ANNUAL REPORT 2004-2005
Dear Shareholders and friends of IFSL,
I have great pleasure and pride in addressing you in my maiden statement as
Chairman of the IFSL. Pleasure, because we are all part of a Company which
is in one of the most attractive industry segments. Pride, because in a
relatively short time-span, IFSL has taken significant strides in
implementing greeenfield renewable energy projects, which are environment
friendly. I take this opportunity to outline the global and domestic
perspective for the power industry and the role that we envisage for
ourselves within it.
The role of energy in economic and social development cannot be
overemphasized. Fossil fuels (coal, oil and natural gas) will continue to
dominate the energy supply situation for the foreseeable future across the
globe. Much of the increased demand will be led by developing countries who
are reporting rapid economic growth and rising population. Therefore, a
sharp increase in energy services is required to improve the standard of
living of growing populations in such countries. I foresee that a
significant portion of this increased supply will come from renewable
sources, because they help both in the containment of environmental impact
and ease the pressure on conventional energy sources.
THE INDIAN SCENARIO:
Low per capita consumption presently half that of China (475 kWh per annum
vs. 1,020 kWh per annum). This, in itself represents a huge demand driver.
In addition, accelerated industrial growth point towards the requirement of
almost twice the present generation capacity in our country.
Fortunately for us, almost 89 per cent of our energy structure in power
generation is from indigenous sources. Only 11 per of electric power
generation is dependent on oil and natural gas which is mostly imported at
enormous cost. 2-3 million tonnes of oil contribute one per cent of this,
while the balance ten per cent is coming from high cost gas supplies.
The consumption matrix of India shows a dependence on coal as a primary
source of energy. However, coal being a fossil fuel, is limited in supply.
Moreover, oil and gas prove to be expensive energy sources given our import
dependence. Also, these sources emit a huge volume of carbon dioxide which
is detrimental to the ecological system in the long run.
Therefore, in my opinion, sustainable energy sources such as hydro power
and renewable energy (presently accounting for only five per cent of total
energy supply) assume importance and offer potential for growth.
The government has also recently become conscious of these impending
realities. This cognizance is reflected in the recent policy initiatives
such as the Electricity Act and fiscal incentives announced for investment
in the energy sector. It is interesting to note that the Government's Plan
allocation for 2005-06 for the power sector stands at almost Rs.21,914
crore. This comprises Rs.3,000 crores of gross budgetary support and
Rs.18,914 crores of internal and external budgetary resources. Rs.1100
crores have been allocated for rural electrification alone. These figures
imply aggressive investment in the power sector in India. However, it would
entail increased private participation and a greater reliance on non-
conventional energy sources.
RENEWABLE ENERGY AS A VIABLE ALTERNATIVE:
The potential for renewable energy in India is estimated at a staggering
100,000 MW. The areas of solar, wind and biomass energy seem poised for
aggressive growth given the greater environmental consciousness to reduce
carbon emissions and impetus on conserving fossil fuel. However, only a
fraction of the aggregate potential in renewables has been utilised so far.
The governmental shift in focus was initiated in 1992 by the Ministry of
Non-conventional Energy Sources (MNES), when it announced a new strategy
and action plan to replace subsidy-driven programmes with incentive driven
ENERGY FROM MUNICIPAL WASTE - A WIN-WIN PROPOSITION:
Urban wastes are a menace worldwide, but yet represent a potential source
of untapped energy. Class-I cities generate an estimated 27 million tonnes
of solid waste annually and almost 4400 million cubic metres of sewage. The
quantity of industrial waste is also very large. Converting this waste to
energy or to other useful by-products (such as compost) will help reduce
the volume of wastes to be handled (to almost 90 per cent). It will also
liberate precious land, reduce waste disposal cost and lower health risks.
As such, waste to energy represents a win-win proposition. The estimated
energy potential of municipal waste in the country is almost 1700 MW. This
translates into potential revenues of over Rs. 5000 crones in the
prevailing context representing an attractive opportunity for a company
such as IFSL.
IFSL - VISIONARY THOUGHT, PIONEERING INITIATIVES:
IFSL is a full service organisation providing end-to-end turnkey solutions
in the field of generation of energy from non-conventional energy sources.
IFSL aims to bE~ the leading Indian non-conventional energy provider in
three years. The avenues being targeted are municipal solid waste, rice
husk for biomass power, hydro and wind energy. The immediate focus,
however, is on the waste-to-energy segment.
Besides, environment friendly energy production will enable the company to
generate substantial revenue from the sale of carbon credits. Under the
Clean Development Mechanism or Emission Trading, the cash flow from such
sale is expected in the region of Rs.75 mn per annum till 2016.
Our pioneering status allows us to extract first mover advantages and
create a market for environment friendly energy production not only in the
country but globally. The near term thrust will make IFSL a major player
across South Asia and the Middle East. In the long term, IFSL will have a
substantial presence in Africa, South America and Europe.
IFSL has made considerable progress in combining its focus on world-class
technology with cost effective operations and is confident that the sector
will be able to replicate the Indian IT success story. Our management is
powered with an ideal mix of highly qualified and successful professionals
with a visionary approach and aggressive project management capabilities.
CREATING DOMESTIC AND PAN-ASIAN CAPABILITIES:
IFSL has already made significant progress in the establishment of waste-to
energy projects across India. These projects will be operational from the
next financial year and will account for significant revenues in the
The company, through its wholly owned subsidiary, has already signed an
agreement with the Kalyan Dombivili Municipal Corporation for the treatment
of 500 tonnes of waste daily to produce 8 MW electricity. The necessary
agreements related to waste supply, land lease and power purchase
agreements have already been signed with the KDMC. The project is also
eligible for sale of carbon credits. The project is expected to be
operational in October 2006.
IFSL's vision and foresight has been reinforced by its successful
international foray. The company seeks to create and manage a presence in
high-growth regions of Asia.
The company's presence has already been established in Indonesia, with the
bagging of a prestigious 1000 tonnes per day waste to energy project to be
implemented on a turnkey basis valued at USD 48 million. On completion,
this would yield 10 MW of electricity apart from 350 tons per day of bio
fertilizer. The project is being executed through an exclusive technology
sharing arrangement with ENTEC Biogas Gmbh, leading global technology
company from Austria. IFSL is negotiating other similar projects in
Indonesia as well as, Qai and Teheran.
I find that the advances towards sustainable energy use area taking place
at a fast pace globally, especially after the implementation of the Kyoto
Protocol from February, 2005. We are committed to enhancing international
cooperation for the use of renewable energy and the development and
dissemination of innovative energy-related technology. Our commitment will
be borne out by the various initiatives I have outlined above, and will
lead to the creation of superior stakeholder value.