,160 MWe nuclear capacity to be added by 2011

July 2: By 2011, the country is expected to have 7,280 MWe of nuclear power capacity, against the present 4,120 MWe, on completion of projects that are currently under construction. In a written reply submitted to the Rajya Sabha, the Minister of State for Science and Technology and Earth Sciences, Prithviraj Chavan has announced that the nuclear generation capacity of India would be augmented by setting up a mix of indigenous and foreign technology-based reactors.
8There are 17 nuclear power reactors in operation in the country. In addition, six nuclear power reactors-- the 220 MWe units 5 and 6 at Rajasthan Atomic Power Project(RAPP) at Rawatbhata Rajasthan, one 220 MWe unit Kaiga-4 at Kaiga in Karnataka, two units of 1000 MWe, each, at the Kudankulam Nuclear Power Project (KKNPP) at Kudankulam in Tamil Nadu, and one Prototype Fast Breeder Reactor (PFBR) of 500 MWe capacity at Kalpakkam in Tamilnadu-- are currently under construction. In Rajasthan, four units of Rajasthan Atomic Power Station (RAPS), totaling to a capacity of 740 MWe, are in operation and another two units of 440 MWe capacity are at the final stages of construction.
8In January 2009,  the Government of India entered into fuel supply agreements with the Russian nuclear fuel supplier, TVEL, and the French energy major, Areva. The contract with TVEL envisages long-term supply of 2,000 tonnes of natural uranium, while the contract with Areva is for supply of 300 tonnes of the nuclear fuel.
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Progress update for Birla Corporation's Bikram coal block (as of June 20, 2009)

July 2: The website carries here, a status update on various activities that are in progress at the Birla Corporation Limited's Bikram coal block, located in the Shahdol district of Madhya Pradesh. This block, with a geological reserve of 20.975 million tonnes, was allocated on August 12, 2008, by the coal ministry, for captive use of the associated end-use cement plants of the company. However, the block developer has not even been able to purchase the geological report (GR) of the block, from the Central Mine Planning Design Institute Limited (CMPDIL), even after depositing a sum of Rs 2.89 crore for the same. Reportedly, CMPDIL has encountered some tax-related problems over the GR amount and the utility is presently waiting to have the coal ministry clarify the issue. Meanwhile, the private company has submitted the bank guarantee to the coal ministry, for executing mining operations at the block and the application pertaining to the mining lease has been submitted to the state government. All other major milestones with regard to the Rs 110 crore mining project are due to be achieved as per their schedule. However, the submission and subsequent approval of the mine plan by the coal ministry are due miss their respective deadlines on account of CMPDIL's delay in providing the GR.
8Pertinently, the three associated end-use cement plants, with a cumulative capacity of 5.78 million tonnes per annum, one each located in Madhya Pradesh, Rajasthan and West Bengal, are already operational, whereas the block is scheduled to start coal production in August 2013.
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List of HEPs held-up on environmental issues: An update (as of May 31, 2009)

July 2: For reference purposes, the website carries here, an updated list released by the Central Electricity Authority (CEA), of the hydroelectric projects (HEP) that are stalled due to lack of environmental clearance from the ministry of environmental and forests (MoEF), as of May 31, 2009. The list includes a total of 17 HEPs, with an aggregate capacity of 6,924 MW, conceived for development under the 50,000 MW hydro electric capacity addition initiative of the Government of India.
8Out of the 17 HEPs, 11 projects, with a total capacity of 2,178 MW, are proposed to be constructed in Uttarakhand; while five projects, with a combined potential of 4,620 MW, are due to be developed in Arunachal Pradesh. One HEP of 126 MW capacity has also been planned for implementation in Himachal Pradesh.
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MoEF Committee wants revised ToR for Dhamwari Sunda & Shivasamudram power projects

July 2: The Expert Appraisal Committee (EAC), under the Ministry of Environment & Forests (MoEF), has directed Dhamwari Power Company Private Limited to prepare and submit the terms of reference (ToR) for the 70 MW Dhamwari Sunda hydroelectric project (HEP), on the basis of the model ToR approved by the MoEF. In addition,  while preparing the revised ToR, the project developer is required to incorporate the additional information sought by the Committee. On receipt of the same, the EAC will consider granting its approval, so that various pre-construction activities at the project site can be kick-started. The HEP is proposed to come up in the Shimla district of Himachal Pradesh. An underground power house is proposed to be located on the right bank of the Pabbar river, at a distance of about 600 m from the upstream of Chirgaon village. The total cost of the project is estimated to be Rs 439.953 crore.
8Alongside, the EAC has asked Karnataka Power Corporation Limited (KPCL) to prepare a revised set of ToR for the 270 MW Shivasamudram seasonal power scheme, on the basis of the MoEF-approved model ToR, and submit the same to the EAC, along with the clarifications sought by the Committee. On receipt of the same, the EAC will consider granting its approval to the commencement of various pre-construction activities at the project site. This project is proposed to come up as a run-of-the river scheme across Cauveri river, in the Coorg district of Karnataka. While the total land requirement for the project is estimated to be 70 hectare, which will be entirely barren forest land, an area of around 20 hectare, mostly in river bed, is under submergence due to the setting-up of this project. The underground powerhouse is located at a distance of 17 km from the existing Shivasamudram colony on the right bank of the river, with 3 units of 90 MW. The total cost of the project, to be completed in 30 months, is pegged at Rs 686.13 crore.
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News Briefs

