FMC bans futures trading in electricity
Press Trust of India / New Delhi August 27, 2010, 15:01 IST

Commodity market regulator Forward Markets Commission (FMC) has banned futures trading in electricity owing to poor volumes of trade.

"The ban on electricity futures has been made effective from August 23 for an indefinite period," a senior official with the Consumer Affairs Ministry, which overseas the functioning of FMC, told PTI.

At present, MCX is the only commodity exchange which is offering monthly contracts in electricity futures. However, the ban would not extend to spot trading in electricity, which is being offered by Indian Energy Exchange and Power Exchange of India Ltd, the official said.

The government has taken the decision to ban electricity futures after considering views of the Power Ministry, FMC and the Consumer Affairs Ministry.

The Power Ministry has been objecting futures trade in electricity since its launch in 2006, the official said, adding that FMC gave its ascent for ban recently after seeing poor trade volumes.

"The electricity contracts did not attract significant trading interest. Accordingly, no futures contracts would be permitted to be traded in electricity futures for the time being," according the FMC directive issued to the exchanges.

FMC, which regulates 23 commodity exchanges, has said that it would review the ban at a suitable time, with feedback from the ministry and market players.

The country's total power capacity is over 1.62 lakh mega watts and the average shortage is roughly about 13-14 per cent.
Natural gas availability in India to increase 52% by 2013-14
Press Trust of India / New Delhi August 26, 2010, 15:31 IST

Availability of natural gas, including imported LNG, is likely to increase in the country by over 52 per cent to 271.92 million cubic meters a day by 2013-14, Oil Minister Murli Deora said today.

"At present, total availability of natural gas in India, including liquedified natural gas (LNG), is around 167.80 mmcmd, which is projected to be around 202.97 mmcmd, 256.6 mmcmd and 271.92 mmcmd during 2011-12, 2012-13 and 2013-14 respectively," Deora told the Lok Sabha here.

Most of the increase would come when Reliance Industries hikes output from its eastern offshore KG-D6 fields to over 80 mmscmd and the commissioning of LNG import terminal at Kochi in Kerala.

Kochi terminal would import 2.5 million tons of LNG a year and shipments to the currently operational Dahej and Hazira facilities in Gujarat are also going to rise.

Deora said power sector's current requirement of gas is around 77.44 mmcmd and it would need another 15.59 mmcmd in 2011-12 and 60 mmcmd each in 2012-13 and 2014.

Similarly, gas demand in fertiliser units is 39.61 mmcmd, which will rise by 3.43 mmcmd in 2011-12, 13.44 mmcmd in 2012-13 and 46.78 mmcmd in 2013-14.

Deora said that according to the Power Ministry, "the total requirement of proposed power plants, whose expected date of commissioning has yet to be certified by Central Electricity Authority (CEA), is around 600 mmcmd. However, only 60 mmcmd has been included in each of the years 2012-13 and 2013-14."

He said most of the domestically produced gas is priced at $4.2 per million British thermal unit. "LNG imported under long-term agreement is sold at $6.53 per mmBtu while the price of spot cargo presently varies in the range of $5.40-9.4 per mmBtu."

An Empowered Group of Ministers, Deora said, has given fertiliser plants the highest priority in the usage of KG-D6 gas, followed by LPG extraction plants, while gas-based power plants are placed third on the list.

These are followed by city gas distribution (CD) entities for supply to domestic and transport sectors, steel plants, petrochemical units, refineries and captive power plants.

Dora said KG-D6 production is presently around 60 MIMD. Against this the government has made firm allocation of 63.715 MIMD.
What is Nuclear Liability Bill?
Reuters / New Delhi August 25, 2010, 19:44 IST

Here are some questions and answers on the nuclear commerce liability bill.

WHAT IS THE BILL?

A civil nuclear agreement between India and United States in 2008 ended New Delhi's isolation in global atomic commerce and opened up its state-controlled nuclear power market to foreign firms.

But the deal could not be implemented until India put in place a compensation regime that limited the liability of private companies, especially those from the United States, in the event of an industrial accident.

So India framed the Civil Liability for Nuclear Damage Bill 2010, which stipulates the compensation burden on the state-run reactor operator, the liability of the federal government and the responsibility of private suppliers and contractors.

WHY IS THE BILL IMPORTANT?

The bill is important for private companies whose liabilities are not underwritten by their governments, as is done by the governments of Russia and France.

Compensation claims from one nuclear accident could be enough to bankrupt a private company. Firms are reluctant to enter the Indian market despite its size until there is some clarity on compensation in case of an accident.

WHY IS THE BILL CONTROVERSIAL?

Critics say the original draft law pegged the compensation liability of the operator too low -- at about $110 million, almost 23 times less than that of an operator in the United States.

It also did not hold private suppliers liable, opening a debate on whether the government was allowing them to get off easily in case of an accident.

But the main opposition Hindu-nationalist Bharatiya Janata Party agreed to back the bill after the government trebled the compensation liability of the operator and extended the liability to cover private suppliers.

HOW MUCH COMPENSATION IS BEING OFFERED?

Following opposition to the bill's original draft, the government referred it to a special parliamentary panel.

The panel recommended the liability cap for the operator be trebled to $320 million, a suggestion largely backed by the opposition.

State compensation, or the liability burden on the government, has been pegged at the equivalent of 300 million IMF special drawing rights ($450 million) which will be over and above the operator compensation.

The panel has also suggesting extending the liability to cover private suppliers and contractors.

WHICH FIRMS WILL BENEFIT AND AT WHAT COST?

The main beneficiaries could be firms such as US-based General Electric and Westinghouse Electric, a subsidiary of Japan's Toshiba Corp.

They already lag Russian and French firms, which have moved ahead on building reactors in India. While higher compensation would mean firms would have to shell out more for insurance premiums, a formal compensation regime will bring in much-needed policy clarity which will help speed up projects.

Once the bill becomes law, the US firms can start work on building reactors at least two sites identified for them. The first fruits of the India-United States deal could fetch GE and Westinghouse up to $10 billion.

The Confederation of Indian Industry, a business lobby, said the bill would keep away domestic and foreign suppliers because of the stiff provisions against private firms.

"Globally, there is no insurance coverage available for suppliers in the nuclear business," CII wrote in a letter to the government, which was released to the press on Wednesday.

"This will stall the growth of the nuclear manufacturing industry in India and be a setback for the government's plan to indigenise maximum supplies for the foreign technology plants."

ANY OTHER HURDLES REMAIN?

Yes, problems over acquisition of land for nuclear power plants could delay projects. In India, farmland acquisition has highlighted a broader standoff between industry and farmers in a country where two-thirds of the population lives on agriculture.

There have already been several farmers' protests against upcoming nuclear reactors and opposition support for such demonstrations will complicate the land acquisition process.