The gap between imports and exports has increased but if it goes any further, it will increase unemployment and have other cascading effects, Vimal Mahendru, President, Indo-Asian Electric, said at the conference in Delhi. R Srinivasan reports.The two-day Power Today conference was held at Hotel Sheraton in Delhi and based on the theme of ‘Restructuring India’s power sector, new Open Access, equipment import duty and scaling the SEB hurdle’. Delivering the welcome address, Pratap Vijay Padode, Editor in Chief – Power Today and MD, ASAPP Media Information Group, spoke of challenges faced by the power sector and said that they would soon be overcome. The conference chair Dr Pramod Deo, Chairperson and Chief Executive, Central Electricity Regulatory Commission (CERC), speaking about the discoms said, “Financial viability of discoms is increasingly becoming a matter of concern for investments in generation. Power sector reforms at the state level are the need of the hour. There is an urgent need to undertake tariff revisions on a regular basis, ensure tariff adequacy and rationalise tariffs. Model tariff regulations have been evolved by the Forum of Regulators to address the issues of financial viability of discoms and other related issues.”Guest of honour RK Kaul, Consultant and former Joint Adviser (Power), Planning Commission of India, said, “There is a strange paradox in the Indian power sector - while there is a huge opportunity due to the demand-supply mismatch, the sector is presently going through a difficult phase and grappling with critical issues like fuel availability, surge in coal prices, domestic coal availability, fuel transportation issues, water and environmental issues, equipment, financially precarious condition of distribution utilities, distribution network improvement and sustainability concerns amongst others. To sum up, certain important areas where reforms have been lacking during the 11th Plan will need adequate attention in the coming 12th Plan Period. The key focus of the 12th Plan is to carry forward the achievements of the 11th Plan and to introduce improved initiatives.”In Session I, Rajesh Mediratta, Senior Vice President, Business Development, Indian Energy Exchange, on the topic of ‘Power and fuel exchanges’ divided his presentation into electricity, gas and coal exchanges. Speaking of IEX market segments (delivery-based electricity contracts) he divided the segments into day-ahead, term-ahead market and renewable energy certificates. About gas markets in terms of domestic vs imported gas, he said that domestic gas can be allocated on a long-term by the Ministry of PNG/PNGRB based on priority and that imported gas can be traded through a transparent marketplace (exchanges). About coal exchanges he said that the way forward is to create spot markets for input (fuels) and output (power), a facilitatory framework for gas/power spot and forward exchange, futures market to hedge price risks and that a multi-asset exchange minimises margin requirements.Ayon Banerjee, Director – Sales (India, Bangladesh and Sri Lanka), Pratt and Whitney Power Systems India, gave two presentations on ‘Waste heat recovery through the organic rankine cycle (ORC)’ and ‘Peaking power stations’. He said, “The estimated peak demand at the end of the 11th Plan (March 2012) is expected to be around 136 GW and if we take growth in demand to be around 6 per cent plus, the estimated peak demand at the end of 12th Plan (March 2017) will be ~ 183 GW. If we continue to have the same level of peak deficit at the end of the next Five Year Plan, it is around 22 GW. But assuming the peak deficit will be around 5 per cent then estimated peak demand will be around 9 GW in 2017, which is a huge number in terms of a country like India. In view of this and huge discom losses, India needs a peaking power policy as soon as possible.”Speaking of increasing privatisation, RK Madan, Managing Director, Adani Power, on the topic of ‘Provisions and limitations of power purchase agreements (PPAs)’ said, “Private sector participation upto the 10th Plan was only 7 – 8 per cent and capacity was over 135,000 MW. In the 11th Plan, private sector participation was 45 per cent by January 2012. Now in two more months even Adani has added 1,320 MW, which needs to be added. In the 12th Plan, according to the government, 66 per cent is to be added by the private sector out of 88,000 MW.” He added, “The basic issue is that the developer is taking responsibility for 25 years. Almost 1 Rs per unit enhancement for a 4,000 MW project is Rs 300 crore per month. So the developer has to pay about Rs 75,000 crore for 25 years. Who will pay this amount?”Winding up session I, Amulya Charan, Chief Mentor – Power Trading and Advocacy, Tata Power Company, and the moderator said, “India is coming of age and we are still stuck with the old model of five year planning and PSUs are sacred. We have to see what the country wants. The SEBs have gone sick because of the enormous T&D losses, because the powers that be think that people will not pay for higher tariffs. But at the same time to mitigate load-shedding people are using diesel gensets and we are burning about Rs 50,000 crore of diesel and fuel oil. Everyone is trying to increase tariffs. Bulk power internationally is available in the range of 4 to 6 cents. Four cents today is Rs 2 and 6 cents is