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Interaction | May 2013

Sense of urgency to bring out required policy changes will boost the industry sentiments

If India's GDP has to grow at the rate of around 8-9 per cent and catch up with other developed countries within a short period of time, thermal holds the key. L R Shrivastav, CEO, Thermal, Moser Baer Projects Private Ltd, shares his view on power generation scenario and company's future plan.

India has a shortage of domestic coal as output at state-run Coal India stagnated due to delayed environmental clearances, land acquisition troubles and poor investment in advanced technologies. Given this situation how do you see the growth prospects of thermal power sector in the country?
In India, thermal currently occupies a significant portion of the overall generation capacity. In terms of numbers, the total installed capacity is 211,765 MW, of which thermal constitutes 67 per cent of the energy mix, i.e., around 141,713 MW and will continue to remain our major source of capacity addition in foreseeable future. Though the government has been focusing on the generation of power from solar and other forms of renewable energy, because of the nature of power generation from these sources, it may not be able to meet the base load shortage. Further, if you look at per capita consumption, India needs to take lot of initiatives to be at par with countries such as China and the US, among others. As per the available data, India's per capita consumption is 879, while that of China is 2,994. Today, we have over 9û10per cent deficit in base load power and about 12û13per cent in peak load power. Besides, almost 40per cent of rural India does not have access to electricity. If our country's GDP has to grow at the rate of around 8û9per cent and catch up with other developed countries within a short period of time, I think thermal holds the key. China has an installed capacity of about 800,000 MW, but India has 211,765 MW and in terms of population, we are slightly behind China, which indicates the kind of capacity addition required in the country. Under the current scenario, this gap cannot be bridged from other forms of energy like solar, etc., but thermal can make this possible. However for this to happen, an all-round development of the sector would be essential e. g improvement in distribution and transmission sector by way of reduction in AT&C losses, improvement in collection efficiency, tariff rationalization etc. Similarly, coal sector has to catch up with the coal demand through indigenous sources, by adopting various available options, like engaging large foreign companies for extraction of coal adopting latest technology, private participation in coal production which has not really taken off even though GoI allotted large number of coal blocks to private sector & setting up Regulator in Coal sector etc.

Many power companies subsequently have to look for coal mines overseas and source more expensive imports, which may hamper the business rationale in long run. What is you take on this and what are the other options on which power producers can work on ?
Coal availability of course is a problem. It is a recognized fact that there is coal shortage in the country. In this regard the GoI, CIL, Ministry of Coal and Power are working closely to evolve a pooling price mechanism for use of imported coal and also rationalization of use of imported coal. It is expected that such efforts will yield good results in near term future when some policy for pooling of imported coal as well as few other steps are announced shortly.

The government has geared up reform process for the sector, when do you see a turnaround?
Government is working on several fronts simultaneously. Some of these measures are, financial restructuring package for discoms announced by GoI linked to various improvements in distribution sector, revision /modification in Case-1 standard bidding document to address the anomalies which were causing problems to bidders, latest announcements by CERC in respect of Adani, Tata Power etc addressing their long pending issues. These measures will restore the confidence of the industry to some extent in investing the funds which are needed for capacity addition, going forward.

What are the major bottlenecks for industry growth that has been still remained unaddressed?
The price & availability of coal is a major concern among industry players; there is a lot of volatility in coal pricing. The other major challenge is with respect to the distribution companies (Discoms); the accumulated losses of the state power Discoms are estimated to be about Rs 1.9 lakh crore as on March 31, 2011. Unless they become financially healthy, the revival of the sector is going to be difficult. But good news is that the government of India has recently announced a re-structuring package for Discoms to restore the power purchasing capacity of the debt-ridden Discoms. While the government is taking various initiatives for the well-being of the sector, a sense of urgency in bring out the required policy changes will boost the industry sentiments.

If you are asked to priorities the reform initiatives, what kind of reform you may suggest to be implemented in first go?
As variable charges (coal price) forms significant component of power tariff, the formation of a coal regulator will help the sector significantly. Coal India Ltd is already doing an excellent job by growing the level of production for coal by around 8û9per cent over corresponding period of last year. This year, they are going to touch an additional 30 plus million tonne of coal over the last year. They are trying their best to improve the coal scenario. However it is important that other alternatives like augmenting coal production through private sector participation, bringing latest technology & large foreign companies in coal production will result in faster improvement in coal availability. Once the regulator is set up in coal sector it will result in better control in terms of monitoring development in a timely manner, monitoring cost of production and profit margins from this natural resource, methodology adopted for allotment of this natural resource and it's utilization etc. The need has been felt for a long period of time.

Apart from these string of measures, urgent implementation of re-structuring package for discoms, early revision and implementation of case-1 standard bidding guidelines etc are some more measures which will help.

Financial year 2012-13 has been one of the most challenging years for most of the companies. How has the company observed the financial year so far?
The financial year 2012-13 has been very challenging and most companies have been striving to survive this period. Many companies have shelved /deferred the implementation of their projects in view of challenges, banks are creating lot of challenges in disbursing funds which are already sanctioned. The issues related to tie up of power on long term basis has also been causing concern because now it has been linked to supply of coal by CIL. There are hardly any case-1 bids for companies to bid and tie up power sale. Projects which are close to commissioning are concerned that there assets will become NPA if they can't tie up sale of power.

Where do you see Moser Baer in next five years? How are you assuring fuel linkages and equipments for your upcoming power projects?
We had a plan to become a 5000 MW company within first 5 to 6 years. We were moving forward according to our target and have developed two projects with over all 4000 MW capacity. We have completed about 60 percent of the work at our first project ie Anuppur Phase- 1 having 2 x 600 MW capacity and we feel the unit should be commissioned by early next year.

We do have a joint venture with Chhattisgarh Mineral Development Corporation where we are developing a small commercial coal block. Since the block does not have huge reserves , we may be able to fill some part of shortfall from this block, but it is too small a block to be of much help. This uncertainty over coal supplies is forcing us to go slow on other projects that we had earlier planned. We have plans to develop 1320 MW unit in Chhattisgarh and another 1320 MW at Anuppur as Phase-2. These two projects are ready for implementation with land acquired, all clearances tied up, but we will start the execution of these projects only when we see comfort in the coal sector.

On increasing man power, what kind of strategy you have set?
We have started taking people for our O&M set up. It is our strategy to build our own strength and capability in house for O&M because we want to become a power company with reasonably good standing. It is difficult to get good people because the sources are limited like BHEL, NTPC and state generating companies, but now there are lot of private sector companies which are attracting such talent and drawing from the same pool.

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