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NTPC has Always Converted Challenges into Opportunities Interview with T. Sankaralingam, CMD, NTPC Limited

What is the overall scenario of power sector in India?
The country has 135,006 MW of installed capacity today. However, there is energy shortage of 7.9% amounting to about 19 billion units and peaking shortage of 13.4% amounting to 13,686 MW.

In order to meet the growth requirement and to ensure that power development rapidly reaches every sector of the economy and every segment of the society, including the under privileged, the Government has set the objective of reaching power to all by 2012. Accordingly, the Government has set a capacity addition target of 78,577 MW during 11th Plan period (2002-2007).

How does Indian power scenario compare with the rest of the world?
With installed capacity of over 135,000 MW, India has the world’s 5th largest generation capacity. India’s T&D network of close to 6 million ckt km is the 3rd largest in the world.

However, per capita consumption of electricity in India is among the lowest in the world.   It is about 600 kWh which is rather low compared to even developing countries like Malaysia (3196 kWh), Brazil (2246 kWh), China (1440 kWh). The global average per capita consumption is about 2490 kWh.
Comparison of India’s per capita consumption with the consumption levels in the developed countries reveals a huge gap.  Canada (about 18000 kWh), USA (about 14057 kWh), Australia (about 11446 kWh) and Singapore (about 8000 kWh) are consuming electricity at an entirely different level, nearly 15 times and even more than that of India.

However, Indian power sector is projected to grow at 9% per annum. Along with China, India is likely to develop power capacity at a fast pace and in large volumes.
What are the key issues facing Indian power sector today?
Performance of the distribution segment; rural electrification; capability building; availability and affordability of fuel and availability of equipment are among the key issues facing the power sector today. The positive, though slow, improvement in the distribution sector and the consequent state of financial health of most of the distribution utilities inhibits the satisfactory completion of the electricity value chain.   Investors feel concerned about the payment security issues in the power sector.  Although things are improving, there is need to accelerate the reform in the sector and reduce AT&C losses.

With the aim of improving the distribution infrastructure and aiding the reform efforts of the States, Government of India had launched the Accelerated Power Development and Reforms Programme (APDRP). NTPC is also closely involved with the implementation of this scheme and we have been able to help the utilities in bringing down the distribution losses in more than 150 towns covered under APDRP to below 15%. 

About 56% of rural households have not been electrified even though many of these households are willing to pay for electricity.  As many as 20% of villages are still un-electrified. National Electricity Policy calls for determined efforts to ensure rural electrification for securing electricity access to all households and also to ensure that electricity reaches poor and marginal sections of the society at reasonable rates within next five years.  Accordingly, creation of reliable rural electrification system has been taken up under the Rajiv Gandhi Gramin Vidyutikaran Yojana (RGGVY). NTPC is associated in electrification of about 40,000 villages in 6 States under the Rajiv Gandhi Gramin Vidyutikaran Yojana. Nearly 3,000 villages and 60,000 below power line households are targeted in 2007-08. The Yojana targets to electrify villages within a period of five years.

Another major issue which has already started impacting the power sector is the human resource crunch. This is very critical, and more so in view of the large capacity addition plans. Today most of the sectors, including the power sector have to handle the issue of talent migration, especially at the entry level of executives, because of the attractiveness of other industries like IT, Telecom, etc. The power sector would need a large number of people both at managerial level as well as those in the skilled technician grade. This is an area which would need large scale capability building, because we need people to build the power plants, operate and maintain these at very high efficiency levels.

Availability of fuel in adequate quantities and at affordable prices remains the key to having adequate power supply by the year 2012. Today, the fuel component in cost of power generated from thermal power plants is more than 70%. Over the last few years it has continuously moved higher and higher. Since 2000, the fuel cost component in NTPC’s average cost of supply alone has increased by more than 50%.

