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I want to kill 10 birds with one stone: Goyal

Interview with Minister of State for Coal, Power & Renewable Energy

Minister of State for Coal, Power & Renewable Energy Piyush Goyal has stayed in the news through the Narendra Modi-led government's first year in office. While India saw its first coal allocation through the e-auction method, power generation grew to record 22,544 Mw, and the target for the renewable energy sector was set at 175,000 Mw. Goyal explains in an interview that his next set of plans have already been designed - getting investments into power transmission, providing private players a level playing field and taking all states along. He calls it killing 10 birds with one stone. Edited excerpts:

The country has this year achieved its highest capacity addition. But when is the plant load factor (PLF), a factor of increased supply, likely to improve?

We have enough coal to increase production. We have a lot of power to sell. I hope the states would now start getting into power-purchase agreements (PPAs) and buy more power. That is the way forward for PLF to increase. A huge amount of work has been done over the past year to set the investment climate right, and to get back international and national investors' confidence in India. Our own competitiveness vis-à-vis China is getting better. I see a lot of industrialisation happening in the country in the days to come. There will also be new investment. And we need to serve 280 million unelectrified Indians and save millions of dollars spent on diesel generators. As we work on these three big-ticket demands, both electricity generation and PLF will increase.

Since March 2013, no state has signed any power-purchase agreement (except Kerala). Once all these stranded assets get coal & gas and start firing, who will buy?

The uncertainty in the sector was the reason. We have been able to resolve problems, to a large extent. There is demand and states will soon start buying more. I am told Uttar Pradesh is coming up with nearly 3,500 Mw of power purchase in a month.

How has your dialogue with states been, given that most of your schemes - the Integrated Power Development Scheme (IPDS) or the Deendayal Upadhyaya Gram Jyoti Yojana (DDUGJY) - will need states' participation?

I have had a very fruitful dialogue with almost all states. One good thing is that governments have in the past five years understood they will be judged by their performance when they go back to people in the next elections. The governments that perform well are voted back with renewed majorities, while the bad ones go out. We have seen that happening at the Centre and in many states. It's a clear reflection of people's anger over non-performance; that strengthens my resolve, of not only winning the election but giving 24x7 power supply.

When you go to Parliament with amendments to the Electricity Act, you will need support from states...

I am doing my work in an honest way, with the intention of serving the last man standing at the bottom of the pyramid. If anyone has objections, we will leave it to the people of India to decide. I am very committed to 24x7 power and these amendments will help me change the picture.

How do you plan to have an efficient transmission?

The transmission sector is going to be the next sunrise industry. We believe it is something for which you have to plan for generations, and not just years. We have already begun planning for the medium and long terms - only we have redefined medium term as 20-25 years and long term as 50 years. In the next six to 12 months, at least Rs 1 lakh crore worth of transmission capacity will be bid out. And, I see global players coming to India. It's a great annuity business.

Where do you see private investment coming?

There is a huge potential coming for the private sector. Also, there will be a lot of 'Make in India' opportunity - smart meters, infrastructure, towers, cables conductors, etc. In generation, there will the opportunity of completing the stranded projects. Also, there will be ultra-mega power projects (UMPPs); my idea is to dovetail the replacement of old plants with plug-and-play UMPPs. So I don't kill two birds with one stone; I kill 10 birds with one stone.

Both you and the PM are enthusiastic about renewable energy. But investors are still waiting for a framework for financing, PPAs, etc...

I have publicly pledged myself to cause of the 175,000-Mw capacity target. There already are 19 solar parks being planned, and we are discussing with states to have a new renewable policy. I discuss this with every chief minister I meet - West Bengal, Punjab and Maharashtra. We are working on various things to bring the cost down and make this viable. Unless we plan properly, the 32-year-old ministry, which has achieved 3,000 Mw of solar capacity, will only manage to double it over the next five years. Instead, I want to see a 3,300 per cent increase.

Coal auction, gas mechanism and enhanced renewable capacity - all of these - will impact the financial health of distribution companies...

