Powergrid Corporation of India (PGCIL), the state-owned power transmission giant, is largely untouched by the ongoing global financial crisis. The challenge for the Navratna PSU, which is planning a 100 per cent jump in capex to Rs 100,000 crore in the Twelfth Plan, is to ensure that supply of transmission capacity does not precede demand. The threat of competition from the private sector players is also not serious in this regulated-returns sector, chairman S K Chaturvedi tells Sudheer Pal Singh in an interview.
The service tax department has recently slapped a Rs 413-crore tax liability on PGCIL for a two-year period, which is about 28 per cent of your annual profit. Is the move justifiable?
The service tax department, in its own wisdom, thought that transmission and distribution is a part of the services sector and they will be falling under the tax net. We understand that the services, which are taxable are defined clearly in the legislation itself, and power transmission is not one of them.
Transmission word as such is not there but there are two other things — support services and auxiliary services. These are sweeping definitions and they say that they can cover it. It all started with Madhya Pradesh. Initially, they had levied this tax on MP Transco, which had gone to the tribunal.
And the tribunal had said that this required further study, pending which MP Transco was asked to pay Rs 5 crore, not the full amount. The states, which have been asked to pay this tax are Orissa, Uttar Pradeh, Madhya Pradesh, Karnataka and Tamil Nadu. Although, no state has paid this till now and it is under discussion.
Has any state approached the court?
Not yet.
So what is your plan of action now?
We are trying to persuade them. In case we fail, it will not have impact on us because for us taxes and duties are pass-through items as per CERC’s Tariff Act. So, whatever tax the government levies, we will ask CERC to consider and it will be passed on to the consumer as a tariff.
What is the outlook on the current year?
This year is expected to be as successful as the previous years. But in most of the organisations, January to March period is most crucial. So, like any other utility, these three months are going to be the most crucial for us for attainment of the target as well as the utilisation of the budget.
Your investment plans have grown from Rs 17,000 crore in Tenth Plan to Rs 55,000 crore in Eleventh Plan. What is the investment you are looking at for the Twelfth Plan? Do you hope to meet you investment target of Rs 8,000 crore for the current year?
I think the Twelfth Plan investments will be almost between Rs 90,000 and Rs 100,000 crore. We had plans for investing Rs 8,400 crore this year, which was later reduced to Rs 7,600 crore as the company was expecting to Subansiri projects in Arunachal Pradesh to mature this year.
But since those projects are not coming through, we had to cut down the investment plans, which was kept for transmission system for that project. The only weakness in Powergrid is that I cannot afford a mismatch (between commissioning of plant and laying down transmission line). My revenue starts flowing only when the power starts flowing. So, if a generator fails, it affects my plans.
I had kept around Rs 800 crore for evacuating power from Subansiri. Now, Subansiri is nowhere in sight. They said, it will be completed by 2011. Now, they are saying 2013. And, God alone knows it will complete in 2013 or 2015. So, if I start investing as per the original proposal, then I lose.
The new CERC tariff regulations, which allow a 2 per cent increase in return on Equity (RoE), is set to provide a fillip to your earnings?
It is a win-win situation to Powergrid. Depreciation has been improved. RoE has been improved. All these benefits that the tariff regulations have provided us will help us in getting around over Rs 375 crore in a year.
How has the financial crisis affected you?
Not at all.
But has it not intensified further the problems you have been grappling with for past some time — namely, the risk your business faces from delayed capacity additions and the lack of good vendors?
My requirement is huge. To match the availability (of equipment) is the biggest problem for me. In times to come, we will be requiring almost one transformer per month. There is no manufacturing capacity available in the world so that they can supply to me as well as to China and to West Asian countries.
The transformers, which we require are not indigenously made. Bhel is not developing (those transformers). The foreign companies like ABB, Areva and Siemens are also trying to establish their companies here but it will take some time. My capacities can not wait for their factories to produce. It might be a constraint for our growth but if we are pro-active and book the capacities, this can be minimised.
