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There is no room for stressing farmers with more power cost: Piyush Goyal

Interview with Union minister of state for power, coal and renewable energy

Shreya Jai & Jyoti Mukul 

There is no room for stressing farmers with more power cost: Piyush Goyal

Power and coal have been among the most action-packed sectors in the first two years of the National Democratic Alliance government at the Centre. Fixing fuel supply even as the Supreme Court struck down previous coal mine allocations and bringing the distribution companies out of losses when they are heavily debt ridden were some of the challenges. Union Minister of State for Power, Coal and Renewable Energy Piyush Goyal, in an interview with Shreya Jai and Jyoti Mukul, said the era of tariff increases is gradually changing to an era of possible reduction. Edited excerpts:

Is economic growth a concern for power demand and future investment in the sector?

The gross domestic product (GDP) growth will touch eight per cent this year. Next year, we will reach 10 per cent, hopefully. This is coupled with energy efficiency. In March 2016, overall growth in power generation was 11.3 per cent. Thermal generation grew 15.8 per cent. Hydropower is down from 8.6 billion units to 6.9 billion units because of a three-year drought. We made up for that by increasing thermal. Gas is up by 43.7 per cent because of innovative schemes with which we revived the gas-based power sector.

The Electric Power Survey conducted among states has lowered the power demand projections for 2022 to 239 GW from 289 GW earlier. How do you explain such a scenario?

The demand projection earlier did not anticipate the saving which will come from just one programme. We will get 22,000 Mw from one energy efficiency initiative (the LED programme).There are huge aggregate technical and commercial (AT&C) losses which are assumed to be given. They are expected to come down by nine per cent by 2019-20. Earlier, it was perhaps just 1.5 or two per cent. So, there is a difference between earlier trajectory and now.

The third factor is the efficiencies we have in systems like coal supply. Earlier, it was assumed that coal will be in shortage, so you needed more capacity. But now Sasan UMPP achieved 100 per cent plant load factor in April 2016. So now, we are encouraging people to run at higher rate. I have asked NTPC to ensure that their plants run at 90 per cent.

Where do you see power demand rising?

There are one crore agriculture pumps not connected to the grid. Very high efficiency pumps will replace these pumps and reduce diesel imports. We are looking at more uninterrupted power to replace diesel gensets. Some $2 billion of diesel is consumed by the telecom companies which would be connected to electricity. We have to think out of the box, bold and big. Like, can India think in terms of a 100 per cent domestic manufacturing of electric vehicles by 2030? Our own estimates should be a rolling plan. Certainly Uday will empower us to look at greater demand. We want India to be free from diesel gensets and completely run on grid and off-grid.

What kind of benefits you anticipate from higher PLF?

If more capacity gets utilised, my cost will come down. If PLF goes up from 60 to 90 per cent, the cost of power comes down by ~1 a unit. My whole effort is to make power affordable and I’ll give an example. Today people encourage industry by giving subsidy and tax waivers. I spoke to the Madhya Pradesh government, and said they should give low-cost power to attract industry. They currently give an incentive of ~0.5-1 a unit for incremental use of power. I asked them to change the thinking. You reduce ~1 in ~6. Imagine if we go to the US and ask them to invest in a state, and offer power at ~4 or ~3.5 for the next 10 years. We are now looking at giving a kick start to the Make in India programme through these kind of innovative measures. We will talk to all states and help them get cheap power.

We will have a back-to-back arrangement with the NTPC at a fixed price, provided distribution companies give it further for the benefit of industry and manufacturing. Imagine the benefits — job creation, increase domestic manufacturing, look at economies of scale, you can increase indirect tax collection like excise duty VAT, entry tax, professional tax and income tax on wages and salaries. The entire system benefits.

Power sector till now has seen cross-subisidisation. Will this mean an end to that era?

That will continue and I am the last person who will advise this. Farmers have small land holdings. Many are doing subsistence farming. Technology is outdated. They are monsoon dependent. Irrigated area is less. In such a situation, it is incumbent upon all of us to support farmers. We are committed to doubling the income of farmers in the next five years. Certainly, I don’t think there is any room for stressing them with more power cost. And our Indian cost of power by itself is quite low. With Uday scheme (restructuring of debt in distribution sector), there will be a saving of ~1.8 lakh crore on cost of power annually from 2019-20 in a business as usual scenario. I see no reason to burden the farmers with any more cost.

But wouldn’t the generators be burdened if industry is supplied power at low rates?

If somebody is encouraging more investment, we can produce at very attractive rates. If a NTPC plant is running at 80 per cent, we can make it 90 per cent. We can set up more pit head plants. I can expand plants which are at pit heads to generate at low costs. As we are giving more thrust to transmission, more efficiencies will come.

What will be your priorities henceforth?

The biggest challenge when we took over was gas and coal; and power transmission which was inadequate to reach areas which were in shortage. So we focussed on them. The second year, I took up distribution and renewables. Today we are reaping benefits of that since power tariffs have not gone up anywhere. By and large they are stable. The era of tariff increases is gradually changing to era of possible reduction in large parts of India which run their discoms well.
My focus this year is on success of Uday, which is all encompassing as it touches all segments. We will undertake deep monitoring. PFC and REC will do that as part of Deendayal Upadhaya Gram Jyoti Yojana and Integrated Power Development Scheme.

Two other priorities are hydropower and wind. There is sufficient coal today. Gas is on auto pilot. So fuel is sorted out; transmission is under control. Now is the time to roll out rural electrification to the last household.

