Vol 1, Feb 2023 | Punctured

The Adani Group has grown sizeably in recent years by borrowing against its pledged shares and bonds.

And how will the contagion affect India’s ‘green growth’ ambitions? Read more

The Adani Group has grown sizeably in recent years by borrowing against its pledged shares and bonds.

Post-Hindenburg, what happens to Adani’s energy plans?

And how will the contagion affect India’s ‘green growth’ ambitions?

In early February, as the market was absorbing the immediate impact of Hindenburg’s exhaustive report on Adani’s alleged improprieties, cabinet minister RK Singh struck a sanguine note. Speaking at a press conference, Singh, India’s minister for New and Renewable Energy, dismissed concerns that the Adani Group’s current crisis might hurt India’s clean energy plans. 

“I have the most robust renewable energy capacity in the world and that means that I have at least 15-16 large companies which are at the level of global companies,” he said, adding: “It will not impact us in any way.”

Even at first glance, the minister’s words seem counterintuitive. Scan any part of India’s energy sector—coal, gas, RE, hydrogen or solar—and you will find an oversized imprint of Adani’s presence. 

Not only is the group one of the biggest RE developers in the country, it’s one of three firms chosen by the Indian government for the solar module manufacturing PLI. The group is also an early mover into sectors considered critical by India’s NDA government—like pumped storage and hydrogen. For the latter, it aims to be the largest fully integrated green hydrogen player in the world. It’s the only large firm vying with RIL chairman and managing director Mukesh Ambani to create a clean energy ecosystem in India spanning solar, wind, batteries and electrolysers. 

For this reason, India needs a more careful answer to the question reporters had asked Singh. Given the short-selling attack, what happens to the group’s clean-energy plans? What does that mean for India’s own low-carbon ambitions?

There are no easy answers to these questions. The Adani Group has grown sizeably in recent years by borrowing against its pledged shares and bonds. What we are seeing right now is a battle over the worth of these instruments—is it in line with the value they intend to secure? 

Take the recent price movements of shares of Adani’s crown jewel, Adani Enterprises, for instance. In December 2022, its share’s value stood at ₹4,165. On February 3, 10 days after Hindenburg’s report, its share slipped below ₹1,050 before climbing back, by February 8, to ₹2,200. In the week since, it has once again fallen by 20%, and stands at about ₹1,750 at the time of publishing. Other group companies have traced similar trajectories. It remains unclear what their real value is. Two economic commentators—veteran business editor TN Ninan and academic Aswath Damodaran—found Adani shares over-valued even after falling for two weeks.

A similar battle is underway in bonds as well. Over the past three weeks, Adani bonds shed enough value to enter distressed assets territory. Adani Green Energy dollar bonds due in 2024 slid 13.4 cents on the dollar to 61.6. Adani Ports & Special Economic Zone notes due in 2031 fell 5.2 cents to 63.2. A clutch of large financial institutions, including Credit Suisse, CitiGroup and Standard Chartered, announced they wouldn’t take Adani bonds as collateral. In tandem, however, firms specialising in distressed bonds have picked up $1 billion worth of Adani’s overseas bonds.

Given that this repricing is still underway, it’s hard to surmise how the group’s future borrowings will change and the attendant implications for the group’s plans.

Adani’s climate footprint

Seen through a climate lens, the group has four deeply consequential verticals.

Foremost is the coal-based vertical. This started with power plants before integrating backwards into coal imports, coal mines, coal mining and ships, and integrating forwards into transmission lines and DISCOMs. Today, as CarbonCopy reported two years ago, Adani and NTPC are the only thermal power producers in India that straddle the entire thermal power value chain, from coal mines to DISCOMs.

Next up is the gas-based vertical. Through separate partnerships with Total and IOC, Adani has been picking up city gas distribution contracts to supply CNG to vehicles and piped natural gas to homes and industries. Then there is the renewable energy vertical with substantial capital tied up in wind, solar and pumped storage projects.

And finally, there is ANIL (Adani New Industries Limited). Shortly after Mukesh Ambani announced Reliance’s ₹75,000 crore clean energy push (four giga-factories to make solar modules, batteries, electrolysers and fuel cells), Adani Group made a matching claim. ANIL would house its equivalent push into renewables (green hydrogen) and renewables manufacturing—wind turbines, solar modules, electrolysers.

The group is not shy of ambition for all four verticals.

In coal-based power, it is developing seven new coal mines, adding two new thermal power plants, trying to add another 11,000 km to its existing 20,000 km by 2030, trying to acquire state-owned DISCOMs plus acquire power distribution licences in large markets like Delhi and Mumbai, and chalking up investment plans for each. In gas, it has picked up 52 city gas distribution bids and aims to cover 15% of India’s population by 2030. In renewables, Adani Green’s operational (and under-construction) assets add up to 20.4 GW. The group wants to amp this up to 45 GW by 2030

For ANIL, investments have been pegged at $20 billion (₹160,000 crore) over the next 10 years. Elsewhere, even larger numbers have been cited. In June 2022, group chairperson Gautam Adani said the group (and Total) will jointly invest $50 billion (Rs400,000 crore) over the next 10 years on green hydrogen alone.

As boggling as these numbers are, they are a part of a larger thrust. Adani has equally ambitious projections for most of its non-energy verticals as well—data centres, ports, airports, cement, road projects, defense, drones manufacturing, electric commercial vehicles, alumina, steel,agricultural logistics and trading. Its ambitions for packaged foods, edible oils and media seem relatively more prosaic.

In all, the group pegged its total investments at about $107 billion (856,000 crore) over the next 10 years

In its cover story last December on Gautam Adani, India Today posited even higher expenditure. Adani Enterprises, it said, plans to spend $10.4 billion (over ₹86,000 crore) as capital expenditure till 2024. “In the following five years from then on, the capex would be $49 billion (around ₹4 lakh crore).” 