Rs 3, so why should Indians pay higher tariffs of around Rs 15 to go through diesel-based solutions? These issues need to be tackled and they cannot be tackled on a five year planning horizon. Globally, infrastructure is dealt with in not less than 15 - 20 year cycles.”In Session II, Ananth Chandramouli, Senior Manager – client services, India Business unit, Infosys Technologies, before his presentation on ‘Smart Grid – Challenges in Indian Context’ began with an interesting quote about ‘unknown unknowns’ and said, “Before we take any steps forward within our country we need to learn from some of the mistakes that other developed countries have made before we start threading our way into smart grids. The three broad challenges can be divided in to people (consumer’s mindset and equity employee’s mindset), technology (smart grid standards and interoperability) and process (policies, legislations and education to consumers and larger programme management).”Rahul Agrawal, Director – Technical (Coal Power), GVK Power and Infrastructure, on the topic of ‘Challenges to IPP’s in thermal power project development’ said, “They are fuel security, environment clearances, land acquisition, water availability, PPAs, MOUs, tariffs, power evacuation, equipment delivery and quality, discom’s financial condition, bank funding, availability of construction/erection contractor, railway network, ash utilisation, changes in government guidelines and shortage of trained/experienced manpower.” On timely availability of transmission lines by utilities and congestion in the lines, he said, “We are talking about 76,000 MW addition in the 12th Plan and 1 lakh MW in the 13th Plan but where is the planning for transmission lines? In Gujarat there is no 765 kV line and it is going to be 30,000 MW in the coming one year. It has only 400 kV lines. We are not moving forward due to congestion and non-availability of transmission infrastructure.”Session III featured a panel discussion on ‘Power equipment: The imported vs domestic debate’. Vimal Mahendru, President, Indo-Asian Electric, said, “We opened our borders and welcomed overseas players, which helped improve its global prominence, efficiencies, and made us a force to reckon with. But in the last five years at a macro level the gap between imports and exports has increased - in 2007 it was 22 per cent and now it is 28 per cent. If this gap increases, it will increase unemployment and have other cascading effects. The macro policy that needs to evolve is that the industry must improve or perish, the government has a role to play in providing a level-playing field and it needs to get out of the way. So get the red tapism out of the way so that Indian companies can perform.”Narayan Sethuramon, MD and CEO, WS Industries India, said, “India is gradually becoming the second largest power market in the world after China. Today, the overall sector is about Rs 110,000 crore and imports which was Rs 13,937 crore in 2006 is today Rs 31,769 crore, so effectively 31 per cent of the sector is being met by imported products. The key issue is that of a level-playing field. There is some form of local industry preference and protectionism in other countries – Russia has passed a decree which supports the domestic industry in the power sector. In Brazil there is an additional CVD on all imports. So India, especially the power sector, is the most open market in the world. In the case of PowerGrid, 47 per cent of their power transformers are imported and 85 per cent of their insulators are imported. Globally, there is a strong emphasis on building a robust, locally competitive power sector and the same needs to be done here.”TR Ramanathan, Head- Groupwide Procurement, Mechanical Vertical, Reliance Infrastructure, began with a light-hearted manner remark that the moderator (Amol Kotwal) was strict and speakers overshooting the time limit would be shot and quipped, “Usually the first session post lunch is both the best and the worst. Worst because the attention of the audience is poor in proportion to the quality of food and the speakers need to take extra effort to get attention but the advantage is that due to poor attention they can say anything and get away with it.” On a serious note he assured the local industry that imports were not due to quality ‘since Indian quality is second to none’ and urged for a broader view of globalisation.Madhav Digraskar, Chief Executive – Power Systems, KEC International, said, “The Union Budget is below our expectations, especially for power equipment. My recommendation is to create a level-playing field. Also, we hear about the delivery period. The equipment delivery period has now been cut down by over 50 per cent.”SC Mittal, GM (Marketing) Nuclear and Hydro, BHEL, said, “Over 1 lakh MW orders have been signed with foreign suppliers which are going to be installed in the 12th and 13th Plan because the 12th Plan capacity addition target has been reduced. Also the orders are not there. This year BHEL has booked orders only for 2,520 MW whereas in the last three years on an average we had 15,000 MW or more. All this will create pressure on the industry. So developers should look at the lifecycle cost and not merely the minor initial capital cost since the equipment and partnership is going to last for 25 years.” As a representative of the international power