India’s power-generating companies are bearing the brunt of a historic fuel supply crunch. Arup Roy Choudhury, chairman and managing director of NTPC, the country’s largest electricity producer, tells Sudheer Pal Singh & Jyoti Mukul the fuel crunch, along with costly imports of coal, is unfortunate, considering the nation has huge coal reserves. Edited excerpts:
How badly has capacity addition in power generation been hit, considering the stranded capacity due to fuel shortage?
We are fortunate we have no project stranded due to want of fuel. NTPC goes ahead with its projects only after the fuel tie-ups are in place. But we are aware of some power projects in the country that are stranded due to fuel shortages. This is unfortunate in a power-starved country like ours, which has ample coal. However, I wouldn’t comment on the subject, as the stranded projects are not NTPC’s.
What do you think of the dependence on imported coal?
The future of Indian power generation is through domestic coal; the coal industry must grow at the same rate as the power sector. How can we base our growth on some other country’s resources? We cannot. Therefore, we must consume our own resources first.
Being a government company, and the largest in the sector, are you in a better position to secure coal compared to other power companies?
We always get much less than what we require. But our supply has grown. Our requirement for the current year is 160 million tonnes. The Coal India chairman has assured us NTPC would get 10 per cent more than last year’s supply. Fuel supply agreements (FSAs) are in place for meeting this coal requirement. We have no dispute with Coal India on the issue of FSAs. But the fact remains India is producing about half a billion tonnes of coal every year, and we need to double our production. What is the fun in increasing profitability by raising prices? Productivity must be increased if business is to be conducted.
How would a regulator for the coal sector help?
A regulator is the best option. This is because it would act as a single point of contact for anybody who wants to invest in the sector. Also, there would be transparency on quality, production and pricing. If NTPC is investing money today, it is because we know there is a power regulator to ensure returns. If we can set up a regulator to reform the power sector, why can’t we have a regulator for the coal sector?
What do you think of price parity in coal?
How can we talk about international price parity when we do not have international-quality of coal? We have about 40 per cent ash content in our coal, sometimes with a calorific value of less than 3,000 kilo calories/kg. Sometimes, people talk in isolation without realising the situation on the ground.
Do you think the efforts of the Prime Minister’s Office (PMO) to resolve the issue of FSAs has helped?
The PMO’s initiatives have definitely helped; now, at least Coal India has committed itself to signing FSAs. The issue was stalled since April 1, 2009. This had led to various problems for a lot of generators. Though many generators do not favour the FSAs, at least Coal India has made a commitment, even if the commitment would be fructified in three to four years. As far as NTPC is concerned, we do not foresee it as a major issue because we are able to secure the coal required to run our plants. We have also been able to bring in Coal India on the same platform, as far as the FSA conditions are concerned. Therefore, it wouldn’t affect our existing stations, as all the FSAs are for our expansion units at plants for which we already have FSAs with Coal India.
How would NTPC prices rise as a result of coal pooling?
The Central Electricity Authority says the overall rise in rates would be 10 paisa per unit. We have no issues with this, as long as everybody, including consumers, is willing to pay. Ultimately, the extra cost would have to be paid by state electricity boards (SEBs). The ability of SEBs to pay has not improved through some years. Therefore, this proposal may put a burden on them. They have to take a call.
How would a 21 per cent import duty on power equipment impact NTPC?
Any increase in import duty would lead to higher project costs, which would increase the cost of power. This would also restrict participation from foreign equipment manufacturers in the bidding process, reducing competition.