The Union Cabinet has just green flagged a new coal linkage policy and two years after Piyush Goyal was put in charge of two crisis-ridden sectors, things appear to be looking up for both.
Piyush Goyal: We have been able to completely eliminate corruption in the system through the highest degree of transparency which India has never witnessed in seven decades.
Power is one ministry where a lot of the success of the central government depends on how states respond.
Minister for power, coal and renewable energy Piyush Goyal is in a happy place. The Union Cabinet has just green flagged a new coal linkage policy and two years after he was put in charge of two crisis-ridden sectors, things appear to be looking up for both. Stranded projects have been rescued; there’s been a huge addition to power generation capacity, what appeared to be unrealistic targets on renewable energy are close to being met, coal blocks have been auctioned in a transparent manner.
His UDAY initiative is being accepted by more and more states. Yes, there are some problem areas – power demand is still low because the economy is still not in top gear, so plant load factors of plants are down and, one wonders if the extremely low bids in renewable energy will sustain in the long run, to name just two. In this interview with Seetha, Goyal talks about his two years in office. Excerpts:
Two years on, what would you say are your biggest achievements and disappointments, or would you say none?
Tangible achievements are many and I can keep talking about how we have been able to revive gas plants through an innovative mechanism, how we were willing to take the gauntlet on coal production—record breaking coal production which is unprecedented in the history of India, so much so that last four months I had to regulate the production of coal because I have excess supplies.
I can claim that I have been hugely successful in transmission. We have done 150 per cent of what was done in the two years before we came in, adding 50,000 circuit km in this short span. In south India where power used to be available at Rs 12 and 15 a unit, we have been able to bring it down to Rs 3/4/5 a unit. We have added 71 per cent of transmission capacity in south India in my first two years. And in the next two years we will do another 80 per cent on top of the 170 per cent we have now. So effectively in four years we would have added three times what I had inherited.
I can keep talking about the world’s largest renewable energy programme, UDAY—the most holistic power sector reform.
But what gives me the greatest satisfaction is the intangibles—the change in mindset; the fact that today, my team is willing to accept challenging targets which are unparalleled and used to be considered impossible at one point of time.
We have been able to completely eliminate corruption in the system through the highest degree of transparency which India has never witnessed in seven decades. Everything is transparent and done through websites and mobile apps. And if you have a problem, it can only be resolved through a process, not through meeting a minister or an officer.
Then there is the team spirit with which the entire government of India is working, both amongst ourselves and with states and other stake holders. It is one family, everybody is working as one, supporting, handholding, encouraging each other. And the same spirit is there in the PSUs, down the line and I mentioned that in my letter of appreciation which will go to every individual who has been a part of this team.
A big intangible benefit is that the cynicism and pessimism that prevailed in the world about India, particularly about this sector, has moved to a sense of optimism, confidence, self-reliance and the can-do spirit.
Any disappointments or a feeling of could have done more or not done as much as you wanted to?
Well, the disappointments come in when you are trying to do good for a section of society or a particular state and you find that despite the best of intentions, it is not reciprocated with equal enthusiasm on the other side.
Are you talking about Tamil Nadu?
Not particularly referring to Tamil Nadu, but since you raised the issue, UDAY is a win-win for every stakeholder. Tamil Nadu alone stands to benefit Rs 22,400 crores in the next three years. It is the largest beneficiary in the entire country, even more than Uttar Pradesh and Rajasthan. But the chief minister of Uttar Pradesh can write me a letter complimenting me and thanking me and saying we are joining UDAY because you have brought me a scheme which is good for the people of Uttar Pradesh. So I don’t see why anyone has to politicise a simple thing like that.
West Bengal and Telengana are two other states . ..
Mamata Banerjee had committed to me that she will come on board and then the elections came. I am sure that whichever government comes to power will join. Chief minister of Telengana has committed that the state is joining. Karnataka has agreed.
Will Tamil Nadu staying out affect your work in any way?
Not at all. It will certainly affect the people of Tamil Nadu because they will feel the stress and strain. It is unfortunate because the central government is not keeping a single rupee out of the entire benefit; it goes to the states. On top of that, we have introduced so many schemes that will help the states at our cost. We are funding the Deendayal Upadhyay Gram Jyoti Yojana largely.
We give 100 per cent of the money for the Power System Development Fund. Our financial institutions give a lot of support through loans etc. The LED scheme, efficient fans, efficient agricultural pumps—all of these things the people of Tamil Nadu could have benefited if the Tamil Nadu government was willing to join this scheme.
Power is one ministry where a lot of the success of the central government depends on how states respond. Have you faced any problem because of that?
All are giving support. I wish even Tamil Nadu would not worry about demanding more and more money and subsidies and waivers and write offs but would be willing to take the benefits of UDAY, join in and serve their people better.
You have had huge capacity addition, but PLFs of thermal plants are low because demand is low. Rating agencies say demand growth for electricity will be low for some time. Are you concerned about this?
Demand is picking up. Year before last, power generation was up 8.4 per cent, last year it grew 5.6 percent. One of the reasons the growth was less last year was because we were focussing a lot on energy efficiency.
But as we reach access to more and more households, as we expand transmission ability and different regions are able to get access to power, as I keep bringing in newer things that can reduce the cost of power purchase like UDAY, like yesterday’s path-breaking initiative on coal, all of these will help us reduce the cost of power, make it more affordable and rid India of diesel generator sets and inverters.