Around 10% of the national installed capacity is gas based, which faces major constraints in producing and dispatching power on account of high fuel costs. Historically, the gas power plants were supplied gas by State owned companies under the Administered Price Mechanism (APM). Over the last few years, the supplies under APM have reduced considerably, forcing the generators to purchase gas from other sources. Even the domestic producers/ suppliers of gas now wish to link the gas price to international crude price, even though natural gas is a wholly indigenously produced commodity.   Natural gas resource of the country should be treated as valuable national asset which should be allocated and utilized in line with the larger economic objectives of the country including effective power sector development.

Apart from gas, adequate quantity of coal (which would remain the prime source of power generation in our country) is essential so that the power plants are utilized to their maximum potential. Over the last two years, the Government has started allocating coal blocks to power utilities, which is a very positive development. At NTPC, we have a target of having a coal production capacity of around 50 MTPA by the year 2017, which would account for 20-25% of our total coal requirement.

Adequate and timely availability of main plant equipment i.e. Boiler-Turbine-Generator (BTG) as well as Balance of Plant (BoP) will be very critical for the accelerated growth of the sector envisaged for the future.

What are the threats and challenges ahead for NTPC?  How well is NTPC geared up to face future challenges?
NTPC has always converted challenges into opportunities. This is a proven strength of NTPC. There are no threats to the Company. The Company is operating in a sector which is poised for major growth.

However, the Company is geared up to secure its market leadership and to further strengthen its position as a premier power utility in the country with strategies and execution plans in line with the emerging power market dynamics.

NTPC has made strategic entry into coal mining with a view to ensuring fuel security and deriving economy and stability of pricing. And its coal mining activities are going ahead full throttle.  NTPC is also exploring opportunities to acquire coal mines abroad and is looking for partners with proven expertise to acquire and develop coal mines.

 Similarly, for meeting long term requirement of gas supply for its gas based power stations, NTPC is exploring options for participation in the gas value chain, including opportunities abroad.
Besides diversifying into backward integration areas of coal and gas, NTPC is developing substantial hydro power by way of lateral diversification. We also plan to develop at least 1,000 MW of capacity based on new renewables by 2017.

By way of forward integration, NTPC has formed a trading subsidiary ‘NTPC Vidyut Vyapar Nigam Limited’ (NVVN) and NVVN has made substantial progress in the business. NTPC is also setting up Merchant Power Plants to sell power in the de-regulated segment of the power market.

NTPC places strong emphasis on its human resources, its key competitive strength. In order to attract and retain talent, NTPC realigns its package of benefits and developmental initiatives. It is taking steps to manage the aspirations of its employees through innovative HR practices.

Do you suggest any measures to improve the status of the power sector in India?
There is a broad consensus on the measures to improve the sector. Bringing AT&C losses to a level of at lease 15% is a very important task to be done. For this, there is a need to effectively implement the modified Accelerated Power Development and Reform Programme (APDRP).

Improvement in the plant utilization by the State utilities will also help augment supply with less cost compared to setting up new power plants. Measures like Partnership in Excellence (PIE) initiated by the Ministry of Power are a good example of the effectiveness of this approach. PIE was launched to improve the performance of under performing stations of State utilities through peer interaction. 22 Units operating at less than 60% PLF have been identified. NTPC has been partnering 13 power stations (42 units) for improving the aggregated present generation capacity of over 4700 MW. Power plants entrusted to NTPC recorded net increase of approximately 2833 million units during 2006-07, equivalent to 430 MW capacity addition at 75% PLF.

Effective rural electrification is also an important measure to improve the quality of life of the rural people, especially those in remote areas and those who are underprivileged. In this context, Rajiv Gandhi Grameen Vidyutikaran Yojana is a welcome initiative.

A number of other specific measures can go a long way in improving the effectiveness of the sector and thereby enhancing its contribution. These include:
Timely Development of Hydro and Renewable Sources
Timely Development of Inter-State and Inter-Region Transmission Lines
Effective Operationalizing of Open Access
Ensuring Planned Capacity Growth
Effective Demand Side Management
Introduction of appropriate technology and best practices

How do you look at the potential for the growth of the Indian power sector in the changing economic environment?
The booming Indian economy and the encouraging investment climate are conducive to growth of the sector.

