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Minister of State for Power (Independent charge) Jyotiraditya Scindia speaks about the challenges in the power sector and the need for a more transparent system of tariff fixation. This session was moderated by Senior Assistant Editor D K Singh
D K Singh: Describe some of the challenges we face in the power sector and the initiatives you have taken.
The power sector has four segments in the value chain: generation,transmission,distribution and last-mile connectivity. You have to get the entire value chain to become viable. On the generation side,there are two issues: the first is capacity generation,the second is coal supply. The power sector gets 377 million tonnes of coal per annum from Coal India and with that capacity,we are facing a shortage of more than 15-20 per cent. If we want power plants to operate at high plant load factor (PLF),there is no option but to look at imported coal. That is why the Cabinet has approved the concept of price pooling. Another issue is that of fuel supply agreements (FSAs). We need to sign FSAs for 60 giga watt (GW) of capacity out of which we have already signed close to 21 GW of capacity. As for transmission,we have a capacity of 28 GW,making our network the third largest in the world. We plan to increase the capacity to 65 GW,which will make us the largest transmission grid in the world. For me,the key issue in transmission is the issue of grid security,especially after what happened last year (the northern grid failure). Theres a great deal of volatility created if you have underdrawn or overdrawn on the grid. The key issue is to iron out that volatility curve, which can be done by reducing the frequency band. Then there is the issue of distribution where the prime thrust has to be to make the discoms viable. That can be done through reducing aggregate technical and commercial (AT&C) losses and increasing electricity tariffs in line with the rise in costs. The AT&C losses should be reduced to 15 per centsome states have actually done that. This is where the financial restructuring package (FRP) comes in where efforts have been made to make utilities viable by shifting their burden onto the books of state governments. On the last-mile connectivity,we have the Rajiv Gandhi Grameen Vidyutikaran Yojana (RGGVY) and the Accelerated Power Development and Reforms Programme (APDRP). We are also looking at reducing energy consumption. We are looking at 12 GW of energy conservation in the next four-five years. For all this to happen,the sector needs a collaborative approach involving the Centre,state and private sector.
DK Singh: Bijli,paani,sadak are major electoral issues. What do you plan to do in the next one year that will change the fortune of your party in the elections?
You cant judge the work done by any government in the span of a year. The complete tenure of the government should be looked at. If you look at this governments performance in the social sector,there has been a tremendous upsurge in last four-five years. With specific reference to the power sector,I can confidently say we have taken major strides forward that will change the perception of the people about the governments ability to provide reliable power supply across the country. In 1991,we had a generation capacity of 65 GW and in the 20-year period,we have added a capacity of 150 GW. Much of the accelerated growth has happened in the last five years with a record 20 GW of capacity having been added. In the four months of my tenure,we have added close to 10 GW of fresh capacity. The target still looks daunting and challenging. The demand by 2020 will be 400 GW and by 2032 it will be 800 GW. Our per person power consumption is one of the lowest in the world. Which means we need to have a robust capacity addition programme. We are planning to add 88 GW in the 12th Plan and 93 GW in the 13th Plan. If you look at the 12th Plan target,that means 17.5 GW per year. We have already surpassed that yearly target. This years target until March 14 was 15.9 GW and we have put in place 16.6 GW. To date,we have put in place almost 19 GW. So we are well on our way to achieving our targets.
D K Singh: Are you concerned about Arvind Kejriwals campaign against inflated power bills?
People are ready to pay for 24×7 power. The power should be affordable,accessible and available. You should understand that tariff fixation is an issue that is dealt by the state government and the regulator. The central government has no role to play in setting the tariff. We need to have a more transparent system of tariff fixation where rates are revised regularly. Efforts should also be made to reduce aggregate,technical and commercial losses.
Subhash Narayan: Several state governments are not in favour of coal price pooling because it can increase electricity tariffs. How are you planning to go about it?
We are looking at various models to make the process of coal price pooling less painful for all the stakeholders. We are evaluating various options. One option is to have this pooling only for power plants that have been commissioned before April 2009. Another is to have this for post March 2009 plants that are facing a shortage of domestic coal. A third variable is to look at reducing the price of fuel by redistribution of coal where imported coal is economically supplied to coastal plants in relation to inland projects where the cost of this coal will become even more expensive due to transportation expenses. The fourth variable could be looking at fuel in terms of its calorific value. In all these options,our prime aim would be to see that transition happens with the least financial burden. The greater amount of capacity that you bring under pooling,the lower your blended price of coal will become. Many plant owners (state governments,private players) may not agree with the option of price pooling. But we forget that theres a fixed capacity charge which has to be paid. For a lot of discoms,its a cost. You have to weigh that against an increased tariff. You need to do a cost-benefit analysis. Its a complex iterative process. I am looking at it and hope that in 10-15 days,Ill reach some conclusion and then it will be taken to the Finance Minister,the Coal Minister and then,together well present it to the CCI.
