Lanco plans strategic stake sale in Griffin Coal - Quoted in the Mint

Lanco Infratech Ltd, India’s largest independent power producer, said it plans to induct a strategic investor into Griffin Coal Mining Co. Pty Ltd. Lanco bought Griffin Coal mines, located in Collie Basin, in Western Australia, a for A$730 million (around Rs.4,015 crore) in March 2011. The project has the capacity to mine 4 million tonnes of coal per annum (mtpa).

Lanco Infratech chairman L Madhusudhan Rao said he is “not averse” to selling even a majority stake to an investor, provided the asset gets the right value from a “strategic perspective”.

The company is looking for a partner as it plans to spend $1.2 billion to augment Griffin’s mining capacity from 4 mtpa to 18 mtpa in three years. Lanco expects to tie up finances for the expansion by July next year, Rao said.

 

“We are looking at debt syndication and also looking for some sort of a strategic partner to join us,” Rao said.

 

Rao said the company expects to finalize merchant bankers to raise the funds by mid-October.

Lanco plans to spend around $600 million on mine expansion, $500 million on building a port and $100 million on a railway line.

 

The company produced around 3 million tonnes (mt) of coal in the year ended 31 March. It plans to increase production to 3.7 mt in this financial year, of which it plans to export about one-fifth.

Lanco is facing a $3.4 billion lawsuit from Perdaman Chemicals and Fertilisers for terminating a coal supply pact for its proposed urea project.

 

Griffin Coal was to supply 2.8 mt a year of coal to the project for 25 years starting in 2014.

“Lanco’s ability to raise equity funding for the project will depend upon the outcome of the lawsuit it is fighting against Perdaman,” said an analyst at a Mumbai-based brokerage house who did not want to be named because his company’s policy bars him from speaking to the media.

 

Rao ruled out an out-of-court settlement with Perdaman. “We will fight the case till the last minute. We expect an outcome in the case by May next year,” he said.

 

Analysts said raising funds could be challenging in the face of the global economic slump.

Indian energy companies, including Lanco, that are starved for coal are, meanwhile, weighed down by a heavy pile of debt and high interest costs.

 

“A lot of Indian companies which bought coal mines in Australia have done so with a prime objective of supply security,” said Dipesh Dipu, partner at Hyderabad-based Jenissi Management Consultants.

Projects with “technical viability” and “long-term supply orders” are the ones that will attract equity capital, Dipu said.

 

Lanco has an installed capacity of 4,110 megawatt (MW) of electricity, out of which around 73% is thermal and 26% gas-based; hydropower accounts for a little over 1%. The company targeted adding 5,000 MW of capacity, but has put expansion plans on hold owing to high interest costs and a fuel shortage.

 

Lanco has borrowed Rs.33,118.6 crore and interest costs shot up 77% to Rs.539 crore in the quarter ended 30 June compared with Rs.304 crore a year earlier.

 

The firm appointed Macquarie Capital Advisers, a Macquarie Group advisory, to find a strategic investor in its power and solar power businesses. In power, the company is trying to sell stakes at the project level in both thermal and hydropower plants.

 

State electricity boards (SEBs) owe the company around Rs.3,000 crore, Rao said.

“There are a lot of efforts going on of late to make distribution companies liquid, and with most SEBs revising tariffs, I think the situation will be under control in 12-15 months,” Rao said.

 

Shares of Lanco Infratech gained 2.03% to Rs.15.10 on BSE on Friday while the benchmark Sensex rose 0.99% to 18,762 points.

Spurt in global coal prices and loopholes in allocation led to coalgate - Quoted in the Business Standard

The mad rush for grabbing coal reserves by corporates with links to political heavy weights, as exposed by the Comptroller and Auditor General of India (CAG) and the Central Bureau of Investigation (CBI) in the coal scam, should not come as a surprise. Superimposing the consistent rise in global coal prices over the yearly data for coal blocks allocated over the past decade reveals the real reason behind the Rs 1.86 lakh crore scam.

The quantum of reserves allocated to companies has moved in a surprising tandem with the global prices year after year. Interestingly, not only did the allocations jumped with the rise in prices between 2002 and 2007, they also dropped at exactly the same time as the prices fell. No doubt, the Indian economy is fully-integrated with the global developments.

The global coal prices remained largely stable below $25 per tonne during late 1990s and early 2000s. Coal block allocation began in India in 1993. The government allotted 41 blocks over the next decade to 2003.

Prices started shooting up in 2003 as demand from developing economies, particularly China, rose. The upward trend continued and prices touched a high of $190 per tonne in 2008 when the global meltdown led to a crash in coal prices. Consider the benchmark price for thermal coal exports from Newscastle in Australia, the world’s biggest coal export harbor. The Newcastle prices increased from $25 per tonne in 2003 to a high of $185 per tonne in early 2008. The number of blocks allotted annually in India also jumped from 5 in 2004 to 52 in 2007.

Post 2007 and early 2008, the prices came tumbling down from $185 per tonne to $80 per tonne currently. The number of blocks allotted also came down from 52 in 2007 to 24 in 2008, 16 in 2009 and finally 2 blocks allotted in 2011. Overall, the government had allotted a total of 195 coal blocks with reserves of a whopping 43 billion tonne (BT) to 289 companies between 1993 and 2011.

A closer look at the growth of margins available to companies between 2003 and 2008 in coal mining, along with the relative ease of bagging reserves, further reveals why the coal scam was waiting to happen. Against a market price of $25-30 per tonne in 2003, the cost of production worked out to around $20 per tonne in India, leaving a tiny margin of $5 on every tonne of coal mined.

This margin went up to as high as $130 per tonne in 2008 when prices jumped to $180 per tonne even as cost of production rose to $50 per tonne. “Coal mining did not make much business sense in 2003. But the possibility of huge profits that was available at the back of a rise in market prices in 2008 ensured that blocks which were hitherto unviable became economically viable. Hence, the mad rush for grabbing blocks. Otherwise there is no business sense in acquiring an asset without experience,” said Dipesh Dipu, Partner at Hyderabad-based energy and resources focused consulting firm Jenissi Management Consultant.

While the spurt in global coal prices gave the economic backing for the mad rush for grabbing blocks, the loopholes in allocation method provided the enabling administrative environment for the scam to flourish, according to experts. “The process itself was such that companies which could prove that their projects have performed well were found more eligible. There was a feeling that less influential people would find it difficult to get blocks in this “beauty parade” of projects,” a senior analyst from a consultancy firm said.