Amidst thrust to T&D, generation seems to have taken a backseat in policy and investment?

Will anybody invest in a sector where there are still stranded plants stuck because the banks are not lending to the existing plants? Which lender will invest? Suppose there is an equity investor, will he lend in such an instable system? This is why the UMPPs we are coming out with are with proper plug and play so that they can be implemented on a fast track basis. I don’t want a repeat of projects being awarded and for five years are being delayed causing stress to banking system cost overruns which means costlier power. We like to plan whatever we do slow & steady at the right time but what we do should be executed seamlessly. Similar to our solar plan, we gave them PPA, land, transmission and therefore 20,000 Mw has been bid in one year — unparalleled in the history.

When do you see private investment coming in power sector?

All these transmission projects to be awarded through TBCB, all the MDOs for coal mining that Coal India, Neyvlie Lignite, state governments are coming out all of them are private sector investment and private sector entrepreneur. International companies are also coming up. Some of the old transmission projects of Power Grid would also be built by the private companies. So the same bidders who are bidding in TBCB are also bidding for Power Grid projects. But now gradually it will become more TBCB share as per the new Tariff Policy. Renewable has huge potential. I see between transmission of renewable, grid connectivity issues, technology and renewable sector investment we could easily see Rs 10 lakh crore coming by 2022 for RE.

What’s the plan of action for auction of coal blocks for commercial mining?

We calibrate all our plans. If I start auctioning out today, it’s the worst time to auction. International prices are low, the country has sufficient coal and there is no coal shortage. So is this the right time to give out the natural resource of the country? I will be considered as an irresponsible minister who gave out natural resources when I could have held back. So we calibrate on based of demand supply but we do very deep modelling going forward in consultation of NITI Ayog.

Do you see stress developing in the RE sector, due to players putting their projects on sale — close to 10,000 MW worth $2.5 billion?

Sale of assets is music to my ears. It means finally the Indian market is maturing because after all there must be demand that they are able to sell. Internationally there is a set of developers and investors. The expectation of return on debt & equity at development stage historically and world-wide is different and as the project matures then the interest cost comes down and investor expectation also comes down. The public sector has not done these aggressive bids in solar. Government has not set the price. These are AAA rated private sector companies. European government companies have also bid. So you should ask these companies why they bid at that price. So projects on block means developer and investor model is maturing in India.

Development & Investment model is a world-wide model for all infrastructure sectors but not in India especially since there aren’t any buyers right now?

The previous Indian government had laws which didn’t permit sale of projects. Why do you think we are now getting such aggressive bids in solar? Land is taken care of in most cases, transmission taken care of at a determined price, NTPC is the counter party so risk is reduced and payment would come in time. On back of that low cost debt is available; investors’ return expectations have fallen. I have allowed exit within six months so you develop, ensure you meet your commitments and exit. We are making it better to get lower prices. Affordability has come based on intelligent bidding and getting out of the cobwebs of the past.

In conventional power, lots of project which are not getting buyers because their balance sheets are stressed. Do you see that threat coming in RE as well?

International players are interested in Indian assets. Indian companies are buying out other companies. Two weeks back, there was an announcement. There is so much interest. NLC and NTPC are behind my back to allow them to acquire some of these assets at such attractive valuation. Power demand will grow and the way we are expanding Make in India program and the way we are keeping power cost affordable, reaching rural electrification to add another 30-50 crore more people, the way we want to eliminate DG sets from households, industry, telecom towers, India is the only bright spot in the world where the power demand is going to growing exponentially. Worldwide the power demand is on its way downward trajectory particularly with technology and efficiency. India will be growing trajectory with efficiency and technology because of the huge one billion people inspiring for a better quality of life.

How far the plan for an equity fund for renewable energy progressed? Will it also be for conventional power?

It’s all ready; I am just waiting for the right time because the unfortunately interest rate have not come down to where I think they should be. I like to do things when I think the citizens of India can benefit the most. We will launch it when best deals are available. Similarly on conventional power, the last word has not yet been written. The equity find will not be managed by the government but co-investors. We will have separate funds for renewable and conventional power. We planned to do it under NIIF. Now that NIIF has come, we will see what to do.

How much has UDAY succeeded in deleveraging the balance sheets of discoms?

The discoms are fully owned companies of the states so net there is no change. De-facto situation has been converted into a dejure situation. This was the liability of the states but they were paying 13-14% interest rates. So we asked them to take on their balance sheets and enjoy much lower interest rates. Banks are now relieved of that stress. More than Rs 2.15 lakh crore of bank debt is already covered in the 10 agreements we have done. Another 3-4 states and we would have sorted out all the loss making situation. Every banker is delighted with the UDAY scheme. I told these banks to pick up these bonds in falling of interest rates scenario as you could earn money. EPFO, LIC, private wanted to subscribe it.

What the Centre’s stand in sharing the penalty amount imposed by the Supreme Court on operational and about to be operational coal blocks since states are demanding a share out of ~6,154 crore collected so far?
We have referred the matter to the finance ministry. I don’t think this matter merits any consideration because it was penalty imposed by the SC and does not entitle any rights of the state government. I will not pass judgement on that. I actually suggested that the centre should have a share in the revenue of the coal blocks but it was the magnanimity of the PM who said unless East India needs to develop equally as the country so it should go to the states. In this case, it is SC mandated.

First Published: Tue, May 17 2016. 00:30 IST