📰 The problems plaguing thermal power generators
With a coal-supply demand gap, and international coal prices rising, cash-strapped thermal power generators are left with critical stocks
•On June 10, India’s power demand touched a record high of 211 MW even as the coal shortage continued with coal stocks available only for eight days. In the last two months, as temperatures soared and the economy recovered, the power demand breached the 200 MW level on several occasions. But the coal stock position at power plants remained worrisome. Consequently, the Ministry of Power sprang into action. To bridge the gap between shortage in domestic supply and increasing demand, power-generating companies or ‘gencos’ were directed to use imported coal for 10% of their requirement, failing which their domestic supplies would be cut.
How did India get here?
•India is the second largest producer of coal, with reserves that could last up to 100 years. Despite that, year after year, the shortage of coal supplies continues to be an issue. Why does India have a recurring power crisis? As seen in chart 1, the domestic production of coal stagnated between FY18 and FY21, but revived in FY22. The power demand too surged owing to economic recovery and hotter weather conditions. In a press release published on May 27, the Ministry of Power noted that “despite efforts to increase the supply of domestic coal, there is still a gap between the requirement of coal and the supply of coal.”.
•Until FY20, domestic sources contributed to about 90% of the power sector’s coal receipts; the remaining was filled by imports. But by FY22, the reliance on imports dwindled to 3.8% which built pressure on domestic supplies. As chart 2 shows, the coal imported by power plants declined to 27 MT in FY22 from 66.06 MT in FY17. Coal imported for blending purposes by power plants that run on indigenous coal declined to 8 MT in the last financial year, from 19.7 MT in FY17. Past data show that importing coal for blending has always seen few takers. A bulk of imports was made by power plants designed for imported coal. Notably, their share of imports too saw a decline of 60% in FY22 since FY17. Out of 15 such import-based power plants in India, five had little or no coal stock as of June 15.
•This dip in imports can be attributed to the skyrocketing prices of coal in the international markets (chart 3). The price of imported coal is nearly 5-6 times higher than domestic supply. It is in this scenario that the Power Ministry asked the gencos to import coal. However, States are wary of using imported coal as it would raise the cost of power substantially. The shortfall in domestic supplies and the rising cost of imports have put power plants in a precarious situation (chart 4). About 79 of the 150 plants that depend on domestic coal had critical stocks (<25% of the required stock) as of June 15. Eight import-based coal plants were also at critical levels.
Perennial bottlenecks
•The use of imported coal will also push up the price of power supply to the power distribution companies or ‘Discoms,’ often dubbed as the weakest link in the power sector chain. Discoms owe long-standing dues to the tune of ₹1.16 lakh crore to the gencos. Delays in payments by discoms create a working capital crunch for generating companies which in turn inhibits them from procuring an adequate quantity of coal.
•According to the 2019-20 report by the Power Finance Corporation, discoms had accumulated losses up to ₹5.07 lakh crore and were therefore unable to pay generators on time. Discoms in Tamil Nadu, Rajasthan and Uttar Pradesh are the most financially stressed (see chart 5).
•Discoms are bleeding because the revenue they generate is much lower than their costs. This is evident from the gap between the average cost of supply and average revenue realised (see chart 6). Tamil Nadu, Jammu and Kashmir, and Rajasthan have the widest gap between revenues and expenses of discoms. Apart from providing power at cheaper rates, some State governments do not revise tariffs periodically. Further, the delay in getting compensation from the government also compounds the woes of cash-strapped discoms.
What is ONDC and how will it change e-commerce platforms? How will the ONDC network aid online applications?
•ONDC is a not-for-profit organisation that will offer a network to enable local digital commerce stores across industries to be discovered and engaged by any network-enabled applications.
•The ONDC model is trying to replicate the success of the Unified Payments Interface (UPI) in the field of digital payments.
•Over the next five years, the ONDC expects to bring on board 90 crore users and 12 lakh sellers on the network, enabling 730 crore additional purchases.
•The story so far: The government of India announced the launch of the pilot phase of open network for digital commerce (ONDC) in five cities in late April with an aim to “democratise” the country’s fast growing digital e-commerce space that is currently dominated by the two U.S.-headquartered firms — Amazon and Walmart. The announcement was made by Commerce and Industry Minister Piyush Goyal. “After UPI, another game changing idea to democratise commerce — ONDC soft launch today to select consumers, sellers and logistics providers. Get ready for a world of choice, convenience and transparency,” Mr Goyal had tweeted.
What is ONDC?
•As per the strategy paper on ONDC, it is a not-for-profit organisation that will offer a network to enable local digital commerce stores across industries to be discovered and engaged by any network-enabled applications. It is neither an aggregator application nor a hosting platform, and all existing digital commerce applications and platforms can voluntarily choose to adopt and be a part of the ONDC network.
