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Updated: February 5, 2012 23:03 IST

Health of state utilities, a concern

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Arup Roy Choudhury
Special Arrangement Arup Roy Choudhury

NTPC is the largest power utility, playing a major role in meeting the power needs of the nation. Recently conferred the coveted “Maharatna” status, it has a vision to be the world's largest and best power producer. With an installed capacity of 36,014 MW, NTPC has been ranked No.1 independent power producer globally in Platts Top 250 Global Energy Company ranking for 2011.

Arup Roy Choudhury, Chairman and Managing Director, shares with Sujay Mehdudia the company's future plans, fuel security and the concerns over the future of the power sector in India. Excerpts:

Now that NTPC has walked out of ICVL venture, how does it propose to tie up for its coal requirements and is it working on its own to import coal?

NTPC has not walked out of International Coal Ventures Ltd. (ICVL). It should be understood and stated differently. NTPC was mandated to be one of the co-promoters with the hope that it would use the thermal coal which would be available through the assets to be acquired by ICVL.

The mines considered by ICVL in Australia and America did not have any thermal coal and had only metallurgical coal. ICVL was looking for low-grade thermal coal in Indonesia. But, the policy changes in Indonesia envisage banning of export from Indonesia of low-grade coal with GCV (gross calorific value) below 5200.

Thus, NTPC was not going to get any thermal coal. It is developing its coal blocks to meet about 20 per cent of its requirement.

We have also been scouting for acquisition of coal mines in countries such as Indonesia and Australia.

However, factors such as asset quality and suitability of coal affect the decision in this regard.

Nevertheless, we plan to meet our requirements through imports for which we have recently floated the tender and are also looking for long-term tie-ups with global coal producers.

Coal Ministry has reportedly decided to give back your cancelled coal mines. How does NTPC plan to work on its captive coal mines to keep deadlines?

Not only the Coal Ministry has decided to give cancelled coal mines back to NTPC, but also has decided to give additional coal mines to it for meeting the requirements of about 8,400 MW capacity. Coal mines development is a long drawn out process.

Globally, it takes about seven years to start production of coal from the resource definition stage, whereas the time taken in India is much more. There are a number of clearances such as forest, environment clearances and the land acquisition process which take a lot of time to come about. From next year, Pakri Barwadih, which has the ultimate production capacity of 15 million tonnes annually, will start producing coal. Starting with 3-4 million tonnes, production will be ramped up to the ultimate capacity. We have appointed MDO (mine developers and operators) for Pakri Barwadih and shall soon be appointing MDO for the second mine Chatti Bariatu. Work on other mines is also progressing. Two of the mines are to be developed by the joint venture company of NTPC and CIL.

There is lot of concern among bankers and financial institutions about the power sector. Does NTPC share this concern and what are the solutions?

Though NTPC has not been facing any funding issue for its growth plans, the financial health of the state utilities is definitely a matter of concern.

The mounting losses of the state utilities are the result of gap between the average cost of power and average revenue realisation by state utilities. Many state utilities have not revised tariff for several years. Now that the Appellate Tribunal has ruled that state regulators can go in for hike in tariff on a regular basis, this issue will get mitigated and will have a positive impact on the financial health of the state utilities.

There have been recent instances of default on payments by state electricity boards. How does NTPC plan to deal with such situations if they continue to multiply?

Due to the financial constraints and the mounting losses of the state utilities, some state utilities are resorting to load-shedding rather than buying power, which entails loss of generation for want of schedule. Also, the fragile financial health of state utilities makes the power generators vulnerable to payments defaults.

NTPC, however, has not faced any payment default and we have a payment security mechanism in place by way of letter of credit opened by our customers.

What is your view on the coal crisis being faced by the country, especially the UMPPs and what cost impact does it have on final generation of power?

Definitely, there are coal shortages in the country and power generators have to resort to coal imports to meet their requirements. However, in the case of ultra mega power projects (UMPPs) every thing has been built in to the levelised tariff on the basis of which the UMPPs are allotted to the developers covering all the risks over the useful life of the power project.

The assumptions made by some developers have not matched with the ground realities, as have unfolded later in terms of coal cost. However, such calculations are part of bidding and part of risks which an entrepreneur undertakes. The real issue is less than adequate growth of domestic coal mines, pushing the entire power sector into a situation of stress.

Does NTPC plan to bid for future UMPPs in view of the changes in guidelines being contemplated in the bidding process?

We have participated in the bidding of two UMPPs based on domestic coal, namely, Sasan and Tilaiya, and we certainly plan to participate in the future UMPP as well.

Could you share with us the future plans of NTPC in the XII Plan?

We are targeting a capacity addition of 4,000-5,000 MW every year for the next five years which shall take us to a capacity of about 66,000 MW by the end of XII Plan from the current capacity of over 36,000 MW.

Close to 13,000 MW capacity is under construction and about 18,000 MW is under bidding. Several other projects are under various stages of development. As such, our expansion and investment plans are well in place.

Could you throw some light on the NTPC-BHEL joint venture?

NTPC-BHEL Power Projects Pvt Ltd (NBPPL), a 50:50 joint venture between NTPC and BHEL for manufacturing power equipment, is already executing the work in 100-MW Namrup power project in Assam and 726-MW combined cycle Palatana power plant in Tripura.

It would also take up execution of NTPC's 500-MW Unchahar, Stage-IV expansion which is awaiting environmental clearance. NBPPL is in the process of forging a technology tie-up for coal handling plant (CHP) and ash handling plant (AHP) with global manufacturers. The work on its production facility in Andhra Pradesh is also in progress.

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NTPC like BHEL is indeed a jewel in India's crown, doing a splendid job in energy sector. To become a world-class establishment it should train and establish quality manpower and also ensure zero outage of units for various reasons by preparing for pro-active preventive maintenance. Similarly, BHEL / Haridwar should also pro - actively participate in growth of solar energy.

from:  Vyas K Susarla
Posted on: Feb 6, 2012 at 06:59 IST
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