CESC, the Rs 3,000-crore power generator and distributor in Kolkata, is planning to enhance its capacity and strengthen distribution system. Sanjiv Goenka, vice-chairman of the private power conglomerate from the RPG Group, tells Pradeep Gooptu in an interview that he is confident the strong power demand in the metropolis will enable the company to absorb rising costs and other challenges like power rates being brought down to 376 paise from 415 paise a unit. Excerpts:
How far is CESC being impacted by rising interest rates and raw material costs?
Rising interest rates is a worry for us and to our consumers, because under the existing provisions the burden is passed on to the consumers. The rise in raw material prices is much more worrying. The cost push is substantial and once again, under the provisions the burden is passed on to the consumers as a revised cost of power. As a company totally dependent on coal, the spiralling mineral prices is a cause for concern. We see coal prices rising on a sustained fashion in the near term with little signals to indicate any flattening out of prices. The trend in mineral prices globally is also upward.
What about the pricing freedom?
We have pricing freedom within the regulatory structure in the form of the West Bengal Electricity Regulatory Commission or WBERC. As a company, we are happy to have our numbers checked by the regulator because it gives our figures credibility. This also gives confidence to our customers, domestic and industrial, that the figures we place are correct and certified.
What are the implications of the recent Calcutta High Court ruling on the issue of power licensing?
The court ruling has major implications for existing licence holders although it has no immediate impact on CESC. This is because our licence is clear about all relevant terms and assures exclusive distribution rights till 2019. We have decided not to seek further extension of our distribution area.
How is the outlook?
We have our hands full. The first quarter saw good growth in demand as well as gains in efficiency, which by all indications will be sustained through out the year. The transmission and distribution losses of CESC at below 15 per cent and the plant load factor of 97 per cent achieved at our stations continue to be among the best in the country, resulting in one of the lowest power pricing regimes and sustained viability.
How is the demand scenario?
The area being supplied by CESC is undergoing a transformation as percentage of use by high tension consumers is declining and low-tension users rising. Nonetheless, we are witnessing demand growth of 8 per cent-plus as all industries, including jute, are doing well. It is also because the city is supporting a large number of malls and retail establishments, besides more demand from people living in multi-storeyed complexes with improved lifestyles based on the use of consumer durables like air-conditioners and washing machines.
What lies ahead for the power business?
CESC is adding capacity to its plants as bought power is expensive and erodes margins. We will be adding 250 mw at Budgebudge near Kolkata by 2009-10 but capacity expansion at plants at Haldia in West Bengal, in Jharkhand and Orissa will take time. The challenge is to add on to the several thousand megawatts that we have planned with minimum debt.
What about coal supply?
The company’s own mines now fill around half of the requirement for power plants but we would like to provide the entire coal requirement of power plants. We have applied for more captive mines to achieve this.
Following the recent mergers, CESC now has a retail arm. How is it creating value?
Every indicator across our retail business, like sales and margins per square feet, is improving across the retail business, which today covers the Spencer’s business of nearly 400 stores and more than 1.2 million square feet and another 90-plus Music World and other stores. These are increasing the range and the worth of our business despite inevitable start-up losses that will continue for another 12 months.