•The ONDC aims to enable buying of products from all participating e-commerce platforms by consumers through a single platform. Currently, a buyer needs to go to Amazon, for example, to buy a product from a seller on Amazon. Under ONDC, it is envisaged that a buyer registered on one participating e-commerce site (for example, Amazon) may purchase goods from a seller on another participating e-commerce site (for example, Flipkart).
•The ONDC model is trying to replicate the success of the Unified Payments Interface (UPI) in the field of digital payments. UPI allows people to send or receive money irrespective of the payment platforms they are registered on. The open network concept also extends beyond the retail sector, to any digital commerce domains including wholesale, mobility, food delivery, logistics, travel, urban services, etc.
What led to formation of ONDC?
•The Department for Promotion of Industry and Internal Trade (DPIIT), under Ministry of Commerce and Industries, conducted an outreach during the outbreak of the COVID-19 pandemic to understand its impact on small sellers and hyperlocal supply chain functioning. Post which, it found that there is a huge disconnect between the scale of online demand and the ability of the local retail ecosystem to participate. Following this, consultations were held with multiple ministries and industry experts and “ONDC was envisioned to revolutionise digital commerce in India,” as per the strategy paper.
•The paper added that ONDC has been envisaged as an entity which should be able to work without the need for day-to-day guidance and advisory from the shareholders/members. The independence of the management is linked to the financial independence of the entity, and therefore, the entity will be required to get funding independently and have a self-sustaining financial model.
What is the current status?
•Presently, ONDC is in its pilot stage in five cities — Delhi NCR, Bengaluru, Bhopal, Shillong and Coimbatore — with a target of onboarding around 150 retailers.
•The government has also constituted an advisory council to analyse the potential of ONDC as a concept and to advise the government on measures needed to accelerate its adoption. Its members include Nandan M. Nilekani, Non- Executive Chairman, Infosys; R.S. Sharma, CEO, National Health Authority; Dilip Asbe, Managing Director and CEO, NPCI; Anjali Bansal Founder and Chairperson, Avaana Capital; Suresh Sethi, Managing Director and CEO, Protean eGov Technologies Ltd.; Arvind Gupta Co-Founder & Head, Digital India Foundation; Kumar Rajagopalan CEO, Retailers Association of India; Adil Zainulbhai Chairman, Quality Council of India and Capacity Building Commission; and Anil Agrawal, Additional Secretary, Department for Promotion of Industry and Internal Trade.
•Over the next five years, the ONDC expects to bring on board 90 crore users and 12 lakh sellers on the network, enabling 730 crore additional purchases and an additional gross merchandising value (GMV) of ₹3.75 crore. The GMV for the digital commerce retail market in India was ₹2.85 lakh crore ($38 billion) in 2020, which is only 4.3% of the total retail GMV in India.
What are the likely benefits of ONDC
•The ONDC will standardise operations like cataloguing, inventory management, order management and order fulfilment, hence making it simpler and easier for small businesses to be discoverable over network and conduct business.
•However, experts have pointed out some likely potential issues such as getting enough number of e-commerce platforms to sign up, along with issues related to customer service and payment integration.
📰 India promises Sri Lanka ‘fullest support’
Colombo has sought a further $500 million from New Delhi to import fuel and is awaiting a response
•India on Thursday assured Sri Lanka of its “fullest support” to help the island tide over its unprecedented economic crisis while “considering further financial assistance”, the Sri Lankan President’s office said.
•A delegation from New Delhi led by Foreign Secretary Vinay Kwatra, and including Ajay Seth, Secretary, Department of Economic Affairs; V. Anantha Nageswaran, Chief Economic Adviser; and Kartik Pande, Joint Secretary to the Indian Ocean Region Division at the Ministry of External Affairs, visited Colombo on Thursday.
•During the visit, spanning barely half a day, the Indian officials met President Gotabaya Rajapaksa and Prime Minister Ranil Wickremesinghe, and held discussions on New Delhi’s ongoing assistance, of over $3.5 billion since January 2022, to the island nation. Indian assistance so far has been extended by way of currency swaps, loan deferments and credit lines for essential imports.
•Colombo has sought a further $500 million from New Delhi to import fuel and is awaiting a response, Prime Minister Ranil Wickremesinghe recently told The Hindu in an interview.
IMF talks
•The Sri Lankan government is currently holding talks with a visiting delegation of the International Monetary Fund (IMF) , on a debt restructure programme, but is also urgently looking for bridging finance to cope with the acute shortages of essentials that have left citizens struggling.
•“Sri Lanka has already received essential food items, fuel, medicine, and fertilizer under the Indian credit line facility... The Indian delegation stated that the Government of India and the political authorities are committed to provide continued support to Sri Lanka,” President Gotabaya’s office said in a statement.
