Various reasons like availability of fuel for plants and absence of power purchasing agreement has created stress in the power sector, says AK Bhalla, Power Secretary, Government of India. During an interview with Swati Khandelwal, Zee Business. During an interview with Swati Khandelwal, Zee Business, Mr Bhalla said High-level committee was formed to look into the sectorial problems of the power sector mainly related to coal supply. Edited Excerpts:
Q: Several things have been spoken about the power sector and several things have happened in the past two years. Update us on the steps taken by the government to re-energise the sector and by when it will fructify?
A: We were developing infrastructure in rural areas intending to provide electricity to every village and every home, till date, before which we were engaged in strengthening the power generation and its transmission and it was completed. The most important thing that we are supposed to do now is 24*7 power supply in a very stable manner and in a way that people can afford it. So, we are working on it intending to further strengthen it. The process will be completed in association with state governments because every state has different demand. A lot of capital investment has been made on it and schemes have also been launched like ‘Deen Dayal Upadhyaya Gram Jyoti Yojana’ (DDUGJY), ‘Pradhan Mantri Sahaj Bijli Har Ghar Yojana’ “Saubhagya” and in urban areas under integrated ‘Power Development Scheme’ (IPDS). Interestingly, the money allocated for Saubhagya scheme has been spent and infrastructure is being developed by using the allocations of other two schemes.
After this, if there is any dearth of things in the state and there is a need to reduce the losses there and why it is not going down, then we are also working on that. I think that in the next 2-3 years, we will be able to ensure 24*7 power supply across the country that it is available in a reliable manner.
Q: How will you address the problems related to deficit, transmission and distribution (T&D) losses, the financial health of the DISCOMS among others?
A: Ujwal DISCOM Assurance Yojana (UDAY) was introduced for the purpose and under the scheme, their debt was taken over by the state government and the process helped in improving their balance sheet. Usually, it is said that this is a one-time measure and it will be needed once again after 5-10 years. But, Uday Scheme was slightly different from such schemes and it was complemented, as I said that we invested in infrastructure and its improvement across the country. The UDAY scheme isn’t unsuccessful as the debt was taken over but the adjustments in books of some states are unfinished, which makes one feel that there is huge debt on balance sheets. The effort was beneficial as tariff setting applications came in regularly in most of the states, improvements made way and the gap between the average cost of supply versus the revenue has reduced. Besides, as coal became expensive and freight increased, the gap seems to widen in the year 2018-2019. We are addressing it by rationalising some schemes and are aiming to reduce the cost of supply and power.
Q: Banks are facing stress from the power sector and are reluctant to fund. How grave is this issue and by when it will be resolved?
A: There were various reasons for the stress in the power sector like the issues of fuel availability for some plants, some plants were created without having a power purchasing agreement, some had the capacity but lacked coal-linkage and power purchasing agreement. The stress from these problems resulted in sectoral issues for the government. The banks had already granted loans so couldn’t grant further. As a result, a high-level committee was formed where the sectorial problems mainly related to coal supply were addressed. New instructions have been approved by the Cabinet and there is an improvement in the coal availability from Coal India. The gaps are needed to be met and we had undertaken to bid for aggregation by bringing in a PPA of 1900 megawatt for a medium-term. We tried for the 2500 megawatt but were able to get a bid of 1900 megawatt. The DISCOMS have signed for 1900 megawatt and the power purchase has started. We also have a slot for 2500 megawatt and the next round of 2500 MW will be planned with coal linkage. With this, we are trying to resolve the issue of the commissioned stressed assets that are unable to function. The second mechanism that contributed to stress is payment security because DISCOMS were delaying the payments. Thus, there was a need to improve their financial conditions and increase their tariff so that they can recover. At places, the regulators were making regulatory assets which are due and are unable to recover. We have tried to address these issues in a new order under which every DISCOM will be required to open a letter of credit with a generator and maintain the amount of money in a revolving way so that the payment follows. The chain is disturbed if the generator is not paid. The efforts have been made and we are helping both sides and asking the DISCOMS to do what has been said and trying to reduce the cost of electricity to the best levels that we can.
Besides, the coal linkage – whose movement was multidirectional – has been rationalised and this rationalisation has helped in reducing coal movement and is saving some freight. As a result, electricity became cheaper. Electricity is sold on a merit order, but we have bought a new scheme under which the emphasis will be given on the availability of cheaper electricity. Apart from this, Security Constraint Economic Dispatch has also been introduced under which a plant that is running on 80% and has completed its contract but the plant is 20% cheaper then it will be operated under this scheme. The pithead plants of NTPC are working on 100% plant load factor (PLF) and they are supplying electricity against the contract of an expensive plant which is not unable to function. Thus, we are putting in efforts to make electricity inexpensive and now DISCOM should complement our effort, become efficient, get tariff in such a manner that they can pay, and we hope to see it.
Q: How do you see the RBI’s revised February 12th circular? Do you think that the problem has been addressed completely or does any issue persist?
