As the Narendra Modi-led government completes two years in office, the minister of states for coal, power and renewable energy Piyush Goyal...
As the Narendra Modi-led government completes two years in office, the minister of states for coal, power and renewable energy Piyush Goyal takes stock of the hits and misses in his ministries and spells out the agenda for the remaining three years in an interview with FE’s Sumit Jha.
Q. Coal block auctions have been cited as a success by the government but only a handful of mines auctioned last year have actually started production. Is that a concern?
Ans. Is there a coal shortage in the country? Power demand has gone up by 7% in the last two years comapred to 5% in the two years before we (National Democratic Alliance government) took charge. So the demand is growing commensurate with the economic growth of the country. We have also focused on energy efficiency. In fact, coal-based power generation growth is even higher as the hydro power has struggled due to droughts. Last month, the electricity consumption went up by 11% while fossil fuel-based (coal and gas) generation has increased 16%. While power demand has gone up, plant load factor (utilisation) has gone down. But that’s explained by the fact that we have been able to revive many of the stranded power projects. Gas-based power capacity of 24 gigawatt (GW) has been stranded for years but we have been able to revive nearly half of that capacity through e-auction of imported regassified liquified natural gas (RLNG). Other plants have chosen not to bid or they would also have been revived. We have added 45 GW of geenrating capacity in the last two year, a growth of 22%. So its an elementary calculation that tells us why PLFs are lower.
Q. Some power developers say that despite higher production, CIL is not providing them full quota of fuel as per agreement. They are sticking what was decided in 2011 when there was coal shortage. Is the ministry looking into it?
A. I have instructed Coal India to fulfill commitments to the non-power industry as the generation companies are already entitled to their entire coal quote. The other industries were getting 50% domestic coal while the remaining amount was to be met through import substitution. However, they will also get the full quota after the ministry’s order. I believe its grossly unfair if this was not being done. However, this came to my notice only a few days ago and I have issued a an order in this regard, which will notified on Thursday.
Q. Is the ministry looking to bring in bidding route for procuring wind power?
Wind developers have realised the importance of transparent method of price discovery which was demonstrated in the solar sector. They realise that bidding brings in efficiency and tariff is right-sized. Cost-plus is not an efficient way of determining tariff. If solar power tariff continues to fall while wind remains at the same level, states would refuse to buy wind power. CERC and other state regulators decide a higher price, which I have found out are dictated by manufacturers at times. This provides no incentive for manufacturers to improve efficiency. The wind developers met me and they conveyed their intention of selling wind power through competitive bidding. This doesn’t require any policy change or announcement. We just have to start bidding in this sector.
Q. You have achieved all this in the last two years. Does commercial mining figure in your agenda for the next three years?
A. With time we will do that but right now we are not in any hurry. Globally, coal prices are down and if start auctioning coal mines for commercial purposes, we will struggle to get the right price. This will impact the eastern states which hold most of the coal mines. We have already started allocating mines to public sector enterprises for commercial mining. If we start auctioning mines for private sector, the public sector will have to buy from private sector. This would not serve the public cause. I want to make sure that do thing properly so that the government’s requirements are fulfilled at a lower price. However, I am calibrating and monitoring the progress very closely. The bottom line is whether you have coal or not. However, to answer the earlier question, we auctioned half the mines to public sector and the rest to private players. The mines were cancelled by Supreme Court because the public sector mines had been handed over to private entities in 74:26 joint ventures where the majority stake was held by private players for mine development. The court had realised that this was a case of subterfuge that the UPA had allowed. West Bengal and Karnataka had done this but these states are again trying to hand over these mines to the private parties. The private player involved in these states has gone to the court after we stopped the repeat of what happened earlier. However, the courts have stayed it and the government can’t do much in this respect.
Q. This situation has, however, meant that the states are not getting revenues in the first year as anticipated due to much lower production from these mines.
A. The states are benefiting from higher production from Coal India. The company is paying massive royalties to states in line with the bumper production. So if the states haven’t received what could have come in their kitties, they have received much more from CIL. If you look at it from the global perspective, all the economic are in bad shape with Indian emerging as a bright spot. In such challenging circumstances India has become self sufficient in coal. I believe this is creditworthy.
Q. What are three-four major items you would focus on in the remaining time of your tenure?
A. We are fosucing on new areas of power demand, huge thrust on energy efficiency, wind power and hydro. When we came in, the challenges were fuel shortage, both coal and gas. This had led to several stranded projects. These along with power transmission required urgent action. We have successfully handled all these issues. The stranded projects are back in a big way. And the remaining are stuck because the promoters are bad as they lack the ability to fund their projects. Coal is now sufficient and gas-based capacity has been revived. So much so that in the last gas auction, we earned money instead of providing subsidy as envisioned in the policy. We have added 50,000 circuit kilometers in transmission sector. Of course, we have exceeded targets but this has never happened before in the history of this country. We focused ourselves on improving transmission capacity to South India, where transmission capacity has gone up by 71% during this period. South India used to buy power in summer in excess of Rs 11/unit but that has been brought down to Rs 2.58/unit in Andhra Pradesh, Karnataka and Telangana right now.
Q. Are the spot power market prices a real indicator of cheaper electricity as only 2-3% of electricity generated is actually traded?
A. We have empowered the common public. They can look at the vidyut pravaah portal and demand that their states buy cheaper power and provide it to them. In the next stage, we will provide the data on power avaialbility and price right down to the district level and further to the every individual feeder in this country. Additionally, we have got the solar sector moving with over 21 GW of solar bids. Nearly 60% of these have been awarded with long-term power purchase agreements and the remaining will be awarded soon. We also managed to revive Teesta Hydro project which was 90% invested but there was a threat that five international investors would walk out if it wasn’t resolved. We saved nearly Rs 10,000 crore from going down the drain with this project. Now, this will produce 1.2 GW of power.
Q. Is the power minsitry closely monitoring the progress of states that have come onboard Uday?
A. My team meets distribution companies and state power secreatries on monthly basis. At my level, I meet and review the progress every six months. Maharashtra and Madhya Pradesh have also agreed to join the scheme but they are currently preparing the required information about their discoms before we sign MoUs. We also expect Tamil Nadu, of the big four states in terms of debt, to come on board post the election results.