Ramesh Chandak, Managing Director and CEO, KEC International Ltd, in conversation with R Srinivasan.
Of the recently announced $250 billion investment for the power sector, the transmission and distribution segment is to get $50 billion and another $60- 70 billion is for power generation. Is this sufficient in view of the government’s ambitious plans?
As rightly put forth by our power minister, these funds would kick start the investment cycle. The funding cannot be limited to USD 250 billion. Funding has to be continuous and on an ongoing basis. Also it is necessary that whatever projects are announced are completely funded from start to end and are not abandoned midway as is the case with many projects currently.
In India, PSUs have huge cash flow but they are depositing money in banks for interest. Your view on PSUs as engines of growth. Private participation led to massive investments in the power sector post the reforms initiated in 2003 and got a good share of the $100-150-billion investment leading to immense development in the sector. But has private participation been up to the mark? What are the challenges and what measures would you suggest to lend impetus to power sector funding?
I definitely feel that PSUs could act as engines of growth. The huge cash flow which the PSUs have should be utilised for infrastructure development. The government should work out means and mechanisms for PSUs to invest in infrastructure development. However, there is huge scope for private investments as well. At the moment private investments are not being utilised optimally on account of lack of approval mechanisms, stalling of projects etc. which has rendered the PPP model with numerous issues. So as put forth in the latest budget, the PPP model should be revisited and revitalised and private investments should be tapped properly.
Further, to resolve the funding related issues, new and innovative models of financing have to be thought of. Also, till the time the PPP model is fully activated which may take another 2-3 years, direct investments by the government could provide the much needed relief.
Going ahead projects should be awarded on plug and play model wherein all the approvals are sought before the project is auctioned. This will help private players to be free of the numerous hassles which they encounter when seeking numerous approvals. The government has already taken this initiative into account in its latest budget and has proposed fi ve ultra-mega power projects for 4,000 MW each in plug and play mode with all permissions taken before auction and future projects to be implemented in this way.
The concept of building partnerships and forming SPVs will also resolve issues and bring in more private investments.
The Asian Development Bank (ADB) invested in a number of renewable energy projects and from its $15 bn agenda, a fifth goes towards renewable energy projects. In this context, where is India in terms of transforming subcritical coal plants into super-critical ones, thus cutting down on emissions and making ‘cleaner’, if not completely green, energy and is the funding for super-critical up to the mark?
India has still a long way to go as most thermal plants in India are coal-based subcritical plants. However, I would say that the Indian government is conscious of this fact and making dedicated eff orts to ensure clean and green energy.
It is reported that during the 12th Plan about 50% of coal-based capacity is being planned on supercritical and in the 13th Plan it has been proposed that all coal-based capacity is to be based on supercritical technology and actions pertaining to the same are also being undertaken. Further the ultra mega power plants (UMPPs) are also using 660/800 MW supercritical units. NTPC and BHEL are leading players in commissioning of supercritical units in India.
To reinstate its commitment towards clean and green energy, the government in its recent budget also proposed to increase the Clean Energy Cess from Rs 100 to Rs 200 per metric ton of coal, etc. to finance clean environment initiatives.
Kindly comment on the way ahead for power sector funding?
PPP combined with direct government funding as well as optimally utilising the idle funds of PSUs would pave the way ahead for power sector funding.