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Interaction | September 2013

Poor Power offtake is of concern

At a time when the power producers struggle to add capacity, the new challenge is that the distribution utilities have not been buying enough power lately. Until the financial health of discoms improves, such challenges will haunt the sector, Arup Roy Choudhury, Chairman and MD, National Thermal Power Corporation (NTPC), tells Pradeep Pandey during his recent visit to Mumbai.

There have been some prompt initiatives by the government to revive the power sector, but nothing has been translated on ground. How long will it take to see a turnaround in the sector?
The turnaround in the power sector has nothing to do with investments. It depends on how soon the state electricity boards (SEBs) be able to dispose off their losses and gain financial strength. As far as NTPC is concerned, last year, we invested over Rs 19,500 crore, which is 27 per cent more compared to the previous year. We are targeting to spend more than Rs 20,000 crore this year too. We do not see any reason why we should not be able to pump in money in infrastructure. This is a good time to raise funds.

There are times when our project gets delayed due to land or social issues, which we are actively trying to sort it out. I am personally visiting the sites, talking to people and state heads to solve these problems. I am confident that we will achieve our capex target by the end of this fiscal, like we did it last year. We have already reached 96 per cent of our actual target.

Talking about the power sector, I think the basic problem lies with the state discoms and certain utilities or IPP setup plants, which are not having proper plan and PPAs and coal supply assurance at place. This does not happen at NTPC, because we do not give investment approval unless we have ensured these things, and have land acquisition and necessary clearances.

Despite huge demand, there is supply gap in the country and a huge capacity is stranded due to poor off take. Being the largest power producer, how do you assess this situation?
As long as discoms are not able to get ensured inflow of finance, they will not be able to buy additional power. They may refuse to buy or will buy as per their availability of funds. Unless the financial health of discoms improves, the industry may not face such kind of problems. If the situation does not improve in near future, then it might be a bigger challenge for us.

Will these situations affect the business?
As of now, it will not affect the business on the commercial side as our business is to set up plants and generate revenue. However, it is a matter of concern for the sector. We being the largest player, we cannot say that we are not concerned about it.

Do you think an independent coal regulator will be helpful for the industry?
Of course, if we have an independent coal regulator and the government decides to auction the coal mines, there will be a lot of private players entering into power biz. People will have more options. Thing will be much streamlined as the regulator will be in the position to provide guidelines based on auction price and capital investment of the miner. I as a generator will then know at what price it is to be picked up. This will make the entire process more transparent.

What will happen with the captive mines? Will it also come under the regulator for coal pricing?
Captive mines should also come under the regulator, but I am not sure about this. What will happen with the captive mines? We are so desperate that whoever wants to sell coal to us can sell, I can only say this.

What will be the better solution increasing the import or to increase the domestic production?
I may not go with increasing the imports as it could not be a viable solution for the sector. We should produce our own coal as we have huge reserve in our country.

The new capacities that are coming in are mostly based on supercritical technologies. So if the quality of coal is not available here or not provided by CIL, what would be the option?
Supercritical is the technology on pressure. The pressure of course is generated by the heat content of the coal. We might have to import coal if the quality of coal is poor in India. We have been getting over 100 million tonne (mn t) of coal and continuously developing our process for quality enhancement. To improve the quality of the coal, we blend and wash the coal before sending it to the power plants.

There are reports that many power companies are exploring options to sell their distressed plants due to persisting challenges. Do have any plan to buy those assets?
If somebody approaches us then we are open for it. My balance sheet is open. We have more than Rs 70,000 crore. However, it has to be priced realistically. Before buying the equipment, I may have to audit it completely. If BHEL offers their equipment to us, then I will buy it if the price is right. But if it's a Chinese equipment, I will have do a lot of complete audit on the quality, as I run a plan for 40 years. I do not plan for a plant for 15 years or 20 years.

Would you be interested in ultra mega power plants (UMPPs)?
Yes, we will bid in UMPPs. We did bid for UMPPs earlier as well, but didn't get it at the right price. If we had got it, the plant would have come up by now. This is what the country does not realise. When we quoted for the UMPP, a lot of people said that the price was very high. We run power projects for 40 years and we expect to get it at a good price.

About NTPC
NTPC is a diversified power major with presence in the entire value chain of the power generation business. Apart from power generation, NTPC also provides consultancy, power trading, ash utilisation and coal mining. The total installed capacity of the company is 41,184 MW (including JVs) with 16 coal-based and 7 gas-based stations, located across the country. The company has set a target to have an installed power generating capacity of 1,28,000 MW by the year 2032. The capacity will have a diversified fuel mix comprising 56% coal, 16% gas, 11% nuclear and 17% renewable energy sources (RES) including hydro. During FY2012-13, NTPC contributed 27.35% of total electricity generated in India with 18.44% share of country's total installed capacity. The company has its global footprints in Bangladesh and Sri Lanka.

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