The United Progressive Alliance (UPA)-I government led by Prime Minister Manmohan Singh, that came to power in 2004, had floated the idea of competitive bidding for captive block allocations. However, a Bill to introduce auctioning could be tabled in Parliament only in October 2008. The rules for competitive bidding in coal allocation were notified on 2 February 2012. The government attributed the delay to conflicting pieces of opinion given by the law ministry to formalize the legislation and the opposition from the sates which feared they would lose control over allocations.

Wide variance in price of imported coal - Quoted in the Mint

At a time when India is facing a domestic coal shortage, there is a wide variance in the prices of imported coal contracted by various government-owned utilities, which some analysts partially attribute to “inefficiencies” in procurement.

While NTPC Ltd has sourced coal (6,300 kilocalories) at $72 (Rs.3,852 today) per tonne, the state power generation utilities of Gujarat, Andhra Pradesh, Rajasthan, West Bengal and Maharashtra have contracted to buy coal having the same calorific value at $105, $103.6, $102, $101 and $99 per tonne, respectively, according to a senior NTPC executive, requesting anonymity. Also, Damodar Valley Corp. Ltd (DVC) has signed contracts for imported coal at $95 per tonne.

 

This is significant given India’s growing demand for imported coal, which stands at an annual 137 million tonnes (mt), and the impact on consumers. Coal demand is expected to grow from 649 million tonnes per annum (mtpa) to 730 mtpa in 2016-17, with the projected local availability at 550 mtpa in that year.

 

To be sure, the price depends upon the quantity, quality, tenure of agreement, delivery mechanism, and the terms and conditions of trade. The prices mentioned above are for the current fiscal year, and correspond with the time in which there has been a dip in imported coal prices.

 

“Over the last six-eight months, prices of imported coal have reduced by almost 15-20%, (mainly) driven by the subdued demand of China,” said Amol Kotwal, associate director (energy and power systems practice) for South Asia and the Middle East at Frost and Sullivan.

 

US coal demand shifting to shale gas has resulted in additional supplies of coal coming to other markets, leading to a fall in price from elevated levels. Also, the falling freight market has resulted in cheaper shipping rates.

 

“The import price for coal would depend upon the calorific value, source (country) of import, and the time of the year. Besides the quantum of import requirement and duration of the contract (in case of long-term contract or memorandum of understanding) would also play in striking the deal price,” Kotwal said. “Additionally, the variation in coal import price brings to light the inefficiencies in the procurement process such as coal procurement without calling for bids.”

 

Dipesh Dipu, a partner at Jenissi Management Consultants, a Hyderabad-based energy and resources-focused consulting firm, said, “Indian power companies have attempted coal procurements that are tailor-made for their requirements, which may explain the reasons for price variance. However, inefficiencies may not be ruled out in cases of such customization.”

 

The country’s largest power producer and coal consumer NTPC has an annual coal requirement of 160 mt, of which it will have to import around 16 mt from overseas. It has already contracted for 9.4 mt, of which 4 mt has been contracted at $84 per tonne, 4.1 mt at $80 per tonne, and 1.3 mt at $72 per tonne.

 

Another NTPC executive confirmed the contracted prices for imported coal.

 

While executives at utilities of Gujarat, Rajasthan, West Bengal and Maharashtra couldn’t be immediately reached, K. Vijayanand, managing director of Andhra Pradesh Power Generation Corp. Ltd (AP Genco) said, “In best of my knowledge, the price AP Genco paid to source imported coal is very competitive, even when compared to other state utilities.”

 

“Imported coal prices are bound to be variedly priced depending on specific tenders,” a DVC executive said, requesting anonymity.

 

According to the 12th Plan (2012-17) paper on energy, in 2006-07, coal demand was 474.18 mt, while output was 430.84 mt, resulting in an import of 43.08 mt. This number exponentially increased to 137 mt in 2012 and is expected to reach 185 mt by 2017.

 

While there have been suggestions about state utilities together floating contracts to source coal at competitive prices, Dipu said, “Attempts to canalize all trades through one or two designated agencies may not work well unless there is total alignment in objectives of all consumers concerned... the market participation in different tenders have varied substantially, which reflect traders’ interests, their risk-assessment, and ease of doing business with entities.”

 

India has a power generation capacity of 205,340.26 megawatts (MW), of which 56.7%, or 116,333.38MW, is coal-based. With more than half of the country’s total power generation currently based on coal, the power sector is the major consumer of the fossil fuel, absorbing nearly 78% of total domestic production. India has a known gross resource base of 264,000 mt of coal, the fourth largest in the world, of which proven reserves are around 101,000 mt.

Coal Mining Quagmire in India - My article in the Mining India magazine

Coal mining in deep rut is pulling power sector down

Coal mining has been the fulcrum for power sector in India. One of the most conspicuous trends in energy sector has been the capacity addition in power generation, in which for the first time the expected addition from private sector alone would cross 10,000 MW in FY 2012. This also when simultaneously the average plant load factor for coal based power plants has taken a dip to about 64% and is also expected to fall further. The major reason for lower than expected capacity utilization has been fuel issues. Coal production from domestic sources saw stagnation while generation saw capacity addition; imports grew but prices and foreign exchange dynamics kept affordability distant. Sector also saw little on reforms and distribution companies’ financial losses and apprehensions about their viability kept finances for them as well as for generation projects getting tough to secure.  

The three biggest challenges for power sector in India are – fuel availability & pricing; cost of supply and tariff gap; and open access implementation. These put together have also led to issues in financial closure. Coal from domestic sources look getting scarce as CIL is unable to produce at the expected growth rate while the political controversies will cause few coal blocks to be invested in and developed. These notwithstanding, new coal mining projects have had severe challenges of land acquisition, rehabilitation & resettlement, environmental and forest clearances and such others. Imports have been rising and prices of coal although on a downslide for now do not make imports an affordable option. The story on the fuel side looks gloomy. On the cost of supply and tariff gap, efforts need to be made in the right earnest to have cost reflective tariffs. Several aggressively bid case 1 bids have now been referred to courts on fuel cost issues. It is obvious that unsustainable tariffs would not see several projects take off. Interestingly, there are however pockets of demand that can afford to pay higher tariffs but are not connected with supply sources due to financially broke distribution companies and their claims to open access charges. These have muffled the growth opportunities for the power sector.  

