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Anil Razdan, Former Power Secretary, Government of India

11 Nov 2010

After spending 19 years in the Indian power sector and holding various portfolios, Razdan bid adieu to the power sector as union secretary of power in the year 2008. Among his other contributions to the sector, Energy Conservation Act, activation of UMPP scheme, ensuring fresh start of 60,000 MW of capacity generation, expanding the equipment manufacturing base of the power sector are some of the tasks which he holds close to his heart. In this conversation, InfralineEnergy's Chhavi Tyagi discusses the raging debate between the environmental concerns of the country and its need for unhindered growth.

Edited Excerpts

From the 7th Plan, the difference between power generation capacity targets and achievements is growing wider. As per CEA, India is expected to add approximately 62,000 MW, against the original target of 78,700 MW during the 11th Plan. The analysis done by Infraline research and other independent analysts suggests that India is most likely to add between 40,000-50,000 MW during the 11th Plan. Why has India historically failed to realize its set targets for the power sector? Are we being over ambitious while setting the targets or does the problem lie in their implementation?

The targets are always set keeping in view the growing requirement for energy of the country. To ensure a growth rate of about 8-10 percent of the economy; we had set a target of 78,000 plus MW for the 11th Plan. However, there have been slippages in meeting the targets. One of the reasons for the non-fulfillment of the targets in earlier plans was that we were not placing the orders in time and thus, not achieving those targets. Secondly, we had a constraint in the equipment manufacturing capacity of the country. BHEL was the sole manufacturer because of which they could not deliver on time as far as thermal equipments are concerned. Hence in this particular plan, there has been a fair amount of ordering for Chinese equipments but that, essentially, was a stopgap to meet the shortfall between the demand and supply position within the country. From the 12th Plan onwards, particularly in relation to super critical equipment, I think this gap would be fulfilled because the new private joint venture manufacturers should be in a position to meet this demand. Hydro does not have much of a problem as there is a proper match between supply and demand. Another area that is giving us problems from the beginning of the plan is the balance of plant equipment, for example, equipments like coal-handling plants, ash-handling plants, chimney manufacturers, etc. It is a relatively easier technology and there is no reason why we should not manufacture it within the country, with more entrepreneurs getting into this.

We highlighted the problem. I, particularly, was very keen that if NTPC and BHEL enter into a joint venture, it should be for balance of plants. There is a huge vacuum and a number of plants are getting delayed because of a delay in balance of plants. But, unfortunately, the balance of plants capacity has not come up as well and I think this is one of the reasons we are going slow. To add to the woes, the Chinese deliveries and the commissioning has not been completely according to the schedule, and it's recently been compounded by some visa problems.

"We should build up a steady profile of about 25,000 MW fresh starts each year. So, even after slippages the country is able to attain at least 20,000 MW each year. In which time these cumulative slippages will also catch up with the sector. Therefore, the country ends up adding about 1,00,000 plus MW in a five-year plan period, as we ought to be doing."

However, early on we had estimated a shortfall of probably about 10-15,000 MW in the 11th Plan. We also knew that the route to compensate for this shortfall would be through captive generation. The fuel linkages for this captive generation were given well in time. And, the good news is that this 10-15,000 MW is going to come on line during the 11th plan. Objectively speaking, we should be landing at about 70,000 plus MW in my opinion after taking into account the captive power generation. However, we have about a year and a half to go and I think we should be chasing projects very hard.

What additional steps can the sector take to ensure minimum slippages on the target?

Somewhere down the line our project commissioning is not as good as it ought to be. We should stop pursuing the projects in clusters and build up a steady profile of about 25,000 MW each year through fresh starts. So, even after slippages the country is able to attain at least 20,000 MW each year. In which time these cumulative slippages will also catch up with the sector. Therefore, the country ends up adding about 1,00,000 plus MW in a five-year plan period, as we ought to be doing. In the years 2007 and 2008, we had fresh starts of about 60,000 MW. This pace needs to be maintained to avoid draught years ahead because if you have delays in starting power projects, you'll have draught years in commissioning. For example, 2008 was a draught year for commissioning and we knew it 3-4 years earlier because there were no projects for commissioning in the pipeline.

"The environmental concerns, in my personal opinion, are not entirely in order because energy and environment have to move in tandem and in balance. We cannot afford to keep large areas of our country underdeveloped."

Another factor that has the potential of cutting down on slippages is online project monitoring. We did introduce online project monitoring - an experiment which we did for the NTPC's plant at Dadri - in which the progress of the project executor, equipment supplier along with his major vendors and sub vendors was monitored online. This experiment was successful for the Dadri project and it was one of the few projects which came almost on time for the CWG. It has now been extended to other projects of NTPC as well. This would tighten the monitoring and also reduce litigation. Also, arbitration would be cleaner and the authorities would be able to pinpoint precisely whose fault it was and at what point of time.

Considering the ever-increasing energy requirements of the country, do you think that these targets set by the government gets the full backing of the all the concerned ministries? What do you think is the solution to the different approaches taken by all the concerned ministries?

The environmental concerns, in my personal opinion, are not entirely in order because energy and environment have to move in tandem and in balance. We cannot afford to keep large areas of our country underdeveloped. I am one of those who believe that the Ministry of Environment and Forests should be concerning itself immediately to the pollution of the rivers. And this pollution is not generated from the power projects. The Yamuna and Ganges are polluted sewers in many places. We don't have to look at IITs to find a solution for that, there is a ministry whose job and charter is to protect the sanctity of the rivers.

