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Business News/ Industry / Energy/  Japan ready to finance India’s coal-fuelled projects

At a time when multilateral funders such as the World Bank have stopped supporting coal-fuelled power projects, Japanese lending institutions and banks are willing to help India’s quest for providing power to people still living without electricity.

Of India’s installed power generation capacity of 267,637 MW, 61.73%, or 165,235.88 MW, is fuelled by coal.

With the country’s demand for electricity expected to double to 2 trillion units in the next five years, coal-powered generation will remain the mainstay in its energy mix.

Experts say by not lending to coal-fired projects, funders are keeping the poor away from a cheap source of electricity.

“Multilateral funding organizations, such as the World Bank, are averse to funding the coal-fuelled projects," an Indian government official said, requesting anonymity.

The World Bank, in its energy-sector direction paper in 2013, had said it would provide financial support for new coal power generation projects “only in rare circumstances".

Power, coal and renewable energy minister Piyush Goyal said on 15 May that he has held meetings with Japanese institutions and they are keen to finance the coal-based thermal power plants.State-owned NTPC Ltd, has received 25.8 billion yen in loans from the Japan Bank for International Cooperation (JBIC) and the Japan International Cooperation Agency (JICA).

Of the 67,170 crore debt with India’s largest power generation utility, 10.16% is in yen loans.

With an installed capacity of 44,598MW, of which around 87% is fuelled by coal, NTPC is India’s largest power utility. It plans to be a 128,000-MW firm by 2032, of which 72% will be generated by fossil fuels.

This comes in the backdrop of special arrangements for Japanese firms and banks under the Japan Plus initiative, which was started following Prime Minister Narendra Modi’s visit to Japan last year. The initiative refers to a special panel of officials created by Modi to speed up Japanese investments in India.

In response to a query about institutions, such as the World Bank, not financing coal-fuelled projects, Goyal said: “Whatever is required is available. I have so far not found any stress. Even if one or two bodies are not willing to finance, there are others who are very keen to finance. The Japanese, for instance, are very keen to finance coal power. Money is not a problem in our country. There is enough and more available for coal industry."

“I am in touch with the Japanese. They came and met me and they are very keen to finance coal-based thermal power plants. Rather, most other banks are looking at it as a commercial decision. There may be some agencies, who don’t want to finance, but they are entitled to their own lending decisions. We are looking at innovative financing models with an open mind," said Goyal.

The Bharatiya Janata Party (BJP) had made energy security a part of its election campaign for the April-May 2014 general election. After assuming office in May, the BJP-led government launched a scheme aimed at ensuring about eight hours of quality power supply to agricultural consumers and 24-hour electricity to households.

While a JBIC spokesperson declined to comment, Shinya Ejima, chief representative, JICA India office, said his institution may finance such projects if they use clean coal technologies.

India is planning to set up a bulk of its capacity on supercritical and advanced ultra-supercritical equipment, which are more efficient. NTPC, along with Bharat Heavy Electricals Ltd (BHEL) and the Indira Gandhi Centre for Atomic Research, is involved in setting up of an advanced ultra-supercritical 800MW equipment prototype by 2017.

“Our suggestion is to utilize coal more efficiently," Ejima said

“The Government of Japan’s position is to at least receive project requests for coal thermal power and depending upon the technology or the efficiency of the project; if its ultra-supercritical and contribute to the energy consumption of coal or reduction in emission of CO2 through the efficiency consumption of the burning of coal, then it is possible."

The JICA disbursed 162.2 billion yen in official development assistance (ODA) loans for India in 2014-15. The amount disbursed is the highest among countries where JICA extends such assistance.

Experts want the funding from multilateral institutions to continue.

Anil Razdan, a former power secretary, said: “The multilateral institutions should give loans for coal-fuelled projects as long as they use clean coal technologies. By not doing so, they are keeping the poor away from cheaper source of electricity. In a situation where expansion of hydro and nuclear power is not happening for various reasons, coal-based power is possibly the only alternative, given the high price volatility and availability issues for gas-fuelled projects."

India’s per capita power consumption, about 940 kilowatt-hour (kWh), is among the lowest in the world.

In comparison, China has a per capita consumption of 4,000 kWh, with developed nations averaging around 15,000kWh per capita.

A World Bank spokesperson said in an emailed response, “No new coal-fuelled power projects have been funded, post the release of the direction paper in 2013."

“Rare circumstances refer to small countries or fragile and post-conflict states where there may be hardly any other alternatives to coal for the generation of base-load energy, and where the bank team can demonstrate that coal is indeed the only viable, least cost energy generation alternative," added the World Bank spokesperson.

As part of the National Democratic Alliance (NDA) government’s plan of achieving energy security, 1.5 billion tonnes (bt) of coal is expected to be mined in the country by 2020.

India’s power sector is the biggest consumer of coal, absorbing 78% of local production.

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Utpal Bhaskar
"Utpal Bhaskar leads Mint's policy and economy coverage. He is part of Mint’s launch team, which he joined as a staff writer in 2006. Widely cited by authors and think-tanks, he has reported extensively on the intersection of India’s policy, polity and corporate space.
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Updated: 26 May 2015, 12:15 AM IST
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