The one most critical part of the value chain that determines affordability of power, which conforms to the adage that mitigation against default risks is low tariff, is availability of low cost domestic coal. The government can open up the coal mining sector for independent mining companies, including foreign majors, with expertize, experience and technology to help India exploit its large untapped resources. Greater the supplies from domestic sources and lower the dependence on one monopolistic producer, the prices of coal would be determined by economic equilibrium and can remain lower. However, till such time that market stabilizes, regulatory supervision of such mining ventures and price fixation of coal produced can be done. That can certainly be the biggest boost the power sector can get from the government.

Not that this has not been comprehended fully, and as a result the Coal Mines Nationalization (Amendment) Bill 2000 was presented in the Indian parliament. However, pending it still is in the upper house for the lack of political accountability and willingness to move towards reforms.

Coal block allocation has been in the news

Much has been investigated and written about the levels of scam in coal mining sector, including the astronomical numbers of notional losses to the government for not following the auction route for coal block allocation. Resource ownership is a key competitive advantage for businesses now since raw materials occupy significant proportion of costs in the energy and metals manufacturing value chain. Given this, the rush to capture resource assets is an obvious conclusion. The trend, however, is more prominent in India and China while globally, there are firms still focused largely on their core competencies. Looking at the regulatory and statutory frameworks in India and economics of energy generation and manufacturing, the trend in India is unlikely to change in future as well. The much sought after coal resources were allocated through a screening committee mechanism that evaluated applications on parameters like - status (stage) level of progress and state of preparedness of the projects; net worth of the applicant company (or in the case of a new SP/JV, the net worth of their principals); production capacity as proposed in the application; maximum recoverable reserve as proposed in the application; date of commissioning of captive mine as proposed in the application; date of completion of detailed exploration (in respect of unexplored blocks only) as proposed in the application; technical experience (in terms of existing capacities in coal/lignite mining and specified end use); recommendation of the administrative ministry concerned; recommendation of the State Government concerned (i.e. where the captive block is located); and track record and financial strength of the company. This method of evaluation can be as good as the implementation. And when the number of application reached 750 for 16 blocks for power generation in 2006 round, the method was stretched beyond its normal application. Hence, the questions are raised and lack of objectivity and transparency has led to allegations of corruption.

Notwithstanding the legal repercussions, It is critical for the captive blocks to be developed efficiently so that resources are made available for power generation. Regulatory reviews of cost of mining can be a way to ensure consumers are protected and the developer is adequately compensated. The current proposal by the Ministries of Power and Coal to allow continuation of captive coal block allocation only when the attached power project sells power through competitive bidding may have its own limitation. Forcing the developers to bid for tariff based competitive bids may not always achieve these objectives of consumer protection as well as incentivization of project development as the competition is typically market determined and discovered tariffs may still have super profits or unviability, both unwarranted. However, liberalizing the sector such that there is regulated competition in coal mining would do good to the sector.

Coal linkages have been challenged too

Coal sector in India suffers structural deficiencies due to statutory restrictions, resulting in rationing for coal produced as well as for coal resources. These deficiencies have aggravated in the times of severe shortage. Large number of applications received for relatively smaller number of coal blocks and Standing Linkage Committee issuing letters of assurance for quantities that far exceed the coal likely to be produced by CIL are manifestations of this. In such circumstances, process quality and efficiency of its implementation open themselves for scrutiny, and quite rightly so.

Processes based on merit are as good as the implementation. With growing number of applicants for linkages, the process has been evolving too to take care of emerging challenges, However, in any merit evaluation, subjectivity cannot be eliminated altogether, which is where the issues of equity and transparency arise. Linkages have two-fold story - one of getting the letters of assurance (LOA) from the standing linkage committee (SLC) that equals an in-principle approval, followed by the other of getting the LOA converted to Fuel Supply Agreement (FSA) with the CIL subsidiaries. Both follow a set of instructions that prescribe for the degree of progress on the end use plant with certain identifiable milestones. While for issue of LOA, the evaluation on the parameters rate the applications on points, which have evolved in the last couple of years, meeting all the milestones on schedule is essential for LOA to convert to FSA.

Evaluation of applications for LOA depends upon scrutiny similar to that for coal block allocation, where agencies at the centre and at the states are involved and their recommendations are considered for the purpose.

Mine Developer cum Operator (MDO) selection are next in the queue

Equally important observations are with respect to mine development through contract mining. Turnkey project commissioning through Mine developer cum operator (MDO) route can be an effective way for participation of private and foreign contract miners. Standardizing documents for MDO selection may serve the purpose of enhancing efficiency and transparency, as has been the result in tariff based competitive bidding in power sector. However, questions would remain pertaining to scope of work for MDO wherein there could be variations in land acquisition, rehabilitation & resettlement, clearances & approvals, capital expenses for immovable assets, and such others.

State government and some private captive coal block owners have preferred the MDO route for fine development and there are various business models, from outsourcing to joint ventures, in view of suitability from investment objectives and risk sharing principles. Coal mining being a unique proposition at each location the practice has been to devise appropriate contractual relationships. However, in matured mining industries of Australia and elsewhere, the contract miners' roles and responsibilities have evolved and hence, standardized contracts are being used. 

In India, due to captive coal block allocation, the end users such as the power generation companies or steel manufacturers have been awarded coal blocks and many do not have any experience in coal mine development. State owned power utilities have lacked financial resources as well for the development, where problem has been compounded for them when the coal blocks they have been given are outside of their own states.

MDO selections in several such cases have also not been transparent. These are the challenges faced in a competitive scenario but where the competition is lop-sided, the market participants in the contract mining tenders themselves have not much experience or expertize and hence, the processes of selection have tended to be liberal on technical qualification criteria. Often, the financial criteria have been formulated with no specific needs or objectives in mind. As a result, the awards have been questioned and are likely to be questioned in times to come. 

Conclusion

The more labyrinthine the legislations, regulations and rules become, the greater are the chances of hoarding, profiteering, corruption, unlawful activities and such other manifestations of rut. Simplicity and ease of compliance reflects in the functions of an industry. From the legislative and regulatory points of views, it will be better for India to adopt openness in coal mining business and let there be competition in production and supplies. There needs to be a wide range of market participation – from independent miners to contractors, from producers to traders, from logistics service providers to financiers, from risk managers to speculators – all with regulatory supervision so the excesses of open markets are not allowed to distort the market the other way. Vested interests cannot be checked by creating layers after layers of regulations, under multiple agencies at central and state levels.  Repeal of the outlived-its-shelf-life Coal mines Nationalization Act can be a good beginning. 