It's a cause for concern that has accumulated over the years. They have Rs 70,000 crore of losses every year. There was a financial restructuring plan that remained a non-starter. First, there cannot be a one-size-fits-all solution for a sector in distress. We need to calibrate each problem separately and understand what can and cannot be done; a roadmap on how things will pan out will have to be made. Also, there should be some handholding for these states so that part of their commitment is fulfilled, too. Second, any action that we decide has to be in a time-bound manner. PM Modi came out with DDUGJY to separate agriculture feeders, give them assured power supply, and make sure supply is calibrated so that the entire sector does not get stressed and there is no misuse. Similarly, to reach out to remote villages, to give more T&D facilities and to create smart grids for cutting down power theft, you have IPDS. For me, the job is easy - learn from the PM and implement it.

Be it coal auction or new gas supply mechanism, the government's focus has been thermal-based power. What about the troubled hydropower sector?

Hydel is one sector that has been plagued by difficulties. The previous government cancelled many projects, some of those at an advanced stage. That, in a way, sparked demand for several other cancellations. As a legacy, I narrated the issue of a stalled Teesta, Subhansari, Lower Demwe and Maheshwar. Teesta is 95 per cent complete and we got all investors, promoters and EPC (engineering, procurement and construction) contractors and lenders on board. Now, the state government has a few small things to sort and I hope Teesta can come on stream. As for Subhansari, we met activist groups of Assam and now have an eight-member committee working out the environmental impact, safety of the structure and impact on the riparian areas. I have talked to the chief minister and power minister of Madhya Pradesh and my suggestion is to set up a committee under the chief secretary or power secretary. They are trying to work out an acceptable solution to resolve the issue with Maheshwar. The lenders of Lower Demwe are also trying to see how we can kickstart that project.

Hydel has tremendous potential. It's a sector we cannot ignore. It is clean energy and has fixed tariff for years. But we also want to make sure the 'Aviral Ganga' or the perennial flow of the Ganga and other rivers is not affected. We want to make sure the interests of the state are protected and there is no structural damage to the ecosystem. At no point should there be an indirect risk or threat.

What would be the next big thing for the power sector after the recent coal auctions?

Transmission, clearly, will be one - Rs 1 lakh crore is not a small amount. I'd move it suo moto, and fast; I want to meet world power transmission companies. Discoms sorting out their problems is clearly a focus area, and so is taking renewable energy pledge to its next level. But if I was to look at something, environment would be my next big concern area. In the coal ministry, we are completely clamping down on pollution - we are making it mandatory to bring in modern technology and best practices. I have told them that there is no budget when it comes to environment protection. This government is completely and totally committed to environment protection.

‘Firms have a choice to bid or not bid’

From a robust bidding process for ultra-mega power projects to smart metering, a lot of action is likely to be played out in India’s energy scenario in the next couple of months. However, certain issues still need to be sorted out, power minister Piyush Goyal declared in an interview. Excerpts.

When is the next round of coal block auctions likely to happen?

We have not decided. We are reviewing the demand-supply situation, the availability of coal blocks which have environmental clearances, land etc.
Do you think project viability would be an issue?

From the day we announced the auction of coal blocks, we have categorically announced that the reverse bidding process would operate in a manner in which whoever offers to supply power at the cheapest price would be the eligible winner of the coal mine. It was clear from the auction documents that the bidding guidelines would be revised, so that the benefits of lower fuel charges are passed on to consumers. We have said it in pre-bid meetings, on the floor of Parliament, in media interactions, not once, but several times. So everybody knew that they have to pass on this benefit. I am sure that they (the winners of the mines) are all intelligent, smart businessmen.

Are you saying that project viability is not so much of a concern?

I have to get an honest process in place... your project viability is your baby, how do I know at what price you are viable. You are the bidder. You have a choice to bid, not to bid, how much to bid. So, I have done my process honestly. If you have done your process inefficiently, that’s not my call to bail you out.

Reliance Power recently walked out of the Tilaiya ultra-mega power project (UMPP) in Jharkhand. Is the central government doing anything about it?

The central government only ran the bidding process. All agreements were between the supplier and the states, and I am sure they are taking appropriate action. We have a committee under the chairmanship of Pratyush Sinha (former chief vigilance commissioner), who is studying the entire bidding process, to make sure that in future UMPPs are more robust. The committee is likely to submit its report within the next 30 days.

Will there be a flexibility in the new bidding structure for UMPPs?

