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I inherited a situation where I had no choice…things brighter now: Piyush Goyal

Power, Coal and Renewable Energy Minister Piyush Goyal has expressed confidence that the long-term structural improvement measures undertaken by the NDA government in the electricity sector could set the stage for powering India into a double-digit growth trajectory. Responding to a December 21 article in The Indian Express on some of the residual issues bottling up capacity utilisation, Goyal said that any evaluation of the status of the power sector must start with the legacy issues of the past few years.

“Historically, if one was to map out economic growth and the growth in power demand, our own understanding is that the correlation factor is that if the economy grows at about 8 per cent, power demand grows by about 5-6 per cent. From that sense, the current green shoots that we can now see in the economy makes us feel that with the advent of UDAY (Ujwal DISCOM Assurance Yojana — the distribution reform package), which was launched only one-and-a-half months back, and has 12 states already on board, we are very confident that the outcome of UDAY, as they start coming out, will probably push this correlation from 5:8 to possibly 8:8, but that’s probably something we will know in the days to come”.

On the sharp drop in the number of inter-state power projects seeking transmission connectivity, a number that has come down from about 46 in 2010 to two projects each in the last two years, Goyal said that the 2010-11 period was an aberration of sorts. He said a policy change in the regulation of connectivity in 2010 allowed generators to hook on to the Inter-State Transmission System without paying any commitment charges, resulting in an unusually high number of applications. The minister said that there are a number of intra-state projects that also got transmission connectivity granted during the years, which does not get reflected in the data maintained by the Central Transmission Utility.

On the generation side, Goyal said that thermal power from coal production in 2014-15 recorded a 12.12 per cent growth, much higher than the national average of growth of power. “Because hydro was down, deficient monsoon, and gas was down due to lack of fuel. Even after that, overall power production last year was higher than 8.4 per cent. This will probably be one of those outlier years where power production was higher than economic growth, which reflects the additional availability of coal … and (the) success of our gas pooling programme, that even when hydro was down, we were able to push thermal production. And for the first time, all the target were met — transmission, thermal and renewable installed capacity,” he added.

On the reason why the plant load factor (PLF) of thermal plants was down to a decadal low, Goyal said that a whopping 1,34,000 MW of thermal capacity was planned during the last 10 years and developers of all sorts were encouraged to set up units, without any reference being made to the demand projections. “Even if you factor in additional demand and new industries etc, you still can’t justify this incremental generation capacity. Simultaneously, you (the previous government) did no study to assess the transmission capability requirement or to improve the distribution sector … And you plan generation, but there is no coal, no gas … So, I inherited a situation where I had no choice…,” he said.

The current surplus output situation on the generation side, he said, has its positives. “I’m not crying over surplus capacity… Surplus capacity is good for India. Surplus capacity means we can get more investors, can get more households and promise them 24×7 power. Therefore I’m saying India is now poised for 10 per cent growth and that too, decadal 10 per cent growth. And my personal sense is this will happen probably next year or the year after.”

Goyal said his ministry had added 22,566 MW of generation capacity addition in the last year, the highest ever. “Of this, 20,830 MW is thermal capacity alone… Simultaneously, we’ve restarted gas (stranded gas capacity) again and we’ve also met all the renewable targets”, alongside a strong thrust on energy efficiency. “So when you combine all this, so much more capacity gets added, PLF will anyway fall… Because I finished all the stalled projects. This year will also be a similar thing. PLF will again fall. But it’s a sign of my success and not failure.”

On the woes of the distribution sector, Goyal said that remedial action was underway. “Distribution companies do not have money to buy power. Absolutely right. But that’s what UDAY is all about. It will strengthen the distribution sector.”

He asserted that peak demand met during the summer peak this year was well over 95 per cent. “Also, power prices on the electricity exchanges were low because demand is low and supply was high. Over 57 base load thermal stations that were shut down in May, that’s also a decision that I’ve taken,” he said. Goyal said he had encouraged states that instead of running plants at low levels, it was better to wait for demand to pick up and run them optimally.

On the fuel side, he said that for 2 years, CIL has not increased prices, and the utility has continued to maintain profitability. Regarding the pre-condition that developers cannot get coal from long term linkage or even mine their own coal unless they have a long term PPA (power purchase agreements) with discoms, Goyal said,“The long-term PPA condition, I would love to change it, but I would need to have enough coal to distribute to whoever applies… (Currently) We’re still importing coal, but it’s been coming down sharply every month.”

If project developers had chosen to put in aggressive bids during the recent coal auctions, Goyal said that it was their (developers’) problem. During the auctions, a number of developers bid aggressively, with some even quoting an additional premium to the government — over and above the mandatory royalty and reserve price — in their eagerness to access fuel, with the intent to load the fuel-charges onto the fixed capacity charges, something that was curtailed by the coal ministry’s decision to cap fixed charges. “Aggressive bids by the private sector is their problem. We had stated clearly in bid documents, that those who bid need to pass on benefit to consumers,” Goyal said.

In these auctions, all the bidders, he said, were made aware of the methodology of auctions and that it was made clear that in the event that an ascending forward auction is conducted, the fixed rate of Rs 100 per tonne, will be the input for computation of energy charge for the purposes of determination of tariff and the additional premium shall not be reckoned for the purposes of determination of tariff.

source: http://indianexpress.com