Power sector challenges in India - Interviewed for Powerline Magazine

What have been the key trends and developments in the sector in the past one year? How has its performance been as compared to the previous year?

One of the most conspicuous trends has been the capacity addition in power generation sector, in which for the first time the expected addition from private sector alone would cross 10,000 MW. This also when simultaneously the average plant load factor for coal based power plants has taken a dip to about 64% and is also expected to fall further. The major reason for lower than expected capacity utilization has been fuel issues. Coal production from domestic sources saw stagnation while generation saw capacity addition; imports grew but prices and foreign exchange dynamics kept affordability distant. Sector also saw little on reforms and distribution companies’ financial losses and apprehensions about their viability kept finances for them as well as for generation projects getting tough to secure.  


The sector has been facing a number of challenges and constraints. Which are the three biggestbottlenecks to growth?

The three biggest challenges are – fuel availability & pricing; cost of supply and tariff gap; and open access implementation. These put together have also led to issues in financial closure. Coal from domestic sources look getting scarce as CIL is unable to produce at the expected growth rate while the political controversies will cause few coal blocks to be invested in and developed. These notwithstanding, new coal mining projects have had severe challenges of land acquisition, rehabilitation & resettlement, environmental and forest clearances and such others. Imports have been rising and prices of coal although on a downslide for now do not make imports anaffordable option. The story on the fuel side looks gloomy. On the cost of supply and tariff gap, efforts need to be made in the right earnest to have cost reflective tariffs. Several aggressively bid case 1 bids have now been referred to courts on fuel cost issues. It is obvious that unsustainable tariffs would not see several projects take off. Interestingly, there are however pockets of demand that can afford to pay higher tariffs but are not connected with supply sources due to financially broke distribution companies and their claims to open access charges. These have muffled the growth opportunities for the power sector.  


What, according to you, is the single most important thing the government should do to revive the sector and build investor confidence?

The one most critical part of the value chain that determines affordability of power, which conforms to the adage that mitigation against default risks is low tariff, is availability of low cost domestic coal. The government can open up the coal mining sector for independent mining companies, including foreign majors, with expertize, experience and technology to help India exploit its large untapped resources. Greater the supplies from domestic sources and lower the dependence on one monopolistic producer, the prices of coal would be determined by economic equilibrium and can remain lower. However, till such time that market stabilizes, regulatory supervision of such mining ventures and price fixation of coal produced can be done. That can certainly be the biggest boost the power sector can get from thegovernment.

Govt working on template for CIL to outsource coal mining - Quoted in the Mint

The government is working on a “watertight” template that would enable state-owned Coal India Ltd (CIL) to outsource mining through tenders, said a person familiar with the development. The move is aimed at avoiding controversies such as the one over the allocation of coal leases.

A committee has been set up by the government, with representation from the ministries of finance, coal and mines, and the state-owned miner to help CIL outsource coal mining to mine developers and operators (MDOs), while ownership stays with the company.

 

“It has been understood that CIL doesn’t have the capacity to mine all the blocks that it has,” said the person cited above on condition of anonymity. “Also, awarding blocks hasn’t been successful, leaving the only option of outsourcing the coal mining for the blocks. To avoid any kind of problem in the process, a template is required for awarding such tenders.”

 

The allocation, rather than auction, of coal mines has become a matter of controversy after a report by the Comptroller and Auditor General of India (CAG) released last month said the giveaways had resulted in notional losses of Rs.1.86 trillion to the exchequer. CIL, for its part, hasn’t been able to cope with the growing demand for coal to generate power, causing dependence on imports to increase.

 

CIL mined only 431 million tonnes (mt) in 2010-11 against a target of 461.5 mt because of stalled projects. While it also failed to meet its target of 440 mt in 2011-12 and mined 435.84 mt, the miner has set a target of producing 468.74 mt in 2012-13 amid land and environment-related hurdles.

By outsourcing mining, CIL will gain access to high-end technology for underground mining through partnerships with global miners.

 

“Such a watertight template would leave little to contention and will even make foreign miners comfortable to participate in such tenders, given the perception of the sector today,” the person cited above added.

 

A case in point is state-owned NTPC Ltd, which has courted controversy after the MDO contract for its Pakri Barwadih mine was given to Thiess Minecs India Pvt. Ltd. Thiess Minecs is 90% owned by Thiess (Mauritius) Pty Ltd and 10% by Minecs Centre Pvt. Ltd. Former coal minister Santosh Bagrodia’s brother owns Cuprum Bagrodia Ltd, which in turn is the owner of Minecs Centre.

“The MDO was awarded through an international competitive bid,” said a senior NTPC executive, denying any wrongdoing.

 

Even the 12th Five-Year Plan (2012-17) paper on energy states: “Indian coal companies must accept the challenge of transplanting the international best practices with more effective management.”

It goes on to recommend: “CIL can have joint ventures or formulate PPP (public-private partnership) projects with appropriate terms with renowned international players to shore up the underground production level in 12th and 13th (2017-22) Plans.” S. Narsing Rao, chairman of CIL, confirmed the development and said, “The idea is to make the process (of engaging the private sector) more transparent and competitive, and learn from the best practices in other sectors. This could also help us attract more global companies.”

 

He added, “We are discussing with Union ministries, based on standing committee guidance, how experiences of public-private partnership models in other sectors such as construction of airports and national highways could be followed in CIL.”

 

The next meeting of the recently set up committee is expected shortly.

 

“We are in the process of identifying some 15-16 coal blocks and will be developing them in partnership with private contractors so that production could start faster at these mines,” Rao had said in a recent interview to Mint. “We also intend to use private contractors in a bigger way in our underground mines—a blueprint for expanding their role in extracting coal from underground mines will be ready in a couple of months.”

 

The move to seek bids for mining comes at a time when the Central Bureau of Investigation is probing alleged irregularities in the allocation and utilization of coalfields. Separately, an inter-ministerial group is looking into the allocations and recommending the cancellation of some coal block allocations.

 

Mint had reported on 18 March 2008 about significant irregularities in the Union government’s award of coal blocks to private sector firms.

 

“It will help in avoiding controversy. Turnkey project commissioning through MDO route can be an effective way for participation of private and foreign contract miners,” said Dipesh Dipu, a partner at Jenissi Management Consultants, a Hyderabad-based energy and resources-focused consulting firm. “Standardizing documents for MDO selection may serve the purpose of enhancing efficiency and transparency, as has been the result in tariff based competitive bidding in power sector.”

