Mr Anil Sardana
India's largest private power producer, TATA Power, has had to address various complications, both at abroad and home. Managing Director Mr Anil Sardana speaks on some of these to Sudheer Pal Singh.
Q - What would be the impact on TATA Power of the government’s decision to impose 21 per cent import duty on power equipment?
A - The sector is already plagued by varied issues, from availability of fuel to poor health of the distribution sector. It is counter-productive to increase project costs through duty increases, since the burden will eventually be borne by the consumer. Due to over exposure of Indian financial institutions, project developers today are dependent on external commercial borrowings. These will be severely impacted if imports are curbed. ECBs also enable the industry to structure costs in a way that the final rates for electricity are reduced for the benefit of customers. The support of buying countries' Ex-Im banks, and so on, would not be forthcoming. The easy import of equipment for power projects has been a large contributor to the capacity addition in the 11th Plan, with almost 50 per cent of additional coal-based capacities depending on imported equipment. Added custom duties will curb the import of superior technology products that are already highly priced, hindering the sector’s advancement.
Instead of protecting sales of domestic power equipment manufacturers by increasing customs duties, we strongly urge the government to resolve the sectoral issues, since these would result in capacity addition and directly increase sales for all manufacturers. There is a strong need for removal of barriers to entry at all stages, and for an optimal pricing and tax strategy, so that resource allocation takes place based on market forces, operating under a credible regulatory regime.
Q - TATA Power had approached the Central Electricity Regulatory Commission recently, seeking a hike in rise for the Mundra Ultra Mega Power Project. The commission asked you to come back with additional inputs. What is the current status? How has the Indonesian regulation on coal exports impacted the project’s financial viability?
A - This is a sub judice matter and the company would not comment.
Q - What is the current installed capacity? Could you elaborate on the expansion plans?
A - TATA Power is India’s largest integrated power utility, with business presence across generation, transmission, distribution, trading and fuel & logistics. The gross generation capacity has touched 6,099 Mw. The company is also one of the largest renewable energy players in the country, with significant capacity in wind and solar. Also, TATA Power is evaluating various opportunities to grow globally, both in conventional as well as non-conventional energy space. The company has prioritised seven countries for international play. We aim to generate 26,000 MW and secure 50 million tonnes per annum of fuel resources by 2020. Towards this end, various projects are in the pipeline.
In distribution, too, we’re making steady progress in Mumbai, crossing the 300,000-consumer mark, now a significant player. The distribution presence in New Delhi, through the subsidiary, Tata Power Delhi Distribution Ltd, is doing very well.
Q - What is the progress on new projects?
A - The 4,000 Mw Mundra UMPP is progressing well and construction activities are in full swing. The first unit was commissioned in March this year and is the first 800 Mw super-critical unit in the country.The second unit was successfully synchronised in July. The first unit of 525 Mw of the Maithon MPP in Dhanbad, Jharkhand, was commissioned in September 2011. The second unit of 525 Mw was commissioned in July 2012. At the 1,600 Mw Coastal Maharashtra Project, all statutory clearances required to start project implementation are in place. Land acquisition is in progress. We also signed an agreement with the Maharashtra government for the relief & rehabilitation package for farmers in Dehrand and Shahpur villages. Economic options for coal sourcing and logistics are under evaluation.
For the 660 Mw project at Marthapur in Orissa, all major clearances have been obtained. Land acquisition is in progress. Clearance has been granted by the environment ministry, subject to clearance from the National Board for Wild Life, for which the process is on. A proposal for using clean technology is also under discussion for this project. Also, the process of land acquisition for the 1,980 Mw Tiruldih power project in Jharkhand is in progress. In principle, clearance has been received from the railways for transportation of coal from the Tubed block.
Q - What are the top issues before the power sector?
A - Poor financial outlook of discoms (distribution companies), where the losses have been increasing to levels far higher than in previous years, is a matter of great concern, as the buyer of merchandise has to be solvent and efficient, failing which the fiscal health of all associates in the value chain will get impacted, and it would lead to a vicious and unviable circle of uncertainty. Power distribution remains a segment needing significant reform-intervention and a combination of rate increases, distribution reforms and open access is required.
The acute shortage of domestic coal has also become an issue. It has also led to apprehension that the ambitious capacity addition targets of 90-100 Gw in the coming 12th Plan period (2012-17) might not be met and also cause avoidable stress on assets already built or committed by the private sector. The country is likely to face a 20-30 per cent shortage in domestic supply of coal. This is in addition to the huge gap in supply of domestic gas. Imported fuels have become a challenge today and if not dealt properly, would be a lost opportunity for India. Progressive governments elsewhere are not just aggressively scouting but are tangibly tying up resources known to be available globally. India needs to also get its act right. Further, the rise in imported coal fuel prices due to regulatory issues in global markets, including in Indonesia, would also need to be dealt, lest developers not create downstream investments here in India to use imported coal.
Projects announced by various players are moving at a snail’s pace. The rate of growth of the transmission network during the past decade has been six-seven per cent. The inter-regional transmission capacity increased from five Gw to 22 Gw by March 2011. However, this fell short of the 14 per cent annual growth in transmission capacity targeted in the 11th Plan. Further, policy directions do not indicate any significant development with respect to addressing peaking shortages. Also, despite expectation of policy changes to allow the private sector in nuclear energy, there is no real development on the subject.
Q - What are your views on the weakening of Indonesian coal prices?
A - Though there has been a marginal decrease in Indonesian coal pricing, it is not significant enough, as the price increase in recent years has been unprecedented, about 130 per cent.
In addition, Indian importers have not benefited significantly from the fall in prices due to the rupee’s significant depreciation. In March-May 2012, international coal prices fell 10.5 per cent, but the rupee’s fall meant Indian imports were one per cent more expensive in rupee terms over the same period.
Source - Business Standard