It will be hypothetical for me to speculate on that today... as far as that 4,000 (MW) number is concerned, I am flexible. There is a view that there could be 50-100% premium from state to state on 24x7 power supply...

All of these things will be done to scale, will be done more efficiently. I personally believe there should be zero premium on 24x7 power. Certain things including surplus power-generating capacity, transmission corridors etc are necessary for India’s energy security. Otherwise, 24x7 power will bring down diesel imports, and cut off people’s capex requirements on diesel-generation sets, extra inverters in their homes -- the savings will be far greater than the extra capacity they will build for 24x7 power.

How much of the upcoming contracts in transmission are likely to go to the private sector?

In the next 6-12 months, you can see a Rs 1 lakh crore worth of transmission lines being bid out. They (the private sector) will also have an equal opportunity.

What are the likely hindrances to big-ticket investments in both coal and power?

One is at the discom side. We have to work together with states. Another would be interest rates. It is a problem especially in an industry like power, where infrastructure costs are high.

On solar energy, don’t you think land costs and other regulatory issues are prohibitive?

Not at all. We are, in fact, toying with the idea of dollar tariffs, where we see a significant reduction in solar tariffs, coupled with that economies of scale. Once we’ve scaled up from the current 3,000 MW to about 1,00,000 (MW), competition will come in.

“24x7 Power for All in Next Five Years”

The government plans large projects in the power sector and will offer equal opportunities to all, ending “cosy“ relationships and largesse from the government, which a section of the business community enjoyed in the past, Power, Coal and Renewable Energy Minister Piyush Goyal has said. It will offer Rs 1 lakh crore of power transmission projects in the next 6-8 months and has also initiated dialogues with states to revive ailing state electricity distribution companies. Adding long-term transmission capacity and designing customised and innovative financial model for state distribution companies will be the government’s focus areas in its second year of operations, as the country grapples with the problem of idling electricity generation capacity due to lack of demand said power, he said in an interview. Edited Excerpts:

How has the past one year in the government been?

It has been an interesting and satisfying year with lot of learning for us. We have been able to break historical records in the country, whether it was adding transmission capacity or generation capacity or increasing coal production. It needed that drive and monitoring to get extraordinary performance from ordinary people. And I find we have some absolutely fantastic people working who have the ability to do wonders. The previous government promised power for all for 10 years in the garb of which so much dishonesty went on. We will give 24x7 power to all in the next five years without corruption.

What is the road ahead for the three ministries in your portfolio?

The power sector was in a state of flux as there was no gas, no coal and accumulated banking NPAs. While I cannot claim that it is completely resolved, but to a large measure the power ministry has been able to ensure that coal is going to power plants, 11,000 MW of stranded gas plants got revived and transmission is on a fast track. The southern transmission corridor is seeing an investment of Rs 26,000 crore and in next six to eight months I see a bidding of may be up to Rs 1 lakh crore of transmission projects to create a robust infrastructure across the country. Sadly, in the past, transmission projects used to be planned for the short-term. We are looking at transmission plans and execution will be on longer horizon.

We will roll out of the Deendayal Upadhyaya Gram Jyoti Yojana and Integrated Power Development Scheme which are important for the 24x7 power supply. Coal is on track to achieve one billion tonnes production. In the renewable sector, framework will be set for achieving 1,00,000 MW of solar power and 38,000 MW of wind energy.

How do you plan to revive the financial health of state power distribution companies?

Distribution utilities are another area on next year’s agenda. We are starting a dialogue with some of the distribution companies. We are looking at innovative financing models and custom solutions because I believe `one size fits all solution’ will not work for discoms.

What is the update on the alteration of standard bid documents (SBDs)?

The Pratyush Sinha committee is going into details on SBDs. The documents for ultra mega power projects is under review to make it robust, practical and win-win for all while ensuring integrity of the process is not compromised. We are working out the areas and plants that can be taken up in UMPP mode and examining places where there is adequate land, water, clearances of environment and forest, and coal block availability. I am not in a hurry as I am facing a problem of power surplus. I have written to all chief ministers asking them to start buying power, open power purchase contracts and pick up more coal.

When is the auction of coal blocks for commercial mining expected?

We are first looking at meeting end use requirement of actual users. We are in talks with state governments to see their interest in commercial coal mining. Various things are under study and working in parallel. There is no defined time-frame.

