The relative obscurity may be a welcome relief to many in the industry. But the calm and relative obscurity doesn't mean that things are any better.
A sense of crisis pervades the industry. The mood is gloomy, particularly because most industry representatives believe the wounds are self-inflicted from paralysis within government.
The fault lines are at three different places.
First, there is not enough coal to go around. Coal India Limited (CIL), the country's largest and near monopoly coal producer, was expected to produce about 464Mt this year. It will likely miss its production target, though its overall dispatch to the power sector will be more or less as planned thanks to a large stock overhang from the previous year. But even with those stocks, supplies are still not sufficient.
New plants are the ones feeling most of the pinch. Industry representatives speak of 20,000 – 30,000 MW of stranded new capacity unable to secure coal supplies or unable to close financing because of the fuel supply risks. Many plants are in financial distress and actively looking for buyers.
Existing plants are hanging on a thread. CIL has assured them about 80% of their contract volume, which is based on 85% of the plant's dispatch; this too assumes that the plant obtains up to 15% of coal through imports. In short, plants are entitled to no more than just over half of the required coal supply from domestic sources.
The CEO of a large power business summed up the gloom for me recently: "These days the power business is all about visiting Delhi and knocking on doors."
Second, the financial distress of state owned power distribution utilities has finally caught up to the sector. Up through March of last year these utilities had accumulated losses of close to US$35B.
Short-term power prices have remained low as these utilities refused to buy higher priced power, even though the fundamentals support much higher short term power prices. Utilities have reneged or delayed several power purchase agreement. When they do buy, they don't pay on time.
A senior power company representative told me: "We are routinely facing delays of six to eight months these days. How do you manage that kind of cash flow problem?"
Last September the central government signed off on a restructuring program designed to remove the debt from the balance sheet of distribution utilities. There has been little uptake of that program and the deadline has now been extended through March of this year. The extension alone is, however, unlikely to ease the financial distress.
Third, there is little consensus even within government on what to do with the environment. Coal and other infrastructure project developers have been repeatedly asking the government to ease environment regulations. Specifically, they want the parts related to local consent and stakeholder discussions to be watered down. They want land acquisition and forest clearances to be streamlined.
Industry claims that environmental regulations, in particular the Forest Rights Act 2006, have blocked industrial and mining development. CIL has said that it will not be in a position to meet future production unless its requests for the development of new mines are cleared. About 100 new mining proposals, many of which are to be used for meeting production targets over the next five years, still await approval.
The Prime Minister's office (PMO) appears to at least empathize with industry. It directed the minister of Environment and Tribal Affairs to streamline implementation of the Forest Act so the requirements for the consent of all affected villages could be avoided. But there was disagreement with the PMO's direction to water down implementation of the Act.
The sense that there are factions within government tugging away in different directions, like with the implementation of the Forest Act, is what creates the perception of "paralysis" within government.
"Paralysis" is a cynical way to characterize the situation. The better characterization would be that the triumvirate challenges of supply, financial distress and environment are overwhelmingly complex.
The Indian polity doesn't have an answer, at least not one that resonates broadly across all stakeholders.
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