 

CIL had earlier flirted with the idea of reviving its abandoned mines by allowing foreign firms to start mining coal in India through joint ventures with CIL, with bidders to be ranked on the basis of their assessment of the revenue potential and the cost of producing coal from these mines. The idea failed to take off.

 

Coal demand in India is expected to grow from 649 million tonnes per annum (mtpa) now to 730 mtpa in 2016-17. Of this, the projected local availability is 550 mtpa.

Firms follow unfair practices to source coal from Coal India - Quoted in the Mint

The government, already under fire for irregularities in the allotment of captive coal blocks, may encounter more trouble, with two consultants and a government official admitting that there have also been significant irregularities in assuring supply of coal to private sector power projects.

Such supply—termed a coal linkage—pertains to only those projects that do not have a captive coal block and instead need to source coal commercially from state-owned Coal India Ltd (CIL)—the only company allowed to undertake commercial mining of the commodity in the country.

 

To take advantage of the discounted price offered by CIL for such assured supply, the developers of power plants allegedly made false claims regarding the order of equipment, financial status, land acquisition and water supply.

 

Amol Kotwal, associate director, energy and power systems practice, for South Asia and the Middle East at Frost and Sullivan, said: “Companies followed unfair practices for securing coal linkage for the proposed power plant projects. In a few case, companies which were new entrants in the power sector and not having requisite financial strength, managed to secure the coal linkages in spite of competition from some of the power sector biggies.”

 

CIL has assured supply to 172 power projects through so-called LoAs or letters of assurance. The generating capacity involved is 108,878 megawatts (MW). The number doesn’t include assurances for projects commissioned before March 2009.

 

To be sure, CIL has been unable to meet its commitments.

 

Several firms assured of coal supply claimed to have placed orders for power generation equipment with manufacturers to strengthen their candidature—only, these were not really orders.

“There were ways and means of securing coal linkage for the plant either through false equipment orders, extraordinary clout or political connections and doing away with scrutinizing or verification process of documents of such companies by concerned authorities,” Kotwal added.

 

An engineering, procurement and construction (EPC) contract works like this: the buyer identifies a supplier and awards it the contract, but this doesn’t become an order till the former pays an advance and sets a delivery date. Mint reported on 7 September that some companies had adopted a similar modus operandi to corner captive coal blocks.

 

Mint couldn’t immediately identify companies that indulged in such practices in a bid to strengthen their case.

 

Earlier, power projects were directly awarded coal linkages. However, scarce resources and increasing applicants prompted the government to introduce a system of awarding letters of assurance that required approval by standing linkage committee (SLC), a panel headed by a representative of the coal ministry and comprising representatives from the planning commission, ministries of power, shipping and railways, central electricity authority, central mine planning and design institute and CIL. These letters were converted to linkages after a project completed its financial closure.

Later, these linkages were converted into fuel supply agreements (FSAs), a legally binding document that requires CIL to supply the quantum of coal agreed upon.

 

This conversion is usually done after the project meets certain milestones in two years.

A senior government official familiar with the matter, who spoke on condition of anonymity, admitted that there were several irregularities in the process. “It’s true that many have cornered coal linkages on the basis of false information.”

 

India faces a shortage of coal and CIL mined only 431 million tonnes (mt) in 2010-11 against a target of 461.5 mt. Coal demand in India is expected to grow from 649 million tonne per annum (mtpa) now to 730 mtpa in 2016-17. The availability of local coal is estimated at 550 mt in 2016-17.

 

The process of selecting companies that were assured coal supply was as subjective as the process for allotting captive coal blocks and also involved factoring in recommendations from central ministries and state governments. Later, a point system was introduced for linkages for the 12th Plan (2012-17) projects.

 

States were happy to provide letters assuring water supply (a key requirement) to power plant developers, which signed in-principle agreements to set up projects.

 

“These anomalies have taken place. If all these projects come up, all the water in the Ganges would fall short. Similarly, lots of fake EPC contracts were awarded. Later on, some who got the linkages, substituted with proper EPC orders. Similarly, false financial claims were made. It was the only way to get a linkage. The system was reduced to a parody,” said the head of a Delhi-based power consulting firm who asked not to be identified.

 

A retired government official associated with the process, who didn’t want to be identified, said the process was transparent. “Whoever applied for coal linkages was awarded them, provided they met the conditions.”

 

An analyst disagreed. “Processes based on merit are as good as the implementation. With growing number of applicants for linkages, the process has been evolving to take care of emerging challenges. However, in any merit evaluation, subjectivity cannot be eliminated altogether, which is where the issues of equity and transparency arise,” said Dipesh Dipu, partner at Jenissi Management Consultants, a Hyderabad-based energy and resources-focused consulting firm.

Power ministry wants coal block allottees to sign PPAs - Quoted in the Mint

The power ministry asked its coal counterpart in March to direct allottees of captive coal blocks to sign long-term power purchase agreements (PPAs) or risk cancellation of the blocks.

Many of these allottees, such as Jindal Power Ltd (JPL) owned by Congress party lawmaker Naveen Jindal, have been generating strong cash flows by utilizing low-cost coal from captive mines to generate electricity that they sold in the merchant power market.

 

Merchant power is electricity sold as a commodity at market price, not to pre-identified customers under long-term agreements. There are no rules to prohibit JPL and other companies that were awarded coalfields from selling power generated using the fuel in the merchant power market.

“We want the coal ministry to direct the companies having captive coal blocks to enter into PPAs,” said a senior power ministry official on condition of anonymity. “In order to do so, we had written to them around a few months back making it very clear that they should ask the developers to participate in bids called by state distribution companies. By doing so, a competitive tariff would emerge that would help the consumer.”

 

The power ministry communication came before the Comptroller and Auditor General of India (CAG) report last month on alleged irregularities in coal block allocations. A second power ministry official said that the move wasn’t made in anticipation of the CAG report.

 

The CAG report estimated that the coal block giveaways had cost the exchequer Rs.1.86 trillion in notional losses and gains for private coal block allottees such as Jindal Steel and Power Ltd (JSPL), Essar Power Ltd, Adani Power Ltd, JSW Steel Ltd, Monnet Ispat and Energy Ltd, Tata Steel Ltd, CESC Ltd, GVK Power and Infrastructure Ltd, ArcelorMittal India Ltd, GMR Energy Ltd and Lanco Group.

