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Interaction | August 2015

High cost of finance requires immediate attention

Sunil Misra, Director General, IEEMA, suggests that the power transmission sector in India needs sweeping reforms, if it is to bring the country back to a high growth trajectory and meet its goal of expanding the common man´s access to electricity by 2019.

The Modi government has claimed several records in its first year. Are these achievements in the best interests of the power equipment sector?
The Indian power sector is undergoing important changes that are redefining the industry outlook. Persistent economic growth continues to drive power demand in India. The government had taken various initiatives in order to achieve the power generation target for FY2016. It has also signed different agreements with various country such as Bhutan and Nepal.

Further, the output of domestic coal is likely to rise in the coming financial year, driven by the improved performance of Coal India (CIL) and the fast-tracked e-auction of cancelled coal mines. The Government of India (GoI) has set a target of 1 billion metric tonnes (bnt) coal for CIL by FY20 (CAGR of 14.9 per cent).

India now has installed power capacity of 267,367 MW, with an additional 30,000 MW in the pipeline; besides which another 100,000 MW would be added from solar power over the next five years. However, the power sector is still in a predicament due to the losses being incurred by discoms.

The country has added the best generation growth in two decades with output touching the one trillion unit mark, but there are no takers for the generation capacity that has been put in place, as the financial health of discoms doesn´t permit them to buy this power.

Do you agree that there is a level playing field for domestic power equipment players? If no, suggest some specific remedies for it?
The industry has to put more focus on product quality and delivery commitments. They should also interact more with our missions abroad to better understand available opportunities.

At the same time, GoI should make the industry more competitive. High cost of finance is an area that needs the government´s immediate attention. Reducing shipping costs and time taken for clearances is also where they can help. Road blocks like non-acceptance of Indian agency issued test certificates e.g. CPRI certification, by foreign countries should be looked into and appropriate action should be taken.

Do you think the government is only announcing projects and nothing much has happened? Why is investment not picking up?
In FY2015, power stations in the country generated 1,048.403 Billion Units (BU) of power, which was 8.40 per cent higher compared to a year ago. There has been an overall increase in power generation by 8.4 per cent since last year.

The government had done well to untangle the supply side issues by augmenting coal supply, besides taking efforts to boost transmission and distribution. ´Make in India´ is perhaps one of the most important programmes being pursued by GoI. It´s central theme is about transforming India into a manufacturing hub with world-class technology along the lines of those adopted by China, Japan and South Korea, etc. IEEMA being a proud partner of the campaign identified a four-point agenda.

We have been vigorously pursuing policy-makers to positively integrate Make in India products with state-of-the-art technology.

What is your practical assessment towards the entire power equipment industry?
The electrical and industrial electronics industry has witnessed a 13 per cent growth in Q4 of FY 2014-15. The overall growth of the industry this fiscal is 9.98 per cent. Although, higher imports continue to plague the industry, policy changes and initiatives undertaken by the industry and government have slowly led to the sector being revived.

List out few ´structural reforms´, that will change the entire transmission sector?
There needs to be sweeping reforms for power transmission in India if the sector is to return the country to a high growth trajectory and meet its goal of expanding the common man´s access to electricity by 2019. India´s annual per capita power sector consumption of around 800 kWh is among the lowest levels in the world today.

Now that the government has stepped into its second year, list your agendas to wake the government from slumber?
IEEMA being a proud partner of ´Make in India´ has identified a four-point agenda and has been vigorously pursuing it with policy-makers this year. This agenda is as follows:

  • Domestically funded tenders by utilities to be in Rs, and if there needs to be international bidding for some reason, there should be a 15 per cent preference given to the domestic industry.
  • Mandatory vendor development programmes by utilities.
  • Mandatory testing of all imported electrical equipment by test houses in India.
  • Standard specifications and standard bidding terms for the same products across utilities in India.
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