•“Both parties discussed on the future course of action of the Indian aid programme to stabilize and revive the Sri Lankan economy, at length,” it further said, adding that the Indian delegation arrived in the island “to consider further financial assistance” to Sri Lanka. A statement from the Indian High Commission said: “Both sides highlighted the importance of promoting India-Sri Lanka investment partnership including in the fields of infrastructure, connectivity, renewable energy, and deepening economic linkages between the two countries.”
•External Affairs Minister S. Jaishankar, who’s in Rwanda to attend the Commonwealth Summit, met his Sri Lankan counterpart G.L. Peiris. “Talked about Commonwealth issues as well as India's support for Sri Lanka at this time,” Mr. Jaishankar tweeted about the meeting.
•From the beginning of this year, India has signed key bilateral agreements with Sri Lanka, to jointly develop the Trincomalee Oil Tank Farm and set up (through the National Thermal Power Corporation), a solar power plant in Sampur.
•Both are located in the Eastern Province. In the renewable energy sector, India’s Adani Group signed an agreement to execute projects in Mannar and Pooneryn in the Northern Province, sparking a controversy over its entry into the island’s energy sector, outside of any known competitive bidding process. Colombo has defended the $ 500 million deal.
📰 Will Agnipath energise or demoralise the military?
The scheme is too massive a change and first needs to be put through a testbed
•On June 14, the government announced the Agnipath scheme, which fundamentally transforms the process of recruitment of soldiers, sailors and airmen into the three services. Agniveers, the recruits, will be employed for four years, after which 25% of them will be selected for enrolment in the regular cadre, while the rest will be given a certain amount of money and be shown avenues to get back to civilian life. The scheme has generated a lot of debate, and protests against it have been violent in several parts of the country. To discuss and understand the nuances of the issue, Dinakar Peri spoke to Lt Gen D.S. Hooda (Retd) and AVM Manmohan Bahadur (Retd). Edited excerpts:
Can you provide an overview of Agnipath and put things in context, given the concerns?
•Lt Gen D.S. Hooda (DSH): Let me try and take a very dispassionate view and look at both sides. Just like any scheme, there are advantages and concerns. Let me briefly cover both. The advantages, as have been brought out by the government and the military leadership… they’ve been talking about a younger military, the average age going down from 32 to 26. The rapid turnover of Agniveers in the system, they are hoping, will attract people who are more technologically savvy and are therefore more capable of handling new kinds of modern equipment. That is why they’re also hoping to exploit some people from the Industrial Training Institutes (ITIs) and other technical institutes. What has not been stated by the military and the government, but which is obviously a big factor for the adoption of this scheme, is the fact that at some stage, maybe not immediately, Agnipath is going to help reduce the salary and pension budgets. That could go into capital expenditure and for the modernisation of the three forces. Also, by picking 25% of the whole lot of Agniveers, you will possibly get people who can then be trained as non-commissioned officers (NCOs), etc. And with our shortage of officers, it is essential that we have better NCOs in the military.
There are genuine concerns. Will people who join only for four years, and who are possibly looking at the military as a stepping stone for a future career, have the same levels of morale and motivation that you find among soldiers who are permanently in the military? Is the scheme going to, in some ways, impact unit cohesion, which is absolutely essential? Is the shortened training period good enough to turn a recruit into a soldier who can fit in and function well within a unit?
•There are also, in my view, different aspects of different services. Everybody is not going to face the same conditions. Someone in a technical service in a peace station is obviously not going to face the same conditions as someone who is going to spend two-three years deployed along the borders with an infantry unit. So, how will these different conditions impact the Agniveer? Some are saying it could have an impact, while some are saying it will not have an impact on operational effectiveness and readiness. I think it’s too early to tell. My suggestion would be that the scheme be put through a testbed. See how it works. Then we can adopt whatever lessons we learn from the testbed.
•About treating it as a testbed, wouldn’t that have been a better way to begin? And then the scheme could have been rolled out on a larger scale?
•DSH: The government has said that we are not going to roll it back, that we are going to implement it. So, even if you do it in this manner, use the first four years as a testbed. The argument that is being made is that the Defence Minister has the authority to make changes where required. But I think the approach to what we are doing currently, and to a testbed, would be different. If we say this is a testbed, I think we will be more open to major modifications wherever required. I am glad the Vice Chief of Army Staff did say something similar, that they are looking at it for the first four-five years as a pilot project.
With respect to the Navy and Air Force, which are highly technology-intensive, what is going to be the impact, given the short tenure of the scheme and only six months of training?