Since we cannot import power in substantial quantities, we need to create power generating assets in the country itself. And, for the creation of these assets we'll need environmental clearances otherwise the country is going to have perpetual shortage of power. Clearly, we should go in for the most efficient technologies and for that purpose, we should be moving to super critical technologies and even ultra super critical technologies. For ultra super critical technologies, we are already starting up a project. An MOU has already been signed between NTPC and BHEL and IGCAR at Kalpakkam. However, we do need a lot of coal in the coming years. Considering the fact that the fuel supply is very deficient in our country, it is very difficult to cut the areas into 'Go' and `No Go' areas. We should also have the 'May Go' areas, wherein the miner should be given the mining licenses, provided he works towards environmental damage mitigation, R&R issues, etc. I am happy that the ministry is concerned about the future generations but you also have to be concerned about the present generation, otherwise there will be no future.

We don't want to have two India for too long. We must take power into rural areas and we must bring up the standard of living of those people. Although, we have decided to go for the solar power in a big way but that big way is only going to give you 2-4 percent of your power requirement, same is the case with wind power. Thus, you will have to try and tap all the other thermal potential.

How can the country create a balance between development and the cost to human element?

At least 5-6 percent of the free power must go into the project affected area and there should be a corpus maintained for the development of that area. The affected area knows best whether it wants free power, cheaper power or wants to use that revenue for other development. The problem is that these people do not get the benefits of this free power. Free power revenues go into the corpus of the state concerned and from there they are diverted to the areas which are more politically important. Consequently, the area which ought to develop doesn't do so, not taking into account the development of the infrastructure during the project construction. These people need to be given revenues in perpetuity from the project and this need to be institutionalized for the coal mining particularly so that the benefits go to the project affected area.

"You have to go abroad and secure these resources before they are no longer available. Today they are not freely available, they are available at a price but tomorrow they may not be available at a price also."

As far as hydro power generation is concerned, over the years we have gone completely overboard for another river project. We should be going in for storage projects and maybe, for cascade development. Water scarcity is going to be an issue in another 10-20 years and unless we manage and store our water, we'll be in serious trouble. We cannot afford for the water to be just running away.

You recently said in an article that "Security comes at a price", what price do you think India will have to pay to achieve its ambitious targets? Do you think the people of the country are ready to pay that price?
When the country is aiming for energy security, it will either have to develop these assets itself or import a substantial amount of energy. If you want to develop those assets yourself, you have to compromise a bit on the environment. Also, you also have to invest money for developing those assets along with investing in the assets abroad for future tie-ups. So, all this is an investment in monetary terms as well as in environment terms. For example, our exploration companies like ONGC, Reliance, etc. have to invest capital in their projects. We need resources and we should not grudge these companies making profit, provided they are ploughing them back gainfully into further development of the resources. Moreover, you have to go abroad and secure these resources before they are no longer available. Today they are not freely available, they are available at a price but tomorrow they may not be available at a price also. Coal India is the largest producer of the coal in the world. However, if it is the largest, it should also be expanding its operations in the largest way possible.
Many experts believe that reforms in India started at the wrong end - from inviting private participation in generation rather than distribution. Though reforms have been initiated in the distribution sector, there has been a question on their implementation. What are your views on that?

It is true that, initially, we only looked for supply side solutions and did not pay much heed to the demand side management. Prior to independence, there were private companies in the generation with no state entity generating or distributing power till we decided to create state level entities and state electricity boards and consolidate the grids. With that, private companies either withdrew or vanished and integrated entities came on. When you integrate entities and make them very large, efficiency is, sometimes, the casualty. Also, when we started giving different tariffs to different consumers or no tariffs to some consumers, then the mischief started. We passed through a phase where for political reasons, or even corruption within the electricity boards, we did away with metering in many situations. It opened the way to unaccounted consumption of power and when there is unaccounted consumption of power, it means unaudited consumption of power. Now to reverse this was politically a very difficult task. We have been consistently demanding that there should be 100 percent metering to which some states have agreed and some have not agreed. You may give free or concessional power but at least you should know how much of it is being consumed. It's more of a question of political will.

Another well-intentioned measure was the setting up of central generating stations in the year 1975 when NTPC and NHPC came into existence. However, some states stopped building their generation facilities, leaving the burden on these central undertakings. Moreover, the power produced was going to be distributed by the Gadgil formula, which meant that whether you are paying for the power or not, you have a right on it. So, in the early 2000s, we went in for a security mechanism to enable the generating companies to get some money back as it was getting close to impossible for them to recover their costs. However, we launched distribution reforms in a slightly delayed time frame, though we did introduce distribution as a subject to be dealt with, specifically in the central power ministry. For instance, schemes like the APDRP and now, the R-APDRP have been introduced.

Another positive step towards distribution reforms was to set up regulatory commissions. However, I feel that setting tariffs should not be the only function of these regulatory commissions. They have a great responsibility for ensuring that the universal service obligation of the electricity provider is also carried out. People should get the power round the clock. If any entity is not delivering that, it should be given a notice, whether it is a public or a private entity. The most important reform would be where the consumer is recognized as an entity apart from generation, transmission and distribution. The good news is that the awareness and the will to reform, at least, is there in a much better form than it was 10 years ago.

(InfralineEnergy thanks Shri Anil Razdan, Former Power Secretary 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 in the Indian energy sector)