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Technology | August 2013

We await policy reform before entering power gen equipment business

The power sector is facing stagnation and is preparing for a new regime for natural gas pricing and distribution, says Deepesh Nanda, Region General Manager ├╗Thermal Power Generation & Services (TPGS) and Distributed Power (DP), GE South Asia, in an interaction with Pradeep Pandey.

What is your take on the Indian power and electrical equipment market? What are the prospects and challenges for the industry?
Despite the promising growth witnessed in the generation capacity additions in the past few years, the electricity shortage continues to impose significant constraints to India's economic development and growth. The power sector is facing stagnation and is preparing for a new regime for natural gas pricing and distribution. Fresh norms being formed for allocating scarce resources like coal, and implementing revised fuel and power tariffs make it attractive enough for companies to commit risk capital and boost output.

Securing India's energy future calls for an enabling policy and regulatory framework that could sustain energy supply to meet demand. The slowdown in the growth of the power sector is on account of problems in fuel linkage for new and existing power generation projects, land acquisition issues, delays in environmental clearances and above all the availability of capital.

The other area that needs to be addressed is the dismal financial health of the State Electricity Boards (SEBs). This can be improved by a combination of increasing electricity tariffs (wherever required) and by reducing distribution losses through reforms in the distribution sector. The gap between average cost of supply and average revenue realised, which is Rs 1.70/ kWh today, must close. Aggregate Technical and Commercial (AT&C) losses are at an average of 25.6 per cent across the country. The losses range from 9 per cent to 39 per cent for various states. In such a scenario, distribution losses can be efficiently addressed with increased emphasis on Public-Private Partnerships (PPP) as these will allow private players to offer the much-needed support to state-run/public companies and address gaps quickly.

On increasing tariffs front, around 16 of the 28 states in the country have either raised tariffs or have proposed to do so over the next six months. However, tariff increase in itself is not a complete solution for a turnaround. The solution lies in efficient viability of discoms across the country. There have been encouraging steps taken by the government such as annual ratings of the discoms, the financial restructuring plan, relocation of coal blocks, effective monitoring of power development and reform programmes, which will help the sector immensely.

On the power generation front, the total installed capacity of the country has crossed 200 GW, with a record capacity addition of 54,964 MW in the 11th Five Year Plan, about two and half times the capacity added in the 10th Plan. To ensure sustainable development of the power sector, a capacity addition of about 76,000 MW during the 12th Plan is required to meet the demand projections of the country supported by fuel availability, tariff revisions and debt capital to set up these projects.

Being a global player, how do you compare the Indian market to other markets rest of Asia and the Middle East?
The peak electricity shortage in India currently is much higher as compared to Asia and the Middle East. Unlike the Middle East, India and the rest of Asia are grappling with similar issue on fuel availability at appropriate prices. India has the additional burden of resolving the tariff issue, which once resolved will open the sector for growth.

Do you see any impact on your business due to slow economic growth?
GE is positive and confident of India's growth and we will continue to expand and bring innovation in the country. Our gas-fired power generation equipment business in India has been impacted, however it continues to grow in Bangladesh. In India, we have taken up few major projects in the repair and maintenance (R&M) space, as we await policy changes to kickstart the gas-based power generation equipment business in India.

What are your plans for future growth inorganic or organic?
GE has a long term perspective and has been investing in technology and people to drive and sustain growth. GE is continuously ramping up operations in the manufacturing facility in Pune. The focus on manufacturing is in line with the need for localised products and solutions suited to Indian customers across GE's various businesses present in the country. The site enables assembly and production support for any GE business that needs local manufacturing capability in India. GE's research and engineering centres (close to 100 engineers) in India work with GE's other engineering and research sites outside India to tailor our world-class products to fit into any operation or plant footprint and local service groups (BHEL-GE Gas Turbine Services Limited, a JV between GE & BHEL) provide diagnostic troubleshooting, servicing, repairs, and upgrades to our customers.

What factors will help the company achieve targets in this challenging environment?
The target for us at GE is to continue to be committed to being a growth partner to India by providing our expertise and diverse product palate to help India meet some of its priorities.

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