This power and energy complex features heavily in Hindenburg’s report. Chief among a clutch of improprieties alleged by the short seller is the charge that the Adani Group has used a web of obscure investment funds located overseas that it controls to sidestep thresholds of shareholder requirements in order to be eligible for being publicly traded — and project an image of regulatory compliance. The group, as is known, has borrowed heavily to support its growth plans. According to Hindenburg, the group has propped up this debt-heavy model by inflating its share prices while cash flows have remained low relative to the debt eddying around the group.

Shares of Adani Power, Adani Transmission and Adani Green Energy, all heavily implicated in the report, have at the time of writing shed 46%, 61% and 66% of their value since the report was released on 24th January. Adani Power stocks have been on a skid since they hit an all-time high of ₹432 in August 2022, and have lost two-thirds of their value since.

What are the fallouts?

A time to tighten belts

Over the past five or so years, the nature of Adani’s borrowings has changed. 

The group has pivoted from bank borrowings to fund-raising through international bonds. “For the next five-10 years,” a senior executive with intimate knowledge of the group’s financials had told this reporter in 2019, “the global bond market will be the most important market for the group”. 

That has come to pass. By October 2021, the group had become the biggest issuer of offshore bonds from India. In December 2022, as Gautam Adani told India Today, Indian banks’ share in the group’s total lending had come down to just 32%. “Almost 50% of our borrowing is now through international bonds,” he said.

Breakdown of top 5 group companies’ debt. Source: CLSA India

This model—of raising money through international bonds—is in trouble. 

In the immediate wake of the Hindenburg report, Adani bond prices fell steeply, slipping into distressed territory. Take Adani Green. “Bonds worth $750 million issued by Adani Green Energy are currently yielding a whopping 31% in international secondary markets, well past the average 8.4% for global junk bonds,” wrote Bloomberg. With other Adani bonds posting similar slides, Credit Suisse, CitiGroup and Standard Chartered said they would not accept Adani bonds as collateral. 

That was followed by a recovery, as investment banks like Goldman Sachs and JP Morgan Chase pointed at the value of the group’s underlying assets. In tandem, distressed asset funds bought close to $1 billion (₹8,000 crore) worth of Adani bonds. To put that number in perspective, however, the group’s debt exposure in bonds stands nearly 14-times higher at ₹110,000 crore.

Put these developments together and you will see the bond market shrinking for the group. Some investors will likely exit and make way for new borrowings, but at a higher cost. 

The company’s shares are in trouble as well. They had fallen steeply in the days after Hindenburg’s report came out—and then staged a short-lived recovery. As this article was being written, Moody’s downgraded its outlook for Adani Green and two subsidiaries of Adani Transmission. MSCI (Morgan Stanley Capital Index), a global equity index, which represents large and mid-cap equity performance across all 23 developed markets, cut its weightage for Adani companies. In addition, the group has lost some investors (like Norway’s largest pension company KLP, which dumped all its shares in Adani Green Energy).

As shares lose value again, the group’s capacity to borrow via pledged shares will fall as well. Turning to banks, as The Ken wrote, it’s likely that any future big borrowings from Indian banks will be subject to a higher level of scrutiny.

In addition, the group has cancelled its FPO, which would have brought in another ₹20,000 crore. 

Given this arid landscape, the group says it might rely on promoter equity funding, private placement and internal accruals to fund growth.

That is easier said than done. The first hinges on the repricing that is currently underway. The second might yield high-cost loans. As for the third, the Adani group operates in long-gestation infrastructure projects. Most of these, additionally, generate modest profits. 

To that, Adani adds its own complications. “The company’s return on invested capital has steadily declined, even as it has scaled up, hovering just over 3% in 2021-2022,” wrote NYU finance professor Ashwath Damodaran in his widely-read blogpost about Adani and Hindenburg.

This shows in the group’s numbers. After accounting for fresh expansion, taxes, depreciation, etc, Adani Group companies are not left with large profits. Adani Enterprises closed last financial year with a net income of ₹70,432 crore and net profit of 475 crore. Other group companies are pretty much the same.

Sources: Adani Enterprises, Adani Green, Adani Ports and SEZ, Adani Power, Adani Transmission, Adani Total Gas

In other words, it’s unclear if internal accruals can keep the group’s expansion plans intact.

That is just the start. Even as the group struggles to raise funds, it is being squeezed for capital. It has to urgently pare debt. It has already faced a margin call—when lenders demanded extra collateral after the pledged equity lost value. To place bonds, the group will have to pay higher rates. If it wants to shore up share prices, in order to avoid domestic margin calls, it will need capital there as well. Buying back its distressed bonds will carry substantial demands for cash too.

A coal company or a green company?

On the whole, it’s hard to see how the group can support all the ambitious expansion plans listed above. Barring dramatic improvements on the borrowing front—or a massive switch to domestic borrowing—the group will have to refocus on a few verticals, and cut capex plans elsewhere. It’s already rethinking plans to participate in the privatisation of Concor. One also wonders if the group will participate in the second round of the solar PLI

Which is where the climate question comes in. Can the group support its clean energy projects? If not, can these businesses raise funds on their own?

CarbonCopy wrote to the Adani Group asking for an estimate of the investible surplus with the group. We also asked which parts of the business are likely to see capex cuts. This article will be updated when they respond. 

In the meantime, it seems safe to assume that, in the short term, the group will have to focus on businesses with high returns. If a ₹100 invested in coal imports nets greater returns than those in Adani Green, the group might well invest more there. 

