(Current Affairs) Economy & Energy | September : 2013

Economy

Time for opening up of New Banks extended by Six Months

The RBI (Reserve Bank of India) on 3 June 2013 released certain clarifications on the guidelines issued for licensing of new banks. Based on the feedback received from the interested entities, the RBI increased the validity period of the in-principle approval of setting up of banks from one year to 18 months. RBI stated that intending applicants have brought out several complex issues pertaining to reorganization of the existing corporate structure, restructuring of businesses and meeting the regulatory requirements. Once the inprinciple approval is given by the RBI for setting up of a bank, the promoter group has to set up a non-operative financial holding company (NOFHC) and the bank within 18 months from the date of in-principle approval. The bank has to start banking business within this period after getting the banking licence. The RBI had released the Guidelines for Licensing of New Banks in the Private Sector in February 2013. Accordingly, the RBI had stated that corporates and public sector entities with sound credentials, 500 crore rupees capital and a minimum track record of 10 years would be allowed to enter the banking business. The last date to submit applications is the 1 July 2013. The RBI had also invited queries from intending applicants seeking clarifications on guidelines.

Mechanism for Coal Supply to Power Producers approved

The Cabinet Committee on Economic Affairs (CCEA) on 21 June 2013 approved the following mechanism for supply of coal to power producers:

  • Coal India Ltd. (CIL) to sign Fuel Supply Agreements (FSA) for a total capacity of 78000 MW including cases of tapering linkage, which are likely to be commissioned by 31 March 2015. Actual coal supplies would however commence when long term Power Purchase Agreements (PPAs) are tied up.

  • Taking into account the overall domestic availability and actual requirements, FSAs to be signed for domestic coal quantity of 65 percent, 65 percent, 67 percent and 75 percent of Annual Contracted Quantity (ACQ) for the remaining four years of the 12th Five Year Plan.

  • To meet its balance FSA obligations, CIL may import coal and supply the same to the willing Thermal Power Plants (TPPs) on cost plus basis. TPPs may also import coal themselves. MoC to issue suitable instructions.

  • Higher cost of imported coal to be considered for pass through as per modalities suggested by CERC. MoC to issue suitable orders supplementing the New Coal Distribution Policy (NCDP). MoP to issue appropriate advisory to CERC/SERCs including modifications if any in the bidding guidelines to enable the appropriate Commissions to decide the pass through of higher cost of imported coal on case to case basis.

  • Mechanism will be explored to supply coal subject to its availability to the TPPs with 4660 MW capacity and other similar cases which are not having any coal linkage but are likely to be commissioned by 31 March 2015, having long term PPAs and a high Bank exposure and without affecting the above decisions.

Background

A proposal had earlier been moved for approval of CCEA for import of coal by CIL in order to meet the shortfall in the domestic coal requirement of the thermal power plants (TPPs) from time to time. In the meeting held on 5 February 2013, the CCEA had laid down certain guidelines for import of coal on cost plus basis/pooling of prices and also directed formation of an Inter- Ministerial Committee (IMC) to consider the cases of power plants with aggregate capacity of about 16000 MW which would be commissioned by 31 March 2015 but are not having any linkage for supply of coal. On the basis of the recommendations of IMC, the matter was further considered by CCEA in the meeting held on 22 April 2013. The CCEA inter-alia directed to consider the feasibility of higher cost of imported coal being allowed as a pass through in case of PPAs signed on competitive bid basis. The revised proposals submitted by Ministry of Coal (MoC) in pursuance of the above directions and in consultation with Ministry of Power and other Ministries were considered by the CCEA.

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