Power sector needs a boost

Mon, 11 Feb Pre-Open

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It was not long ago when the management of Tata Power stated that it was looking at the overseas market to expand its business. Given the opportunities and demand supply gap in India's power requirements, it would seem odd for a company to venture abroad. However, the management stated that it saw no 'tangible business opportunities' in the country. This remark was made towards the many difficulties the sector is facing. In short, India's efforts in this aspect are progressing at a very slow pace.

Tata Power's woes are shared by its counterparts as well. For a while now, the sector has been facing issues related to fuel scarcity and attaining clearances. Also, while companies have resorted to importing coal, this has led to relatively higher costs and unavailability of projects. Passing on the same is also not an easy task given the clearances required from the Central Electricity Regulatory Commission or the CERC.

Mr. Arup Roy Choudhury, the Chairman and Managing Director of National Thermal Power Corporation Limited (NTPC) - India's largest power producer - shared his concerns and key wish list for the company (and the sector as well) for the current year with a business daily recently.

The first one is related to curbing the issues of fuel scarcity in the country. According to him, it would be good to devise a mechanism by which the coal mining in the country increases significantly. Mr. Choudhury also discussed the importance of having a coal regulator and that it should operate like the CERC does, so that it would lead to transparency. This in turn would help investors forecast their returns on coal extraction. This procedure would encourage and bring in more investments, and gradually curb the issues related to fuel scarcity. Another way of lowering the reliance on coal is by increasing the usage of gas and hence, setting up of gas based projects. Given that such projects require less time to set up, are relatively more environment friendly, and require less land, investors would want to focus on this segment as well. However, given the lack of a mechanism to forecast the gas in India has not led to significant investments. As such, with a better mechanism in place, it would allow prospective investors to plan for their long term projects. Mr. Choudhury also added the point of pricing of gas at a fair price.

This brings us to the next point of pricing. That is of pricing indigenous resources at international prices - practice that is not followed by any other country in the world. Especially considering that the quality of Indian coal is not very high. Mr. Choudhury is of the view that the future growth of the power sector depends on domestic coal, which is why it would be important to price it adequately.

Lastly, Mr. Choudhury discussed the problem of land acquisition. The view provided by him is that since there is an abundance of fallow land in the country, there would be no need to touch land that impacts the livelihood of people. And those land banks can be provided for the respective sectors, depending on the resources surrounding the parcels. Also, Mr. Choudhury discussed why it is necessary for the environmental ministry not get stuck with internal matters and focus on the big picture - that of understanding the importance of the cost of delays and that taking a broader views (from a nation's point of view) is what must be done.

We could not agree more with Mr. Choudhury, especially with the last point. With many investors expressing their interests in setting up projects, reforms in this sector are very much required. This especially at a time, when the country needs a major boost in investments to improve its growth levels!