Indian Economy- Infrastructure- Energy Sector- UPSC/ HCS/ RAS/ UPPSC
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Indian Economy- Infrastructure- Energy Sector- UPSC/ HCS/ RAS/ UPPSC

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Indian Economy- Infrastructure- Energy Sector- UPSC/ HCS/ RAS/ UPPSC

We have already started with the topic of the Indian economy- infrastructure and have covered three elements of infrastructure i.e., Roadways, Railways, and Waterways. Check Indian Economy- Infrastructure, before starting part 2.

So let us cover the last element of Infrastructure i.e., the Energy sector.

Energy- Mining inudstry

Indian Economy, Infrastructure, Energy Sector, UPSC, HCS, RAS, UPPSC,

Coal Sector in India:

  • India is the third-largest producer of coal in the world but also a third-largest importer of coal.
  • Coal accounts for around 70% of the country’s power generation and energy security can be guaranteed through assured coal supply.
  • To ensure this, coal mining was nationalized in 1973 by Coal Mines (Nationalisation) Act, 1973.
  • Following nationalization, only state-owned CIL was allowed to sell coal.
  • From 1993-2014, 204 coal mines/ blocks were allocated to the various government and private Companies under the provisions of the Coal Mines (Nationalisation) Act, 1973. But, later Supreme Court of India canceled these allocations in 2014.
  • Prior to the enactment of the Coal Mining (Special Provisions) Act in 2015, coal mines were never given out through bidding. Companies in sectors like steel, cement, power, coal-to-gas, and coal-to-liquid used to apply for coal blocks, and rights were given to them after scrutiny by an inter-ministerial committee.
  • The government allows 100% FDI under the automatic route in coal mining and associated infrastructure.

Current situation of the mining industry:

  • Key to ensuring the country’s energy and raw material security: The mining industry serves as the base for the power sector with around 72% of India’s current power being generated through coal. Further, minerals are the basic building blocks of manufactured products and many agri-inputs.
  • Huge imports: Despite having the world’s fourth-largest coal reserves, India imports huge amounts of coal.
  • Underdeveloped relative to its enormous potential: Reduced demand for power from conventional sources, decreased growth in cement, iron, and steel sectors and approval processes resulted in a scenario where even if mines were allotted, the extraction of minerals would be limited thereby resulting in stagnation of development of mines.

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Provisions of National Mineral Policy 2019:

  • Introduction of Right of First Refusal for Reconnaissance permit (RP)/ Prospecting license (PL) holder.
  • Encouraging the private sector to take up exploration.
  • Auctioning in virgin areas for composite RP cum PL cum ML on a revenue share basis.
  • Encouragement of merger and acquisition of mining entities and transfer of mining leases and creation of dedicated mineral corridors to boost private sector mining areas.
  • The 2019 policy proposes to grant the status of industry to mining activity to boost financing of mining for the private sector and for acquisitions of mineral assets in other countries by the private sector.
  • It also mentions that a Long-term import-export policy for minerals will help the private sector in better planning and stability in business.
  • The policy also mentions rationalizing reserved areas given to PSUs that have not been used and putting these areas to auction which will give more opportunity to the private sector for participation.
  • The policy also mentions making efforts to harmonize taxes, levies & royalty with world benchmarks to help the private sector.

Mineral Laws (Amendment) Bill, 2020:

  • The Bill replaces the ordinance for amendment of the Mines and Minerals (Development and Regulation) Act, 1957, and the Coal Mines (Special Provisions) Act, 2015 which was promulgated on 11th January 2020.

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Key provisions of the Bill:

Removal of restriction on end-use of coal:

  • Currently, companies acquiring Schedule II and Schedule III coal mines through auctions can use the coal produced only for specific end uses such as power generation and steel production.
  • The Bill removes this restriction on the use of coal mined by such companies. And thus companies will be allowed to carry on coal mining operation for own consumption, sale or any other purposes, as may be specified by the central government.

Eligibility for auction of coal and lignite blocks:

  • The Bill clarifies that the companies need not possess any prior coal mining experience in India in order to participate in the auction of coal and lignite blocks.

Composite license for prospecting and mining:

  • Currently, separate licenses are provided for prospecting and mining of coal and lignite called prospecting license and mining lease respectively. Prospecting includes exploring, locating, or finding mineral deposits.
  • The Bill adds a new type of license called prospecting license-cum-mining lease. It will be a composite license providing for both prospecting and mining activities.

Advance action for auction:

  • Under the MMDR Act, mining leases for specified minerals (minerals other than coal, lignite, and atomic minerals) are auctioned on the expiry of the lease period.
  • The Bill provides that state governments can take advance action for the auction of a mining lease before its expiry.

