Power distribution sector continues to reel from crisis despite recent package for debt restructuring of distribution companies. In an interview with Sanjay Jog, JG Kulkanri, executive vice-president Crompton Greaves and newly-appointed president of Indian Electrical & Electronics Manufacturers’ Association (IEEMA) spoke about challenges and opportunities. Excerpts:
What is your comment on GoI’s debt restructuring package of State Electricity Boards?
This will very positively impact the entire power sector as the entire power sector value chain crucially hinges on the financial viability of the power distribution sector, which has been severely eroded in the last few years. Poor financial health of the state distribution utilities has been affecting both existing and planned projects, leaving developers with no option but to run projects at sub-optimal capacities or go slow on the commissioning schedules. Discoms have been unable to sign power purchase agreements (PPAs) with power producers which have had a dampening effect on the entire sector.
With the debt restructuring and improvement in the financial health of the discoms, banks will regain confidence in sanctioning loans to them.
Due to the increasing financial distress of the discoms, these entities are not undertaking any capital expenditure. Further, projects under Rajiv Gandhi Gramin Vidyutikaran Yojana and Revised Accelerated Power Development Reform Programme are not getting finalised for varied reasons, resulting in sluggish demand for the domestic electrical equipment industry, which is already facing intense competition from cheap imports in the domestic market.
Distribution companies should immensely benefit from this package if it is implemented in the right spirit. It will give a fillip to the power sector and consequently, to the electrical equipment manufacturing sector.
Will this be a game changer especially for the distribution sector?
Capacity additions in generation, transmission and distribution is capital intensive. The focus of investments in the Indian power sector has typically been in the generation segment. Power transmission and distribution (T&D) segments have lagged behind.
The T&D sector requires greater and focussed attention than given till now. The lopsided investment pattern needs to be corrected and we need an investment ratio of 2:1:2 amongst generation, transmission and distribution segments in order to achieve a balanced growth in the power sector. It is heartening that there is some move towards correcting this lopsided investment pattern in the 12th Plan. The total funds required by the power sector in the next five years have been estimated at Rs. 13.72 lakh crores, out of which 47% are for generation and the rest 53% for T&D and others. Distribution sector alone requires over Rs. 3 lakh crores in the 12th Plan.
Will it give further boost to bring reform in the distribution sector?
It is imperative that the discoms improve their operational performance and become technically and financially efficient so that the entire power sector value chain strengths. As part of the package, the government has mandated concrete and measurable action by the discoms, including annual revision in tariffs, bring in private investment in distribution, which hopefully will be strictly monitored. If what is envisaged is put in place, then it should help in substantially reforming the ailing distribution sector.
Are Indian manufacturers equipped to compete with global players?
The Indian manufacturers are employing all the latest quality enhancement tools, advanced machinery and manufacturing techniques and processes, and wide spread automation techniques to be competitive in the global markets.
However, R&D and Innovation still do not find much place in the Indian industry. The Government of India should seriously address this issue along with the industry and also provide increased impetus and encouragement to Industry-institute partnership similar to countries like China, Germany, USA, Korea. Many organizations have started their own employee skill development program to enhance their productivity, quality and competitiveness.
IEEMA has taken up two very important & critical initiatives including Mission Plan 2022 and Sector Skill Initiative. The mission plan initiative envisages building up the Indian electrical equipment manufacturing capabilities to cater to the growing domestic demand and boost exports. The Sector Skill Initiative focuses on the development of a strong base of skilled manpower to help Indian electrical industry go to the next level and be globally competitive.
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