Multi-pronged approach required on coal

Written by Noor Mohammad | Noor Mohammad | Updated: Jun 26 2013, 09:47am hrs
The power sector is feeling the pinch as domestic production of coal and natural gas has stagnated while financially weakened state electricity boards (SEBs) remain reluctant to buy electricity generated from costly coal imports. With the industrys viability in question, banks have also become wary of lending to power companies. As a result, the initial bullishness about the sector seems to be ebbing. Reliance Power, a leading private power generator, though still adding capacity, is not oblivious to the bottlenecks in the sector. JP Chalasani, CEO, Reliance Power, discusses with FEs Noor Mohammad the challenges facing the power sector as well as his companys business plans. Excerpts:

How do you think India can ensure the commercial viability of new power projects given the domestic fuel shortage

Domestic fuel availability is one of the most critical challenges facing the power sector today. While several solutions are being discussed, clearly the long-term solution is to increase domestic production and reduce imports. In my view, for increasing domestic coal availability, a multi-pronged approach that would expedite clearances/approvals, land acquisition, resettlement and rehabilitation processes is required. At the same time efficiency improvements should be attempted through better and more productive equipment, outsourcing of operations through the MDO model and having more players participating in the coal mining business.

I would like to emphasise this by quoting the example of the development we have demonstrated in the Sasan coal mines. This will be one of the largest mines in India and has been developed in possibly the fastest period of time. Also, because of mining efficiencies, Sasan would produce power at a very low cost.

Do you think the mining developer-cum-operator (MDO) model would lure international mining players to India

It would certainly be a welcome step if the government spells out its policy clearly. I also think players with mining experience within our country would also be keen to participate in such contracts.

How successful has been the competitive bidding model in the sector

In my opinion, it has been a mixed experience. The increased pace of capacity addition, which the power sector has noticed in recent times, has been largely due to the participation of the private sector. On the other hand, the unprecedented global as well domestic economic and financial crisis have led to an environment which was never seen before and even today possibly could not have been anticipated by anybody, including project developers, procurers, government, regulators and policy makers. How to handle these was not contemplated in the current bidding guidelines and power off-take agreements. We need to find solutions for these issues/situations which all of us have experienced at some point or the other during the last couple of years.

One of the solutions being contemplated by the power ministry is a review of the standard bidding guidelines. But the exercise does not seem to be going anywhere, with the industry yet to evolve a consensus on the norms.

The review of the standard bidding guidelines is certainly a positive step. And of course, a much-needed step considering the problems in the present bidding and off-take agreements. However, the industry is not very comfortable with the direction in which the modifications are being contemplated. It seems that a completely new competitive bidding structure is being contemplated with newer and more serious limitations, entirely different from the previous one and this may, in my opinion, restrict participation in future bids, which is not a good sign for the sector.

How do you look at the prospects of renewable power generation

Renewable power has a very good potential to grow as such projects can be put up at a much faster pace compared to coal- and hydro-based power projects and at the same time do not face fuel supply challenges. For instance, we were able to construct and commission our 40 MW solar PV project in Rajasthan in a very short period of 129 days. However, it is essential that government and regulators continue to support renewable power projects so that these remain attractive enough and keep alive the interests of developers to come forward and participate and develop more projects.

For instance, one possible policy measure which the government can implement, is allowing inter-changeability of the renewal purchase obligation (RPO) between solar and non-solar power generation. This flexibility should be given to distribution companies, which could take a decision based on their requirements.

What is the progress in Reliance Powers capacity addition programme

It is just the beginning of a long journey which we have started some time back. We have the operating capacity of 2,500 MW, including 1,200 MW Rosa project in UP, 600 MW Butibori project, 40 MW solar project in Rajasthan and 660 MW, 1st unit of 3,960 MW Sasan ultra mega power project (UMPP). Construction work is in full swing for the remaining units of the Sasan UMPP and each unit is on track to be commissioned ahead of schedule. The 45 MW of wind power project at Vashpet, Maharashtra and 100 MW concentrated solar power (CSP) project in Dhursar, Rajasthan, have also made significant progress. We have also completed most of the initial activities for our Chitrangi power project, and development work is progressing for the Tilaiya UMPP. We have also crossed important milestones in the development of our 700 MW Tato hydroelectric project.

As for our coal mining activities, coal production has commenced from the 20 million tonnes per annum (mtpa) capacity Moher and Moher-Amlohri coal mines in Sasan. Initial development work and various approvals/clearances are being obtained for the coal mine associated with the Tilaiya project. We have also completed most of the initial activities and studies in our Indonesian coal mines.

Do you plan to review your future capacity addition strategy in view of the problems being faced in the power sector

As you know power projects are large-scale infrastructure projects requiring large capital investments and have significantly longer gestation periods. The development period of such large projects depends on factors such as availability of approvals and clearances, land acquisition, rehabilitation and resettlement, fuel tie-ups, off-take arrangements, and financing. Based on these critical factors, there is a constant review of projects which one implements in terms of schedules, phasing, fuel-mix and capacities.