sector, Peng Zhangwen, Director, Sinofinn Energy, spoke about the quality and efficiency of their products.Summing up the discussion, moderator Amol Kotwal, Deputy Director – Energy and Power Systems Practice (South Asia and Middle East), Frost and Sullivan, said, “Hope the government hears the voice of the industry and implements some measures to ensure that the industry grows at a faster pace in tandem with what the sectoral growth is going to be.”In Session IV, ‘Where the power sector needs to invest’, Mahesh Vipradas, Head – Regulatory Affairs, Suzlon Energy, on ‘Commercial incentives and predictability in renewable energy’ gave a breakup between the various forms of energy, and said, “There is about 23,000 MW of renewable energy (RE) so renewable power is no longer a fringe player and within RE, wind energy is a major player.”About drivers for transmission and distribution (T&D) and while on the topic of ‘Investments in T&D’, Vinayak Walimbe, Senior Consultant, Customised Energy Solutions, mentioned them as economic growth, demand growth, reliability of power supply, inadequate infrastructure, increased role of renewables and smart grid and regulatory incentives. He said that drivers vary according to the country and that for India economic growth is the biggest driver. He added that investments in smart T&D technologies in Asia Pacific is expected to reach $123 billion by 2017.In ‘Challenges in large power projects’, S Saha, Deputy General Manager, Tata Power Company, speaking about some issues in coal said, “The failure to achieve the planned target from captive coal blocks presents itself as a major challenge to the power sector as only 24 blocks have become operational so far, out of the total 210 allotted to the private players. As far as coal logistics is concerned, there are issues in terms of project site connectivity with the existing rail and road networks and traffic congestions in the existing lines.”About ‘Training and manpower needs in the power sector’, Subodh Garg, Director General, National Power Training Institute, while speaking about the manpower requirement for the 12th Plan said, “For the targeted capacity addition of around 94,215 MW, approximately 5 to 6 lakh additional personnel will be required for construction and O&M of generation projects, transmission and distribution facilities, out of which about 4 to 5 lakh will be technical and 1 lakh will be non-technical. Roughly, every capacity addition of one MW requires five to six persons which consists of four to five persons of technical and one person of non-technical background.”In session V, SV Prasad, Vice President – Project Advisory and Structured Finance, SBI Capital Markets, on ‘Financial health of discoms: Ways forward’ spoke of some long-term solutions and said, “We should opt quickly for models (PPP or Franchise) that hold promise of delivering the most-needed efficiencies, there should be private sector participation in distribution for all the cities with >10 lakh population (within 3-5 years), metering and billing should be improved on top priority, energy accounting and audit is a must at every stage, and AT&C loss reduction trajectories are to be achieved.”On ‘Franchisee and PPP models in distribution – Key challenges’, Vivek Singla, Senior GM– Power Management and Corporate Commercial, Tata Power Delhi Distribution, speaking of the financial position of power utilities (as per the Shunglu panel), said, “India has one of the highest T&D losses in the world and over 34 per cent of the energy generated is not paid for. Accumulated losses in the last five years is Rs 179,000 crore, which is close to 5 per cent of the country’s GDP. In 2009-10 alone, the financial loss of all distribution companies was Rs 57,000 crore and in 2014-15 it may touch around Rs 120,000 -130,000 crore.”On ‘Calorific value-based pricing of coal’, James O’Connell, Senior Managing Editor, Platts Coal, said, “India’s coal deficit will touch 265 million MT by FY2016-17 from the current shortfall of 137 million MT. You will be paying a lot more for your import of coal than you will be for your domestic coal. So whether it is gross calorific value or useful heat value, you need to get domestic production right because that will at least take down the cost of your imports.”On Day 2, in Session VI on ‘Managing the new risks in India’s power sector’, moderator AVV Gopal Rao, Deputy VP (Risk management), Reliance General Insurance Company, said, “For any project in the power sector whether in thermal, hydro or renewables, there are three phases i.e., development, project and operational stages.”On ‘New risks in India’s power sector’ Sanjeev Kumar Batra, Head – Property and Engineering Underwriting, L&T General Insurance Company, to prove that large projects imply large risks gave the example of the accident at the Sayano Shushenskaya hydropower plant (one of the world’s largest power plant) in Russia on 17 August 2009 in which the entire power house got washed away after there was huge water pressure surge in one of the turbines, resulting in ejection of the turbine, collapse of the roof and severe damage to other turbine units and loss of 96 lives. In the T&D segment he said that risks were due to increasing loads and ageing grids.On ‘Financial review of state electricity boards’, Sudhir Nair, Head – Customised Research, CRISIL, said that