In such a scenario, Adani Green will have to raise its own funds. The company’s financials, however, are strained. In FY22, the company had gross debt of ₹ 48,171 crore against total income of 5,577 crore and a net profit of 489 crore. The downgrade from Moody’s won’t help. At a realistic valuation, how much fresh money can this company raise?

ANIL has an even bigger problem. Unlike Adani Green Energy, it’s a moonshot project. The group was hoping to raise some money for it through the FPO – but that was cancelled.

Now comes the news that TotalEnergies has put its investment into ANIL on hold. “This project was announced but nothing has been signed…. and for now it won’t be signed,” TotalEnergies chief executive Patrick Pouyanné told reporters on Wednesday. “It makes no sense to add more [projects] until there is clarity.”

The bigger picture

All of which brings us back to the question reporters asked cabinet minister Singh. 

Will Adani’s current crisis hurt India’s clean energy goals? If the group fails to add 45 GW in renewables by 2030, India will indeed lose. And yet, the larger answer is no. 

Over the past eight years, the Adani Group has been shoe-horned into an array of sectors instead of encouraging new market participants.

For the most part, this has been an inexplicable decision on the part of the Indian government. If Adani was to be groomed as a national champion as some say—like South Korean Chaebols or Japan’s MITI—it has rushed ahead without empirically establishing whether the notion would work in India. According to academician Ashoka Mody, South Korea accompanied the Chaebol strategy with large investments in public education. India hasn’t done that. Nor is it clear how/why Adani was chosen, not some other group.

“Adani is now active in solar module, gas, LNG, city gas, thermal, solar, hydrogen, ports and refineries,” an RE industry veteran in Hyderabad had told CarbonCopy last year. “Why are we not supporting new companies in each of these verticals?”

What India has today is a chance to roll that clock back. Take the solar PLI. If Adani doesn’t bid, another firm will bag the incentive. In all, if Adani is forced to shrink its presence in India’s “green growth” plans, it will likely be more of a blip rather than a death knell for the country’s ambitions. If the group is compelled to sell some of its relatively non-core businesses—like cement, steel, defence or road— to focus on a few verticals, what India will have seen is a short-seller driven anti-trust action.

It draws Walter Schneidel’s book on inequality to mind. It falls, he wrote, but only after a cataclysm. 

The earthquake that shook the two countries is also one of the five deadliest earthquakes in the past 20 years. Photo: VOA_wikimediaCommons

Magnitude 7.8 earthquake hits Turkey & Syria, more than 41,000 people dead

A huge earthquake with a magnitude 7.8 killed more than 41,000 people across Turkey and Syria. In Turkey alone, more than 35,400 people died, making the quake one of the deadliest in the country’s history. It is also one of the five deadliest earthquakes in the past 20 years. European Commission chief Ursula von der Leyen promised to bolster aid toTurkey, and responded to requests for tents, blankets and heaters after speaking with President Recep Tayyip Erdoğan.

Meanwhile, Syria’s death toll stands at around 5,800, including 1,400 in the government-controlled areas and 4,400 in opposition-held regions. A total of 52 UN trucks carrying aid have entered northwest Syria through the only authorized border crossing from Turkey. 

NZ declares national emergency as Cyclone Gabrielle wreaks havoc across North Island

The New Zealand government declared a national state of emergency as Cyclone Gabrielle caused widespread flooding, landslides and huge ocean swells across the North Island. The storm’s damage has been most extensive in coastal communities on the far north and east coast of the North Island—with Hawke’s Bay, Coromandel and Northland among the worst hit. New Zealand’s National Institute of Water and Atmospheric Research (Niwa) announced a “record” storm surge of 0.7m, in addition to waves of up to 12m off the northern coast. Whereas, national forecaster MetService said it had broken its record for “red” weather warnings issued around the country, and wind gusts of 150-160km/h were recorded. Cyclone Gabrielle hit New Zealand just two weeks after unprecedented downpours and flooding in the same region, which killed four people. Officials said at least 2,25,000 people were without power.

3 million Indians live in areas that can be swept by glacial lake floods: Study

Three million Indians are at risk of a glacial lake outburst flood (GLOF), according to a new study published in Nature Communications. Together with two million Pakistanis, they form a third of the total number of people worldwide facing such a risk. The first global assessment of high mountain areas found that 90 million people across 30 countries live in 1,089 basins containing glacial lakes. Of these, 15 million (16.6%) live within 50km of a glacial lake. A majority of the globally exposed population amounting to 9.3 million (62%) is located in the region of high mountain Asia (HMA). Just four highly populous countries accounted for more than 50% of the globally exposed population—India, Pakistan, Peru and China. 

Is Europe headed towards an energy crisis this summer?

A winter as historically mild as the present one does not bode well for Europe’s coming summer temperatures. While climate change kept Europe warm enough this winter, the respite may prove fleeting and may cause a crisis this summer. The immediate effect of a warm winter on the probable summer energy situation is constrained electricity generation. Water levels matter for keeping the lights on. In 2020 and 2021, hydropower was approximately 17% of the EU’s electricity. If this summer even just approaches the heat and dryness of 2022, Europe could lose double-digit generation capacity. The consequences of low water levels affect not just hydropower but other power generation, too, such as nuclear and coal generation. What exact effect this will all have on energy prices and market stability is hard to predict, but considerable volatility and at least some price hikes are more than likely. The extent of these will depend on how short the world is on natural gas, oil, coal, and other fuels, and of course the weather—plus any unforeseen emergencies or crises.