Then logically demand will also grow. This is going to be a focus area for me in the years to come. For example, I am asking for a look at electric vehicles. Why should we be spending so much on importing diesel and petrol which are also polluting?
Demand will grow at 7-8 per cent, which is the growth of the economy normally. Because this government sorted out all the pending problems of environment etc which we inherited, we have been able to add nearly 45,000 MW of thermal capacity in the last two years. On the base of 2 lakh MW when you add 45,000 MW, which is more than 20 per cent, in such a situation, obviously PLF will fall. It is not an abnormal fall.
In fact, it is good for the country to be power surplus; that’s when industry and business will come. Nobody comes to a country which is power deficit. I will increase demand in alternate ways.
You have been very successful in renewable energy plans. But are there still issues of evacuation, grid parity etc that need to be sorted out?
Grid parity, by and large, we are okay. You must appreciate that this power is fixed for 25 years. In hydro, it is fixed for 50-60 years, and often you can enjoy for 100 years. So you shouldn’t look at only in terms of immediate cost, you should look at life cycle cost. And on that renewable energy, thanks to the economies of scale, to the honest and transparent process by through which we are procuring it, we have been able to bring it, to my mind, cheaper than a new fossil-based plant. Having said that we still need a base load, a balanced load across the country, so fossil will continue.
For evacuation we are setting up green corridors. I am putting special emphasis on funding of transmission lines and in our tariff policy we have waived inter-state transmission charges for solar and wind.
There is this issue of bidding on very low tariffs and whether it will be sustainable in the long run as a business model.
This is propaganda. It is a transparent bidding process.
The transparency is not being questioned, but whether this is sustainable. . .
The people who are worried about this are also those who say government should privatise everything, government should not be in business, private sector does a better job. Isn’t that the usual refrain? It is the private sector that is bidding, so they must be smart if all of you feel they are better than the government, they know business better than the government. These are triple A rated companies. These are smart businessmen, you should ask these smart businessmen and private sector players.
Do you worry that few years down the line, this may all go . . .
It is not so. Capital cost is known. Projects are set up in less than 13 months. And after that operating expenses are almost zero. For one MW of solar power, the operating cost is Rs 6 lakh a year. That’s all. So per unit is 40-50 paise. Interest costs you can lock in at a fairly reasonable rate. And everyone can see the falling interest rate scenario. So they are sitting on strong macro economic situation.
And also, you must bear in mind that there are many other factors that some times lose out. Many of these are NTPC bids so the counter party risk is much reduced. You can get low interest rate loans, equity expectations are lower because you are guaranteed by NTPC balance sheet being so strong, many of these bids are in solar parks where transmission and land is taken care of.
So it has to be seen in the whole context. We understood the problems of this industry, eliminated corruption, increased the scale of operation to bring in benefits of economies of scale and so these prices came down. And we solved their problems of counter-party risk, getting land and all that.
The emphasis on transparency is welcome but there is a feeling that in doing this, you have not looked at future implication.
Are you suggesting that I should say, hey, investors this is too low, please bid high? Everyone is bidding of their own volition. Have a look at the names of the bidders. They are triple AAA companies, many of them backed by internationally renowned funds and business houses, some of them internationally reputed government companies.
Coal bids were also very low. How many of them have started mining?.
Ten. Thirteen of them which were given to the states are in courts because of problems between the joint venture partner and the state governments. That’s a matter for courts to sort out. And four or five of them there are some issues relating to mining leases at the state level, some valuation and payment issues that are being sorted out. But there is no stress on coal production. As many people who want coal can take it from us.
Coal imports are down, coal production is up, but now demand is low, when demand starts going up again, can we rely only on Coal India?
We have given 40-odd mines to the states, we are giving 16 more mines to states for commercial mining, we are giving out a lot of mines for coal bed methane, for coal gassificaiton. NTPC has received many mines so it can become self-sufficient. Neyveli Lignite has been given mines and they are looking at expanding. Coal India will be in a very pre-eminent position and will continue to expand to that billion tonne target that I have set.
No plans of corporatising or breaking up Coal India – there are some efficient subsidiaries, some inefficient ones?
Look at the legacy of these companies. They also had a legacy when they were nationalised, so each one has a peculiar situation. For example, Western Coalfields has mostly very small, underground mines. It has a peculiar situation not comparable to Central Coalfields, which has large open-cast mines which are easier to mine and make huge tonnages and profits. But if you see each of the subsidiaries, their performance has significantly improved in the last two years.
Western Coalfields, which was a permanent laggard and loss-making company, and which in the last ten years had not opened a single mine, has already opened nearly 12-13 mines and they are planning to open 36 mines, every month a new mine. They have acquired more land in two years than in the ten years before that. tTheir production which was going downward has again started increasing. In the 1 billion tonne plan, Western Coalfields was expected to grow from 40 mt to 60 mt. Now they are planning to grow up to 100 mt. tThere is a sense of confidence, of excitement, of giving extraordinary results, a desire to perform, a desire to excel thate rejuvenates even a person like me who is sitting and reviewing. That iIf these guys are so excited then I have to challenge myself even more.
You don’t have the bureaucracy running you around in circles.
I have an absolutely wonderful bureaucracy working with me. I am on record to say that my team in power coal and renewable energy is an outstanding team, working seamlessly within themselves, with other stakeholders in other ministries, with other PSUs, with states, with industry. We are having fun.
This article is a part of a Digital Special Series on the Power Sector sponsored by Powergrid.
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