Each state and discom has its own preference and way of working. Some state discoms have accessed the loan package announced by the central government and made payments to various generators, while others are still deciding.
Even with the pandemic slowing down the pace of renewable energy deployments in the country, the industry and government were successful in limiting the damages to the minimum, says Sumant Sinha, senior vice president of industry group ASSOCHAM. Sinha, who is also the chairman and managing director of ReNew Power, tells Anupam Chatterjee why he thinks the sector is headed in the right direction and prospects are bright for the industry. Excerpts:
How did the industry-government teamwork pan out in dealing with the coronavirus crisis?
The pandemic has been a disruptor to all economic activity across the globe, but I believe the renewable energy industry and the government have worked together to ensure that the impact … was minimal on the sector … Firstly, despite the pandemic, auctions did not lose steam and competitive solar tariffs were discovered. Secondly, the government’s Aatmanirbhar Bharat package announced last year helped infuse money into the distribution sector and allowed power generators to get majority of their payment dues. Meanwhile, the PLI scheme to boost domestic manufacturing was also launched, paving the way for many Indian companies to get into solar module manufacturing.
In spite of the Rs 1.25 lakh-crore loan package for discoms, dues to private power players have been rising while those for CPSE power plants have fallen. Doesn’t such a development send the wrong signals to investors?
Each state and discom has its own preference and way of working. Some state discoms have accessed the loan package announced by the central government and made payments to various generators, while others are still deciding. Wherever the loan package has been availed, the situation is better. So the package has really helped private players to an extent. Beyond the package, the power ministry has already come out with a set of rules and late payment surcharge order to encourage timely payments. The long-term solution, however, lies in reforming the distribution companies to ensure they are efficient and profitable.
In renewable energy, the policy focus is seemingly moving towards domestic manufacturing. Though it will raise final tariffs in the immediate future, do you think the long-term benefits outweigh the near-term issues?
Due to the geopolitical situation, energy security has become paramount. As renewable energy sources replace fossil fuels, our import dependency on critical equipment for such energy sources should also decrease. But with critical components being imported, we will merely replace one import dependency with another. Hence, it is imperative that we start domestic manufacturing of critical components. Our domestic market, which is expected to increase and reach close to 20GW of capacity every year, is large enough to support manufacturing within the country, and as we grow in scale, we should be able to produce these components at globally competitive prices. Manufacturing will also lead to the creation of a component ecosystem, add lakhs of new jobs, and save lakhs of crores of foreign exchange from going out of the country. ‘Aatmanirbharta’ in critical areas is, therefore, a necessity today.
When do you expect annual renewable energy capacity additions to surpass the 12.5 GW level recorded in FY18?
Like last year, this year also Covid-19 has disrupted construction of new capacity. However, as most citizens get vaccinated, a slow revival of economic activity is inevitable. As the economy picks steam, I expect workers to get back to project sites. This means that as early as next year, when many projects are expected to come on-line, you may see the renewable industry reaching record levels of capacity addition.
With the latest example of Uttar Pradesh, states are looking to cancel older bids in pursuit of lower renewable energy tariffs. Is the industry discussing such issues with the government?
I would not like to comment on any specific case. However, the central government is very clear on respecting the sanctity of contracts and the need to protect them. Union power minister Shri RK Singh ji has time and again reiterated the need to ensure that contracts are honoured. The international investing community takes this issue very seriously, and hence to attract international investment, long-term stability in contracts is paramount.