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Jayant Kawale, Managing director, hydro and renewables, Jindal Power Limited

02 Jun 2014

Managing director, hydro and renewables, Jindal Power Limited, Jayant Kawale, speaks to Neeraj Dhankher about the ill effects of over dependence on coal, the foolhardiness of pushing for thermal power at the cost of a more clean hydro power and why hydro power is like Titanic.

Jindal Power is primarily into coal and power generation. What is the reason for venturing into hydro segment?

Just like the country also needs portfolio of energy sources, not just coal, companies also need to diversify into various sources of energy. We are already present in coal, that is our traditional strength, starting form steel, coal mining, thermal power. So it was time to get into hydro and renewables also. If you look at the country’s portfolio, it is highly skewed in favor of coal. Now if you follow the various debates on global warming, even various issues like pollution, water scarcity, global warming, ash disposal, land acquisition for coal mines, it is all pointing to our over dependence on coal. A country which is supposed to have large reserves of coal, we are importing coal. So this is not sustainable. If you look at the power sector as such, the management of the power system, coal is base load power. Today, it is a shocking figure that in Delhi they spend Rs 3000 crores per year on paying for power which is not required during off peak time because they have contracted thermal power, base-load power which has to back down. But if it is to back down, the contracts they have entered into, they have to pay the fixed charges. So annually it amounts to Rs 3000 crores. Now a more intelligent procurement of power would have been to go for base load for majority of your requirement, also go for peak load power. What are sources of peaking power? Basically, three; one is diesel, now it is prohibitively expensive so that is out; gas, not available and also expensive, three; hydro, cheapest, even cheaper than coal in the long run and you don’t have to import it. It is indigenously available. So everything is pointing to the necessity of looking at hydro seriously. So possibly visualizing this because companies also need to look into the future and see what are the trends. So it was clear some five six years ago also that this situation of base load surplus but peak power shortage is going to happen as it has happened now. And therefore the company needed to get into hydro, peaking power. This is the whole genesis of this. At the same time, Arunachal Pradesh opened up. And they allotted projects on a large scale basically. So company took advantage of that and obtained these three projects which we are now developing.

The Central Electricity Authority expects that under the present circumstance about 45,000 mw of hydro power capacity will be added during the 13th and 14th FYP and the target of 90,000 mw may not be feasible and share of hydro power in the overall energy mix might come down in the years to come. Your views?

Hydro power is like titanic. If you want to change the course, it takes a long time to turn around. If you have seen right from 1970 steadily the share of hydro power has been coming down. In 1970 it was between 40 and 45 per cent. Now it has come down to 17 per cent. It’s going to take time; it’s going to take at least ten years. That too if the government shows some seriousness, solves some basic issues that are affecting hydro power. Then this turn around will take place and after 15 years you’ll see the results. But I think it is worth it.

What are the issues you are facing at present in the hydro power segment?

First issue is the process of environmental forest clearance. Today it is a mess and not just for hydropower but for all sorts of projects. We are not saying that we need to compromise on environmental concerns. What we are trying to say is that you look at the totality of the picture. From the point of environment it is dangerous to continue with thermal power. Therefore, we need hydro power but MoEF does not take this overall picture into account. When it looks at a project it looks at and whatever negative impact on the environment that project will have. But it also needs to take into account if that project does not happen, an equivalent thermal project has to come up somewhere else in the country which is going to cause pollution and all the problems associated with it. Does the MoEF agree that we need to do these many hydro projects? Let them first agree, let them take an accountable target that yes, we will ensure that in the country there’s a pipeline of whatever 20,000 or 25,000 mw whatever is the number they arrive at we will ensure there will be a pipeline of environment and forest cleared projects of X mw for the next 15 years. Then let them come out with guidelines, how they will reach the target. Their target should not be just to bring down any proposal that comes to them. Today this is what is happening. When the proposal goes, the approach is adversarial and negative. I’m not saying don’t subject projects to their rigor of analysis that you want to do. But don’t lose sight of the overall picture. Secondly, today there is no clarity. You start working on a project, first thing you have to do is to get terms of reference for our environmental impact assessment. You get your terms of reference, based on that you start doing your study, you prepare the DPR, you ensure that all the environmental stipulations that are there in the TOR are adhered to in your DPR, then you conduct public hearing. After that when you go to environment ministry for environmental clearance they’ll come up with something new. If you create such uncertainties, developers will get fed up and say forget about it. There are other avenues of investment which have less uncertainty. If that is the case, I’m sure some NGOs (not all NGOs) will be happy with this situation, create a situation in which developers feel discouraged, they lose their enthusiasm. But that is not the way a country should be run.

There is tariff policy in hydro which is going to be extended till 2022. That’s probably an encouraging sign for the industry.

