It's a shame that situation now is not conducive to investment: Anil Sardana

Anil Sardana, managing director, Tata Power, has ensured that his company remains at the forefront among power producers in India.  But the last three years have not been easy.  The cost escalation of  imported coal, without the ability to pass on this increased cost, hurt Tata Power tremendously.  Happily, the regulatory authorities have finally permitted it compensatory increase in tariffs. Now he has to wait for the state-owned purchasers to agree with this ruling.

All this delay has meant higher costs, poorer realisations and a great deal of uncertainty.

This has made Tata Power look to business opportunities overseas.

At the same time, Tata Power continues to do its R&D to find out better and more cost effective solutions for the power scene in India.

Sardana discusses his concerns and his plans with DNA's Dhwani Pandya and R.N.Bhaskar. Given below are edited excerpts.

You are the largest power sector generator in India at this moment. Do you think you will be able to maintain this lead from a strategy perspective?
Retaining a leading market share vis a vis our peers is certainly our management objective --  but there is a caveat; we hope that the exchange rate will not throttle this aspiration. The second caveat is the resolution to Mundra issue.

We are very conscious of the fact that we had bid with our eyes open and that should not have asked for tariff compensation. But the changes in pricing announced by the Indonesian government,were certainly not in our control.  We wanted the Indian government to work out a resolution to this for us [and for other similar power producers] through diplomatic channels.  Since that did not happen, we had no option but to insist on being compensated for the increase in coal prices.

Thus, we are legitimate in asking for this compensatory tariff. We are proud of the fact that even after adding this compensatory tariff we will be selling power at sub Rs 3 per unit, which in today’s world with imported coal is a remarkable achievement.

The state governments concerned have still not cleared the revised tariff.

We believe that the judgement is already there. CERC as following a process. It has already announced that compensatory tariff is to be given. The states definitely have a right to appeal even after the final CERC order. So I feel this is a process is being gone through. One can expect it to be prolonged affair.

Will the plant go to lenders?
If our equity gets wiped out, lenders may want to consummate and run it. But if this was ever to happen, then lenders would be compelled to purchase coal at market prices.  This means that they too will have to get Rs 3. So ultimately it translates to the same picture. It’s not easy to run such a huge plant.

I can say without mincing words, that the situation in India is not very conducive to additional investment. The opportunities we have at our end are taking a long time to reach point of fruition. For example we have done two units in Maithon. Two additional units were to come up there. While land, water and transmission is available, coal is not. Indirectly I am getting the message that [India] doesn't need the additional power plants. We have another project in Odisha, where our mine is about to deliver the coal. But, we've not got clearance from the wildlife board for the past three years because no meeting has been held since.

So, if this country does not need us, let’s look at opportunities outside. Fortunately for us some of our geographical neighbours have embraced us.

The projects which we are doing in Georgia, Australia, Myanmar, the UAE and South Africa, in all of these locations, the threshold is far lower.

Taking about risk, how do you mitigate your risks in Nigeria?
The Nigerian part has been very nicely articulated by us. In those ventures, we have not put any money today. Today we have gone as management partners and we provide our experience and skills with the provision that after two years if we want we can take equity and that too up to controlling stake.

As you look overseas, do you have any particular geographical region in your mind?
We did a full scale exercise based on different criteria, like risk return profile, regulatory predictability, growth potential and our relevance and significance in those geographies. We have shortlisted four regions, one region being Africa, Middle East-Turkey, India and the SAARC region and South East Asia. We are going in developing economies, which will allow us greater relevance. Wherever we go, we should be relevant in that geography.
We are agnostic of the type of project we have to set up – thermal, hydel or solar, or even transmission and distribution. But we do not want to go to a country merely to have our flag there. The objective is that we have to be relevant and significant.

You are today about 2500 MW in hydro, 3400 MW in renewable, do you see any of the sectoral growth change?
Our conscious preference will be for non-greenhouse gas emission projects. Thus, we would prefer solar wind, hydro, geo-thermal or biomass. But it would depend on the opportunities available.

What is your view about cluster power generation and consumption.  They appear to provide more bang for the buck, isn't it?
Our efforts are on to develop decentralized distribution channel, which pans out to very larger numbers. We are not looking at just 1000 or 5000; we are looking at a massive scale. We want to offer an affordable and reliable solutions to rural, semi-urban and urban people who continue to face blackouts and brownouts and are dependent on fuel-hungry inverters and generators, which are both expensive and hazardous for the environment.

We are looking at solutions which are sustainable, green and which can be multiplied into very large numbers.

We are still working on 3-4 solutions which we have done at a pilot level and we are still not getting the numbers that we are very keen on. We want power cost solution not to exceed Rs 7-7.50. We don't want to go to villagers and say here is a solution which is cheaper than diesel, but it is still expensive. Also it has to be a sustainable solution. The work is on full cells which will give you power 24 x 7 at not more that Rs 7-7.50 per unit.

An Indian solution would be something like offering hydrogen or methanol based fuel cell at your doorstep, which can work for days together and you can be absolutely carefree about whether you should have any alternate connection or not because this will be more robust than anything you can ever dream of. That is what I want.