'Two to three years down the line, I am very optimistic the power demand will pick up'

Q&A: Gurdeep Singh, Chairman & Managing Director, NTPC

From managing Gujarat State Electricity Corporation to being part of multinationals  CLP and AES, and now heading thermal power giant NTPC, 51-year-old GURDEEP SINGH has experience across the power industry. Three months after returning to his parent organisation as chairman and managing director, he speaks to Jyoti Mukul & Shreya Jai on a plan to add capacity and keep the energy cost low. Edited excerpts:  

NTPC has been able to reduce power tariffs (rates). How was it made possible?
In FY16, our total cost was down to Rs 2.92 a unit against Rs 3.06 the previous year, due to reduction in both energy and capacity charges. Energy charges incurred on account of fuel came down to Rs 1.86 last year from Rs 2 in 2014-15. We sell approximately 20 billion units every month and if our cost comes down by 14p (a unit), there is a saving of nearly Rs 300 crore a month for the distribution companies.

Under UDAY (Ujwal Discom Assurance Yojana), we are making all possible efforts to bring down energy charges. In spite of the increase in Clean Energy Cess on coal, a saving of Rs 446 crore was made in monthly billing of the equivalent energy supplied in April, as compared to a year before. Possible as a result of rationalisation of coal linkages, reduction in imported coal consumption, enforcement of third-party sampling of coal and other measures that led to reduction in energy charges of coal stations. We will bring down energy charges further.

 
Would this reflect in tariff rationalisation?
That depends from state to state and is the regulators’ job but, ultimately, power cost should reduce for consumers. At a recent meeting of state power ministers in Goa, I asked my customers, the state distribution companies, not to ask for backing-down at our power stations. The single most important point there was that if my pithead power stations are running at maximum capacity, it is in the interest of consumers and we in turn also get the benefit. It is our responsibility.

 
There has been a recent increase in coal prices. When coal availability has gone up, should prices go up/ And, and what will be the impact of it on your tariffs?
As a consumer of coal, we would want its price to be low but Coal India is saying they have rationalised prices. They have reduced it for higher grades and increased these for the lower grades. We estimate a net increase of seven to eight paise a unit in energy charges. For the consumer, the increase is 1.5 times more, due to transmission losses and other discom losses.

 
NTPC is the only power company that is adding generation capacity in a market with tepid demand. Should there be capacity addition and is it because yours is a government company?
It is not because we are a PSU (public sector unit). We have to meet the energy requirement. Power demand is growing at six-seven per cent (yearly), so capacity addition is required anyway. As no one else is investing in this scenario, we are taking the lead. We are 47,178 Mw of generation capacity, a sixth of the country’s, whereas we are supplying a fourth of the country’s energy.

As of now, we are also (going to be) implementing (an addition of) 24000 Mw, in itself is a huge capacity. The decision to add this was on the basis of earlier projections. We plan to place orders for 2,000-2,500 Mw every year, so that we have consistent capacity addition. Two to three years down the line, I am very optimistic the demand will pick up and most of our power stations will be in position to increase generation.
Besides, at some point, we will have to replace old assets, though we will be cautious about keeping our costs low.

 
How do you plan to fund the expansion?
We will raise the money as and when the requirement arises for adding 24,000 Mw. We have a capital expenditure plan of Rs 30,000 crore this year, of which Rs 10,000 crore would be from our internal sources and the balance through debt.
 
NTPC was also trying to buy out plants in distress. What is the status?
If there are good assets which are commercially viable, we would look at these. Last year, we had done a comprehensive study and could not find any assets suitable for us. From all angles, it has to be viable for us. Either the expectation was too high or the assets were not of good standard. As of now, we are looking at a state government asset.

Many of the independent power producers are having different challenges and some of the projects are not complete or there is some issue with contracting agencies. But, it is not a one-off exercise. We will look at an asset if it is good enough. We will be comfortable if lenders are taking over, rather than directly talking to the developers.
 
Are you looking at acquisitions in the renewable (energy) space?
Why should we acquire in renewables? We would be building more new assets; the country requires additional green capacity. Nevertheless, the challenge in acquiring renewable assets would be similar. In hydro, we will not look for a very small project but a decent size, of more than 100 Mw.

Are there any plans to add gas generation capacity?
Is anyone looking at gas? We, too, do not have any plan.
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