There have been a lot of litigations post coal auction. Were you expecting them?

Over the years, a certain section of businesses have got too cozy and used to government largesse. This government believes in equal opportunities, for everybody to participate in an honest process. What we have done is honest. And I believe there is very little scope for any litigation but should some people chose to still litigate, they have every right to do so.

Onus of coal bids on ‘wise men’ running cos: Goyal

Rejection of the winning bid for one of the mines auctioned recently and subsequent court case may have rattled the industry and raised doubts about viability of projects. But power and coal minister Piyush Goyal said in an interview that there was no threat to coal or power sector and the onus of bids clearly lay with the “wise men“ running successful conglomerates. Excerpts:

There’s a growing feeling in the industry that coal is going to be the next distressed sector, given lenders’ unwillingness to fund projects based on mines auctioned through the reverse bidding process?

There was no pressure or compulsion from the government in terms of bidding. It was an open marketplace, the most transparent process. We have no role in what they are bidding. It’s at their risk and cost, so coal industry per se has no problem, power industry per se has no problem. I am sure these wise men, who run such large businesses and conglomerates, have some thoughts in their minds or some reasons to having bid the prices.

But what if, a few years down the line, they realize they can’t recover mining costs and the whole project comes unstuck?

I have not studied their minds, what they were thinking when they did these bids. If I was to sit and advise them and study the whole process, I could possibly find a solution for that also.

Did coal block auctions fetch proper value? How do you explain the wide variation in winning bids for different blocks?

There could be some variation because of the grade of coal or distance of plants (from mines). But in some cases, the variation was so high that the government intervened. And when we found the outliers, where the value on the comparative basis was significantly out of line, we thought in national interest it is better to not allow any possibility whatsoever of any misuse of the coal or (some group) getting the coal cheaper than what others are willing to pay for it. Otherwise, in terms of value, I think we got the honest value of the coal. There is a transparent process, the world was watching and everybody had equal ability to bid. So, we have been able to discover the most honest value.

How do you plan to overcome land acquisition problems?

Frankly , my industry is such where the problem is reverse. I have not received even one phone call in the last one year, or one request, from any quarter not to acquire anybody’s land. I have more pressure and people coming up in delegations requesting that the land be acquired.

What about NTPC’s coal mining plan getting stuck and recently Reliance Power walking out of the Tilaiya UMPP over land issues?

Well, that’s for them (Reliance Power) to say . But, I know for a fact that the Jharkhand chief minister has been on record that he had fast-tracked the process and was confident that land will be available.

I have no information that NTPC is stressed for land. Occasionally , they may have some local issues. It’s more to do with compensation. So, possibly , the people may have resisted giving up their land.

‘Who gave anyone the right to misuse reverse bidding process:’ Piyush Goyal

The government instructed electricity regulators to cap fixed costs for power plants using coal from recently auctioned blocks to ensure that companies don’t charge consumers unfairly despite winning the mines at low prices.

Power minister Piyush Goyal says he believes the transmission sector will see more projects being bid out than awarded to PowerGrid. The government, he says, is launching a pilot to test a system of ‘brownouts’, which will eliminate blackouts. Edited excerpts:

The government’s advisory to cap fixed costs for future power purchase agreements (PPAs) has not only drawn the ire of developers, but also resulted in a confused reaction from state governments and a former CERC head.

We have not put any new condition. From the day we announced the coal auctions, we said loud and clear that reverse bidding is going to result in people bidding for lower coal costs, and that value must be passed on to the consumer. Some people have gone to court and, in their own averment, they said that “we had assumed that we will be able to load cost to the capacity charge”.

I shouldn’t be using the word ‘cheating’ to describe this as it would amount to casting aspersions, but who gave anybody the right to misuse the reverse bidding process, which is transparent in process and intention. The bidding process cannot be allowed to be nullified by surreptitious methods. So, I think they stand exposed. They bid with their eyes open and they had no business to make assumptions beyond what’s there in the bidding document.

The criticism is based on the fear that it would be subject to bureaucratic discretion given the open-ended advisory on capping fixed costs. The technical aspect also poses a problem since every power plant has a different associated fixed cost and capping could lead to arbitrariness.