 

An inter-ministerial group (IMG) is looking into the allocations and whether they should be cancelled, alongside a probe by the Central Bureau of Investigation after the CAG report triggered political uproar, demands for the resignation of Prime Minister Manmohan Singh, calls for the cancellation of the coal block allotments and an independent inquiry.

 

“Our stand is very clear,” the first official cited above said. “This is the only way that this scarce resource should be utilized. If the firms that have captive coal blocks allocated to them don’t do so, their blocks should be cancelled. This has always been our demand and stand.”

 

The Business Standard newspaper reported on Wednesday that the government is “planning a clause to make it mandatory for captive miners to take part in tariff-based bidding for power”.

 

“We have insisted that allottees should sign compulsory long-term PPAs if they want to retain the blocks,” said a senior functionary in the power ministry, also on condition of anonymity. “We have insisted that allottees should sign compulsory long-term PPAs if they want to retain the blocks. This is also to ensure tariff competitiveness. We did not want any of the captive block allottees to sell power in the merchant market, because the captive coal blocks are considered to be a national asset and the coal should be used to produce electricity for the citizens.”

 

Between June 2004 and 31 March 2011, the coal ministry allotted 195 coal blocks on a nomination basis to various firms for captive use. Of these, 115 were awarded to companies developing power projects. Of the 57 blocks mentioned by CAG in its report, 22 were meant for the generation of power.

 

“The power ministry is contemplating that long-term PPAs should be signed by the captive coal block allottees,” said Pramod Deo, chairman of the Central Electricity Regulatory Commission, the power sector regulator.

 

IMG is likely to submit its final report by 15 September, after which the government will take a call on scrapping the allocations.

 

“It is being discussed between the ministries,” said a person familiar with the development. “No final decision has been taken yet.”

 

Mint had reported on 18 March 2008 that there were significant irregularities in the Union government’s award of mining rights for 15 coal blocks with reserves worth around Rs.5.37 trillion to 31 companies.

 

An 11 September report by UBS Investment Research said: “Cancellation of allocation in some blocks is a realistic possibility, especially on the ones where not much work has happened. Even for the coal mines where awardees have invested significant capital, it is possible that there is some negative fallout.”

 

JSPL, Adani Power and Lanco have “significant exposure to merchant power”, UBS had said in a report dated 9 March.

 

A JSPL spokesperson didn’t respond till press time.

 

K. Rajagopal, chief executive officer (thermal) at Lanco Infratech Ltd, said, “As far as coal block allocations are concerned, they were allotted according to terms and conditions of those times. Today, they are asking to tie up for power. While a capacity of around 30,000 megawatts is under construction, it is only partly tied up as no bids are coming from the states. While on the one hand the government wants the developers to tie up on power, on the other there are no bids coming from the states. It is for the government to take a view.”

 

An Adani Group spokesperson said his organization doesn’t have any captive coal blocks allocated to it as the one that had been allotted was not given environmental clearance. “We have signed PPAs for all plants that we are implementing,” the spokesperson added.

 

Dipesh Dipu, partner at Jenissi Management Consultants, a Hyderabad-based energy and resources-focused consulting firm, said, “It is critical for the captive blocks to be developed efficiently so that resources are made available for power generation. Regulatory reviews of cost of mining can be a way to ensure consumers are protected and the developer is adequately compensated. Forcing the developers to bid for tariff-based competitive bids may not always achieve these objectives. However, liberalizing the sector such that there is regulated competition in coal mining would do good to the sector.”

JSPL cornered 6% of coal reserves doled out - Quoted in the Mint

Businessman Naveen Jindal, a lawmaker who belongs to the Congress, is not new to controversy or even taking a stance independent of his party. So much so that he attended a media conclave in New Delhi a few years ago at the risk of angering the Congress leadership, which had boycotted the event, in an assertion of individuality.

The youngest scion of the $12 billion OP Jindal Group, who is also among the highest paid chief executives in India, finds himself in a somewhat similar situation today. His Jindal Steel and Power Ltd (JSPL) says it has won all its coal blocks purely on merit and lobbying with the government had nothing to do with it, separating Jindal the businessman from Jindal the politician.

 

Between 1996 and 2009, JSPL and its unit Jindal Power Ltd (JPL) were allotted nine coal fields in the mineral-rich states of Orissa, Chhattisgarh, Madhya Pradesh and Jharkhand, translating into reserves of 2.59 billion tonnes, or 5.97% of the 43.35 billion tonnes doled out by the Centre. Since 1993, 195 coal leases were handed to 289 companies (several in consortium).

 

The coal blocks allocated to JSPL on its own and as part of a partnership were Gare Palma IV/1 (1996), Gare Palma IV/2 (1998), Gare Palma IV/3 (1998), Gare Palma IV/6 (2006) in Chhattisgarh, Utkal B-I (2003), Ramchandi Promotional (2009), Urtan North (2009) in Orissa, and Jitpur (2007) and Amarkonda Murgadangal (2008) in Jharkhand.

 

The Central Bureau of Investigation (CBI) is probing alleged irregularities in the allocation and utilization of coal fields after the Comptroller and Auditor General (CAG) of India alleged in a report last month that irregularities in the allocation of coal leases caused a notional loss of Rs.1.86 trillion to the exchequer.

 

Separately, an inter-ministerial group is looking into the allocations and whether they should be cancelled.

 

In all the uproar over alleged crony capitalism that has followed the release of the CAG report, two-time Congress member of Parliament (MP) Naveen Jindal’s name has figured prominently.

JSPL’s non-producing blocks Jitpur and Amarkonda Murgadangal in Jharkhand, Gare Palma IV/6 in Chhattisgarh and the coal-to-liquid block Ramchandi Promotional in Orissa have been named by the CAG. And the coal ministry has also issued the company a show-cause notice to explain why the Jitpur block allotment shouldn’t be cancelled because of the delays in mining it.

 

A questionnaire sent to Jindal’s email address did not elicit a personal response from him. The company’s spokesperson sent a reply.

 

The Jindal empire rests on three pillars—steel, power and mining. While other steelmakers such as JSW Steel Ltd, Essar Steel and other smaller producers struggled with raw material supplies, JSPL started with a focus on raw material security, enabling it to become one of the lowest cost steel producers in the country.

 

Analysts say that while coal from its captive blocks has been used in producing steel and power, the meddlings and washery rejects have fired its power plants, enabling low-cost power generation for the group’s own consumption and for merchant power sales.