July 2: 8The 1,500 MW Nathpa Jhakri hydroelectric power project (HEP), the country's largest HEP under operation, owned by the state-run enterprise, Satluj Jal Vidyut Nigam Limited, achieved its best performance, in terms of generation, of 1,069 million units (MU) of electricity, during June 2009. The HEP surpassed its own previous best of 976 MW posted in 2007. "On account of the record generation during the month, all the beneficiary states of Northern India-- Delhi, Haryana, Punjab, Rajasthan, Uttar Pradesh, Uttarakhand, Chandigarh, J&K and Himachal Pradesh, as equity partners, got 25% of the electricity generated at bus bar rates, including the 12% of power provided free of cost," said an official disclosure.
8Power Finance Corporation Limited (PFC) has announced that the Board of Directors of the company is due to hold a meeting on July 14, 2009, for considering the un-audited financial results for the first quarter-ended June 30, 2009.
8In a filing with the Bombay Stock Exchange (BSE), KSK Energy Ventures Limited has announced that the 9th Annual General Meeting (AGM) of the shareholders of the company will be held on July 27, 2009, inter alia, to consider adoption of accounts for the year ended March 31, 2009.

CERC to take punitive action against 4 power traders

July 1: The Central Electricity Regulatory Commission (CERC) is due to initiate punitive proceedings against four power trading licensees for their failure to comply with the related provisions of the Central Electricity Regulatory Commission (Procedure, Terms and Conditions for grant of Trading License and other related matters) Regulations, 2009. These licensees are Kalyani Power Development Private Limited (KPDPL), DLF Power Limited, Maheshwary Ispat Limited (MIL) and Malaxmi Energy Trading Private Limited (METPL).
8Notably, the Commission, vide its order dated February 13, 2009, directed each these players to show cause as to why penalty under Section 142 of the Electricity Act, 2003, should not be imposed for its failure to submit the annual accounts for the period ending March 31, 2008. Notably, the licensees were expected to submit these financial documents by December 31, 2008, under the penalty of having their license revoked. However, apart from METPL, the traders have not even furnished their respective responses to the show-cause notices. Hence, CERC has, now, scheduled oral hearings on July 21, 2009 in order to decide upon any further course of action.
Click on our `Reports` section for more information.

DVC's Chandrapura power project-I: Trouble brewing at Unit VII

July 1: Things are, apparently, not moving in the right direction for Unit VII (250 MW) of Damodar Valley Corporation's (DVC) Chandrapura expansion project, with the utility accusing BHEL of not doing enough. In a recent review meeting, DVC complained that BHEL has been grossly ineffective in persuading its civil sub-contractor, National Building Construction Corporation (NBCC), to mobile additional resources at the site for expediting the construction activities on the tardy project.  Allegedly, contracting agencies are not augmenting their manpower, fearing additional burden that may accrue to them in form of extra compensatory benefits being sought by the workers in light of the unstable law and order conditions prevailing in the area. Moreover, DVC also claims that the sub-contractor has even failed to properly utilize the existing resources. All these factors, if not taken care of, immediately, are likely to puncture DVC's plans to commission 750 MW worth of power units during this fiscal, as compared to the meager 250 MW that it added in 2007-08, given the fact that this unit is due to be commissioned next month, in August 2009. Clearly, in the face of this exigency, the power ministry would do well to intervene immediately and help straighten out the tangles. Click on Details for more information.   Details

