NTPC Ltd, the country's largest power generator, is planning to add 22,000 Mw capacity by 2012 "" a challenging task at a time when there is a severe shortage of main power plant equipment as well as auxiliary equipment. T Sankaralingam, NTPC's chairman and managing director, says the company has a strategy to meet the shortages and one key plank of that is a foray into equipment manufacturing. In a freewheeling chat on December 25 (a working day for him), he tells Sapna Dogra Singh and Vandana Gombar to expect "major announcements" on that front next month. Excerpts:
You are planning to add 22,000 Mw by 2012, which is almost the same as what you have added in the 30-odd years of your existence. Isn't power equipment supply a major constraint to your achieving this target?
Yes, it is a very big constraint. Take, for instance, our Dadri project, which has been running ahead of schedule so far, but now, due to equipment shortage, the construction work would come to a grinding halt and there would be a no-work situation for at least one-and-a-half month.
What are you doing to overcome this?
Along with equipment manufacturers, we are directly talking with raw material suppliers and sub-suppliers. We are also in talks with companies in Germany, Russia and the US.
But there is a shortage of power equipment globally.
Actually, the shortage is only of a few items like large turbine castings, forgings, high-pressure pipes (which is manufactured by just four players in the world). The problem is that all countries are increasing their capacities and they need equipment. Russia is increasing its capacity, Germany is looking at coal-based plants, the entire Europe is booked.
Also, China has blocked all major capacity. Why can't we be the ones to block? That's the strategy we are working on. We are also trying to talk to manufacturing companies to create incremental capacity that we can use. Investing in this capacity is an option.
Is this then the first step towards NTPC becoming an equipment-manufac-turing company too?
I can't say anything now, but you will come to know in a few weeks.
Would you be partnering with one of the international firms that are looking at setting up manufacturing bases in the country?
It is too early to say that. You will know in a few weeks. I can only say that we are entering an area that is not occupied by anyone else. It will involve an investment of a few thousand crores and involve manufacturing the main plant equipment and creating facilities for producing raw material, including the balance-of-plant equipment. The announcement to this effect could be made anytime between January 10 and January 20.
Is this venture likely to be with Bharat Forge Ltd?
You will know about it in a few weeks.
Are you also planning a manufacturing venture with Bharat Heavy Electricals Ltd?
Yes. The joint venture company for that will be registered in January.
What about your plans for generating nuclear power?
We have moved to some extent. But unless the 123 agreement goes through, I don't think any further development can be made.
If it does not come through, then what?
Then the possibility is very low. In any business model for nuclear energy, fuel is the key issue. The availability of fuel in the country is low. Also, fuel is a strategic resource as it is used not just for power generation but also in other areas of research and development.
The Department of Atomic Energy and NPCIL (Nuclear Power Corporation of India) may want to reserve this limited indigenous fuel for a different purpose and not for power generation.
In fact, we have prepared a concept paper that we have given to the government a couple of months back raising some specific issues related to nuclear fuel and also on how and what type of business model should be adopted. We are also open to working with the Nuclear Power Corporation of India.
Nuclear power is one of the many "diversifications" that NTPC is looking at. This diversification drive started in 2002 but it does not seem to have yielded any result. How would you rate your performance after five years?
Our diversification drive has both financial and strategic agenda. We know that unrelated diversification can lead to dilution of your core competence. Therefore, we are doing diversification along the value chain. Take the example of hydro power, the gestation period for which is six-seven years.
That almost ends next year and we will see some results then. We diversified into coal in 2004. Today, we are waiting for land acquisition, otherwise everything is ready from our side. We expect to start mining in the Pakari Barwahdih block by the middle of next year.
Our diversification into power trading has shown visible results. NTPC Vidyut Vyapar Nigam Ltd traded the highest volume last year despite regulatory problems, due to the innovative swap mechanism we devised for trading.
Your foray into power distribution has also not made any headway.
It was affected due to a change in the political scene after our proposal for starting distribution in Kanpur reached the Cabinet. You can expect some announcement here very soon. We don't want some small franchisee kind of a thing, but we want to create centres of excellence in distribution. We are awaiting Cabinet approval.
What would you change in your diversification strategy if you could go back to 2002, when you began?
I would do exactly what I did in 2002. However, there are some areas we could have moved more aggressively and faster. For instance, we could have got coal mining much earlier, and also, we could have thought about setting up manufacturing units earlier.
