With a generation capacity of 35,354 Mw, government-owned NTPC – the country’s largest power utility – is operating relatively unruffled amidst the crisis grappling the sector — from coal shortages and bleeding distribution companies to wary bankers. In an interview with Jyoti Mukul and Shailesh Dobhal, its Chairman and Managing Director Arup Roy Choudhury says the company is an “island” in the sector but warns against the tendency to hand big write-offs to the industry every time there is a problem. Edited excerpts:
Lenders have raised concerns about the power sector. How far is NTPC impacted?
Bankers are rattled by their investment in private independent power producers [IPPs]. They have no problem lending to NTPC. Our paying capacity is very good. We are only going for 30:70 debt equity ratio. We are taking more responsibilities ourselves. Loans for our new projects have been tied up. We also went and raised $500 million euro bonds at about 5.6 per cent (coupon rate). It was subscribed three and a half times. Recently, we tied up Rs 10,000 crore with the State Bank of India.
You may not have been directly impacted so far, but does the fear of payment defaults by your customers, the distribution companies looms large?
All state electricity boards have a problem when it comes to price, though none of the states have defaulted. There was a stage where states were availing two per cent discount if payment was made immediately on raising the bill. That is not happening [now]. We had some problems in Delhi but now tariff has increased. Distribution companies should be able to raise good money since Delhi has less AT&C losses.
Though NTPC is not into ultra mega power projects, what’s your view, as a sector leader, on the problems they’re facing due to the huge increase in imported coal prices?
In our country, there has been a huge movement by the business community through [industry] chambers for privatisation. When the government came into privatisation mode and these companies came into existence and won bids on a competitive basis, where is the question of crying wolf [now]? People laughed at us when we did not bid low for Sasan and Tilaiya, but with our average cost of power at Rs 2.7 a unit, how can I [even] think of putting up a plant at Rs 1.2! If the private sector wants to take the risk, it should take it in total. To become viable, they have to look at the entire value chain — generate, distribute and collect from the market, not just from industry but also retail [customers].
Isn’t there an issue of solvency in the sector?
Investors and the media are not able to segregate NTPC from the power sector. In our own model, we are excellent. We sell at CERC-regulated tariff. In this sector, we’re an island that is doing quite well. There’s no problem because we do not need power. Between production and sales there are certain gaps. The government has tried to address it from time to time. We have to find out a working model. If you clean the slate, it will become dirty in another few years. If you have to subsidise a part of power, you have to do feeder separation, subsidise that feeder and provide for that in the budget. The sector needs some tweaking.
The problems will grip the entire sector — irrespective of generation or distribution.
The power sector is in problem at a macro level. Generation has done well. Irrespective of the criticism that we have fallen short of the Eleventh-Plan target, we will end up doing 60,000 Mw exclusive of captive capacity compared to 21,080 Mw added in the Tenth Plan. It is a fair amount of transformation of generation capacity but generation cannot happen without backward and forward integration. The power sector has been growing at eight per cent but coal production has grown less than three per cent. There is a mismatch. At some stage, we think we will fill the mismatch by importing coal but then we realise that the countries from where we are planning imports are taking advantage of the huge orders — taxes and prices have increased, with the result that price of imported coal is two and half or three times the domestic coal. In downward integration, once you generate power, it has to reach end-consumers without much loss in the system. If you are able to give 24x7 power to the end-user, the user will find a way to pay you. Mobile phones have proved it. The poorest of poor pays for mobile because he has 24x7 connectivity.
How far can the sector depend on domestic coal?
There are about 114-15 billion tonnes of approved reserves of coal and extracting one per cent of it is not a big deal. We are not even doing that. We are extracting less than 0.4-0.5 per cent, which is nothing. If we extract one per cent for the next 25 years every year from more than 280 billion tonnes of established reserves, we will still not deplete. At that stage, we will be economically-strong to pay more for solar and wind. Hydropower, in the long run, is cheap but hydropower-installation is becoming a problem. Solar and wind power are expensive, so thermal power is the only reliable source of energy.
In the medium to long run, is coal availability or price a concern?
If we are doing generation only on domestic coal, then price is not a problem. It is a problem because we are importing and imported coal prices have gone up. But NTPC has no issue even with coal. We went through a setback for about 15 days in October when we were getting 288,000 tonnes as against a requirement of 400,000 tonnes. At the moment, we are fighting a war on a daily basis with various Coal India subsidiaries to try and get our daily loadings. At the end of the day, we are not getting above our daily requirement but then we are not in a luxury situation in this country to have a 15-day stock.
How are you proceeding with tying up imported coal?
We will float tender for 4 million tonnes for importing ourselves. We are getting 12 million tonnes through STC [State Trading Corporation]. After that, we are looking at a long-term contract for 10-15 million tonnes. Through this, we would have tied up assured supply of imported coal. We will have to meet 10-15 per cent of our coal needs through imports.
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What’s the readiness of your captive coal mines?
By September next year, Pakri Barwadih will start producing coal. It will produce 3 to 4 million tonnes initially; it will start producing 15 million tonnes by the third year. We have awarded contract for Pakhri Bharwadih to Australian mining company Thiess and shall soon award the contract for Chhati Bariatu.
Why did NTPC not lift the e-auction coal?
E-auction coal is not of good quality. There is no point paying more for mud and stone. I might as well import. My primary problem is that I am not able to sell power if it is expensive. Last year, I could not sell 13 billion units. This year, we have already not sold 10 billion units. If power is at Rs 3, it sells but if it is Rs 5, it does not. Regulator allows us to pass through coal price in power tariff. Since 75 per cent of cost of power is coal, there should be some regulator for coal to see that the coal price is kept under control. We want a coal regulator for price and quality of coal.