In a dire scenario of a
long-term widespread power outage, adoption of captive power generation
can emerge as the best and sustained alternate for continued industrial
growth. It will also help SMEs, marred with power shortage during peak
season, to meet their export commitments, as told by Rajiv Agrawal, Secretary of Indian Captive Power Producers Association (ICPPA).
Given the current scenario of India's power sector, how can adoption
of captive power generation be the best alternative for industrial
units to meet their power demands?
Rajiv Agrawal: The current power scenario is a mixed bag of
crisis and opportunities for nation. With ever increasing population and
limited resources, it will be long time that demand-supply gap of
electricity will be met. As per government's own planning data, it will
take another 25-30 years to bridge the gap provided all generation plans
are achieved including nuclear, thermal, hydro, non-conventional. With
present indications on nuclear protests, coal blocks production,
stagnated CIL production etc. you are free to draw conclusions on this
timelines of achieving self sufficiency in getting power.
Till such time, governments will keep resorting to rationing of energy
& its sources. The pain starts when the well-discussed policies are
set aside by and under influence of a few individuals and PSU like CIL
without consulting all stakeholders. For rationing we should take a call
on use of energy & power for following broad purpose:
1. Power for productive purpose in the industries
2. Supply to unconnected villages increasing productive hours
3. Increasing consumption in cities & towns
4. Wasteful or avoidable consumption
The power for productive purpose in the industries leads to direct
addition in GDP growth, tax collection, employment, economic prosperity
and is undisputed winner. The 2nd use will give wider empowerment &
new economic activities for 70% population in villages but is lagging
behind due to only fractional availability out of power generation
growth in last 5 years out of which a large portion goes to 3rd &
4th category consumption.
Therefore it is clear that the power for productive purpose in the
industries should be spared from rationing done through power cuts.
However looking to power shortfall and condition of grids, we may have
to wait till power demand gap is bridged.
In such scenario the only available option is to give full support to
Captive Power generation so that the industrial value addition don't
retard. Moreover, the industry requires stabilized power supply that is
difficult to get through existing grid. There are definite indications
that the Industrial Investment (both green field projects &
expansions) has retarded due to non-assured power availability.
This proves that Captive Power Generation (either Group CPP or
dedicated CPP) is the best option available for the nation. This fact
has already been acknowledged by policy makers at least since 1995 and
reinforced through National electricity act 2003.
In your opinion what are the main challenges for power sector in India?
Rajiv Agrawal: In my opinion, all
challenges merges in the balancing acts required in rationing of power
for above mentioned 4 broad power usages. The CPP in industries are
scattered through out country and have not been able to do intense
lobbying as was recently done by private IPP (Independent Power
Producers).
The infrastructure and its definition for
power supply to unconnected villages is fraught with many pitfalls. The
use of power consumption in cities & towns is not collectively
addressed in the absence of political willpower and fear of backlash
except resorting to power cuts. The wasteful power consumption is
related to theft due to both infrastructure & collusion of
executives; free electricity leading to wastage; increasing use of
electrical gadgets in cities & towns; many more such items in the
4th category.
There is a need to change the
prohibitive policy towards captive generation so that more industries
set up captive generation. What is your take on this?
Rajiv Agrawal: To my view there are
no prohibitive policies towards CPP. In the beginning when I mentioned
that while implementing, the laid down policies have been set aside it
specifically refers to policy framework available for CPP. It is the
non-implementation of policies due to populist politics & influence
of lobbying; the coal is un-available for CPP. This is the precise
reason that even the constitutional interpretation about equitable
distribution of coal has not been followed.
More than 1 MW generation by any entity for
captive use is defined as CPP. Based on fuel, CPP may be broadly
categorized as Coal based, Diesel powered, Non-conventional &
reusable. Diesel power is a very costly option but its generator size
and ease in fuel handling makes it popular. Approximately 55 per cent
installed capacity is coal based CPP but DG sets are widely used as
stand-by thus giving coal-based-power as largest share in generation.
Today industries across all sectors are
suffering because after investing a few lakh crore rupees in CPP,
availability of coal is turning it is as bad or under-used investment.
How are policy imperfections impeding growth of India’s coal mining sector?
Rajiv Agrawal: Post nationalization,
the coal mining sector has been grossly underdeveloped. The experience
& expertise outside CIL is available only with a few. Now giving
coal mining rights to few entities either by selection or by competitive
biding does not create equitable distribution of coal as national
resource.
If we compare it with spectrum allocation,
tele-company are harnessing (mining) the spectrum and equitably
distributing this national resource to all tele-users. On the contrary
even with captive-use clause, mine owner uses it for own purpose and
other users still remain without Indian coal.
Further, allocation of coal blocks to
future end use plants has deprived the existing users to get sufficient
coal. It has also prompted many to corner the blocks for speculation.
Similar situation is created when all present & future coal
availability was allocated to IPP depriving the rest of nation &
CPPs to get equitable share of coal. Now government is moving towards
declaring that in current five year plan they may not give coal to 500
odd pending applications of CPP. A large number of these are already
commissioned or are at advance stage.
