Shortages of domestic coal and gas, rising fuel costs, difficulty in renegotiating tariffs,?a lack of clarity in tariff renegotiation and weakness in the rupee have hit India?s power industry.?Tata Power managing director Anil Sardana tells Viraj Nair in an email interview about the company?s expansion plans and discusses ways to tackle the challenges facing the sector. The company?s gross generation capacity recently touched 7,700 MW, with the synchronisation of the fourth unit at its flagship 4,000 MW plant in Mundra, Gujarat.?Edited excerpts:

What are your expansion plans for 2013? How much do you intend to invest on these projects?

The company aims to generate 26,000 MW, 4,000MW of distribution and secure 50 mtpa of fuel resources by 2020.?At this stage, the company is not looking for any tangible business opportunities in India due to multiple woes that the power sector is grappling with, including acute fuel scarcity and poor financial health of electricity distribution companies.

However, it is evaluating various opportunities to grow globally in conventional as well non-conventional energy space. The company has prioritised seven countries in three geographies for international play. These include South Africa and other sub-Saharan African countries, Indonesia, Vietnam, Turkey and West Asia. The company is also in the process of deploying resources in these geographies to understand the market dynamics and scout for opportunities and will announce the same as when it materialises.

The company had said recently it was looking at assets in North America and Africa.?Could you give us an update?

Most of our domestic coal-based plants, which are under construction, have secured coal linkages. But planned projects could face fuel shortage issues. For imported coal?based plants, we are looking at coal assets in Indonesia and Africa. We are continuously looking at various geographies and today, the options are the US, Colombia and Africa.

What is your outlook for international coal prices, which have been depressed in recent times?

The recent depression of coal prices was a result of oversupply in the global markets due to healthy production growth in major supplier markets like Indonesia, Australia and South Africa and poor demand from the key markets, Europe and China. However, with the Chinese coal inventories and mines back in production, we can expect upward movement in coal prices in the short as well as in the longer term.

There have been reports that the company plans to add 1,600 MW capacity at Mundra, which will cost R8,000 crore over the next three years. How do you plan to raise money for this?

The existing infrastructure, the state?s progressive and supportive outlook and the coastal location makes it an excellent choice for expansion.?The cost of generation will remain the same across all units.?As and when the case 1 bidding is successful, appropriate funding will be arranged.

There have been protests over Tata Power?s plan to convert a 500 MW unit at Trombay to coal from gas. What is the company?s stance on the issues raised?

The public hearing for Trombay unit modernisation was conducted?in January and the deputy collector / Maharashtra Pollution Control Board will be sending the report to the ministry of environment and forests. The company would like to reassure all its stakeholders that their concerns raised around pollution and ash disposal have been addressed effectively and there will be no additional emissions beyond controlled levels.

In the wake of the SEB debt restructuring plan, which you had criticised as a ?stop gap measure?, what further policy changes are needed to stimulate growth in the industry?

The government and the industry are working together to resolve the issues facing the sector.? The Electricity Act, 2003, has superseded all the previous legislations governing the sector and has created a favourable environment for investment and competition.

Some states have introduced unbundling of the SEBs by creating multiple distribution licensees allowing space for participation of private players. However, clarity is required on certain sections of the Act, specifically those dealing with open access and power trading. The major positives have been capacity addition by private players, addition in inter-regional transmission capacity and regulatory interventions that have paved way for private sector participation in build-up of transmission systems.

Distributed generations and mini-grids are being implemented to facilitate electricity for the rural population. The government?s Ultra Mega Power Projects (UMPP) scheme has the potential to herald an era of energy efficiency. Of the 12 proposed UMPPs of 4,000 MW capacity each, four have been awarded. The Mundra UMPP employs super-critical technology which not only uses less coal but also reduces carbon dioxide emissions.

Renewable energy continues to play a major role in creating a sustainable portfolio of energy. To tap the renewable power opportunity, the government has provided various policy and regulatory incentives, which, in the last decade, has enabled considerable private sector participation. The renewables sector is expected to undergo a paradigm shift by moving from a regulated environment to a market-oriented one.

The industry has grappled with fuel shortages, as Coal India has struggled to increase production. How can domestic coal production can be ramped up?

To address the shortage in supply, the following need to be ensured: (i) that Coal India and its subsidiaries augment production of coal and in order to achieve that, CIL will have to adopt some of the newer exploration techniques and technologies; (ii) progressive liberalisation of the coal sector is undertaken to allow private participation in exploration by stepping up capacity building from the prospective service providers and users of inland waterway transportation facilities etc. (iii) improvement of the existing coal evacuation infrastructure including enhancing rail connectivity, last mile infrastructure and adequate availability of rail racks.