India Power Corporation Limited (IPCL) is one of the oldest power companies in India. It has successfully achieved a significant drop in its transmission and distribution (T&D) losses, which stand at 2.31% as compared to the national average of 25%. Apart from having its presence in the conventional energy sector, IPCL is successfully diversifying into the renewable energy sector. Raghav Raj Kanoria, Managing Director, IPCL, spoke to BE’s Saptarshi Deb regarding his company’s growth model and the Indian power sector in general.
Q. How is India Power a ‘holistic integrated power company’?
A. Well, India Power has its footprint in almost all domains of the power sector business whether be it generation (thermal and renewable) or transmission and distribution. India Power has forayed into power trading with its subsidiary company and has also merged with Uniper to form India Uniper Power Services Ltd., giving consultancy and operations and maintenance (O&M) services for plant optimisation. We are constantly exploring new opportunities in India and waste-to-energy is one sector that we are looking to enter into.
Q. IPCL operates in a competitive environment in Asansol, West Bengal. How has been your experience there?
A. There are very few distribution licensee areas in India which has witnessed the Parallel Licensee Model and in the case of Asansol, this competitive environment is leading us to take a more customer-centric approach towards our business although we have been serving this area for 99 years and our goal has always been to render value addition to the services that we provide. Serving the people (both LT and HT consumers), commercial entities, and industries has been a splendid journey because they are the major contributors for the development of Asansol-Ranigunj area.
Q. How have you achieved such low T&D losses as compared to other power companies?
A. Our robust network and meticulously designed processes has ensured that we are able to maintain such low T&D losses even when our consumer base is increasing manifold. We have routinely upgraded and modernised our network to ensure low technical losses in the lines. AMR and prepaid metering has allowed us to cap the commercial losses with minimal manual interference. SCADA systems and DT monitoring through IoT solutions have given us a better control over our system 24x7.
Q. What sort of business model has allowed IPCL to record steady growth when many other private players in the power sector are recording losses?
A. We are aware of the fact the power sector is going through stress but it is just matter of time and at this moment, it is an opportunity to improve our systems and focus on efficiency improvement. Our business model has always been a lean one; we focus on rendering valuable services and doing simple things exceedingly well.
Q. What policy changes can incentivise/encourage private participation in the power sector?
A. It is not only about policy but also the right execution that is needed. We have seen a large private participation in the generation business though many stake-holders are suffering now. We need a rational and impartial approach from the government and regulatory bodies. Fuel supply has been a major issue lately and now it is dealt with by the SHAKTI scheme. We hope that our concerns are addressed properly. The key policy intervention required from the government is in respect to the banks and financial institutions who have lent to the power sector. Most of the projects are stressed due to high interest rates being charged presently as well as prior interest charged forming Interest During Construction (IDC). The Finance Ministry along with the Power Ministry has to allow interest charge for projects to be converted into debentures/ preferential shares, which can be recovered after five to ten years. This will allow the projects some breathing space among a slew of other issues and can save a large chunk of NPA projects.
Q. Can privatisation of DISCOMs transform the power sector?
A. Distribution has always been the weakest link in the value chain and thus, it gives an enormous opportunity to private players to come in as the financial health of DISCOMs has worsened over the years. Improving the distribution network and bringing down the gap of Average of Cost Supply (ACS) and ARR need a huge investment and private equity would be definitely needed. Also privatising DISCOMs would mean fresh investments, new management and better processes. The central government should push states to bring in new models of PPP and private participation in the distribution sector.
Q. Is the governmental emphasis on the renewable sector coming at the expense of the conventional power companies? Is a more integrated, calibrated approach needed?
A. India has set a very ambitious target of making 175GW of renewable portfolio, which is extremely desirable. This has created cut-throat competition because of which we have seen a drastic decline in the price of renewable power. Now, all the renewable projects are awarded through reverse bidding process, which would bring down the cost further. Cost of solar power has gone down to less than Rs. 2.5. But the situation is yet to consolidate and one can still be sceptical regarding the viability of all these projects. There remain apprehensions pertaining to these assets ending up being financially stressed. Also, adding this capacity would mean harm to the grid stability. We need to ensure all risks beforehand because we have seen one round of investments in the thermal generation space that created lot of stressed assets.
Q. Given the surplus energy and offloading of costs to consumers, what is the process to ensure optimal returns on energy?
A. State regulatory commissions have a huge role to play in this. More tariff slab rationalisation and reducing cross-subsidy surcharge will lead to more transaction, which is a hindrance for now and it will definitely ensure optimal returns as of now. Also, the cost of fuel needs to be monitored as coal received on GCV basis is not the same as it is declared. Flexible operation and optimisation are needed for power plants to decrease the variable cost and thus the overall generation cost. We have India Uniper Power Services, which addresses this kind of challenges. Technology intervention and efficiency improvement are critical to ensure optimal returns.
Q. Is the quality of Indian coal a problem? How can we reduce import dependence and make domestic power companies more competitive?
A. Yes, it is a problem as is the issue of uninterrupted supply. Auctions do not happen often and not everybody has coal linkages. So, procuring imported coal is the last resort. But this issue can be addressed properly through rational distribution of coal mines to all the utilities. Robust planning is needed from Coal India Limited (CIL) because India has a large unexplored coal reserve. Commercial mining is also one option, which we will see in the coming years. The coal policy needs radical change wherein power plants should be allowed to buy coal from CIL at fixed price, irrespective of PPA and FSA or e-auctions. This will help all stake-holders and the customers at large.
Q. Are new technologies being worked on to combat the polluting factor of coal?
A. Yes, as Indian coal has huge ash content and we need to reduce SOx and NOx emissions. A lot of recent advance-ments have happened and in India, emission norms are becoming more stringent. All TPP have to mandatorily install FGDs, SCR and will need to upgrade ESPs to comply with these norms.