•AVM Manmohan Bahadur (MB): When you’re talking about technology, and you have studied something in your school or college or an ITI, and then you’re absorbed into a military formation, the systems there are totally different. The basis may remain the same. And it takes a lot of time — in my experience, at least four-five years — for people to be trusted to work on systems in their own individual capacity. For four-five years, you’re actually under the tutelage of a senior person. No airman, no air warrior signs for his trade in the clearance form for an aircraft going for flight. It is similar for radars, anti-aircraft missile systems, and so on. I’m sure a similar thing goes for the naval systems too. So, at the ripe time of four years, when they are ready to be exploited to their full potential, you’re asking 75% of the people to go. And then you get a new lot coming in and you have to start from scratch. A person who would become a supervisor after five-six years of service leaves. A lot of money and, more importantly, effort and knowledge as well as wisdom are going out of the system. This is something that has to be catered for.
•And since we’ve talked of a trial period, in my opinion, the initial lot who come in should go into non-critical streams of the Air Force and Navy. The same goes for the Army too. Let’s see how the people respond. And thereafter, in the next lot, or maybe from the third lot, you tweak the system and modify it to take into account the issues that may have arisen. For example, we’ve done this with the Short Service Commission. It was initially for five years. It was increased thereafter to 10 years, etc.
The terms and conditions state that Agniveers will form a distinct rank and will sport distinctive insignia on their uniform during the duration of their service before some of them come back into the regular cadre. This is a clear demarcation. How is that from the point of view of motivation, especially where there is close camaraderie?
•DSH: I wish they had not done this. There is absolutely no difference in the kinds of jobs that they will do in units, there is no difference in how they will be treated. Having a separate insignia sort of signifies two classes of soldiers in a unit. You shouldn’t make any sort of distinction at this stage… Because when you do that, even individuals within the unit will look at each other as a separate class, which is not good. As I mentioned, one of the key factors is unit cohesion. That comes in with a sense of common purpose. Everybody feels that everybody is equal.
•MB: A different rank or a unique insignia actually hits at the very basis of unit cohesion. The armed forces are a classless lot. You wear a uniform, whether in school or in college or in the armed forces, to remove all economic and societal disparities, and say all are one. And here you have two people fighting, say in the trenches, the enemy is in front, and you have one person wearing one type of uniform and the other one has an insignia signifying him to be somebody who is different. That is not right. I feel the government can do a simple modification, which is to remove this clause. In any case, when the Agniveer leaves after four years, you may call him Agniveer, but he’s not an ex-serviceman. The rule says he’s not an ex-serviceman.
•A major concern that has been expressed on social media is the issue of national security as young military-trained men will be going back to civil society in large numbers every year.
•DSH: I don’t think it’s as much a concern as it is being made out to be ... militarisation of society. First, the numbers are not that high that we’re looking at huge militarisation in society. There could be some who could be exploited [by anti-social elements], yes. And I think to allay these fears, if we are able to give them some decent, honourable second career, that to a large extent would help overcome these issues about how these armed forces-trained people will behave once they’re out in society.
•MB: When we are talking in terms of militarisation, the pressures of a jobless existence weigh against the ethos, or the morality, that you may have learned in those four years. That really stretches the elastic, the malleability of one’s character, and some may, unfortunately, fall for it. So, the point is, it is not such a big problem — but to say that there is no problem, I think that too would be incorrect. And the way out is we have industry falling head over heels saying that we will give them jobs. I like former Navy chief Admiral Arun Prakash’s reply to a tweet from one of the industrialists, where he said, what have you been doing till now, please give us numbers? Even now as we speak, ex-servicemen are looking for jobs. We have to move beyond the optics and statements, and do something on the ground to help these people.
What would you say in conclusion?
•DSH: I want to reiterate what I said in the beginning. This is a massive change that we have brought about in the recruitment process. I am not sure there has been enough discussion and debate even within the services on how we are going to take people, train them, inculcate in them the ethos of the military, and how long they will serve. I know the service chiefs and service headquarters have been discussing it. There have been discussions with the political leadership. But has it been debated enough within the organisation, at the level of commanding officers and company commanders who are actually going to be bearing the brunt of what is going to happen? My suggestion again is to put the scheme through some kind of a testbed and be open to major changes, if and when required. As AVM Bahadur has also said, you will probably find that there are certain areas, certain pockets, certain traits that are more suited for Agniveers, and some are not. So, this across-the-board option could also be changed a little bit.
•MB: We need to look beyond four years. The issue — and rightly so — is that the decisions have been taken by people at the top. When you’re talking of the armed forces, the top brass would have retired in four years. And the fallout, if any, good and bad, will be faced by the next set of leadership within the military. I think they need to be taken on board in all the decisions that are going to be taken now — the way this scheme is going to be rolled out and implemented on the ground — because they’re going to face the proverbial music.
•Additionally, do we need to set up another organisation to look after the people who go out? We have the Department of Ex-Servicemen Welfare, and there are enough [complaints] from the existing ex-servicemen that nothing much has been done. Now we have a larger mass going out every year, a younger lot.