Lobbying for captive coal

In 2009, the government allotted coal fields to Jindal Synfuels Ltd (JSFL), a unit of JSPL, for converting the mineral to liquid fuels, despite Rajya Sabha member Abani Roy having expressed concerns the previous year to Prime Minister Manmohan Singh about such allocations being made without competitive bidding.

 

The project entails an investment of at least $6 billion (around Rs.33,300 crore today). Jindal, chairman and managing director of JSPL, lobbied for the allocation of three coal fields in Orissa to three applicants for coal-to-liquid projects rather than assigning them to any one company.

He had also lobbied for allocation of the Urtan block, as seen in a copy of a letter he wrote in 2008 to the Prime Minister’s Office. To be sure, these letters were written in his private capacity.

JSPL denied any wrongdoing.

 

“You would have noticed that the first four blocks as mentioned...were allocated when he (Naveen Jindal) was not in politics and not even a member of the Parliament...Based on our performance we were subsequently given four more blocks,” a JSPL spokesperson wrote in an emailed response to questions from Mint.

 

“Projects were given to the companies based on their ability to make investments and develop mines. Hence it’s not right to say that there was inequitable distribution of natural resources...He’s an industrialist before he became a member of Parliament. Being a Parliamentarian elected from Kurukshetra (Haryana), he has responsibilities towards his constituency. Similarly, (he has) responsibilities in running a business and at all points of time, efforts are made to avoid conflict of interests.”

 

Jindal, 42, usually dressed in an immaculate suit, studied at Delhi Public School (Mathura Road) and Hansraj College in Delhi University, from where he graduated with a degree in commerce, according to his website. He completed an MBA degree from the University of Texas at Dallas in 1992, it says.

He fought the election from Kurukshetra in 2004 as a Congress candidate and won, a feat he repeated in 2009.

A competitive edge

As chairman and managing director of JSPL, “Naveen’s hard work and business acumen demands applause, for he has transformed the once moderately performing enterprise to the organization that today operates as the world’s largest coal-based sponge iron manufacturing plant in Raigarh, Chhattisgarh, in addition to plants in Jharkhand and Odisha,” says his website www.naveenjindal.com.

 

The availability of coal has helped in that transformation. “For any ore-based manufacturing company, its raw material is mineral,” said Anil Razdan, former power secretary and a retired Haryana cadre Indian administrative service (IAS) officer. “Its future depends on the availability of mineral. Any such company would like to have to be present across the value chain. This may not be peculiar in the case of JSPL.”

 

With three coal mines—Gare Palma IV/1, Gare Palma IV/2 and Gare Palma IV/3—under production, JSPL has managed to keep costs down and has remained a low-debt company. According to a presentation on its website, JSPL posted a compounded annual growth of 40% in revenue from 2003 to 2012. Net profit grew at a compounded annual growth rate of 45% in the same period.

In FY12, JSPL made a net profit of Rs.4,002 crore, up from Rs.3,804 crore a year ago. Net turnover was at Rs.18,209 crore, up from Rs.13,112 crore in the previous year.

 

“JSPL is one of the lowest cost steel producers in India. Other than the fact that they have captive natural resources, the company is innovative in deploying new technology for both processing cost and high-end products such as wide-width plates and rails,” said Chirag Shah, director of research at Barclays Capital.

 

JSPL produced 4.7 million tonnes (mt) of finished and semi steel products in 2011-12, up from the previous year’s 3.85 mt. As for power, the company produced 4,634 million kilowatt hour (kWh) in 2011-12 as against 3,420 million kWh a year earlier.

 

“Resource ownership is a key competitive advantage for businesses now since raw materials occupy significant proportion of costs in the energy and metals manufacturing value chain. Given this, the rush to capture resource assets is an obvious conclusion. The trend, however, is more prominent in India and China,” said Dipesh Dipu, partner at Jenissi Management Consultants, a Hyderabad-based energy and resources-focused consulting firm.

Courting controversy

Naveen Jindal has done better than his brother Sajjan Jindal when it comes to finding resources.

The siblings are not new to controversy. JSW Steel, promoted by Sajjan Jindal, was named by the Karnataka anti-corruption ombudsman Lokayukta in July 2011 for their involvement in illegally mined iron ore controversy in the southern state.

 

JPL was in the news when the environment ministry asked the Chhattisgarh state government to take action against the company for starting construction of a 2,400 megawatts (MW) plant—comprising four units of 600MW each—at a site that had received environmental clearance for only a 1,000MW project. It later allowed JPL to go ahead with preliminary studies for environmental clearance.

JSPL also featured in the controversy surrounding India’s first so-called ultra-mega power project, the 4,000MW plant at Sasan, Madhya Pradesh. The power project was initially won by a combine of Hyderabad-based Lanco Group and Globeleq Singapore Pte Ltd, a subsidiary of Houston based Globeleq.

 

The controversy began when Globeleq Singapore’s stake in the Sasan project was acquired by Lanco by teaming up with JSPL. The contract was scrapped later by the government.

 

“Naveen is being unnecessarily targeted,” a senior JSPL executive said on condition of anonymity. “Even if he lobbied for coal blocks which every businessman does, why were those blocks awarded?”

JSPL has also ventured overseas to secure natural resources.

 

It acquired Canadian miner CIC Energy Corp. for $115 million (around Rs.644 crore) last week in a transaction that will give it access to 6 billion tonnes of coal reserves in Botswana. This is in addition to JSPL’s mines in South Africa, Indonesia and Mozambique.

Troubling times

But overseas mining comes with its own particular problems. The gestation period is long and managing the nuances of local regulations and governance can be difficult.

 

The CIC Energy deal followed the termination of a $2.1 billion Bolivian mining and steel venture in July because of the “non-investor-friendly attitude” of the local government. According to a report by news wire agency PTI, “two employees of JSPL were arrested and later released in Bolivia.” The report said the company’s property and equipment in Porto Suarez, where the project was supposed to come up, was confiscated and a criminal case filed against company employees.

 

JSPL has also diversified into oil and gas sector and internationally with operations in Africa, Bolivia, Oman, Australia, Mongolia, Indonesia and Georgia. But Jindal’s current troubles are tied to coal. So are those of other coal block allottees such as Essar Power Ltd, Adani Power Ltd, JSW Steel, Monnet Ispat and Energy Ltd, Tata Steel Ltd, Cesc Ltd, GVK Power and Infrastructure Ltd, ArcelorMittal India Ltd, GMR Energy Ltd and Lanco Group.

