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Ramesh Narayanan, Chief Executive Officer, BSES Yamuna Power Limited (BYPL)

19 Jan 2013

With the entire power sector in the country facing a rough patch, distribution companies are grappling with their own problems. These are very different from the problems being faced by generation and transmission companies. Reeling under losses despite the recent rise in tariffs by 26 per cent, they are demanding a fresh round of tariff hikes. The Chief Executive Officer of distribution company BSES Yamuna Power Limited (BYPL), which distributes power in 14 districts of the national capital across Central and East Delhi, Ramesh Narayanan speaks to Pallavi Karan Chakravorty about why distribution companies have nothing to do with raising of power tariffs and why the sector is in need of a fresh set of reforms. Excerpts:

Has raising of power tariffs solved the problem of a distribution company? If not then what has been the reason behind it?

For a distribution company, 80 per cent of the cost/ expense is the power purchase cost from the generators, 10 per cent is the depreciation cost and the remaining 10 per cent is what we charge from the consumers. The last 10 per cent is used for meeting our operation and maintenance (O&M) expenses, employee cost and other miscellaneous expenses.

Our O&M expenses over the past 10 years have come down. But the tariffs have gone up because the input cost has gone up. I used to get power at `1.41 per unit in 2002, today I get it at `5.37 per unit, so the cost has gone up by 350 per cent whereas my tariff has gone up by only 70 per cent. I manage the remaining 280 per cent cost escalation by efficiency gain. I brought our losses from 60 per cent to 18 per cent, so there was some extra flow of cash and that has supported that 280 per cent cost escalation. But I didn’t get any benefit from the efficiency gain; it was all sucked away by the generator and the transmission companies. However, the inefficiencies on the part of the generation and transmission companies are growing in terms of their power purchase cost. Power from the Jhajhar plant is available at `6.50 per unit, so how am I supposed to support that against my tariff?

The energy bill should have three subheads; power purchase cost, transmission cost and the distribution cost. Let the people know why the hike was essential.

What is your solution for a better distribution network?

The Centre can divide the distribution sector into two parts -- wires and content. Basically, power is not flowing to the end consumer due to lack of wires, the content we already have. For the wires, we can have a similar project finance arrangement. They can have a back-to-back tie-up with an offtaker and have a leasing arrangement. These wire companies can be financed on the basis of the lease agreements. This infrastructure can be created all over the country. The distribution company can lease these wires from the central company upfront without investing in building a new infrastructure.

What, according to you, should be the first thing that the government should do for the betterment of the power distribution sector?

The government has to initiate investments at the distribution level. For every 1 mw that you add on the generation side, 2.1 mw needs to be added on the distribution side. If we have added 50,000-60,000 mw in the past 20 years on the generation side, we have not added around 300,000 mw capacity on the distribution side. So, the power is not able to reach the end consumer.

What kind of reforms do you think are required in the power sector?

Basically, we need a set of reforms for the distribution sector on the lines which were provided to the generation sector. We need a financial, legal and administrative framework. It is time we concentrated on the downstream.

The first set of economic reforms in the country were announced in 1992 by the then finance minister Dr. Manmohan Singh. He allowed foreign direct investment (FDI) and also created three frameworks for the generation sector -- financial framework, legal framework and administrative framework. International norms became Indian norms. This gave a tremendous boost to investors’ confidence. From 67,000 mw installed capacity then, we have achieved an installed capacity of 206,000 mw now – a progress of 210 per cent.

This installed capacity is also much higher than the demand on the grid. At peak season the demand is 135,000 mw. So, does that mean that we have 80,000 mw surplus capacity. No. It is actually an artificial surplus. Today, some of the power generation companies are struggling to meet their fixed costs, and it is not only because of fuel. The main reason is that the transmission and distribution sectors have not developed and grown the way generation sector has. We never focussed on the transmission and distribution sector. However, later it was realised that the transmission sector too needed a framework similar to the generation side and independent transmission projects started taking off.

Delhi will be islanded soon, in order to avoid slipping into darkness following a grid collapse. Being one of the major power distributers in the capital what would be BSES Yamuna’s role here?

For islanding, there has to be a certain amount of committed generation for Delhi, which will isolate itself in case of any crisis on the northern grid. For example, National Capital Power Station (NCPS) or NTPC Dadri was supposed to exclusively supply power to Delhi, and it was supposed to lay transmission lines from Dadri to Harsh Vihar, one of our zones in East Delhi. Then all the 900 mw has to flow here. Similarly, power from Jhajhar Power Plant to Mundka, which is 750 mw, has to come on a radial mode. We are trying to make a ring around Delhi, which is a 760 kv ring being made by the Power Grid. As such there are two rings 400 kv and 220 kv. They are segmented at a few places due to faults which would be rectified. So, it is basically an involved subject of a transmission network. Once that is done, we can proceed from our end. They have to deliver. At our end we are assisting in evacuation facilities from those load points or the load centres.

How long will it take for Delhi to be islanded?

It will take at least six months, may be more. Because Power Grid, which is doing that line, is facing some land acquisition issues as the route falls in Uttar Pradesh. Similar issues are there at the Mundka level.

What is your view on Open Access? Do you think it would promote healthy competition in the sector?

Open access is good and it is just a matter of time before it takes off. It is not really happening right now not because anyone has any reservations about it but because there isn’t enough network to transfer surplus power. You need reliable supply of power and also the wires (transmission lines) in place before opting for open access. Today, what is happening is in order to give power to one person, the other is left deprived as both are being catered to by the same transformer. For regular power supply to both the persons, we either need a bigger transformer or two separate transformers. These are the basic hindrances because of which open access is not taking off. 

Today, the biggest challenge is how to accelerate the infrastructure. Open access is being promoted by those who are sitting with surplus generation capacity. Law is not an issue, the process is not an issue, wires are an issue.

If today I have surplus power, I cannot give it to someone in Gurgaon, Noida or Faridabad. DLF City has asked us to supply power, but I cannot take it there as there are no transmission lines. So, there has to be a right kind of infrastructure for me to take the power there. Till these things are put in place, open access will not happen. Wherever it was feasible, it is happening. For instance, in Mumbai.

(InfralineEnergy thanks Ramesh Narayanan CEO, BYPL for sharing his valuable insights with our readers. The column 'In-Conversation', is a platform to engage experts from various sectors to share their views on the different transformations happening in the Indian energy sector.)