high AT&C losses were due to overburdened distribution networks, inefficient metering and collection and that weak discoms cater to 32 per cent of the country’s consumption and account for 60 per cent of accumulated losses. He said, “Strong reforms and significant tariff hikes are the only solution.”On ‘Holistic approach to critical infrastructure security risk management in power: Role of the leaders to manage people, process and technology’, Colonel Sandeep Sudan, Head - Physical Security Practice, Mahindra SSG, as opposed to the conventional financial risk spoke about physical security and the IT side which is critical for any project. He said, “IT is a major component of any critical infrastructure project and you can hack into any project. The level of sophistication has increased. In the 1980s you needed to be a computer wizard to hack into systems now you have tools which are available. So this needs to be taken into account.”In session VII ((Panel discussion) about ‘Risk in power transmission projects’, moderator SK Deb, Managing Director, Parbati Koldam Transmission Company, said, “As far as transmission projects are concerned, historically in India we have been in a very cocooned environment where it was cost plus projects and the perception of risk was just not there. Risk was normally associated with insurance so whatever is insurable was considered a risk and people would consult with their insurance companies. Today, the situation has changed with private players and competitive bidding where tariffs are fixed, etc.”Manoj Kumar Sabat, Senior Manager – T&D, IL&FS Energy Development, said, “The transmission service providers who develop projects are quoting transmission charges for 35 years which is risky in view of cost escalation of the project and the uncertainty of the project which may go on for 5 – 10 years due to environmental clearances even though they should be completed within 2- 3 years.”Dr K Balaraman, Chief GM, System studies, Power Research and Development Consultants, said, “In the last few years many issues are cropping up and the biggest risks are land acquisition (or land compensation) and environmental or forest clearances – these two factors may delay the project or even lead to it being abandoned.”LN Mishra, Senior Vice President – Business Development, Reliance Power Transmission, said, “Now there is a paradigm change in the business model in transmission. From 5 January 2011 onwards as per the tariff policy amendment, all projects in the central sector are going to go through competitive bidding and in the state sector they have given scope for two years to come up to the competitive regime. So the business model has changed from cost plus regime to competitive bidding. So the structuring of the business is very crucial… There are systemic and regulatory risks and flaws in the bid structuring that are being thrust upon the developers, which need to be addressed.”In session VIII ‘Perspectives to new policies, trans-national transmission connectivities’, Dr K Natarajan, Joint GM and Head – Corporate Services, Power (T&D), Larsen & Toubro ECC, spoke about the energy outlook globally, transmission models being followed, upcoming grid advancements and the power sector worldwide. He said, “Based on current trends, 1.2 billion people – or 15 per cent of the world’s population will still lack access in 2030. About ‘Upcoming grid advancement – Boost to integrated transmission network’ he said, “PowerGrid is coming out with six smart grid pilot projects, and states like Kerala are going in for smart metering, which is the need of the hour.”On ‘Macro-perspective on renewable energy’, Pallavi Bedi, Partner, J Sagar Associates, said, “Under Batch 2 biddings we saw a big dip in the solar tariff which moved from the average bid which was earlier Rs 12.16 to a tariff of Rs 7.49 to Rs 9.39. This is a good move but how viable the move will be is yet to be seen.”On ‘Mitigating AT&C losses: A discom’s perspective’, Arvind Gujral, VP, BSES Rajdhani Power, said, “The demand for electricity is growing at 8 per cent YOY with a recorded maximum demand (MD) of 5,028 MW this year. The projected MD next year may be approximately 5,430 MW. Inadequate funding will affect the companies’ ability to incur capex for system augmentation. This will, in turn, affect the reliability of supply and increase outages.”Replying to a question about the issue faced in Tamil Nadu, moderator SN Gaikwad, GM (Projects) Rural Electrification Corporation, said, “After unbundling, all discoms have independent generation, transmission and distribution entities and some of them are doing fairly well. But this is not the case in Tamil Nadu.”In the last session IX on ‘Adequacy of inter and intra-state transmission infrastructure’ (panel discussion), SR Narasimhan, Deputy GM, Power System Operation Corporation (a subsidiary of PowerGrid), said, “When it comes to an adequacy issue one needs a real paradigm shift. What we have been doing in the last several years may not really stand us in good stead in the coming years. We can break the issue into three stages of planning, maintenance – the execution part of it - and operations.”The two days of deliberations on various aspects of the power sector in terms of problem-solution formats made for some very riveting fare.
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