Winter rain causes heavy damage to acres of mustard crop in the northern belt 

India saw a record sowing of mustard in the 2022-23 Rabi season. But fresh spells of rain recorded in January damaged the crops at several places. A dip in temperatures due to cold waves led to ground frost in some areas in the northern belt and maximum damage has been reported from Udaipur, Sirohi, Churu, Ajmer, among other districts. In January, the area under mustard was recorded at 9.7 million hectares (ha), according to data uploaded by the agriculture department. This is almost 700,000 ha more than last season. The increase in acreage was also more than other competing crops. 

Climate change has led to early flowering of the gul toor in the Kashmir Valley 

The Kashmir Valley is experiencing warmer winters and as a result, the flowering period for the dazzling yellow gul toor, has shifted from mid-March to mid-February, revealed a new study. The flowering phenology of the gul toor has significantly advanced by 11.8 days/degrees Celsius increase in maximum temperature and 27.8 days/degrees Celsius increase in minimum temperature, indicating that the climate warming has led to substantial shifts in flowering phenology of the model plant species. The irregular weather pattern has also delayed the flowering of saffron to November when the sunshine is not adequate. About 30% of the flowers get aborted within the sprout because temperature conditions are not optimum.

China to face severe floods and heatwaves in 2023, warns CMA

As the climate crisis escalates, China Meteorological Administration (CMA) warned regional authorities to prepare for more extreme weather this year after record-breaking temperatures and a lengthy drought last summer played havoc with the country’s power supplies and disrupted harvests. China’s southern regions need to brace for more persistent high temperatures and ensure that energy supplies are available to meet the summer demand peak, while northern regions need to prepare for heavy floods.

China was hit last June by a heatwave that lasted more than 70 days, damaging crops, drying up lakes and reservoirs, and causing devastating forest fires throughout the Yangtze river basin. In August, as many as 267 weather stations registered their highest temperatures to date. A sharp drop in rainfall in the southwestern regions of Sichuan and Chongqing also forced hydropower facilities to cut output. Local industries had to restrict operations and electricity deliveries to the eastern coast were also affected.

Chile battles deadliest wildfires on record as heatwave grips the country

The hot and dry weather led to Chile’s deadliest wildfires in recent times killing at least 26 people. Firefighters struggled to control dozens of raging wildfires, which have consumed 270,000 hectares (667,000 acres) of land in south-central Chile. The recent catastrophe

has already made 2023 the second worst year in terms of hectares burned after the so-called ‘firestorm’ that hit the country in 2017. Chile is in the grip of an over a decade-long period of dry weather, which the World Meteorological Organization (WMO) called a “mega drought” last year, adding it was the longest in a thousand years and marked a major water crisis. The heat wave and strong winds have caused a rapid spread of the flames during the Southern Hemisphere summer season.

The country's massive infrastructure projects would need the removal of almost 2.3 million trees, the Union environment minister informed Rajya Sabha.

2.3 million trees proposed to be felled for mega infra projects, green ministry tells Rajya Sabha

“Mega infrastructure projects” will most likely take the place of 2.3 million trees across the country. The environment ministry informed the Rajya Sabha that between 2020 and 2022, it had granted clearance to “31 projects related to highways, 11 projects related to ports, 15 projects related to airports, 20 projects related to river valley and 10 projects related to Thermal power plants”. Three of the highway projects pass through protected areas, for which 2.3 million trees have been proposed to be cut. The ministry had submitted the written response to questions raised by Congress MP Vivek K Tankha. Environmentalists pointed out that the reply showed that the government was pursuing a “business as usual” scenario when it came to the environment.   

US agrees to be transparent with EU on subsidies for green tech under new act

US president Joe Biden’s landmark climate legislation, the Inflation Reduction Act has left the EU concerned about the country poaching its green businesses. France and Germany’s economy ministers met with the US treasury to discuss subsidies provided under the act for green technologies. Both ministers said the US agreed to provide transparency on specific subsidies so that the EU is able to match them if needed. The EU is worried about its competitiveness in the market because of these subsidies, especially for electric vehicles and battery manufacturing, including the raw materials that go into them.

12 employees from UAE oil company take up roles in office hosting COP28 

Twelve officials from the UAE’s state-owned oil company found roles in the office of the country’s climate change special envoy. The UAE will host this year’s COP. The new roles were discovered during an analysis by the independent investigative group Centre for Climate Reporting (CCR) of LinkedIn accounts, The Guardian reported. Two former engineers with the Abu Dhabi National Oil Company (Adnoc) will be part of the group of negotiators representing the UAE at COP28. Their LinkedIn profiles do not reflect a background in climate diplomacy, the analysis found. Recently, it was announced Sultan Ahmed al-Jaber, who is Adnoc’s chief executive, will preside over COP28 without giving up his role in the company. This has sparked concern over the country’s effectiveness in hosting the climate summit. 

Greenwashing? Study rates net-zero plans of Samsung, Amazon, Nestlé, Uniqlo and others low on credibility 

A study by the “Corporate Climate Responsibility Monitor” accused some of the world’s biggest companies, including Samsung, Amazon, Nestle, Uniqlo among others, of making “misleading” claims about their emissions reduction plans. The study said each of the big names are on course to miss their own net-zero targets, the Times reported. The report stated that 18 of the companies have “problematic” plans such as relying ‘heavily’ on offsetting emissions by planting trees and through similar projects designed to remove carbon from the atmosphere. 

The 24 companies investigated in the report are responsible for 4% of global greenhouse-gas emissions, span eight sectors including automobiles, fashion, food and technology and have combined yearly revenue of more than $3 trillion”, wrote the WSJ, adding that the combined net-zero pledges of the 24 companies “would reduce their total greenhouse-gas emissions by 36% by their respective target years, typically 2040 or 2050, compared with the at least 90% emission reductions needed”. None of the firms in the sample have “high integrity” net-zero plans.

