India needs to end Coal India's monopoly status and appoint a regulator for the sector to increase output of the fuel that is critical for thermal power generators, says NTPC Chairman Arup Roy Choudhury. In an exclusive interview, he says he fears his company would miss targets for the 12th Five-Year Plan because of fuel shortages. Excerpts:
The government has taken some initiatives for the power sector in the past few months. As India's biggest utility, are you happy with these steps?
I am not happy at all. I am terribly unhappy that I have been made a miner from being a power generator. Mining is not my core competence. It is out of compulsion that I am getting into coal mining. I am not happy at all that we don't have enough miners in the country. There is no global yardstick, but backward integration helps when you can benefit from unregulated prices, while we work in a regulated market.
Coal India has not been able to add capacity in line with the increasing demand of the power sector. How can this be changed?
If we are not mining even half of our mineable capacity, then what are we doing? Our solution is not imported coal but to increase local output, and we left that to Coal India. We have no coal regulator, and the administrative ministry is the owner of Coal India.
Why would the owners do anything that is not good for Coal India? We need to open the sector to private miners and make up our mind on how we price it. We worry about windfall profit, coal being diverted to other projects, depletion of minerals...let's have a coal regulator and all that can be taken care of.
How willing are we to open up coal mining?
We have a total lack of willingness. When you make a new system, there would always be unscrupulous elements who find loopholes. But just because somebody would find a loophole, we can't stop putting in place a new system. We must design a new system and have a regulator on top of it. We have been talking about a coal regulator for a year, but it has not happened. If we don't have a regulator soon, we will remain in this confusion.
Given the shortage of coal and gas, what is your growth strategy?
All the stations that I am running have coal supply. But my expansion plan is affected by fuel availability. I would probably not be able to add 11,000 MW due to lack of fuel availability. It would be a loss to my company, but also to the nation. I would have added that capacity with my money, without any budgetary support.
What are your expansion plans for the 12th Plan?
We had a target of 25,000 mw of new capacity, but we would be able to add only 12,000-14,000 mw. Almost 11,000 mw of projects are stranded due lack of fuel linkages, this includes 3,000 mw of capacity where the government had taken back our mines and need to formally restore them to us.
I am still optimistic, if something is done now, we could achieve the target. But the capacity addition would be bunched closer to the end of the Plan even if the problems were resolved now.
Most power distribution companies increased tariffs last year. Do you think they require a similar increase this year to reduce losses?
Absolutely. If we don't increase tariff this year, nothing is likely to happen next year as we would enter the election mode.
What would be an appropriate tariff increase?
The hike has to be realistic since the average cost of power is around 2.90 paise because Coal India has been increasing prices. Coal India has increased prices twice in the last one year because they are now a listed company and they want their share prices to remain high. Coal India may be the only company in the world where the production has gone down but the profits have gone up.
What is your strategy for renewable power?
Renewable energy is a social compulsion for cleaner environment. Renewable power is most unreliable as plant load factor is 20-25% at best. We must put up renewable energy, but first we need to make affordable power available to all. That will come from power generated from domestic fuel.
The government has taken some initiatives for the power sector in the past few months. As India's biggest utility, are you happy with these steps?
I am not happy at all. I am terribly unhappy that I have been made a miner from being a power generator. Mining is not my core competence. It is out of compulsion that I am getting into coal mining. I am not happy at all that we don't have enough miners in the country. There is no global yardstick, but backward integration helps when you can benefit from unregulated prices, while we work in a regulated market.
Coal India has not been able to add capacity in line with the increasing demand of the power sector. How can this be changed?
If we are not mining even half of our mineable capacity, then what are we doing? Our solution is not imported coal but to increase local output, and we left that to Coal India. We have no coal regulator, and the administrative ministry is the owner of Coal India.
Why would the owners do anything that is not good for Coal India? We need to open the sector to private miners and make up our mind on how we price it. We worry about windfall profit, coal being diverted to other projects, depletion of minerals...let's have a coal regulator and all that can be taken care of.
How willing are we to open up coal mining?
We have a total lack of willingness. When you make a new system, there would always be unscrupulous elements who find loopholes. But just because somebody would find a loophole, we can't stop putting in place a new system. We must design a new system and have a regulator on top of it. We have been talking about a coal regulator for a year, but it has not happened. If we don't have a regulator soon, we will remain in this confusion.
Given the shortage of coal and gas, what is your growth strategy?
All the stations that I am running have coal supply. But my expansion plan is affected by fuel availability. I would probably not be able to add 11,000 MW due to lack of fuel availability. It would be a loss to my company, but also to the nation. I would have added that capacity with my money, without any budgetary support.
What are your expansion plans for the 12th Plan?
We had a target of 25,000 mw of new capacity, but we would be able to add only 12,000-14,000 mw. Almost 11,000 mw of projects are stranded due lack of fuel linkages, this includes 3,000 mw of capacity where the government had taken back our mines and need to formally restore them to us.
I am still optimistic, if something is done now, we could achieve the target. But the capacity addition would be bunched closer to the end of the Plan even if the problems were resolved now.
Most power distribution companies increased tariffs last year. Do you think they require a similar increase this year to reduce losses?
Absolutely. If we don't increase tariff this year, nothing is likely to happen next year as we would enter the election mode.
What would be an appropriate tariff increase?
The hike has to be realistic since the average cost of power is around 2.90 paise because Coal India has been increasing prices. Coal India has increased prices twice in the last one year because they are now a listed company and they want their share prices to remain high. Coal India may be the only company in the world where the production has gone down but the profits have gone up.
What is your strategy for renewable power?
Renewable energy is a social compulsion for cleaner environment. Renewable power is most unreliable as plant load factor is 20-25% at best. We must put up renewable energy, but first we need to make affordable power available to all. That will come from power generated from domestic fuel.
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