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Interaction | March 2015

We seek Rs.10,000 crore for power reforms

In an exclusive interaction, Devendra Fadnavis, Chief Minister, Maharashtra, talks about the image makeover of State power companies and involving local support for feeder management systems. Meanwhile, some good news is in the offing as the State´s power reform may see slashing of electricity prices for industrial units. Edited excerpts:

How much funding has the State asked from the Centre for power reforms?
In the meeting, we have put forth our various concerns right from evacuation infrastructure, how to bring down the cost of power generation, rationalise the cost for distribution infrastructure to lowering the tariffs for industrial units in Maharashtra.

We have submitted detailed plans about this to the Centre. And on the basis of internal assessment, we are seeking Rs 10,000 crore of assistance under the Deendayal Upadhyaya Gramjyoti Yojna. It will fulfil our commitment of strengthening the power infrastructure in the State. It is expected that the government may consider releasing the funds as they have given us a positive indication on the same.

You have mentioned about lowering power tariffs for industrial units. how soon we can expect this step?
We have discussed the much-needed reforms to lower the power tariff for industries which were continuously demanded by industrialists. I do not like to comment by how much the power tariffs will be lowered. But the main intention of the State is while we lower the tariffs, it will be without any subsidy or cross subsidy. This will improve the investors´ sentiments in the State. We have already prepared a plan which will be submitted to the Maharashtra Electricity Regulatory Commission (MERC) and it will be MERC´s prerogative to take a concrete decision on lowering tariffs.

Meanwhile, have you set any timelines as in when these reforms could be streamlined?
Earlier, when we planned these reforms, it was for five years. However, after our rounds of meeting with the Power Ministry, it was suggested to implement the same in the next two years. The main emphasis was to streamline and complete the basic infrastructure related works on an urgent basis. This includes improvement in Plant Load Factor and feeder separation to improve efficiency (especially in infrastructure deficit areas) and cost factor. In addition, we have also asked the Centre to increase the coal supply from 20 lakh MT to 25 lakh MT. And it is under consideration.

It seems the image of Mahadiscom in rural areas is dented, due to continuous load shedding in these areas. How are you going to get local support?
The image makeover is just not for Mahadiscom but for Mahagenco and Mahatransco as well. For this, the State government has decided to come up with the ´Feeder Manager´ scheme to be implemented in rural areas of Maharashtra. And, this scheme will include participation of locals. This will improve efficiency and collection efforts. Meanwhile, to achieve the efficiency of distribution and transmission companies, which exert big losses due to power theft and unpaid bills, the ´Feeder Managers´ will be entrusted with maintaining the feeder, recovering the dues of bills from people and coordinate with the district offices.

By way of doing this, it will not only decentralise the process, making it much more effective and transparent, but also provide jobs to electrical engineers. The government has decided to release 20 per cent incentive if they recover Rs 1 lakh.

We understand that there is some headway towards revival of the Ratnagiri Gas Power Project (RGPPL). Is it true?
The State government has made some suggestions to the lenders and stakeholders of these projects. However, we have conveyed our decision of not purchasing power from this project as the cost is high and not affordable for the State. At present, the cost of power purchased from RGPPL stands at Rs 5.50 per unit as compared to an average cost at which State buys, which is Rs 3.30 per unit. However, if RGPPL offers us a competitive rate which is around Rs 4 per unit, the State government will take a call on it. Going forward, we are also ready to give no-objection certificate from our side to RGPPL to sell its power to any power-deficit States.

Ergo, for revival, we have suggested to operationalise an LNG terminal which can generate business revenue of Rs 1,200 crore. Meanwhile, since it´s a gas-based project, we have suggested a fixed price mechanism for gas availability for this project which may bring down the cost of power production.

But there are rumours that the State government may not release arrears of Rs 2,200 crore to RGPPL...
We stand firm on our decision that we will not release Rs 2,200 crore as arrears to RGPPL because they have violated the power purchase agreement (PPA) in which conversion of fuel was not with the consent of the State government. The Supreme Court has already given a stay order so I cannot comment more on it. Meanwhile, it´s a national asset for us and we will be in a supportive role.

Lastly, we have not witnessed much of headwind for distribution franchise model in Maharashtra...
At present, we have not received any proposals or interests for distribution franchise model for the State from any private company. We already have two-Nagpur and Bhiwandi-in place. Meanwhile, according to me, the DF model can be more successful if the government decides on fixing capital investment cap for private players. In DFs a private company can improve efficiency by arresting the theft but to improve overall efficiency of DFs, it requires capital investment, which is important. So even if we want to make a fresh start in DFs, the capital investment should be already defined by the Central authority.

- Rahul Kamat

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