Despite increasing the budget allocation to NCAP, the budget lacks a plan to tackle air pollution from crop management.

Budget for National Clean Air Programme raised to ₹756 cr, ‘No plan to tackle crop residue’

The Centre increased the budget of the National Clean Air Programme (NCAP) this year to Rs756 crore from ₹406 crore in 2021-22 to ₹600 crore in 2022-23 and ₹756 crore in 2023-24. But the budget lacks a plan to tackle air pollution from crop management, experts said. Bhargav Krishna, fellow at New Delhi-based think tank, Centre for Policy Research (CPR) told TOI that the lack of attention to crop residue management or crop diversification mean there is unlikely to be any substantial improvement in crop residue burning this winter.

The Commission for Air Quality Management, which was formed last year, was allocated ₹17 crore as regulator for air quality management in Delhi and adjoining areas. 

In February 2020, the government had allocated ₹4,400 crore for 42 urban agglomerations based on the 15th Finance Commission’s interim report. The first tranche of ₹2,200 crore was released in November 2020. In her Union Budget speech for 2021-22, finance minister Nirmala Sitharaman had announced ₹2,217 crore as the second tranche based on the XV FC recommendation. The entire amount was disbursed to the cities in 2020-2021.

Toxic fumes: Polluting paper mills owe millions to residents of Muzaffarnagar alone

Paper mills in north India are emitting toxic fumes by burning waste paper (imported form USA and Canada) containing plastic impurities three times the permissible limit, as they fail to transition to cleaner fuel, reported the Quint. Plastic incineration is known to be 4,100 times more toxic than wood combustion. The report estimated the health and social costs for the residents of UP’s Muzaffarnagar (one of the worst hit by mill emissions) alone between $250 million to $500 million annually, according to the EU- and OECD-supported ‘polluter pays principle’.  

Earlier, the mill owners told the Supreme Court they required nearly Rs15 crore a day and investment of Rs40-100 crore to convert units from coal, biomass and paper to PNG. The mills said they have installed Online Continuous Emissions Monitoring Systems (OCEMS) to stick to pollution control norms, but the data is not available to citizens, the Quint report said. 

Centre allocates Rs10,000 crore for 500 compressed biogas plants

India announced 500 new ‘waste to wealth’ plants under Galvanizing Organic Bio-Agro Resources Dhan scheme (GOBARdhan) in the Union Budget 2023.  The plants will promote a circular economy in the country, finance minister Nirmala Sitharaman said.  “These will include 200 compressed biogas (CBG) plants—75 in urban areas—and 300 community or cluster-based plants at a total investment of Rs10,000 crore,” Sitharaman said. In due course, a 5% CBG mandate will be introduced for all organisations marketing natural and biogas, the FM said. For collection of biomass and distribution of biomanure, appropriate fiscal support will be provided.

Centre pledges more funds for scrappage policy to boost new and cleaner vehicles

Finance minister Nirmala Sitharaman, in her budget speech, said more funds have been allocated now to support effort to scrap old vehicles under the central government. States will also be supported to help them scrap old vehicles and old ambulances, she said. India announced a scrappage policy last year with a target of phasing out vehicles older than 15 years to boost new car sales and clean-energy vehicles.  From April 23, the government plans to scrap 9 lakh vehicles owned by central and state governments. As per the scrappage policy, central and state governments will provide 25% tax rebate from road tax for vehicles that are purchased by scrapping old vehicles.  

Parts of India, China hotspots of nitrate radicals which spike up heart-threatening ozone: Study 

New research found hazardous levels of nitrate radicals that could increase amount of ozone and PM 2.5 (both bad of health of heart) in the air in some parts of India and China. Nitrate radical is an oxide of nitrogen that consists of three oxygen atoms bound to a nitrogen atom, reported the Indian Express. The newspaper wrote that while cities in Europe and the United States have experienced a decline in the night-time production of nitrate radicals, parts of China and India have become hotspots and experienced a rapid increase. 

Express quoted one of the co-authors Zongbo Shi saying that nitrogen oxides are reactive gases that regulate the formation of air pollutants, including ozone and PM2.5 particles. Nitrate radicals oxidise gas pollutants such as volatile organic compounds(VOCs), which then generate ozone and secondary organic aerosol, which deteriorates air quality. Ozone is an air pollutant that affects human health and crop yield. Secondary organic aerosol is an important component of PM2.5. 

Scientists in London find Arsenic in smoke from burning wood

In a survey scientists found arsenic among the chemicals from wood smoke in London. The survey revealed that about 9% of people who burned wood at home were burning waste wood from construction sites. Researchers asked 30 men to grow beards for two weeks, then shave and collect the hair for analysis. Arsenic in their bodies would be incorporated into their growing beard forming a record of their exposure.

The study said that aside from cigarette smoking, the biggest factor that affected arsenic in the men’s beards was the frequency of wood-burning smells in their neighbourhood, suggesting that nearby wood-burning was a main exposure route. More arsenic was also found in the beards of men who burned wood offcuts.

With ALMM in place, India would take seven years to achieve the target if the entire module supply came from domestic manufacturers. Photo: Ministry-of-Science-and-Technology_GOI_wikimedia-Commons

Govt lifts Approved List of Module Manufacturers (ALMM) mandate for two years

Solar developers will be exempted from procuring solar modules only from the Approved List of Module Manufacturers (ALMM), as India has put the ALMM policy on hold for two years. Power minister RK Singh said the existing domestic manufacturing capacity is not enough to meet India’s solar targets. Also, the country has been dragged to the WTO over the ALMM scheme. “India has 70 GW of solar capacity under implementation but the manufacturing capacity for 10 GW,” Singh said. India would take seven years to achieve the target if the entire module supply came from domestic manufacturers. “We can’t wait for seven years. Incidentally some countries have gone to WTO against ALMM, we shall fight it there,” Singh said.