During the 10th Plan period (2002-07), the country achieved its highest ever GDP growth rate of 7.6%. GDP growth for the year 2006-07 was 9.4%. During the 11th Plan (2007-12), the country aims to achieve faster and more inclusive growth. GDP growth target for the 11th Plan is 9% and the growth is expected to reach double digit by the end of the Plan. The economic boom will fuel power demand at a fast pace. The power sector has to cope with the demand and facilitate the unprecedented economic growth. 

In order to meet the growth requirement and to ensure that power development rapidly reaches every sector of the economy and every segment of the society, including the under privileged, the Government has set the objective of reaching power to all by 2012. Accordingly, the Government has set a capacity addition target of 78,577 MW during the 11th Plan period (2002-2007).  Probability of achieving the target for the 11th Plan is high because learnings from the previous Plans have been utilized while fixing targets and concrete advance actions have been taken for placing orders for the power projects to be implemented during the Plan.

During the 12th Plan, the capacity addition target is expected to be about 82,200 MW. According to the projections for electricity requirements as per the ‘Integrated Energy Policy’ of the Planning Commission, the total required installed capacity by the year 2031-32 will be 778 GW at 8% GDP growth rate and 960 GW at 9% GDP growth rate.
What are NTPC’s future plans?
The Vision of NTPC is to be “A world class integrated power major, powering India’s growth, with increasing global presence”.

NTPC has at present an installed capacity of 27,904 MW, including 1054 MW from JVs.  We plan to be a 50,000 MW Company by 2012 and 75,000 MW Company by 2017. The company has an ambitious capacity addition programme of over 22,000 MW during 11th Plan. Currently 13,360 MW is under construction and for the remaining 9,000 MW; orders are going to be placed by the end of the year.

NTPC has a well conceived Corporate Plan covering the period 2002-2017. The Plan lays down the broad contours for the Company’s future growth and diversification. By the year 2017, the profile of NTPC will include the following features:

Indian MNC with presence in many countries
Diversified utility with multiple businesses
Setting benchmarks in project construction  and  availability and efficiency
Having a strong research and technology base
Loyal customer base in both bulk and retail supply
Preferred employer
Leading corporate citizen with a keen focus on executing its social responsibility

What is the NTPC’s growth rate since its inception?
In terms of capacity addition, NTPC’s CAGR has been about 20% since inception, and in terms of electricity generation, the CAGR has been about 24%.

What is your opinion on the developments concerning policy and regulation in the power sector? 
We feel that the enabling legislation, policies and regulatory interventions are all in place. The Electricity Act 2003 (EA2003), the National Electricity Policy, the National Tariff policy, Rural Electrification policy, guidelines for competitive bidding, grid code, multi year tariff regulations, integrated energy policy, etc are now all in place. Consequent to the enactment of EA2003, the Government has framed various rules and guidelines for removal of difficulties, State regulators have started issuing open access regulations and Appellate Tribunal for Electricity is fully functional.

The National Electricity Policy, which outlines the broad aims and objectives of the sector, amongst other things, sets the following major targets:
Access to electricity – available for all households in next five years
Availability of power – demand to be fully met by 2012
Energy  peaking shortages to be overcome and adequate spinning reserves to be available
Availability of  electricity to be increased by over 1000 units by 2012
Minimum lifeline consumption of one unit/household/day  by year 2012
Financial turnaround and commercial viability of electricity sector

The Government has itself taken the lead in attracting new investment through UMPP. The Regulator has taken a proactive approach towards trading and is also considering proposal(s) for setting up power exchange, which would enable real time trading of power. The development of the transmission system along with a much higher level of inter-regional transmission capability and the availability of open access is to improve the utilization of the generation assets.

To sum up I would say, that on the policy and regulatory front there has been significant progress, the private sector participation is looking up. But there is scope for substantial progress further.

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   RNI No. WBENG/2008/27737
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