A: The new circular has brought a fair responsibility to the lenders. If they want to solve the assets, they can do so. Earlier, there was an issue of 100% lenders which has been relaxed. So now, if they think, what they have is resolvable, they should agree and do it. If they delay it, then they’ll have to make the provisions in the balance sheet. Doing so might also cause losses to some banks. I hope lenders will not delay the resolvable projects this time and many discussions have going on and inter-creditor agreements have been signed-in some places and 7-8 solvable commissioned projects like many megawatt projects, if resolved then the commission capacities will fair. As far as non-commissioned capacities are concerned then I doubt if we can do anything for it because we have worked very less in their case. So, we will have to accept things that come out through liquidation. But, if lenders can solve them outside the NCLT, then it would be a good step, and if any issue arises, then we are trying to resolve it.
Q: What is the total amount of stress in this sector? How many megawatts and how much worth lakhs of crores of Rupees?
A: It is difficult to say anything about it as we have always dealt with coal-based plants in a certain category. Lenders daily observe if any plant is stuck in stress and we brought around 10 projects into normal standard and 7-8 more projects can be solved under the new circular that has been issued. The remaining projects are not commissioned projects as our capacity was 15 thousand, which came under the aggregation model, the 1900-megawatt model, the 2500-megawatt model and the others will come under the next round. If they get the power purchase agreements, then those will be solved. The remaining, where we haven’t worked a lot, are in NCLT.
Q: Can we say that 50% of the problem will be resolved?
A: More than 50% of the problem will be resolved. We had around 40 thousand megawatts out of which 10 thousand megawatts has already been solved and we’ll try to resolve another 15 thousand megawatts. As a result, the issue of 25 thousand megawatts can be solved.
In terms of value, it is difficult for me to state the numbers because I don’t have the figures readily. It was considered that they had a debt of around Rs1 lakh 70 thousand crore but many accounts of those have been standardised and more than 50% of the amount will be recovered.
Q: Discussions are revolving around giving a specific timeframe to Open Access Permissions for bringing in more competition. Are you working on these lines?
A: We are planning to introduce reforms in our tariff policy and our Minister has also said that a new tariff policy will be brought soon. The experience of the DISCOMS, issues on functioning, regulators and policy gaps will be considered while bringing in new tariff policy and they’ll get implemented as soon as they are approved. The charges on Open Access Permissions were high enough which made it unworkable many times. There is a need to reduce the tariff structure in the cross-subsidy as it is sending people to have open access because they are receiving costly electricity from the DISCOMS. If the tariff is rationalised, then those people will not find the need to depart outside and will obtain electricity here itself. While the policy gets implemented soon, we expect easier open access as well as its minimum requirement. The policy was ready earlier and is awaiting the Cabinet approval.
Q: This means the policy is ready.
A: It is ready and was ready earlier. However, it was decided that it will be approved after the elections are over.
Q: Power availability is a matter of concern and renewable energy also has its contribution to the power pool. Thus, how renewable energy will be contributing to the power segment of India?
A: We have commitments for it and it includes the Paris Agreement, in which we have committed that 40% of the installed capacity should be from non-fossil fuels by 2030 and by addition of 175-gigawatt renewable energy by 2022, we will be reaching that capacity of 2022 itself. So, whatsoever we have at present is quite good as we have a renewable capacity – including solar and wind both – of around 79-gigawatt. This supplements the grid. However, it is facing the issues related to integration, but coal is the baseload for us at present, which is balanced by hydro-plants in morning and evening hours. The remaining gap is met by flexibilization of the coal plant under which the coal power-plant is brought to 55% plant load factor (PLF) from 85% PLF and then it is ramped up. So, we have ramping capacities and the plants are identified. Currently, we don’t have problems that require its integration. But, we are not going to stop with it and have ambitious projections which will be achieved by 2030.
So, we have projected a requirement of around 830-gigawatt for 2030 and solar power will have a contribution of more than 300-gigawatt to it and we have created a model to integrate it. So, it is not a problem as it is very easy to integrate. Rather, we are doing much more ambitious projections by 2030 in which we will be integrating more solar and wind energy to it.
Q: Electric Vehicles (EVs) and electric charging infrastructure is an important part and is linked to your ministry to a great extent. How will you address it and by when its infrastructure will be ramped up?
A: Several policies have been framed by different ministries and NITI Aayog was coordinating it. We have introduced Charging Infrastructure Policy and have also issued guidelines that talk about what will be considered as the public charging infrastructure. Heavy Industry Ministry has released FAME-II scheme that will be providing vehicle head support will be provided and some funds will be released in the form of subsidy to support the infrastructure. Apart from this, the Road and Transport Ministry has also announced something for it. Similarly, several things were announced in the 2019 Budget. So, this is the beginning. Earlier, we were thinking of installing the charging infrastructure and that’s why subsidy provisions have been kept making sure that the user doesn’t feel that sufficient charging infrastructure is not available in the country. Besides, we expect that it is time for the automobile manufacturer to come forward and announce as one company has launched a vehicle in recent past. So, we expect that other automobile manufacturers should come out and announce their plans for it. Rest will follow the announcement because it will take some time to transit. So, these two things will happen, and we are prepared for it. In the process we have introduced a policy for it and also creating an infrastructure to support it, for instance, we have created certain infrastructure in NDMC (New Delhi Municipal Council) area and the NCR region will be looked after in the next round. Apart from this, we are also facilitating certain cities that are coming forward with an interest. It is not mandatory that we should be brought in for the purpose, but the state government is free to choose and hire any agency that it wants and create the infrastructure. We have laid down the norms that ask for the installation of fast chargers in the charging infrastructure while slow chargers can be used at the homes/residential building itself. We are bringing a provision of creating such facilities in the building code.