The ALMM regime was implemented two years ago, along with 40% Basic Customs Duty on modules to protect and boost domestic module manufacturers. But the ALMM pushed up the prices of even domestic modules because of immense demand-supply gaps. 

The developers have warned that once they exhaust the stock they imported before implementation of ALMM, “the country will see a virtual pause in solar capacity addition”, Mercom reported. 

However, solar manufacturers in India said ALMM mandate is crucial to protecting investments into domestic PV manufacturing, reported PV Magazine. The Indian solar manufacturers lobby told the portal that improving domestic solar manufacturing is expected to bring $30 billion (Rs2.3 lakh crore) to domestic manufacturers in revenues by 2030 (by selling 150 GW at Rs15/Wp). The news portal wrote that ALMM list features 83 solar module manufacturers totaling 20.98 GW capacity.

“Green growth” budget: Rs35,000 cr for oil and gas ministry to meet net-zero 2070 goal

The Union Budget 2022-23 pledged ₹35,000 crore to the ministry of petroleum and natural gas to invest in green technology to meet net-zero target, clean up the country’s economy and create jobs. In her speech, finance minister Nirmala Sitharaman said the government is implementing “many programmes for green fuel, green energy, green farming, green mobility, green buildings, and green equipment, and policies for efficient use of energy across various economic sectors.” Such “green growth efforts” will help cut carbon intensity of the economy and provide green job opportunities, she said. 

The government allocated Rs8,300 crore to build inter-state transmission system for evacuation and grid integration of 13 GW renewable energy from Ladakh. The budget also included Viability Gap Funding for 4GWh of battery energy storage system (BESS), which could be close to Rs3,500 crore, Financial Express reported. The Centre also allocated Rs19,700 crore under the Green Hydrogen Mission and a Green Credit Programme. The budget reiterated the Green Hydrogen Mission goal of 5 million metric tonne by 2030, with an allocation of Rs19,744 crore.

Experts said for RE the budget was a mixed bag. “Is the government signaling developing more strategic gas reserves or gas infrastructure development or helping OMCs tie up with the loss on account of high oil and gas prices?” wrote IEEFA’s Vibhuti Garg.

CEA 2022 data: RE generation much lower than the average installed RE capacity?

According to the data from the Central Electricity Authority for 2022, while India appears on track for achieving installed capacity of electricity generation from non-fossil fuel-based sources, actual generation from such sources is more volatile and much lower, HT reported. According to the newspaper, renewable installed capacity averaged 41.5% from January to December last year, growing consistently every month. However, generation from renewable sources averaged 29.2% from January to November (latest available data), with great month-wise variability.

Solar power accounted for 15% of the total installed power capacity, and 37% of the total installed RE capacity, Mercom reported. Last year, India confirmed to the United Nations Framework Convention on Climate Change that by 2030 it will reduce the emissions intensity of its Gross Domestic Product (GDP) by 45% from 2005 levels and source about 50% of its energy requirement from non-fossil fuel-based sources. 

European Investment Bank commits 1 billion euro funding for green hydrogen projects

The European Investment Bank (EIB) will join the India Hydrogen Alliance (IH2A) to boost large-scale green hydrogen hubs and projects across India with an estimated funding of one billion euros, subject to Indian government and EIB approvals, reported ET. The new EIB-IH2A memorandum of understanding will enable the European bank to invest more in green hydrogen. The bank said they are exploring a credit facility with the Indian government to provide investments to the green hydrogen sector that will help India to commercialise and reduce the cost of green hydrogen. Industry experts told the newspaper that the funding for large-scale green hydrogen projects is nascent and EIB’s participation will help solve a key eco-system problem.​​

Supply chain shortage: Wafer, cell prices up by up to 36%

According to new data from the China Nonferrous Metals Industry Association (CNMIA), wafer prices rose by between 24% and 36% this week. Chinese manufacturers are now selling 182 mm/150μm, M10 monocrystalline wafers for CNY (Chinese Yuan) 6.0 ($0.88) to CNY 6.22 each, up 26.4% from the preceding week, PV magazine reported. 

The industry lobby attributed the price increases to higher polysilicon prices and unspecified shortages in the supply chain. Polysilicon prices have risen since the start of the year, after a relatively long period of decline toward the end of 2022, according to CNMIA. 

Andhra Pradesh gets central grant of ₹16,400 crore for five solar parks 

The central government told Parliament it has sanctioned five solar parks at an estimated cost of ₹16,400 crore for Andhra Pradesh with an approved capacity to generate 4,100 MW of power. 

The Centre has already released ₹590.8 crore for the projects. The government provides central financial assistance (CFA) of up to ₹25 lakh per solar park to prepare a detailed project report (DPR), the power minister informed Parliament. The solar park scheme has been extended up to March 2024 for completion, he said.

The Reasi district in the northern union territory of Jammu and Kashmir has been identified as having 5.9 million tonnes of lithium inferred resources, which are yet to be verified.

Large amount of lithium deposits found in India

According to the Geological Survey of India (GSI), large lithium reserves have been discovered in India. The Reasi district in the northern union territory of Jammu and Kashmir has been identified as having 5.9 million tonnes of lithium inferred resources, which are yet to be verified. India had so far relied on importing lithium from Australia and Argentina. Lithium is a crucial component of rechargeable batteries, which power many devices, including electric vehicles, laptops, and smartphones. According to experts, India’s plan to expand the number of private electric cars by 30% by 2030 as part of measures to reduce carbon emissions to combat global warming may benefit from the revelation. Previously, significantly smaller lithium resources were discovered in Karnataka in 2021.

