As states are staring at likely power disruptions due to shortage in coal supply, power secretary, Ajay Kumar Bhalla, on Wednesday said government needed more mines as supply is an issue.

In an interview to CNBC-TV18, Bhalla said, "We are definitely looking at 6 percent plus growth in the power sector in the days to come. Actually, 6.4 percent has been the compound annual growth rate (CAGR) of the last three years."

According Bhalla, "People have to pay for what they are asking for and they have to realise that too much of free electricity will not be possible, so you will have to pay for it."

Edited excerpts:

Q: Are you seeing any increases in power tariffs by various states considering that the raw material cost is rising?

A: Exchange prices is about four percent of the power getting transacted should not be taken too much in power tariff in general.

If we look at August range of tariff on exchange, the lowest was 75 paisa and maximum was Rs 9. On an average, it was Rs 3.30 paisa, which compares with national average of long-term power purchase agreements (PPA).

In September, it was Rs 1.75 as the lowest and Rs 16.49 as the highest, raising the average to Rs 4.69. This is about 300 million units per day getting transacted, which is about four percent of the daily transactions. So, one should not read too much into it.

I will give you two reasons responsible for this. One, was the sudden reduction in renewable energy, basically, wind energy going down as the seasonal change from 600 million units per day, it fell down to 300 million units per day and hydro also came down from 74 million units to 528 by end of September.

Month of September always reaction like this and the demand has been increasing day by day, so there was sudden spurt in prices beyond peak hours as well.

Q: What do you see the road ahead in terms of power prices and since coal shortage has been leading to an uptick in coal prices, what is the government doing at this point in time to ensure that there is enough supply at affordable prices?

A: We have been regularly reviewing with ministry of railways and ministry of coal. There has been an increase of 10 percent in coal dispatches compared to last year. Power demand has definitely gone up and on an average till August, the growth was 4.6 percent, and in September too growth is there. That is a positive indication that coal dispatch is going up, power generation has gone up, but as we have not been able to build stocks in the power plants due to sudden decline in wind and hydro energy, stocks of coal got exhausted. That is why in some places there is shortage and that resulted in high prices in tariffs, like 15 minutes to half an hour slot in the evening. So, coal loading has definitely improved over last one week and it's showing improvement now.

Q: We have the coal offtake numbers that came over the weekend and that was at 43.9 million tonnes, up only 0.8 percent, slower year-on-year in two years. Can you give us an update on both coal output and offtake? Is there any chance that the fuel supply agreements (FSA) situation can improve and any new FSA can be signed this year?

A: If we look at April to September, the dispatch growth has been 10 percent and arrivals in power stations have also increased, but consumption of coal in power stations during the same period has been more than the arrivals. So that is why the opening stock in month of April has been utilised by power stations even stocks have gone down at pitted power stations. It was heavy rains that flooded some of the mines and then, there were loading constraints in some places.

Now, during the last week, minister for coal and railways had reviewed with all the concerned agencies, and loading position has improved quite a lot. Power sector is getting more than 90 percent of all the rakes loaded and these rakes are on the move and coal is reaching all the power stations. Usually, demand declines during winter time and we see no problem on this front.

Q: What about aggregate technical & commercial (AT&C) loses? What does the data suggest as of now and what do you think the feasible solution would be to bring down the AT&C losses?

A: Basically, large chunk of it's commercial losses. The billing efficiency has to improve and collection efficiency also has to improve. In our government funded schemes, we are putting metering as one big component of the scheme and lot of money is getting invested in infrastructure to improve conductors and transformers, which will ensure that losses go down. But the DISCOMs will have to ensure that they meter all the consumers and recover all the dues that they are supposed to get from the consumers.

Q: Your ministry sent out list of amendments to the Electricity Act. Stiff penalties proposed for PPA violence, any progress at all on that?

A: We have given 45 days for all the stakeholders to comment including the state governments, the DISCOMs, the regulators and the generators. We have received one or two comments, but still there is time, so we expect good number of comments, maybe we will regulate those and have another round of consultations.

This has been done after different round of consultations with different stakeholders and there are lot of improvements in that. Content and carriage separation is also on the agenda, besides high penalties to DISCOMS to improve their power supply systems.

