Ratan Tata, Anil Ambani, Gautam Adani to discuss issues such as coal shortage, discoms’ strained finances and rate problems involving new UMPPs.
The big government owned companies won’t be part of the meeting scheduled tomorrow between heads of top private power companies and the Prime Minister.
NTPC and PowerGrid, for instance, won’t be there. The meeting appears to have been convened for issues particularly impacting the private sector. Also, the government-owned companies do not find themselves in that much of a problem.(Click here for TRIPPED ON POLICY)
The issues expected to come up include coal shortage, the strained financial health of distribution companies and rate issues involving new ultra mega power projects (UMPPs). A delegation which would include Tata Group chairman Ratan Tata, ADAG chairman Anil Ambani and more than a dozen other company heads would seek answers on these, in the background of the expected target of adding 75,000 Mw of power capacity in the country during the 12th Plan (2012-17).
Among those expected to attend are Tata Power deputy chairman Cyrus Mistry, Adani Power chairman Gautam Adani and GMR Energy chairman G M Rao. Confederation of Indian Industry (CII) director general Chandrajit Banerjee said, “Critical obstacles, including fuel supply bottlenecks, distribution losses and lack of funding, need to be urgently addressed to achieve double-digit GDP growth. We are hopeful that the meeting will identify solutions to these bottlenecks and chart a road map for the sector.”
Private companies have 44,818 Mw of generation capacity and had planned to install another 80,000 Mw. However, with land and fuel challenges, many of the proposed projects are expected to be on hold. Government-owned entities, that account for 57,000 Mw capacity in the central sector and 84,000 Mw in the state sector, do not find themselves in such a problem, since they operate in a cost-plus regime where any increase in fuel price is a pass-through. “The private sector has itself to blame for quoting unrealistic tariffs (rates, to win contracts),” said an executive in a government-owned company.
Apart from the PM, the CEOs are also expected to meet finance minister Pranab Mukherjee and coal minister Sriprakash Jaiswal tomorrow. The growing shortage of domestic coal and its impact on project economics due to the higher prices of imported coal needs to be urgently addressed, industry body CII has said.
The UMPPs of Tata Power at Mundra (Gujarat) and Reliance Power at Krishnapatnam (Andhra), based on imported (Indonesian) coal, are facing uncertainty because of changes in Indonesian pricing policy, linking the price to market-based ones. The companies are now asking for rate revisions for both the projects, to ensure viability. Both firms had acquired stakes in Indonesian coal mines for the import.
Fuel availability has emerged as the biggest risk faced by thermal power projects in India, as coal production has not kept pace with power capacity addition in the current Plan and developers have been forced to import coal at a time when international coal prices have shot up, a CII statement added.
Due to rate mismatches and subsidy problems, power distribution companies had accumulated a loss of about Rs 75,000 crore in 2008-09, which had increased to Rs 1,06,347 crore in 2009-10. Most discoms are under huge financial stress and some state discoms have already asked for a bailout package. The government is in the process of formulating a revival plan for discoms.