DVC's Chandrapura power project-II: Problems galore

July 1: While Damodar Valley Corporation's (DVC) Chandrapura expansion project, Unit VII (250 MW), is facing problems with its civil work package, things seem to be in doldrums with respect to the major plant packages as well. For instance, while BHEL has failed to deploy adequate resources at the coal handling plant (CHP), the PSU has also been ineffective in exercising efficient control over the staff of its civil sub-contractor, the National Building Construction Company (NBCC), for expediting civil construction pertinent to the CHP. In tandem, DVC is apprehensive that BHEL might fail to meet deadlines for installing the ash handling package (AHP), given the fact that it has not been able to chalk out a detailed schedule for its execution. Then again, Geo Miller, BHEL's sub-contractor for the water pre-treatment plant, is reportedly playing truant with its work. The company has demonstrated a lack of planning by failing to initiate relevant civil work at the site of the filter water pump. And most importantly, BHEL has also not been able to deliver promised equipment supplies for the main plant package. As a result, the piping and duct systems are yet to be insulated completely, due to the unavailability of the requisite supplies, giving DVC a cause for worry, since partial insulations are likely to get damaged during rains. All these factors are likely to impinge the commissioning of the two units, worth 250 MW each, that are due to go on stream in August 2009 and December 2009. Click on Details for more information.   Details

RIL's gas supply to fertilizer companies: Teething problems

July 1:  Fertilizer companies seem to be adversely impacted by what has been termed as a "complete lack of cooperation" between three principal transporters of gas -- RGTIL, GAIL and GSPL -- from RIL's D-6 discovery. The following issues have cropped up: 
 Different timings of nominations of gas quantities: Fertilizer units have to provide nominations for RIL gas by 1200 hrs daily whereas GAIL/GSPL informs the scheduling of different types of gas by 1900 hrs for the next day. At the time of nominating RIL gas, it is not known how much quantity of APM and PMT/RAVVA JV gas would be scheduled by GAIL/GSPL for the next day. It sometimes results in an underdrawl of either RIL gas or JV gas or RLNG. This in turn results in penalties as 'take or pay' in NG/RLNG contracts.
 Problems in gas transfer from RGTIL to GAIL: There is a mismatch between the GCV of gas as reported by RGTIL at the exit point of their pipeline and GCV as reported by GAIL/GSPL at their entry point. Due to this the total (and exact) custody transfer of gas is not taking place from RGTIL to GAIL/GSPL and, thus, the quantities cannot be reconciled.
 Different conversion factors: The Gas Transportation Agreement (GTA) with GAIL/GSPL is based on GCV basis while the GTA with RIL/RGTIL is based on NCV basis. GCV to NCV conversion has to be used while nominating gas to RGTIL and GAIL on daily basis. This again creates imbalances for which the shipper, that is the fertiliser company, is held responsible and has to pay imbalance charges.
 Lack of timely information: The penalties for imbalances created in the system by overdrawl or underdrawl are payable on daily basis. The information on imbalance is not given on the daily basis by RGTIL, GAIL and GSPL. There are situations where the scheduled quantities are changed by RGTIL during the day and the fertilizer companies are informed only after they have already drawn and consumed the gas according to the original schedule. At time, even the allocated quantity at entry and exit points of the RGTIL network varies widely, leading to imbalances without the knowledge of shippers. There are cases where one unit has negative imbalance with RGTIL and positive imbalance with GAIL and vice-versa for the same day. This happens quite a lot as RGTIL does not adhere to the scheduled quantity and also does not inform the shipper in time. In such cases fertilizer companies become liable for payment of imbalance charges.
 Plant Shutdown: When a plant takes a shutdown for maintenance purpose, there may be variation in withdrawal of gas quantity from the nominated quantity on the day of shutdown, thus creating an imbalance. In such a case the unit has to pay imbalance charges on dally basis for the entire period of shutdown which is an unfair practice. The unit should be liable to pay imbalance charges only for the day of shutdown and not the entire shutdown period.
 Commissioning Period; The contracts with RIL and RGTIL provide for a "commissioning period" of six months and during this period RIL has promised not to impose any 'take or pay' charges. RGTIL will also not impose any 'ship or pay' and imbalance charges. The contracts with GAIL provide for a commissioning period of three months where no 'ship or pay' charges are to be paid. It also provides for additional three month period where 50% of 'ship or pay' charges have to be paid. However, GAIL is imposing imbalance charges right from the beginning.
 Change in NCV of existing GAIL supplies: In one case, NCV of existing gas supplies have been reduced owing to the mix of RIL gas. Though the scheduled volume is being delivered, due to reduction in NCV, the energy available has come down considerably. It is worthwhile to note that though GAIL is providing rebate for the reduction in NCV, it is not equivalent to the non-APM or RIL gas energy cost.
 Automatic balancing not evident: During the discussion on the GTA, the shippers were assured that the imbalances cannot exceed 5% as that would threaten the integrity of the pipeline and hence the transporters on their own would take actions to correct the imbalance, in case the shipper does not react. In fact, this was the reason being quoted by GAIL for not allowing Take or Pay at 100%. But there are instances now where imbalances of upto 15% are being charged, without any prior intimation to the shipper to enable any corrective action.   Details

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