Q: I agree penalties, but at the moment, their financial position is so precarious that even with these penalties will you be able to get much done. Ultimately, their financial position improves only if they bill properly and that is what is not happening. Is there any quick fix for that to ensure that billing gets done?

A: The culture has to change, people have to pay for what they are asking for and they have to realise that too much of free electricity will not be possible, so you will have to pay for it. We have been saying that if the government wants to subsidise some set of consumers, they can give the subsidy through different accounts. That has been built into the draft act also. This is what the draft act also mentions.

Of course, the DISCOMs culture has to change. We feel at times threat of penalty will definitely work on large number of DISCOMs.

Q: What is the progress on the sale of power plants? Some of these power plants had gone into National Company Law Tribunal (NCLT), but for the apex court status quo? Can you update us? How much will be done in the next one month in terms of rupee crore for the banking system?

A: It will be difficult for me to say any number. But, as all of us are aware that lenders had invited bids after doing the ratings and lenders are at discussion of some of the plants, as I am aware of, to arrive at final settlements. Definitely, we see something before November 14, the next date of hearing in the Supreme Court that some of these assets get resolved by the lenders among themselves. They have done bidding and they are at a very advance stage of discussions. As we understand from some of our own companies like Rural Electrification Corporation (REC) and Power Finance Corporation (PFC) that they are seriously looking at some of these assets, which in the bidding system outside NCLT. The lenders have given reasonable prices and these are sustainable prices, so they may be able to sell those assets.

Q: We were also told that REC is able to participate, because its rules do not permitted to take haircuts. Is there a problem like that and are you looking into these kings of roadblocks, which can be easily removed, so that sale happen and still give us some number, do you expect 4-5 plants to get sold off?

A: Six to seven plants are under discussion among the lenders and I do not know how many of those are finally get the seal of it. They have been restricting along with other lenders. The RBI circular may not apply to NBFCs, but it’s not purely NBFC funded assets as they are part of other lenders who are controlled by RBI.

Q: In terms of demand, what are you projecting? Also considering that diesel prices have gone up so much so as a ramification of that what kind of growth do you see as far as power demand is concerned?

A: Plus of six percent, we expect till 2022. If GDP grows at 8 percent, then 6.4 percent should be the power growth at 0.8 factor. So, we definitely are looking at 6 percent plus growth in the power sector in the days to come. Actually, 6.4 percent has been the compound annual growth rate (CAGR) of the last three years.

Q: What about Mundra power plant and the high powered group that was set up to resolve the compensatory tariff issue? What is the update? Can we see it resolved in a day or two?

A: I am not aware whether they have given the final report to government of Gujarat, which will be discussed by all the precarious together, whether that has happened or not, I am not aware. In any case, whatever is decided to be done, finally they will have to come to the regulator for approval.

Q: Is there even one PPA that you are expecting in the next 6 months considering that states like Gujarat have bought short-term power at even Rs 6-7 and Rs 8, any hope of a PPA getting signed?

A: We had done a pilot of 2,500 mw and out of that, we are in the process of contracting about 1,900 mw with the states for three year PPA. Therefore, once we have states like Tamil Nadu, Telangana, Bihar coming forward and we are in discussions with other states also. If that happens, then that will be a three year fresh PPAs getting signed and once this gets through, we may come up with the next round of bidding for medium-term PPAs.

Q: Coming back to the issue of coal shortage, you did speak about it? But has there been any improvement at all, because the last we heard is that 19 thermal plants had coal stocks of less than 7 days, this was as on the last week of September. What is the situation on the ground currently? Has there been any respite?

A: During the last one week, there has been good loading of coal on the rakes. So, some of these rakes are in the process of reaching the plant and we expect sufficient coal availability. As from the beginning, I have been saying that there has been growth in coal dispatch, but the consumption at power plant is much more than what has been coming. So, the stocks have not been able to build up, but plants are getting coal and we expect these rakes, which have been loaded over the last week will be building some stocks in some of the power stations.

Q: Any update on coal import duty, any changes?

A: Not that I am aware of anything.

Q: The merger of Satluj Jal Vidyut Nigam (SJVN) and National Hydroelectric Power Corporation (NHPC) into NTPC. Is that been contemplated?

A: We do not have anything on the table as far as I am concerned.

First Published:Oct 3, 2018 5:20 PM IST