In place of mines give-away, a BOLT model
would have made coal available to all. Other option could have been a
51% private JV with CIL and proportionate distribution of mined coal
would have made that 49% coal available to others thus creating
equitable distribution of national resource. This would have improved
efficiency due to private requirement and would have used CIL’s Rs.
55,000 Crore unproductive reserves lying idle. This is important because
individual CPP & a large number of consumers don’t use coal
quantity to justify for a coal block. It means, whatever happens under
present arrangements, CPP will continue to suffer.
As a national policy, all countries try
to minimize cost of energy & power. Whereas CIL is propagating that
coal cost should be comparable with landed cost of imported coal. We are
not against e-auction as one more method of “equitable distribution of
coal”. Contrary to basic definition of “market” in elementary economics
text-book, e-Auction under Monopoly is being considered as “free market
by CIL”. In Feb’2011 CIL started charging 35-40% higher coal cost from
CPP as compared to other power producers (and also from industry for
non-power use). CIL declared that all industries operating in free
market can sell their product at increased price to offset higher CIL
price? I am leaving a few open questions on these impeding
imperfections:
- Is it effect of few CIL managers going overboard to improve their internal ranking? or
- Whether CIL as PSU has forgotten that it also has mandate to work as “extended arm of welfare state (India)”? or
- Is it effect similar to setting aside
policies under influence of FII with stake in CIL? (Refer legal actions
initiated by TCI-UK against Ministry’s intervention in Jan’12 forcing
CIL price roll-back after abnormal 80% to 270% price-raise in the name
of GCV-based pricing)
Investments in captive co-generation
power projects is the best option to meet the power supply deficit.
Please share your views.
Rajiv Agrawal: As explained above,
under continued long term power shortage scenario, CPP is the only long
term alternate for sustained industrial growth. Moreover, most CPP
produce electricity at the point of consumption thus saving 20% T&D
losses (excluding 10% theft). This make CPP as the most efficient “Coal
to Electricy-Consumption System” surpassing most modern super critical
technology UMPP bringing in 3-7% thermal efficiency.
The industrial consumption is approx. 30%
of national generation that requires high quality of uninterrupted
power. To bring the whole grid at this quality level will imply
improving quality of balance 70% electricity distribution. We know that
at present India can not afford prohibitive cost of infrastructure
up-gradation. Therefore decentralized generation through dedicated or
group CPP is the only sustainable option.
Industry has already invested and is in
the process of investing few Lac Crore rupees in CPP. Government only
has to ensure coal availability for CPP.
It has been generally seen that SMEs
fail to meet their export commitments due to power shortage during peak
season. In your opinion, how they can overcome this problem.
Rajiv Agrawal: Electricity Act 2003
& rules have already provided for Group CPP that can be set-up under
JV of SMEs in geographic vicinity with mandatory 51% consumption by its
constituents and remaining electricity can be sold if not used. This
can provide peak electricity to SME for meeting peak demand and option
to reduce generation or sell excess power to grid. As explained earlier,
the only constraint is that government has to ensure coal availability
for CPP.
While creating current Electricity
policy,the government also contemplated that idle or under utilized CPP
capacity including stand-by DG sets can be harnessed to fill peak hour
demand gap. However, a little has been achieved due to various reasons
including delayed payments from State Discoms, higher resource needed
for recovery, higher cost due to non availability of linkage-coal,
higher cost DG-power. The opportunity for nation still exists.
Is the decision-making process an impediment?
Rajiv Agrawal: It is a mixed bag of
decision making, concentration of resources in the hand of few
financially strong entities, today's brand of divisive politics, leaking
financial flow, populism over rational & long term decision making
are all to be blamed.
What are the key priorities of Indian Captive Power Producer Association (ICPPA)?
Rajiv Agrawal: Coal linkage should
be made availabile for all CPP as & when it become operational,
ending discrimination against CPP, including higher price charged by CIL
from Feb' 2011, resolve problems faced by CPP with CIL &
subsidiaries, take-up matters related to differential power taxation and
rules at state level and help government in creating CPP friendly
policies.
What measures, according to you, should Central government adopt in order to promote captive power generation in the country?
Rajiv Agrawal: As explained earlier,
since the policy frame work already exists for CPP, the government
should properly implementation policies and also remove the hurdles in
getting coal.
At the same time, Central government should
implement uniform power taxation & power administration policies
across states to remove discriminations created by states.
Please share your roadmap for the current fiscal (2012-13).
Rajiv Agrawal: In the current coal
turmoil we are focusing on achieving our key priorities. CPP are
scattered throughout country and no single agency has exhaustive
information about CPP. Therefore enrolling more and more CPP for ICPPA
membership is also a herculean task in our hand. We are reachable at icppassociation@gmail.com. You can also visit our website and enrollment at a very nominal fee http://icppa.webs.com
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