New Delhi: Tata Power Co. Ltd, which has been making all its new bets on conventional power generation in overseas projects over the last half a decade, is showing renewed interest in new large domestic power projects if they are designed to address all project risks. The government is now working on the bid documents for new 4,000 megawatt ultra mega power projects.

In an interview to Mint, Tata Power chief executive officer and managing director Anil Sardana speaks about the need for increasing per capita consumption of power, making land acquisition easier and putting an end to the practice of industry subsidizing the power bills of residential consumers. Excerpts from the interview:

Is the 7 April order of the Appellate Tribunal for Electricity (APTEL) that power regulators cannot grant compensatory tariff, but can give relief within the limits of power purchase agreements to make up for power producers’ losses from higher coal prices, beneficial for companies like yours?

APTEL has said that while the Central Electricity Regulatory Commission (CERC) has no regulatory powers under the Electricity Act to change tariff determined by competitive bidding process, in case “Force majeure" or “Change in Law" is made out, relief can be granted to power generating companies under the Power Purchase Agreement (PPA) under the regulator’s adjudicatory power. Accordingly, APTEL has sent the matter back to CERC to consider the relief to be granted to Coastal Gujarat Power Ltd (Tata Power’s wholly-owned subsidiary) for Force Majeure event. CERC has also been directed to conclude this work before 7 July 2016. We now look forward to the calculations being done by CERC as per the APTEL order.

There has been a gradual shift to other markets for Tata Power in terms of new investments and projects?

In the last five years, other than the renewable energy business in India, almost all our commitments have gone outside India because we find that land acquisition and approvals take a good amount of time. In December 2011, we got our 400 mega power hydro power project awarded through bidding in Himachal Pradesh. And in December 2012, one year later, we got a similar 400 MW hydro power project awarded through bidding in Georgia, near Turkey. We are commissioning this project in Georgia by December 2016. I’ll be happy if I can, even one year later than this, put the first brick in Himachal Pradesh.

Anil Sardana, 57Sardana, an alumnus of Delhi College of Engineering and a cost accountant, has been with the Tata group for 16 years. He was credited with turning around the fortunes of Tata Power Delhi Distribution Ltd when he led the company for four-and-a-half years till January 2011.

Will you be open to bidding for the ultra mega power projects (UMPPs) that the government is now preparing to offer?

We will consider new UMPPs if the final bid documents addresses all risks that a developer has to deal with. One of the risks relate to exchange rate fluctuations as developers cannot entirely depend on local banks for funding these projects. I’m sure the government would want to address these. If done, we will look at new projects in a positive way.

We don’t give guidance on investments. But I can say in general that we have been making about ₹ 2,500 crore of capital spending every year in growing subsidiaries as well as in new projects.

I see no reason why that should change. If we find a project in any of the markets we operate in—India and neighbouring countries, Africa, Turkey, the Middle East and South East Asia—in which risk can be mitigated and the reward is above the threshold, we will invest.

Affordable and reliable electricity is crucial for the Make in India initiative to succeed. Will generation companies be able to meet this challenge?

India’s per capita power consumption of 1,000 KW hour is one third of the global average. The per capita consumption of our neighbours too is three times ours. If we have to improve power consumption, it is the distribution sector that has to ensure that it caters to consumers on a 24x7 basis. It is the distribution business which has the responsibility to make sure that industries set up upstream investments in manufacturing and create more jobs. If that doesn’t happen, neither will the per capita power consumption increase nor will the Make in India initiative succeed.

The blame for power sector’s problems rests not with the generation or transmission sectors, but on the fact that we have taken far too long to reform our distribution sector. Power generation capacity has no meaning at all if per capita consumption remains low. For whom have you built the capacity? Instead of talking about milestones in terms of money spent on capacity addition or villages electrified, we should speak about the number of new consumers who got connected to power and the increase in power consumption.

President Abdul Kalam used to say there are two parameters to monitor prosperity, one is girl child literacy and the other electricity consumption. If these two parameters are met, the country is getting prosperous.

Do you think the latest initiative to turn around debt-ridden state-owned power distribution companies—Ujwal Discom Assurance Yojana (UDAY)—will be successful?

In the present government, there’s no pressure on anyone to visit the ministries. Business-to-government interface has been reduced to a large extent. At Tatas, we will be very happy if one doesn’t have to knock at the doors of the ministries. I don’t see much need now. At the same time, progress is to be made on fuel linkage. (Tata’s 1980 MW Tiruldih Power Project is stuck after the Supreme Court de-allocated the Tubed mine on 25 August 2014).

Power distribution companies did not come out of their problems despite the previous two turnaround schemes. The change this time is that the central government has offered many incentives for states to join the scheme and has set operational and financial efficiency improvement targets for distribution companies. One has to wait and see how distribution companies respond to this.

The Economic Survey 2015-16 suggested that the industry should not be made to cross-subsidize consumers; instead, rich residential consumers should subsidize the poor.

I have always been saying that it’s high time that industrial tariff should be the lowest, because industry contributes to economic productivity and creates jobs. That will really give tremendous flip to the industry to make viable projects and make even upstream investments. The new power tariff policy particularly emphasizes on the word “affordability".

Today in a city like Delhi, most of the residential customers are being subsidised. Those who need subsidy are those below poverty line, who have just one light bulb and a fan at home. We should give subsidy to people who consume less than a specified threshold of power. But the rest should get electricity at the actual price. Then, you don’t need industry to subsidise residential consumers because BPL people are few. When we give subsidy to the whole system, we are resetting the economic principles.

Would you also be interested in the government’s waste-energy projects?

Absolutely. I think whatever can be converted into energy within a competitive price, we should do that. We need those solutions for villages because there, you can get a lot of waste and a lot of biomass. If we can convert that and give it back to the village, at least they don’t have to wait for a transmission line next to the village.

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