Customs duty waived for machinery required to manufacture lithium-ion cells for batteries

While announcing the 2023–24 budget, finance minister Nirmala Sitharaman stated that to  provide a push to green mobility, Customs duty exemption is being extended to the import of capital goods and machinery required for the manufacture of lithium-ion cells for batteries used in electric vehicles. The FM also added that in order to steer the economy on the sustainable development path, Battery Energy Storage Systems with a capacity of 4,000-megawatt hours will be supported with Viability Gap Funding. A detailed framework for Pumped Storage Projects will also be formulated.

According to experts, the decision to extend the Custom duty exemptions for the production of Li-On batteries is a very good one because it will allow for the domestic expansion of capacity, which has previously been more import-driven due to low volumes and the increased volume of electric vehicles.

Govt vehicles to be replaced with green options to lower expenditure on oil

According to the road transport and highways minister Nitin Gadkari, about 9,00,000 government vehicles will be replaced with electric or alternative fuel models in order to lower the cost of importing crude oil and minimise pollution, the Economic Times reported. Gadkari said that the government vehicles that will be scrapped under the Centre’s vehicle scrappage policy would be replaced by those using cleaner mobility technology. In the budget speech made earlier this month by the finance minister, it was stated that all state and central government-owned vehicles, including buses owned by transport corporations and public sector undertakings that have been on the road for more than 15 years, would be scrapped. The import of fossil fuels worth more than ₹17 lakh crore and the rise in pollution are India’s two main auto industry issues, Gadkari added. 

Tamil Nadu releases revised EV policy with sops for manufacturers and users

The Tamil Nadu government this week released its new EV policy with a substantial overhaul of benefits and incentives to attract investments in the EV sector and accelerate adoption. The policy will see manufacturers receive a full reimbursement of state goods and services tax (SGST), investment- or turnover-based subsidy as well as subsidies on land costs and for advanced cell chemistry manufacturing. Additionally, power purchases from the state-run discoms have been made tax-free for five years. The public too has been provided with incentives in the form of waivers on road tax, registration charges and permit fees in addition to purchase incentives ranging from Rs 5,000 and Rs 10 lakh.

The state is hoping to attract more investments from the EV industry and has included a sweetener in the form of employment incentives which will see the state reimburse employer’s contributions to EPF capped at Rs 48,000 per employee for all new jobs created in the state.

Chandigarh to stop registering non-electric 2-wheelers from Feb 10

The Chandigarh administration announced that it would stop registering non-electric two-wheelers as of February 10. According to the order, this was done to fulfill the goal of environmentally friendly and sustainable mobility in “City Beautiful”. The Chandigarh administration had in September notified the Electric Vehicle (EV) Policy 2022.  A waiver on road tax on electric and hybrid vehicles has been envisaged in the policy to encourage electric vehicles. At the same time, to limit and discourage non-electric vehicles, provision for capping on their registration has been made in the policy. According to the policy, a reduction of 10% in four-wheelers and 35% in two-wheelers from the previous year has been targeted for the first year by limiting their registration in the city. Beginning on April 1, 2023, non-electric two-wheeler registration will be accepted within the allotted limitations for the fiscal years 2023–2024.

FAME II : Industry expects further extension, govt probes key industry players 

While Budget 2023 just doubled the allocation for the FAME-2 scheme for FY24, the auto industry now wants a further extension of subsidy in an attempt to give the EV industry the required push in the country. The industry members said that the subsidy is needed for at least three more years for sustainable growth. However, the government is currently probing four key players for allegedly mispricing their electric two-wheelers to make them eligible for subsidy under FAME II. These players are Ola, Ather, TVS Motor and Vida. It is estimated that the EV makers may have falsely claimed at least ₹300 crore subsidy. While the retail market share and sales of electric vehicles reported a decline in January 2023, Union Minister of Road Transport and Highways, Nitin Gadkari denied reports of alleged proposals advising banks to offer cheaper car loans on EVs. Industry players said the dip in sales is due to the halt of FAME-II (Faster Adoption and Manufacturing of Hybrid and Electric Vehicles) subsidies, rising cost of EVs, and supply chain constraints. Gadkari confirmed that the ministry is not considering any such proposal at this time. 

According to the Kremlin, Russia discussed its plan to cut production with some members of the OPEC+ alliance, in which it is a key member leading the group of non-OPEC producers.

Russia announces 5% oil output cut in March, OPEC+ to keep its production targets unchanged

Russia shocked oil markets last week by announcing a voluntary production cut of 5,00,000 barrels per day (bpd) starting in March. But the OPEC+ group currently doesn’t plan to change the course in its oil production targets, two delegates from the OPEC+ alliance told Reuters. According to the Kremlin, Russia discussed its plan to cut production with some members of the OPEC+ alliance, in which it is a key member leading the group of non-OPEC producers. Russia, however, had not formally consulted with OPEC+ on its plans before announcing the decision, a Russian government source told Reuters.

Last week, OPEC+ kept its production targets unchanged in a widely expected ‘wait-and-see’ approach to supply just ahead of the EU ban on Russian diesel and other petroleum products. Supply from Russia, demand in China, the state of the economies in the coming months, and the trend in interest rate hikes in the US and other major mature economies will be the key decision drivers for OPEC+ this year. As will be the price of oil on the markets—the group led by Saudi Arabia and Russia is unlikely to leave oil trading below $80 per barrel.   