Q: So, the upcoming buildings will have to create such facilities.
A: Yes, the Ministry of Housing and Urban Affairs has released a guideline under which it should be done.
Q: Lot of work was done on the consolidation of Power Finance Corporation (PFC) and Rural Electrification Corporation (REC). By when the process will be completed?
A: PFC has taken over REC and the apprehensions that propped up in the market has been addressed and both the companies are doing very well as their profits and shares have gone up. So, both the companies have performed well despite one company has been taken over by the other. We have now engaged a consultant to look at how the merger can be done. So, we will like to merge these companies in a timeframe and a logical manner. Things will move ahead and discussed for approval as soon as an action plan is available for it.
Q: Any timeline for it?
A: I can’t provide any timeline now, but we will have to look into the government equity percentage in it, whenever the plan is created. Presently, such companies should have 51% government equity. So, we will have to look that will it have 51% equity in a plain merger or not and if not, then consultants will be providing the ways to do so. Thus, any view can be created after looking at it.
Q: What are the next round as there were talks related to NTPC-SJVN merger and so?
A: Such talks came in news last year, but we were not able to conclude the process and secretary disinvestment has once again said that it is in further agenda. So, we will be looking after the companies that are controlled by us and find out the advantage of which should take over to the other. For instance, if we want to merge SJVN with someone after acquiring it then will it create a big company of hydro-sector or not or it should be diversified so that a thermal company takeover a green asset. Thus, we will be able to say anything on it after discussing it.
Q: But, it was discussed last year with NTPC?
A: Last time, it was one direction that NTPC should takeover SJVN and it remained at the same stage and we moved ahead with PFC and REC.
Q: Will it proceed, or it can be changed?
A: It can be changed as whosoever takes over and we must see the combined entity is much more productive and useful.
Q: Which are the companies that are looking forward to it?
A: See, we have several hydro PSUs like SJVN, TSDC. They are companies with one or two projects and are trying to expand themselves. We will have to look at who should be merged with whom to increase its competence and scope. Thus, decisions will be made on lines of who will be more competent to take over and produce better results.
Q: What are your top priorities for FY20 that can be completed in this fiscal itself?
A: Tariff Policy and we are looking forward to. We also want to bring a scheme that is linked with the outcome of UDAY scheme to find out deficiencies of every state so that we can help them out. It will vary for each state so that a specific requirement of each state will be met. The third thing is related to prepaid smart meters – our minister has also spoken about it – which will be installed across the country. We have devised a three-year timeframe for the purpose and have already had several rounds of discussion with the meter manufacturers and have asked them to increase their manufacturing capacity and how it will be operated, as in, it should be done by adopting CapEx model or by outsourcing the same. These things are going on at our end and this smart metering program will be launched at a big scale. Apart from this, we also have a target of reducing the losses to make DISCOMS commercially viable entities. We also have the vision to list few DISCOMS on the exchange as PSUs were listed on the indices and become professional companies. They should be listed not to turn up just profit-making companies but also be able to capitalise itself in the market.
Q: Investors are quite worried for the sector because it is going through problems even the banks have a big exposure on it and NCLT results have not been declared yet. How are you encouraging/inspiring PSUs like NTPC and others to perform better so that they can compete well with the private players? How these PSUs can become better financially?
A: Frankly saying that in today’s time our companies are doing very well financially, and their turnovers and profits are very high. We have a set of a generation that looks under stress for a time being. Otherwise, the power sector is one thing which is going to grow, and we have been growing by more than 5.6-6%. Generally, it grows along with the GDP which is growing by 8% and we have grown up to 6.5% under normal conditions. Growth is going to take place, but we are just looking at a small stressed group but if you have a look then you will find that competition has increased in transmission and transmission companies are doing very well. Improvement in the distribution sector will improve a lot of other things. We have a scope of growth in the intrastate transmission of the states. Our projection for the year 2030 seeks huge investment in generation and for the purpose, we have placed a draft energy mix plan at the website of Central Electricity Authority and plans can also be made after the finalisation of the draft. There is plenty of scope for investment tariff policy will bring in competition, even for government companies, which power grid is already doing while competing with private sector companies in the transmission projects. This is a win-win situation for everybody. The consumer gets the benefit of lower tariffs and the companies are also competing with each other.