Maruti's disagreement with M&M, consolidation in city gas, and Dolly Kikon's book — Issue #12
📰 News of the Week
On 29 June, cement-maker Ultratech had raised eyebrows.
The firm had used the Chinese Yuan to pay for a cargo of Russian coal. Last week, not only did the trend spread to other users of Russian coal – like the steel sector – an explanation emerged as well.
Three months back, the Indian government doubled the price of domestic natural gas, shoving the country’s City Gas Distributors into a crisis. At that time, an industry observer told Energy Trends Weekly that consolidation was inevitable. “He expects no more than four or five private sector firms to remain in the sector – Adani Gas, Torrent Power, AG&P, Think Gas and Megha,” we wrote at that time. Over time, he added, a couple of these might also sell out to the rest.
Last week, India saw the first signs of that consolidation. A clutch of firms, including Adani Gas and AG&P City Gas, are looking to acquire Morgan Stanley’s stake in Unison Enviro, a small City Gas distributor with operations in Chitradurga and Davanagere. That is not all. The Economic Times reported last week that AG&P is also readying a Rs 9,000 crore city gas push.
This is interesting. As CarbonCopy had written in September 2020, Unison Enviro was in trouble – like a bunch of other CGD operators -- even before the crisis hit in March.
Here is the nub. India’s coal-based power producers – especially Adani and NTPC -- have been vertically integrating for a while, trying to find efficiencies that will keep them competitive against solar longer. Last week, NTPC acquired Jhabua Power and announced plans to raise Rs 5,000 crore by selling a stake in its renewable energy arm. Gas seems to be going the same way.
Other news. Automaker M&M has big plans for the EV market. The company is launching an electric SUV – a segment it hopes to dominate. The financial model underlying this expansion is interesting.
Like Tata Motors, M&M is also creating a new subsidiary focusing on EVs and drawing investment from development finance institutions. The UK’s British International Investment has invested in M&M. Earlier, Tata Motors had drawn investment from TPG Rise Climate, which invests in climate investments.
Even as these firms bet on EVs, India’s biggest small-car company, Maruti Udyog, stays unconvinced. The company, which announced it would stop selling petrol-powered cars over the next seven to ten years, is less gung-ho about EVs. Instead, it is planning a more accommodative approach that contains hybrid, flex-fuel, bio-fuel and pure electric vehicles.
This divide – on whether the future belongs to EVs or bio-fuels – can also be seen in the Indian government. Bureaucrats and ministers are making equally bullish statements about both.
The news came too that Petronas Hydrogen is planning to invest Rs 32,000 crore in Karnataka – and that India’s states are crafting EV policies trying to woo companies. These reports must be read in conjunction with a sharp analysis by The Print’s Rama Lakshmi. India’s states, riven between the BJP and opposition parties, are starting to resemble the US’ red-state-blue-state mindset. Given its federal structure, India can also be seen as a mass of state-level democracies, each with its characteristics. Democratic decay, too, is unevenly distributed across them.
Will companies prefer a state government with authoritarian tendencies? Or one where the rule of law is relatively functional? Up on such questions (also), hinges the future energy map of India.
Yet other news. Ecologist Sharad Lele scoffed at India’s INDC – that the country can sequester 2.5 to 3 Gigaton CO2 in fifteen years – calling them both unrealistic and ignorant of “the multiple roles that forests perform in a densely populated and historically forest-dependent society such as India”.
Elsewhere, clarity emerged on why north India is seeing no rain while the north-east is flooded. One reason, said RK Jenamani, a senior scientist at the India Meteorological Department, is the “absence of easterly winds that usually push the monsoon clouds onto the Indo-Gangetic plains”.
The Ongoing Energy Shock
The multiple crises sparked by the Russia/Ukraine war headlined this newsletter through June (See this, this, this and this). July looks set to continue down that track.
Last week came more reports on how the energy shock is affecting the west. High energy costs are telling on US production. Germany, cognizant that it’s now seeing “economic warfare”, in the words of economy minister Robert Habeck, is “rationing hot water, dimming its street lights and shutting down swimming pools as the impact of its energy crunch begins to spread from industry to offices, leisure centres and homes.”
Last week also came reports on how the west is trying to cope. France is nationalising EDF. Germany is buying more Gas from the USA. In response, trying to create alternatives to Russian supply, the west is pressing ahead on new natural gas infrastructure once more.
A year ago, we were told that the world was building more LNG import-export terminals than needed – and that these could become “multi-billion boondoggles”. Russia’s invasion of Ukraine has upturned all those analyses – and brought back the good times for Gas exporters. Cheniere, for instance, wants pollution norms to be relaxed so that it can export more. To be fair, though, the EV industry is also making similar demands.
In some ways, then, the world is regressing.
The US is exporting gas again. As Europe buys gas from Africa, the continent faces an energy crunch. That is just the start. The continent might also invest in fossil fuel infrastructure, which, given Europe’s faster progress at decarbonisation, might indeed become multi-billion boondoggles.
Elsewhere in the world, too, there is disquiet. Here is Japan, where the crisis has revived debate over nuclear power, long considered a touchy subject since the 2011 Fukushima nuclear disaster. Here is Pakistan. The country expanded its power grid on the (unwise) assumption that gas would always stay affordable. It’s now unable to buy gas in the market. And here is Ghana.
In other ways, we are seeing a fraying of the world order. Saudi Arabia is hiking oil prices everywhere except in the USA. This is odd. Surely these hikes result in countries buying less from Saudi and more from Russia – like India and China.
🎙️ Climate Podcast this Week
The Most Hated Solar Company in America. This is old. Circa June, 2022. But interesting.
📖 Climate Long Reads
“By the beginning of 2022, it was clear that Sri Lanka’s economy, in particular its reserves of foreign currency, was facing an unprecedented catastrophe. The country owed $51bn in foreign loans, of which it was expected to pay back almost $7 billion that year, but it was running out of dollars and had been locked out of all international markets to borrow anymore.” The Guardian takes a look at the country’s spectacular ejection of the Rajapaksas this week.
Natural Gas drives geopolitics today. A long-read from Bloomberg.
📚 Book of the Week
Living with Oil and Coal: Resource Politics and Militarization in Northeast India
, by Dolly Kikon
A long time back, this reporter travelled to Manipur and found himself stunned. A hydel project had to be built, so AFSPA (quasi-military rule) was declared. Elsewhere, an oil exploration tender had been granted to a company which runs a healthcare business apart from being the Indian franchisee of a fast-food chain. Neither the government nor the company was willing to comment on how the latter had been chosen.
More recently, we had the instance of Baghjan, where an oil well went up in flames in June and was stopped only in November – after destroying 55% of the biodiversity in the area (the well is near the Dibru Saikhowa National Park). Private contractors were handling the well in question.
Hardwired into such instances are questions about how India views the northeast – as a frontier for resource extraction – and how local communities respond to such pressures. And so, Kikon’s book. An anthropologist, she looks at hydrocarbon politics in the region.
A larger review here.