European Commission proposes mass EU exit from Energy Treaty to accelerate climate action

The European Commission proposed a joint EU exit from the 1998 Energy Charter Treaty (ECT), over fears its protections for fossil fuel investments will slow down climate action. The treaty was designed to protect companies in the energy industry by allowing them to sue governments on policies affecting their investments. But in recent years it has been used to challenge policies that require fossil fuel plants to shut down. At present, France, Germany, the Netherlands, Poland and Spain have announced plans to quit the ECT, increasing pressure on Brussels to coordinate an EU-wide withdrawal. However, Switzerland won’t follow EU out of the ECT since it is not an EU member state. This has sparked fears that fossil fuel companies will restructure their investments through Switzerland in order to keep suing governments over climate action.

India predicts 500% increase in domestic natural gas demand, plans for expansion of oil and gas sectors 

India intends to increase oil refining volumes to 450 million tonnes a year by the end of the decade, from about 250 million tonnes, and will also boost liquefied natural gas import capacity. Natural gas should account for 15% of India’s electricity generation by 2030 from about 6% now, while the country’s share of global oil demand will ultimately more than double to 11%.

India’s gas demand is expected to rise 500% due to the rapid pace of development, while its share of global oil demand would more than double. A recent OPEC report expects India to be the largest contributor to incremental demand, with the country expected to add some 6.3 million bpd until 2045. Right now, India relies on imports for some 85% of its energy needs, with India and China being the largest importers of oil and gas in the world. Going ahead, India will remove significant restrictions on exploration, reducing “no-go” areas for E&P companies. India also plans to expand its refining capacity, along with its LNG import capacity by 2030. 

India aims to achieve 1,017 MT coal production in FY 2023-24

India’s coal production target has been fixed at 1,017 million tonnes for the financial year 2023-24. The target has been divided among state-owned Coal India Limited (CIL), which has been tasked with producing 780 million tonnes (MT), Singareni Collieries Company Ltd (SCCL) with 75 MT, and 162 MT for captive and commercial mines. Coal minister Pralhad Joshi said the steps were being taken by the Centre to augment the coal output in the country by engaging mine developers and operators. To achieve this goal, a thorough review was conducted by Coal Secretary Amrit Lal Meena with all coal companies. The review revealed that 290 mines are currently operational in CIL, with 97 of them producing more than one MT per year. It is anticipated that CIL will exceed the 700 MT goal set for the current fiscal year and, as a result, will reach 780 MT for the year 2023–2024. More than 80% of domestic coal production is attributed to CIL.

The Adani Group offers coal cargoes at discount to boost liquidity

The Adani Group is offering coal cargoes at a discount, suggesting that the group’s traders are eager to sell the coal quickly and potentially boost the liquidity at Adani Group, according to people familiar with the matter. The group’s traders are offering to sell several coal shipments from Australia and Indonesia at discounts of about 4% relative to Asia’s price benchmarks. While Adani hasn’t spelled out its motivation for offering discounts and it’s not the only producer doing so, the move suggests the firm is eager to offload the cargoes swiftly. The Indian conglomerate has had a difficult few weeks after short-seller Hindenburg Research, in a report, accused the group of gross market manipulations, leading to a massive wipe-out of the market capitalizations of the group’s listed units.

Energy crisis: South Africa’s chronic power outages trigger National State of Disaster 

After months of rolling blackouts and a raging energy crisis, South African President Cyril Ramaphosa declared a national state of disaster. The power cuts by state-run utility Eksom are daily and are reportedly the worst in its history, and are expected to cut into the country’s economic growth by 2 percentage points. The country has suffered some form of chronic power outages for the past 15 years. This energy crisis is largely brought on by supply shortages due to aging coal-fired power plants. Eksom has 14 coal-fired power stations responsible for supplying 80% of South Africa’s power. Many are old, most have not been maintained properly, and the company is in deep debt. South Africa has grand plans to retire 12GW of its coal-fired power fleet within the next seven years, but the country’s newest plants, Kusile and Medupi were fired up last year and were plagued with severe cost overruns and are still not operating at full capacity.

French giant TotalEnergies halts investment in Adani’s $50-billion hydrogen project

French giant TotalEnergies put on hold a planned investment in Adani Group’s $50-billion hydrogen project. This move comes after US short-seller Hindenburg Research in a report, accused the group of gross market manipulations. The partnership with the French giant to take a 25% stake in the hydrogen venture of the Adani Group and invest $50 billion over 10 years in a green hydrogen ecosystem that includes an initial production capacity of 1 million tonnes before 2030 was announced in June last year. But TotalEnergies has not yet signed a contract. TotalEnergies is one of the biggest foreign investors in Adani’s business empire and had previously taken stakes in the group’s renewable energy venture, Adani Green Energy Ltd, and city gas unit Adani Total Gas Ltd.

New coal blending order by govt will raise DISCOMs’ cost by Rs11,000 crore 

The government directive mandating power producers to increase the blending of imported coal to 6% of their requirement until September will add up to Rs11,000 crore towards power purchase cost for distribution companies in the first half of FY24, according to a report by Crisil Market Intelligence & Analytics. At the present blending rate of 5.4% applicable this fiscal, the distribution companies or DISCOMs will incur an additional cost of Rs42,000 crore on their power purchase bills this fiscal as this has pushed up the variable cost of power for utilities by Rs0.226 per unit. The latest directive is aimed at averting a power crisis from coal shortage this summer due to domestic supply issues.  

Power ministry asks utilities to not retire aging thermal power plants till 2030

Due to a surge in electricity demand, India asked utilities to not retire aging thermal power plants till 2030, just over two years after committing to eventually phase down the use of the fuel. “It is advised to all power utilities not to retire any thermal (power generation) units till 2030 and ensure availability of units after carrying out renovation and modernisation activities if required,” the Central Electricity Authority (CEA) said in a notice dated Jan 20 sent to officials in the federal power ministry. The CEA, which acts as an advisor to the ministry, has asked to increase the lifetime of such units considering the expected demand scenario.