India will again become the top investment destination: Power minister

At a time when a slowdown has gripped most sectors of the economy, Raj Kumar Singh, Union minister of state for power and new & renewable energy and skill development, is not worried. In an interview with Shreya Jai and Jyoti Mukul, he says private investment will come back to the sector in one year as the government has created demand from 26.5 million households through a single programme apart from taking other measures. Edited excerpts:

The power sector has been under stress for longer than the economic slowdown. Do you, therefore, see the need for a stimulus package for the power industry?

My sector is growing. In the first quarter, it grew 6.7 per cent over the last year. There was stress but out of 34 stressed units, 14 have seen resolution and three are in the process. About eight have been referred to the National Company Law Tribunal (NCLT) and nine-ten are under hearing in the tribunal. We have put in place a number of measures to help these units.

We carried out bids where demand from distribution companies (discoms) was aggregated. Companies that did not have power purchase agreements (PPAs) could participate. We tied up 2,500 Mw capacity in the first round. Rates in the second round were slightly high which was surprising because if these units are under stress, rates should not be higher. Another initiative was the implementation of recommendations made by the high-level empowered committee (HLEC) under the Cabinet secretary. One of this was you will get coal to generate and sell power in the market even if you don’t have a PPA. By and large we have addressed all the difficulties in the sector.

Do you see private investment returning, especially in conventional power generation where no new projects have been planned by the industry?

You wait for one more year, maybe, and we will bid out some ultra mega power projects because our demand is growing. Any investor just needs coal and certainty of payment. I have now provided certainty for payment through the letter of credit (LC) mechanism. As far as coal is concerned, we have already implemented the HLEC recommendations. We have addressed all the problems which were brought to our notice by the developers.

At the same time, a lot of capacity was added in the power sector which was more than the demand. Now the power demand is growing at a healthy rate. We will again become the most attractive destination for investors. I have added 26.5 million consumers in the past 16 months. No country in the world has added so many consumers in such a short period. We are the fastest-growing power destination in the world, be it renewable or the overall power demand. This will push the demand for power and electric equipment.

But the real problem lies at the distribution end where payment dues have mounted and discoms sometimes do not honour commitment. Do you think that has been addressed?

We have taken a path-breaking decision, which we implemented from August 1. Power will be dispatched only when the discom concerned gives an LC and the quantum of power which is dispatched is equivalent to it. So after August 1, there is no question of dues for the current supply. That leaves the legacy dues which total up to Rs 35,000 crore. In the tariff policy, the delayed payment surcharge cannot be waived off under any circumstance. We are also amending the law to implement the same.

On the other end, discoms are not paid by several government departments and outstanding on that account is about Rs 41,000 crore. We are telling the state government to pay discoms.

Most PPAs had the provision of LCs but it is only state-owned generators like NTPC who were able to pressurise discoms on payments. Are private generators in a position to do this?

That’s why I put this system in place. The private generator did not have the bargaining power as they were dependent on the states. Regional load dispatch centres and Power System Operation Corporation have directed power will not be dispatched without LC from either private or central units, except for state’s own generating units.There  are some old PPAs in renewable where there is no provision of LC. We need to address this immediately.

What is your assessment of UDAY (Ujwal Discom Assurance Yojana)? What will the modified scheme look like?

By and large, losses did come down to 18 per cent. We will lay down a fresh trajectory for bringing them below 15 per cent. It will be one umbrella scheme under which we will give money to states linked to their performance. It will be Deendayal Upadhyaya Gram Jyoti Yojana, Integrated Power Development Scheme and UDAY. If you don’t follow a loss trajectory, you won’t get funding from PFC and REC.

Will the scheme have debt restructuring?

I don’t think it is needed at the moment. I am addressing something else — the causes of that debt. Discoms couldn’t collect money for the power that was distributed. You did not meter and bill it, did not stop energy theft.

Hasn’t there been stress in the renewable energy sector lately?

All major pension funds of the world are invested in the Indian renewable energy sector. Only disruption now is because of Andhra Pradesh. We have written to them. I have spoken with the chief minister.

But the wind power sector is facing challenges?

Ultimately, it is a market. All forms of energy have to compete. If some form of generation is more efficient and cost of electricity is less from an energy source, it is ultimately economics. If some method of generation gives you electricity at Rs 2.6 per unit and another gives at Rs 3 per unit, anyone will prefer the cheaper one. The consumer wants service and he wants electricity at most economical cost.

What is the government doing to address the issue of open access?

Open access for all was envisaged in the Electricity Act in 2003. It was the spirit behind the law. Everybody has the right to buy power from wherever they want. We are strengthening that in the new tariff policy. We are saying if an application for open access is made, it has to be decided in 30 days. If it is denied, then give reasons.

Some discoms disrupt and avoid open access by levying surcharge. This will be capped and phased out in four years.

What is the status of the tariff policy and how are consumers going to benefit from it?

We have received suggestions and it will be sent to the Cabinet soon. Discoms cannot pass on any loss above 15 per cent to the consumer. You want to give subsidy, give it by direct benefit transfer. You cannot burden paying consumer with the load of subsidised ones. Power generation is not free so states will have to pay discoms for free electricity.

What has been happening over the years is that the state pump in money for buying coal, transformers, conductors, building sub-stations. But discoms are unable to collect money for power they distribute, so they are unable to maintain infrastructure. The system runs but then you have to invest again. We will put a stop to this cycle. We are going to make the sector viable and sustainable.

After Saubhagya, what is the next task?

Compulsory 24X7 power. Under the tariff policy, if discoms do load-shedding, they will have to pay penalty. Norms will be laid down for power cut, replacement of transformers, repairs and maintenance, etc. The Central Electricity Authority is working on the regulations and it will be circulated to all regulators and they will finalise the norms. Amendment to the Act will be needed to strengthen penalty. Power is a concurrent subject so the law created by the Centre prevails. Even if state wants to create a separate law, it will have to be approved by the Centre.