I have full confidence in state electricity regulatory commissions (SERCs). They are competent to do what has been asked of them. The ministry and CERC can always help them in the exercise. They will take a pragmatic and fair approach, but any attempt to take away the benefit from the consumer will not be tolerated.

On paper, the coal auctions will generate over Rs 3 lakh crore in revenue for coal-bearing states, but most of this value is to be generated by companies that have struggled to make money and add value. Some of these infra companies have been stressed for a while. Is the scepticism around these companies’ ability to generate such revenue justified, especially in the face of such aggressive bidding?

A large part of the value, nearly Rs 2 lakh crore, is from the 17 coal blocks that are with the non-regulated sector (steel, iron, cement), which would have had to import coal for their requirement. Most of the rest of the amount — Rs 1.40 lakh crore — is coming from the state sector. The price of coal for them is only Rs 100/tonne. For private sector power developers, the amounts to be accrued to states over 30 years as revenue from coal are much smaller.

These companies are large conglomerates and they have to fulfil their commitment, otherwise there are severe penalties prescribed in the bidding document, including black-listing from future auctions.

As for transmission, the policy of awarding projects to PSUs on a nomination basis has hampered growth and somewhat burdened PowerGrid as well. Why haven’t we seen the same level of private sector participation in transmission as in generation?

PowerGrid has served the country splendidly. It is required to execute projects of national interest that need to be implemented faster. For example, projects in the northeast and corridor to south, which are needed urgently. Having said that, going forward, as much as possible, transmission projects will be bid out. PowerGrid will also compete and we will ensure a level playing field for everyone. I believe nearly all transmission projects, worth nearly Rs 1 lakh crore, will be bid out in coming days unless there are compelling reasons for doing otherwise.

There has been talks about an innovative solution in the distribution space that would eliminate blackouts.

We are looking at a solution called Uninterrupted Direct Current (UDC), whereby a parallel DC line will go into every home and compatible appliances can run even when there is load shedding or blackout. Instead of blackout, you would now have a brownout. When there is overload, this line will ensure that a fan and lights continue to work.

Even with reduced production, you ensure that these households get power, albeit reduced capacity, to run essential appliances. We are planning two pilots, one for 5,000 installations and another for 1 lakh households, at the cost of Rs 80 crore.

The third phase of coal block auctions has not started yet. Any timeline?

We don’t have any ready blocks. We are still assessing the demand-supply situation and the readiness of blocks in terms of environmental clearances and land acquisition. I believe whenever the auctions happen, they should be such that people could quickly move in and start mining. We don’t want a situation where someone puts in all the effort to win the bid and then gets stalled.

How far are you from implementing the idea of replacing old, inefficient thermal plants with Ultra Mega Power Plants (UMPPs)?

This is one of the ideas we are working on. We would be able kill many birds with one stone. For example, we would also be able to increase capacity manifold. We would be able to expand the plant close to the coal source so that costs remain low. The older sites would already have abundance of land and a water source. This is being planned separately from the other proposed UMPPs.

But the standard bidding norms for UMPPs were rejected by private players and the committee appointed to look into the possible changes has not finalised the norms yet.

Bankers had come to me, saying they had certain reservations in the financing of these projects. The committee will decide what the bidding document should read like.

While the government has got an enthusiastic response to its solar power target from utility-scale plants, the same commitment is absent when it comes to solar rooftop installations. Is a lacuna in the extant policy behind this?

There are many reasons why solar rooftop installations have tnot aken off as well as utility-scale installations. We have to get net metering done in all states. The model needs to be tested a bit for its impact on utilities.

Simultaneously, Indian rooftops aren’t really made for such installations. Homeowners are not always in a position to install rooftop solar PV panels. We are looking at changing the policy whereby aggregators like PTC can come into picture and install panels on rooftops on a bulk basis rather than on individual houses and buildings. We have a lot of work to do in that regard but our plans are on track.

Developers and industry watchers are confused as to whether there will be subsidy on such installations, or will there be interest subvention.

We have an open mind towards subsidies on rooftop installations. If required, we should be able to provide it. The other option is to try innovative methods such as dollar financing to bring down costs. But, to be fair, rooftop and remote off-grid may require some upfront government support and we have enough money in the national clean energy fund (NCEF), which can be used for this purpose.

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