Nothing stops independent power firms from procuring coal to meet shortfall: Jyotiraditya Scindia

Last Updated: Fri, Feb 22, 2013 21:51 hrs

The power sector has the unique distinction of always being in crisis even as nobody denies that it has a vast investment potential. But Jyotiraditya Scindia, the 42-year old minister, is full of enthusiasm for the sector and seems to be in a mission mode to set things right. In an interview with Jyoti Mukul & Sudheer Pal Singh, he says any solution has to be balanced well. Edited excerpts:

With power plants working below capacity, do you think there has been an excessive focus on capacity addition in the past five years, without fuel being properly tied up, which led to unviable investment and huge losses to companies?

My focus is on capacity creation and not blind capacity addition without being able to generate. On fuel shortage, the biggest challenge was to get FSAs (fuel supply agreements) signed for 60,000 Mw where Letters of Assurance (LoAs) had been given. Of this, FSAs have already been signed for 21,000 Mw. Of the rest, 14,000 Mw is with National Thermal Power Corporation (NTPC) alone. Talks with NTPC on FSA were stuck owing to seven issues. We have resolved six of these. The only remaining issue is of coal quality. This will be resolved soon and once NTPC signs the FSA, other players will also come on board. After that, FSAs for only 25,000 Mw will remain. Currently, Coal India (CIL) supplies 377 million tonnes per annum (mtpa) to the power sector. This entails a 20 per cent shortage.

To meet this, either the country has to extract more coal or increase imports. This is why the proposal of price pooling has been cleared by the Cabinet. I have worked on multiple possibilities for pooling. But this will not be easy because there is a limit on blending capacity and also the tariff rate increase should not become prohibitive for companies. The solution has to be well-balanced.

But there is significant opposition to pooling, not just from the CIL board but also states like West Bengal that argue pooling will benefit new plants of private companies at the cost of state utilities. Given power is in concurrent list, how would you tackle this?

This is why the solution will not be easy. A lot of states are asking why the additional cost of imports should be passed on to them? As the power minister, I have to ensure power is available to every citizen and plants operate on at least 85 per cent plant load factor (PLF). Objections coming from states are also to be kept in mind.

Would an unwilling state have the option to not be a part of the mechanism?

I am working at all permutations and combinations.

How do you plan to tackle gas shortage?

Unfortunately, this is a crisis situation. KG-D6 is not supplying gas at the desired level. There are many gas-based plants, which are operating at 45 per cent plant load factor (PLF). In addition, 9,000 Mw of gas-base plants are completely stranded. But here, imports are not an option due to high cost. This was an issue I raised with the Advisory Group.

One of the solutions I have thought of is that today, gas is used as source of base-load power. Whereas gas can also be used, like hydro, for peaking capacities. If we import R-LNG at Rs 8-9 a unit, we can at least compete with diesel generator sets, which supply at Rs 20 a unit. A lot of the stranded capacity can be used as a substitute for that. I have asked the Advisory Group to revert to me on this idea. This requires state-wise analysis of such capacities.

Would you look at price pooling in gas, too?

This will make sense only if the base is large enough. It makes sense in coal where an additional 15-20 per cent of imported fuel is being added to a total of 377 million tonnes of coal supply and, thus, the impact gets averaged out.

In the new FSAs, CIL will support only 65 per cent PLF of new stations. Is this not a concern?

Even if CIL meets its full commitment, plants will run at low PLF. But nothing stops an IPP (independent power producer) from procuring its own coal to meet the shortfall. IPPs achieved financial closure of projects, after getting LoAs, based on 80 per cent of supply commitment, which is about 65 per cent. The IPPs made their investment decision based on CIL’s commitment. IPPs can import more to increase PLF. NTPC, for instance, imports coal.

But there are small companies which might not be able to import...

Ideally, an IPP should be supplied 100 per cent of the 80 per cent ACQ (annual contract quantity) commitment to enable 80 per cent PLF. But the contract very clearly provides for 80 per cent supply.

What is the status of the amendments the ministry wants to make in the Electricity Act?

We are taking a re-look at 16 clauses in the Act to deal with the issue of grid. The grid collapse last year was a very regrettable situation. One reason for this was underdrawal and overdrawal, which led to volatility in the system. This could have been avoided, if states resorted to local load-shedding. To avoid such failures in future, we have also tightened the grid frequency band. I will be able to introduce the draft of the amendment at the end of this Parliament session or in the monsoon session.

You took charge of the ministry at turbulent times and announced an ambitious reform agenda. How far have you been able to implement it?

We have been able to achieve traction across the four verticals of generation, transmission, distribution and the last-mile solutions. In the current financial year so far, we have been able to set up around 12,500 Mw of capacity and another 4,500 Mw will be in place by end March, taking the total to over 17,000 Mw. Also, we have got clearances from the environment ministry for 2,500 Mw of hydro projects. We have been able to get three mines allocated again to NTPC and hopefully, mines of additional 42 mtpa capacity will be allocated soon to fire 8,500 Mw. We have had one of the largest and most successful public issues (of NTPC) this year.

Standard Bidding Documents for case II (UMPPs) has also been finalised. In transmission, I have put together a road map for granting independence to the Power System Operation Corporation. In distribution, for the first time, we have put in place a rigorous credit rating mechanism to infuse transparency in discoms.

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