Jyotiraditya Madhavrao Scindia, Minister of State (Independent Charge) for Power has been vested with a job that has many challenges — among them, fuel supply constraints, financial health of the distribution companies, funding of new capacity addition, transmission issues. Despite these, the Minister is confident of achieving the targets set in his sector for the 12th and 13th Plans.

The target for 12th Plan is more than 88,000 MW of which 60,000-65,000 MW is thermal. For the 13th Plan, the target is around 93,000 MW. In an interview with Business Line, Scindia says that the role of his Ministry is that of a facilitator and his team has set its own targets which at least better the power scene in the country, if not resolve problems altogether. Excerpts from the interview:

You have been saying that high tariff (electricity rates) should be the last resort. Given the present circumstances, how do you think tariffs can be checked?

Long-term power purchase agreements are very important from an Indian perspective, not only in terms of supplying regular power across the country but also for efficacy of the transmission network.

I would like to see, over a period of time, close to 90 per cent of base load power of the States to be contracted under long-term power purchase agreement. I have requested the State Governments as well.

I do not want situations which are emerging in States such as Tamil Nadu and Chhattisgarh. In Tamil Nadu, there was a great expectation of intra-State capacity coming up, but it did not come up. There is also a problem of transmitting power from other regions, as the regional power forum did not want power from other States.

The opposite is the case in Chhattisgarh. There, a lot of plants have come up, but they do not have transmission capacities. They have not signed long-term PPAs, rather signed short-term. All these volatilities would be ironed out once you sign long-term PPAs.

How does it check tariff?

If you have contracted for 90 per cent of long-term power, then your volatility spread narrows to a large extent. There is much more predictability from Power Operation System Co Ltd (POSOCO) point of view, in terms of regional requirement of power, congestion becomes less, issues of under-drawal and over-drawal become less. One contracts more long-term power at lower rate.

It may not be an easy task in view of the financial health of the distribution companies (Discoms). How do you manage it?

The financial viability of Discoms is under question. As a result, the utilities are not able to contract long-term power. Therefore, there is load shedding. It also results in buying short-term power, which impacts cash flow and grid on a national wavelength. The root cause is viability.

That is why a financial restructuring plan is important. It is to ensure that the subsidy (the price at which Discoms buy power) in the future is not huge, but cash flow is neutral to the Discoms. Today, we have eight States on board with Rs 1.40 lakh crore of losses. The transitional financial mechanism is ironed out and, hopefully, by next week or two, we will have it down.

By when do you think National Grid will be a reality?

The connectivity of the Southern Grid with the Northern will happen by January 2014. I am monitoring it on a fortnightly basis with Power Grid, including numbers of towers erected, circuit of wires done. I have a monthly target to ensure that it happens within the deadline.

Who are the real beneficiaries of the National Electricity Fund?

The real beneficiaries will be the State Governments and, through them, the end consumers. We are looking at close to Rs 25,000 crore in terms of projects over the next two financial years (2013-14 and 2014-15).

As of now, we have already got projects which will get an interest subsidy of Rs 8,665 crore over the next 14 years. It is an interest subvention. We are giving loans at subsidised rates by Power Finance Corporation, Rural Electrification Corporation and other financial institutions.

We are hopeful of getting more projects from the State governments. This is all about modernisation and renovation of distribution set-ups in the States. This is in addition to the assistance given under Rajiv Gandhi Grameen Vidyutikaran Yojana (RGGVY) and Restructured Accelerated Power Development Reforms (RAPDR). We have projects from across the States.

Fuel supplies are a major concern, what is the status on PPAs with Coal India?

We have signed close to 28,000-29,000 MW of fuel supply agreements. Now we are waiting for 14,000 MW of NTPC.

Budget rationalisation of customs duty on coal is said to make electricity more expensive. Besides, on the one hand the Government has made imported coal expensive, while there have been no takers for exemptions given to the power sector for importing LNG. Do you agree?

Power plants use both steam and bituminous coal. The Budget proposal is a huge plus for units using bituminous coal.

The units that were importing steam coal were categorised as bituminous by Customs Department, and therefore were anyway paying a heavy duty. Even for them it is a win-win now (the duty is at 2 per cent for all categories).

Lowering the customs duty (on LNG) is an important step, but it is not the only step in that critical path to get those (gas-based) plants started. Today, nearly 10,000 MW is stranded. The KG-D6 gas output has gone down. The key issue now is not the fact that customs duty has been lowered, but that people are still not importing.

The issue is, if you import, it is the substitute for peaking power compared to diesel. The point is that, a lot of these plants have signed PPAs. So, you will have to find the demand in the States for that substitute and set up the mechanism. The power producer should be able to tie up with States to buy that peaking power from imported gas. Only then does it make sense for the Independent Power Producers to import the gas. If somebody imports, it should be able to produce power from it and supply.

Is there a solution for gas-starved units?

I am discussing with my officials to put together a policy for these stranded plants. We are evolving that on a daily basis. My role is of a facilitator.

Is gas swapping a solution?

If gas is supplied from the East Coast and is wanted in the West, an agreement has to be worked out between the two parties — it could be the two State Governments. And they will have to agree with each other. At this point of time, it is not happening because there is an issue of transportation fees that the Western States incur. The Power Ministry’s role is of a facilitator.

Is it a Commercial Decision?

I do not want to call it a commercial decision. It is a swap. The word ‘commercial’ implies a notion of profit. Even if you do it on a no-profit-no-loss basis, the estimation should be agreeable to both the parties. I am not an authority on who can impose it.

Where is the power trading business headed in the country?

I have not met the power trading companies. I believe that the Regulatory Authority has a role to play. For example, the decision on imported coal price by UMPPs is also with them.

The Government has given powers to the Regulatory Authority and so let them take its view.

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