 

Between June 2004 and 31 March 2011, the coal ministry allocated 194 coal blocks on a nomination basis to various firms for captive use.

 

To be sure, lobbying by itself is no crime.

 

“Lobbying is okay as long as he (Naveen Jindal) is not in any parliamentary committee that relates to business and economy,” said Shriram Subramanian, founder and managing director of InGovern Research Services, a consultancy and research firm on corporate governance.

 

In Parliament, Jindal is a member of committee of privileges (Lok Sabha), standing committee on home affairs, consultative committee of ministry of defence and a special invitee in consultative committee of ministry of civil aviation.

 

The three states where his projects are located— Jharkhand, Chhattisgarh and Orissa—are known for one other thing besides their mineral wealth: Maoist unrest. That’s something the home ministry is grappling with.

On Record – Dipesh Dipu , Energy & Resources Expert - My interview in the IIM Indore Magazine

INTRODUCTION:

Dipesh Dipu, an Energy and Resources expert is the founder and partner at Jenissi Management Consultants. He is a mining engineer and did his post graduate in finance and management. He was awarded the young mining engineer in the year 2007 by Mining Engineer’s assosiation of India.He is also on the editorial board of Mining Engineering Journal of Mining Engineers’ Association of India. Earlier he was working with PwC as a principal consultant and later moved as a CEO of Nava Bharat Ventures in the year 2010. He joined Deloitte Touche Tohmatsu India Pvt. Ltd as a Director for Energy and Resource consulting and worked till August 2012.

A prolific writer, an existing energy expert and one of the most sought after consultant in the field, Dipesh Dipu still believes in continuous improvement and wishes to be the chosen advisor to his clients and a trusted leader for the industry

1. What according to you are the three most important qualities a consultant must have?
DD: The three most important qualities that I believe a consultant must have are – a) ability to listen effectively, since solutions are mostly woven in the problem statement itself, and then to communicate with the client in their own context; b) ability to imagine and think creatively which enables generation of solutions; and c) ability to market and sell ideas, which after all is what makes a consultant click.

2. What according to you was the turning point in your life?
DD: In my professional life, the turning point came when I got an opportunity to blend my undergraduate technical education and post graduate financial education, which helped me realize my passion. I believe that there is a certain passion in each and everyone of us, which is God-gifted, and we do get equipped along the way to follow our passion. The one big differential that can impact our lives is to discover where our passion lies. The opportunity to work in energy and resources consulting was the turning point in my life.

3. We found you an intense writer. How do you manage to balance your time?
DD: Yes, I do write, but I could do more! I plan to write a book in some time, it has been on my mind for a while. So, I must admit that I have been little off-balance. But writing is again a passion, and sometimes by effectively managing my time and maybe delegating some work to my trusted colleagues, I can pursue writing.

4. Looking back at your graduation, what is the one thing that you find the most useful and what is it that you find indispensable from B School?
DD: My engineering education gave me the analytical foundation and equipped me to have a realistic look at the world around. My business education was also firmly grounded in the practical world; however, it shifted my perspective from being focused on technology to focus on its utility. B-school education probably sets us up for the ‘bigger picture’ perspective.

5. Can you give us a quick overview of the energy consulting industry?
DD: Energy sector consulting mostly focuses on oil & gas, power &fuels; each having niche areas within themselves such as power generation, transmission, distribution, renewables, equipment, regulations, governance, financing, transactions and several others. The typical consulting works involve strategy formulation, performance improvement, human resources advisory, bid advisory, mergers & acquisitions, business structuring, and much more including outsourcing.

6. If possible, please describe the kind of work that a typical consultant in the energy sector does.
DD: There are several types of consultants, so the kind of work they do depends on their scope. Strategy firms have consultants focus on entry and growth strategies for the market participants, while there are firms focused on transformation work, where consultants may be engaged in business processes mapping, evaluation, reengineering and strategies around performance improvement through technology intervention and through outsourcing. There are others who focus on transactions ranging from bid advisory support, financial modeling, valuations, due diligences and assisting in mergers & acquisitions. There are a few others who typically work only on technical aspects such as project design, engineering, quality assurance and implementation monitoring.

7. What do you feel is the current trend in the energy sector? Is renewable energy going to act as a mainstream energy source any time soon?
DD: In India, coal is likely to remain the mainstay for the foreseeable future. The contributions from renewable sources are envisaged to rise substantially from their current levels, but their proportionate size in the portfolio is likely to remain low for now. However, the potential does exist, as several studies indicate that a large portion of our energy needs can be met through renewable sources.Currently,there are hurdles with respect to their affordability, quality of supply and gird connectivity. Regulation wise we are moving towards greater supplies from renewable sources through mechanisms like Renewable Purchase Obligations (RPOs).

8. With a growing number of start-ups and ventures in the energy market (some of the recent ones include – Kiran Energy Solar Power, ReNew Power Ventures) – Do you think the market is actually ready for more such ventures?
DD: Well, energy sector projects tend to be capital intensive and many have economies of scale. However, in the beginning, they all start small. The Indian market is big, and due to its state-wise divides, we may see a larger number of regional players in India. In the traditional coal based power generation sector, we are witnessing stressed firms and fuel constraints indicating potential consolidation.

9. With the energy sector in India still trying to meet the demand, what are the points that
i. The industry needs to keep in mind
ii. Any student pursuing an MBA should consider if he/she wants to get into the field of energy consulting?
DD: The industry needs to be realistic in expectations – from regulatory and commercial points of views. Pace of reforms in India is unpredictable, and hence bets on them can be unsafe. Also, when the competition gets tough, industry players should not lose sight of the basics and become extremely aggressive. The current financial duress can be traced to several over the top aggressiveness by many market players in the private sector.
New consultants in the sector would have to read a lot of research work and follow the trends minutely since the sector has many nuances. Clients always expect the consultants to know more than they do themselves.
 
10. As an energy consultant, which are the 3 exciting growth opportunities/emerging trends in this sector in the next 5 years?
DD: I believe that performance improvement is going to be critical in energy sector – especially through technology intervention. Business process management and enterprise resource optimization are likely to be big opportunities for consulting in India. Project management is another, where clients would need assistance in implementation of large capital projects for improved cost structure, schedule, and scope control. India has had relatively modest success in project implementation as the work requires specialists and consultants to engage with clients and help them in implementation. Significant opportunities existin financing and also in the renewables sector as it develops.