As per the tariff policy hydro projects need not come through the route of tariff based competitive bidding, you can have a direct MoU with the distribution utility. And the tariff will be determined by the regulator on the basis of project cost. But today we are seeing in the market, let alone hydro, utilities are reluctant to enter into long term power purchase agreements. They are relying on short term markets so even thermal is having difficulty. There is stipulation on thermal projects (we also have some thermal projects which are sufferers because of this) is that coal allocation will be given only if you show a long term PPA. If utilities are not coming into the market for PPA, how do you show long term PPA? Then what happens to your project without coal? On the thermal side, these need to be addressed. But even for thermal utilities are reluctant, for hydro they’ll be even more reluctant because mentality of a publicly owned distribution utility is driven by the political constraints. There is talk in the Ministry that we should introduce hydro purchase obligation just like renewable purchase obligation. Let’s see what comes out of that. But it must be said that unlike renewable purchase obligation where the intention is to provide tariff subsidy to new technology because it is expensive, being new and eventually it will come down so therefore you are giving temporary tariff compensation through RPO. That is not the intention behind HPO. There is no tariff protection required. This is a mature technology and even after hundred years if you are not competitive in terms of tariff then you have no business to be protected. That is understood, problem is to get over this issue. These are long gestation projects, initially tariff is high. So if your first year tariff is quoted, people might shy away, it might be seven rupees but in the long run after the repayment is done then it is going to be cheap like Bhakra is today available for some 16 paise. So after 20 years after the start of this project it’s a bonanza for the people of the state but who thinks of 30 years. You think of the next five years that is the jinx you want to break by having a hydro purchase obligation.

With the new government coming, what kind of policy push are you looking at in terms of the regulatory mechanism that is required?

Let us wait. Mr. Modi had made some which are encouraging. Somewhere, I think in J&K he had made a statement that hydro needs a push. In another interview he had said we need to look at the environment process and there should be a way of combining development priorities of the nation with the ecological and environmental constraints. So there is awareness about these issues.

After the floods which happened in Uttarakhand last year, the Environment Ministry came up with a set of recommendations where they said that the hydro-electric projects along the Himalayan foothills have actually contributed to loss of biodiversity. So wouldn’t that be a setback for investors?

Supreme Court asked Environment Ministry to set up an Expert Body to come up with recommendations. The Environment Ministry in its wisdom appointed a body which was mainly composed of dam opponents. It contained some experts who resigned and who gave their separate reports. They disagreed with the majority view. Now in the Supreme Court, the case had nothing to do with disaster as such. There was one project in which some NGO had said that public hearing should be conducted afresh. Supreme Court disagreed with that, said that there is no need for conducting public hearing afresh. Normally they would have stopped at that but in their wisdom they opened this issue of Uttarakhand disaster. Now that had nothing to do with that project. They said appoint an expert body. MoEF appointed a body of people who are known opponents of dams. It had hardly any experts who found it impossible to work in that committee. So they gave a separate report. Now various organizations including the Indian National Hydro Power Association, other project proponents they have applied for being made a party to the case that they are heard and the issue is not decided by a so called expert body by the MoEF and the Supreme Court without hearing all other parties. MoEF has submitted to the Supreme Court that a third committee should be appointed because now you have two committees who do not agree with each other. That has been rejected by Supreme Court. So on that basis to say that MoEF has held hydro projects responsible for the disaster is factually incorrect. A body which was appointed by MoEF has said that hydel project are responsible and should be stopped. A part of the same body has disagreed with this. MoEF has not expressed its opinion, therefore, it is wrong to say that MoEF is saying this.

You feel there is uncertainty in policy and guidelines on development of hydro sector?

Absolutely, so we all need to sit down. Let bygones be bygones. Let’s sit together. Let’s have an across the table consultation of all stakeholders. Let us see how we can improve it without compromising on environmental considerations. I’m again repeating. Without compromising on environmental considerations can we make this process faster, can we make this process more dependable, less uncertain? Let’s find a solution. Today there is no discussion also.

Do you have outlook for the hydro potential of India in the coming years? In terms of your growth plans, what is the outlook for this sector in spite of having issues?

It is changing. We have a theoretical potential of 150 thousand mw. Now some cumulative impact assessments have been done for some basics. Now you can have a cascade of 10 to 15 projects but if MoEF and MoWR after conducting the cumulative impact study say that out of these 10 projects only 6 should be done, for whatever considerations, 4 should not be done, then obviously the potential will come down. Today we don’t know. This study has been done only for a few basins. There again we are putting the horse before the cart. First projects were allotted then people did DPR. After doing everything and getting the environmental clearance they say no, we need to do the cumulative impact assessment. And you might discover, after cumulative impact assessment they say that your project is not to be taken up. So forget about the developers cost, effort and money, as a nation we have wasted time and effort in this process.