What’s the biggest challenge for NTPC and the power sector?
Till a few years ago, meeting the fuel requirement used to be the only challenge, but now fuel is just one of the challenges. Today, we are also concerned about the ability of states to buy power. Whatever I produce or generate, it is not sold.
Commercially, I do not have any problem because I am paid according to availability of my machines to generate. You know that NTPC is rated as the world’s No. 1 company in capacity utilisation. But for the sector, it is a huge concern that there is power available in the market but there are no consumers.
What do you expect from the proposed coal regulator?
The coal regulator should be able to bring transparency in the sector. It should also devise a mechanism for encouraging investment in the coal sector. Only then I see a lot of new players coming in, who would then be able to increase the production of coal. The power sector became attractive for investment because there is a regulator.
But the regulator does not have the power to decide the price of coal...
I am sure there would be some mechanism. What is quality without price? There is price for the gross calorific value or GCV. There is international price as well as domestic price. In effect, their decision will somehow get linked to price. I expect like a power regulator, the coal regulator would define the return that a coal miner should get. So that, if I want to invest in a coal mine, I should know the returns on it. To me, the coming of the coal regulator should be such that it encourages private investment, since it will benchmark the returns to performance.
The government tried to bring in the private sector and it resulted in the coal scam...
If a coal regulator was there at that time, there would not have been any scam. The person who was given a mine would have been very transparently told that you do the mining and whatever investment has been made, submit that to the regulator and the regulator would decide the returns on that, just like in the power sector.
So you are suggesting the cost-plus model instead of absolute profits?
I do not know what you mean by the cost-plus system. I am only supporting a system where the costing is transparent and not opaque where you quote something today, come back tomorrow and ask for relaxation of the price you quoted. This is neither transparent nor does it meet the competition ethics.
This is what’s happening in power sector. CERC has allowed pass-through of the cost of imported coal...
If you read the entire ruling of the CERC, you will see how it would be applicable. The buyer of power will have to agree for the pass-through of the cost because it is a contract between a buyer and a seller. How will you establish the actual increase in the cost of power? What is the increase in taxation? How will it be established between the buyer and a seller? The power sector will have to be made transparent. This is not a windfall sector; those who have come to the power sector must understand this. I believe that a transparent mechanism should be there, so that there is no scope of re-discovery of price. If you have come to do business, do business. Quote price upfront and fulfil the commitment.
Do you think you would have done better than private sector companies if the tariff-based bidding projects were awarded to you?
Yes, if we were given those projects, they would not have been stranded today. We had made our bids with real calculations. People made fun of us when we did not make aggressive biddings saying we were a PSU (public sector undertaking). But they forgot that we are in business for more than four decades and we know how the sector works.
How will the gas price hike impact the power sector?
Power from gas-based plants will not get sold at the proposed gas price. The government has clarified that they will give subsidy for power and fertiliser sectors, though I do not know how a dual gas pricing mechanism will work.
We run the risk of increase in the cost of power by Rs 1.50-2 per unit. So, the power which is around Rs 2.50 today will cost Rs 4.50. We don’t know if the state electricity boards will buy this power. At this rate, people can buy power based on imported coal. So why would somebody buy gas-based power? At times, we are not able to sell power even at the current gas price of $4.2 per unit. Some 43 million units of our gas-based power go unsold daily. So, you can imagine the condition after increased gas prices.
But do you think by hiking the cost of gas, the government will be able to provide more gas to the power sector to boost capacity addition?
I don’t know. It is based on hypothetical assumption that after making the cost of gas $8 per unit, companies will be able to produce more gas. We will have to see in one year’s time whether they will produce more. But we can’t add capacity based on those hypothetical assumptions. Thankfully, we did not add more capacity without getting assurance of gas and that is why we do not have stranded capacity today, otherwise we would have doubled our gas-based portfolio from 4,000 mega watt (MW) to 8,000 MW.
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What’s the biggest challenge for NTPC and the power sector?
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