Transfer of statutory clearances to new bidders:

  • The Bill provides that the various approvals, licenses, and clearances are given to the previous lessee will be extended to the successful bidder for 2 years.
  • During this period, the new lessee will be allowed to continue mining operations. However, the new lessee must obtain all the required clearances within this 2 year period.
  • Currently, upon expiry, mining leases for specific minerals (other than coal, lignite, and atomic minerals) can be transferred to new persons through auction. This new lessee is required to obtain statutory clearances before starting mining operations.

Prior approval from the  central government:

  • Under the MMDR Act, state governments require prior approval of the central government for granting reconnaissance permits, prospecting licenses, or mining leases for coal and lignite.
  • The Bill provides that prior approval of the central government will not be required by the state government in granting licenses for coal and lignite in certain cases. These include cases where the allocation has been done by the central government and the mining block has been reserved to conserve a mineral.
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  • Prakash stands for Power Rail Koyla Availability through Supply Harmony.
  • The portal aims at bringing better coordination for coal supplies among all stakeholders- Ministry of Power, Ministry of Coal, Coal India, Railways, and power utilities.
  • The portal is developed by NTPC and sources data from different stakeholders such as Central Electricity Authority, Centre for Railway Information System, and coal companies.
  • It helps in mapping and monitoring the entire coal supply chain for power plants.

Energy- Gas Economy

Indian Economy, Infrastructure, Energy Sector, UPSC, HCS, RAS, UPPSC,

City Gas Distribution (CGD) Networks:

  • CGD network is an interconnected network of pipelines to make the supply of natural gas to domestic, industrial, or commercial premises and CNG stations in specified Geographical Areas.
  • It is part of India’s attempt to cut carbon footprint by raising the share of gas in the energy basket from 6% to 15% by 2023.
  • Draft Policy suggests standardized charges and time-bound permission for setting up CGD networks, conversion of public transport fleet to CNG, creation of green corridors for intercity traffic, and fiscal incentives for gas-driven mobility.
  • Under the Petroleum and Natural Gas Regulatory Board (PNGRB) Act 2006, PNGRB grants the authorization to the entities for developing a City Gas Distribution Network (including PNG Network) in a specified Geographical Area of the country.
  • CGD sector has four distinct segments: CNG predominantly used as auto fuel and Piped Natural Gas used in domestic, commercial, and industrial segments.

North-East Gas Grid Project:

  • It is a part of “Hydrocarbon Vision 2030 for North-East India” which outlines steps to leverage the hydrocarbon sector for the social and economic development of the northeast region.
  • NEGG project is being implemented by Indradhanush Gas Grid Limited, a Joint Venture company of five CPSEs (GAIL, IOCL, ONGC, OIL, and NRL).
  • It will cover 8 states of the North-Eastern region.
  • It will enhance the availability of natural gas in the North East and ensure an uninterrupted supply of natural gas to industries, domestic consumers, and transport purposes to establish a clean fuel-led economy.

Energy- Power Consumption

Indian Economy, Infrastructure, Energy Sector, UPSC, HCS, RAS, UPPSC,

Smart Meters:

  • They are part of an advanced metering infrastructure solution that measures and records electricity use at different times of the day and send this information to the energy suppliers.
  • They allow two-way communication between energy providers and consumers of electricity.
  • It reduces the operational costs of energy companies by improved billing.
  • It will allow consumers to pay at their own convenience, requirement, and consumption.


  • Indian Electricity Grid Code (IEGC) is a regulation made by the Central Electricity Regulatory Commission (CERC) under Electricity Act, 2003.
  • The IEGC lays down the mandatory rules, standards, guidelines to be followed by various persons and participants in the power system to plan, develop, maintain and operate the power system.

Must Run Status:

  • An expert group reviewing the Indian Electricity Grid Code (IEGC) has asserted that renewable energy power plants shall be treated as “must-run” and electricity from these plants shall not be curtailed for any commercial reasons.
  • A ‘must run’ status means that concerning power plant must supply electricity to the grid under all conditions.

Wind Energy:

  • India has high wind energy potential - 302 GW at 100 meters hub height and 695 GW at 120 meters according to the National Institute of Wind Energy.
  • Tamil Nadu has the highest wind energy capacity followed by Gujarat, Maharashtra, Karnataka, Rajasthan, and Andhra Pradesh.
  • In 2015, India announced an ambitious goal of installing 60 GW of wind energy by December 2022.

Ultra Mega Solar Power Projects:

  • The scheme envisages setting up at least 25 Solar Parks and Ultra Mega Solar Power Projects each with a capacity of 500 to 1000 MW targeting over 20,000 MW of solar power installed capacity within a span of 5 years starting from 2014-15.