Subhash Narayan: But is price pooling happening?
The Cabinet,in principle,has approved price pooling. The mechanics have to be worked out. We are looking at all options that are on the table.
Shekhar Gupta: But has the coal production gone up?
Yes,it has in recent months but being the Minister of Power,the key issue for me is to ensure that the committed level of coal is supplied to power plants. So if we need to import coal to meet the fuel needs of a power plant,so be it. Today,on a total capacity of 210 GW,the average PLF in our plants is 70 per cent. So the actual generation is 143 GW. If we take out 25 per cent AT&C losses,we are looking at a capacity of 110 GW. I need to reduce AT&C losses so that I can put those 40 GW back into the system and raise the PLF.
Priyadarshi Siddhanta: The import of coal is increasing. Dont you think coal-exporting countries such as Australia and Indonesia can form cartels to jack up coal prices?
I dont think it will happen. We are already importing 30-40 million tonne of coal per annum across various sectors. If the issue of cartelisation hasnt occurred till today,I dont think it will happen now.
Priyadarshi Siddhanta: One reason for the current coal shortage is that several captive coal blocks have not taken off even though they were allotted to power companies a few years ago. Allegations have also been levelled that a few captive block allottees are misusing coal to make huge profits from sale of merchant power?
In my communication to the Coal Ministry,I have told them that all captive coal block allottees must sign long-term Power Purchase Agreements with state governments. The blocks are not awarded for merchant power but to be able to provide cheap power to states. We are discussing with the Coal Ministry and the Law Ministry as to how this can be put into agreement with coal block allottees.
Ravish Tiwari: Who will lead the Congress in Madhya Pradesh for the Assembly elections?
I firmly believe that the PCC chief is the head of the party in the state. He has been given that responsibility by the Congress president.
Ravish Tiwari: Do you want to focus more on state politics or central politics?
I dont think you can divorce the two. I spend eight-10 days every month on the ground (Guna in Madhya Pradesh) and work for the people.
Sunil Jain: We have seen a lot of restructuring in the power sector. Why do you think it will work well this time?
I think it will work because in the last four-five years,our schemes are gaining traction in terms of achieving those targets. I talked to you about Aggregate Technical and Commercial losses which have come down. Theres much more transparency with the SCADA system in our distribution network. To give you an analogy,it is very much like the mobile business where you actually have visibility down to the last consumer in terms of his consumption. The IT platform that the Accelerated Power Development and Reforms Programme scheme uses actually helps a similar kind of tracking in power networks. The other reason I think it will work is that 10 years ago,the states were not asked to take much responsibility on their own books. This time states are taking 50 per cent of the responsibility onto their books. But along with that stick is also a carrot that provides incentives for meeting the targets.
Sunil Jain: One of the critical things about this (financial restructuring) scheme is the role that banks would play. What powers could bank exercise under this scheme?
I think the key issue is the realisation by states that 50 per cent of the restructuring burden is going to be put on their balance sheets. I think that itself will force a lot of states to actualise a lot of what has been visualised. The bank has power in terms of first right,in terms of earnings,the cash flow but that will depend on the negotiation capability between each bank and state government.
Subhash Narayan: What is the plan of action for gas-based plants?
In many ways,gas has a much more complex problem because it is far more scarce. So,where our thermal plants were running on 70 per cent PLF,our gas-powered plants were running on 40 per cent PLF. About 10 GW of gas capacity is completely stranded. The reason is that gas is scarce and production from the KG-D6 block has also declined sharply. Let me first deal with coal pooling,then Ill come to gas pooling. But the key issue with gas is that if you dont have a domestic supply of gas,you can import gas which is Rs 9.5-10 per unit. You add on to that wheeling charges,that is another 0.50-75 paise and we are looking at Rs 11 per unit. Compare that as a substitute to diesel which is Rs 16 per unit. But that being said,gas generally should be used for peaking power. Looking at coming out with a peaking power policy is option one. Option two is to look at the gas pooling principle.
Subhash Narayan: A pass-through status for imported coal is being looked at. Will it be only for new projects or will it be for older projects also?
All we are talking about is prospective application of pass-through status for imported coal. This would be part of the revised standard bidding document (SBD) that is being finalised by the ministry. We are taking time on finalising the SBD because we want to take care of every aspect so that the bidding process becomes smooth and transparent, that attracts attention of both Indian and overseas investors. This would be out soon.
Transcribed by Subhash Narayan