Compared with telecom, which is run on a day-to-day basis, in terms of constantly revising tariffs and talk times, power generation and distribution is more of a long-haul business, involving gestation periods of as much as 20-30 years and is very strategic in nature, says Anil Sardana, managing director of Tata Power. Still, these are exciting times for the power sector, he feels. Tata Power, for one, is in the midst of a massive expansion to increase its capacity multi-fold. True, with coal prices flying off the handle, uncertainty looms on the sector and many a player is expected to endure pain. Send them to us, a confident Sardana tells DNA in an interview, indicating the appetite for growth in the Tata group company. Excerpts:
A number of policy issues are still dogging the industry. A few developed countries have omnibus regulations that straddle sectors, leaving very little to doubt. Your thoughts on an omnibus Act...
There is a whitepaper the Planning Commission prepared sometime back, covering all regulations needed in the country. It covers the concept of omnibus regulations versus individual ones. It also compares countries which over a period of time have seen regulations evolving. We know very clearly that the US is one of the advanced countries when it comes to public utility regulations. They have moved away from omnibus and got into specialised regulations in which they have looked at stakeholders’ interests. The Planning Commission in India has categorised the work and tested it with our maturity of regulation vis-a-vis what the world has moved towards. It has given a roadmap, in terms of how India should work on protecting various stakeholders’ interest, both from development and customer point of view.
The major breakthrough in the power sector came through the Electricity Act, but it fell short of some major policy changes. Can you list some of the shortcomings?
One of the key subject matters associated with the Electricity Act is its applicability to different states. The subject, being in the concurrent list, guides the states to respond. In terms of providing a clear guidance in the areas of last mile, I think, it fell short. It does not mention anything about how a master plan for a town of a different category should address various energy sector related issues.
Can you elaborate?
Take for example a master plan for Bangalore, Hyderabad or Chennai. The development of the city has to evolve in 15 or 20 years. Does it give them guidance in terms of what percentage areas you must outline for setting up customer distribution networks and for setting up substations on the receiving end and the transmission end, or what we should do in terms of power generation if we have to create some sort of islanding concepts? It fell short in giving any guidance on those issues. This was one of the biggest missing links in the Act.
What do you mean by energy security?
A country should know how much nuclear energy should be generated in 10 years. Likewise, hydro energy and thermal energy generation also need to be quantified and so also renewable energy. Provincial governments today have no guidance on energy security needs. There has to be a guidance which links the states to the overall energy security needs of the country. But the country cannot meet its energy needs without importing coal or gas. China, for example, is importing. Even though they own a lot of coal, they are net importers of coal and gas. It is because of their energy security policy. India today needs that energy security concept.
Would it make sense to break up your businesses in Tata Power into different entities?
It is an evolving process. In every segment, if you grow to a point which can justify a business becoming a company in itself, then we can look at that. There are companies that have done that very successfully.
Will you do that? You are moving to become a 25,000 mw giant?
I think our size today is not that significant to do that. If any segment justifies it, we’ll certainly look at that. But what happens is in our business, there are many projects that get into an SPV (special purpose vehicle) mode anyway. For example, Maithon and Mundra are separate SPVs. Coal blocks are separate SPVs. They eventually merge into one single entity as part of consolidated accounts. In any case, they are not part of us in a day-to-day operation. Subsidiaries, divisions, separate boards, separate SPVs. Take Bumi Coal, or Mundra Power or Maithon Power, they have their own CEOs. By virtue of that, they have a separate governance structure.
Tata Power doesn’t have any plan in nuclear energy yet. Is it because the government is yet to come out with a clear policy?
2014 is when the government says it will come with a clear plan, segregating strategic and civil nuclear segments. As of now, they don’t permit more than 49% to private sector. Therefore, we’ll wait for 2014 for unbundling to take place and also for the government to amend the Atomic Energy Act to allow private sector to have a higher participation. Our participation will depend on how much the government will be open to that path.
Which segment in your business do you expect to grow the fastest?
The segment around thermal coal will grow the fastest. We will also like the consumer end of our business to grow faster. The unfortunate part is that none of the provincial governments is keen to open up that segment. They are all ducking around franchisee models, which means nothing in terms of how it meets the Act. It is ultra vires of the Act, because it doesn’t allow the consumer the advantage of capex or reduction in transmission losses. Many state governments are working on that. We are working along with the Planning Commission and the Government of India to have standard bidding documents, which are more open, ultimately benefit the customers and have a long-term sustainable benefit to make distribution more viable, efficient and customer friendly.
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