Ultra-Mega Renewable Energy Parks:

  • The Ministry of New and Renewable Energy (MNRE) aims to set up Ultra Mega Renewable Energy Parks of a total of 50 GW in Gujarat and Rajasthan.
  • The initiative could be one of the largest renewable energy investment programs in the world.
  • Khavda in Gujarat and Jaisalmer in Rajasthan have been identified for RE parks of 25 GW each.
  • The land would be made available for setting up solar, wind, and wind hybrid plants, and the proposed parks would have received necessary clearances from the respective state governments and the Ministry of Defence.
  • MNRE has undertaken a scheme to develop UMREPPs under the existing Solar Park Scheme.
  • The objective of the UMREPP is to provide land upfront to the project developer and facilitate transmission infrastructure for developing RE-based UMPPs with solar/ wind/ hybrid and also with a storage system if required.
  • The implementing agency of the UMREPPs may be a Special Purpose Vehicle in form of a Joint Venture Company to be set up between Central PSU and any State PSU or State Utility or Agency of the State Government or an SPV fully owned by any CPSU or an SPV fully owned by any State PSU/ State Utility/ Agency of the State Government.

Renewable Energy Management Centre (REMC):

  • REMCs were set up as part of the Green Energy Corridor project which was aimed to integrate renewable energy into the National Grid Network.
  • REMCs are equipped with Artificial Intelligence based RE forecasting and scheduling tools and provide greater visualization and enhanced situational awareness to the grid operators.
  • Government-approved the implementation of REMCs as a Central scheme and had mandated POWERGRID, a Maharatna CPSE as implementing agency. 

Renewable Energy Industry Promotion and Facilitation Board (REIPFB):

  • It will deal with challenges and issues being faced by the Renewable Energy sector due to:
    • Payment delays by state distribution companies
    • Increasing curtailment of projects
    • Renegotiation of power purchase agreements by states
    • Difficulties in land procurement and transmission connectivity.
  • REIPFB will be chaired by Joint Secretary (solar) and have two other joint secretaries of MNRE as members. It will also have representatives from Central Electricity Authority, Central Electricity Regulatory Commission, NTPC, etc.

Renewable Hybrid Energy Systems:

  • A hybrid energy system usually comprises two or more renewable energy sources combined in such a way to provide an efficient system with appropriate energy conversion technology connected together to feed power to the local load or grid.
  • Various types of Hybrid Renewable Energy Systems include a Biomass-wind-fuel cell, a photovoltaic cell array coupled with a wind turbine, a hydro-wind energy system, etc.
  • Hybrid energy systems are inclined towards providing customized power solutions according to the diverse needs of the customer. They were devised to overcome the constraints of standalone systems and fulfill the need for a reliable power source.
  • They are beneficial in terms of reduced line and transformer losses, reduced environmental impacts, increased system reliability, improved power quality, and increased overall efficiency.
  • Hybrid energy systems often yield greater economic and environmental returns than wind, solar, or geothermal stand-alone systems.

Renewable Energy Certificates:

  • REC mechanism is a market-based instrument to promote renewable energy.
  • It was launched as a means for companies and states to produce Renewable Energy without physically setting up renewable power plants.
  • The project developer can sell the energy produced as REC. One REC represents 1 MWh of power produced from a renewable energy source and is tradable at power exchanges (Indian Energy Exchange and Power Exchange of India).
  • It also aims to address the mismatch between the availability of RE resources in the state and the requirement of the obligated entities to meet the Renewable Purchase Obligation (RPO)
  • Under RPO- notified under the National Tariff Policy, 2006, it is obligatory for state-owned distribution companies, open access consumers, and captive power producers to meet part of their energy needs through green energy.

Power Purchase Agreement:

  • It is a contract between two parties, one who generates electricity and one who is ready to purchase electricity.
  • These define all of the commercial terms for the sale of electricity between the two parties including when the project will begin commercial operation, schedule for delivery of electricity, penalties for under delivery, payment terms, and termination.
  • The State governments have entered into such agreements with private renewable energy companies to establish the power plant and sell the power back to the government.

State Rooftop Solar Attractiveness (SARAL) Index:

  • It is released by the Ministry of New and Renewable Energy.
  • It aims to objectively assess states on several parameters critical for establishing strong solar rooftop markets.
  • These parameters belong to five broad categories: Robustness of policy framework, Effectiveness of policy support/ implementation environment, Consumer experience, Investment Climate for the rooftop solar sector, Business ecosystem.

State Energy Efficiency Index:

  • It is developed by the Bureau of Energy Efficiency with Alliance for an Energy-Efficient Economy.
  • It tracks the progress of Energy Efficiency initiatives in 36 states and union territories based on 97 indicators across all demand sectors: buildings, industry, municipalities, transport, agriculture, and DISCOMs.
  • It categorizes states as ‘Front Runner’, ‘Achiever’, ‘Contender’ and ‘Aspirant’ based on their efforts and achievements towards energy efficiency implementation.

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