Power Demand In India Is Bound To Grow

Dr Arup Roy Choudhury, 
CMD, 
NTPC

Despite the current economic downturn, the country has to work to regain its growth momentum. NTPC will be among the growth engines in this process. Amid all the uncertainties and challenges, there are some very strong factors clearly indicating a robust growth outlook for the power sector and for the company.

The Indian power sector has seen its fair share of ups and downs. What, according to you, would be the future scenario considering the challenges of fuel supply and skewed grid capacity? 

The power sector is the key enabler of India’s economic growth. The sector consists of generation, transmission and distribution utilities. It is a crucial component of the country’s infrastructure, and leads the investment in infrastructure for the 12th Plan. The energy deficit increased marginally on a year-on-year basis to 8.7 per cent in FY2012-13 from 8.5 per cent in FY2011-12. Overall, the sector is characterised by acute shortages. 

In terms of consumption patterns, India ranks amongst the lowest in the world. The per capita consumption of power in the country has increased from 631 units in FY2005-06 to 879 units in FY2011-12 as per the CEA. This is many times lesser than the electricity consumption in the developed countries of the world, giving enormous scope of capacity addition in India. 

Speaking of NTPC, what kind of capacity addition we can have in the current fiscal? 

As far as NTPC’s plans are concerned, we are about to award over 5000 MW of projects in this fiscal. Among these, the first would be 1320 MW of the Tanda project in Uttar Pradesh, the 1600 MW Dhalli Palli project and the North Karanpura project of around 2000 MW. These will be awarded very soon. 

How do you rate NTPC’s performance in the present economic scenario of the country? 

NTPC, being a Maharatna and the largest power utility in the country, has been playing a major role in meeting the power needs of the country and contributing to its economic and social development. The company has a vision to be the world’s largest and best power producer, powering India’s growth. With an installed capacity of 42454 MW through 16 coal-based, seven gas-based, two solar renewable and seven Joint Venture power stations, NTPC contributes 28 per cent of electricity in the country, with about 19 per cent per cent of India’s installed capacity. 

Focus on technology as a key driver of efficiency, sustainability and competitiveness has been and will be central to NTPC’s strategies. It continues to retain technology leadership in the Indian power sector, with the introduction of the 660 MW super critical unit at its Sipat project. 

What kind of coal requirement would you have in the current year and going forward? 

We are starting coal production in our Pakri Barwadi mine very soon. To start with, we will have 3 MT of coal from this mine, and during the 12th Plan, this production will go to 15 MT. Apart from this, the total 12th Plan coal production from our mines would be 38-40 MT. 

Our coal imports would be based on how we fare in the production of coal from our captive mines and also how much Coal India provides us with. Cautiously, we want to keep our imported coal within around 10 per cent, so that our cost of electricity does not increase much. Today, CIL is giving us 140-145 MT of coal and we are looking at 160-165 MT from them by the end of the 12th Plan. So, by the end of the plan period, we would need 220-230 MT of coal. From that perspective, we would need 20-30 MT of imported coal. 

We have seen some slackening in demand owing to the drop in GDP growth in the past two quarters, and due to this, the PLF of almost all companies has dropped (avg. at 64 per cent). Is this a big con- cern for NTPC? 

It is true that the drop in demand so far has led to a huge generation loss for NTPC, i.e. around 22-25 per cent. Last year, the generation loss was around 30 per cent. But our financial numbers don’t change due to the generation loss. This is because our business model is such where we have to make our plants available for generation, and the availability of our plants has increased by more than four per cent. 

The other positive sign is that some of the states are now requisitioning more power, as a result of which many of our plants are experiencing more demand now. With elections around the corner, power demand from the states will be going to increase in the near future. 

What transpired in the NTPC-Reliance gas allocation case? 

This issue is sub-judice and we haven’t given it up. 

The increase in gas pricing is being termed as a big blow for the sector. What is your view on this, and is it sustainable to generate electricity at a price of USD 8.4 per unit of gas? 

Today, we have 78 per cent PLF for coal-based plants, while the PLF of gas-base plants is as low as 35 per cent as no gas is available for these plants. Currently, we have 5000 MW plus of idle gas-based capacity. It is not for the government to decide about the fate of these capacities. But I have made it clear that even at USD 4.2 per unit price of gas I am finding it hard to sell power. So, we all can assess what will happen at USD 8.4 per unit. 

In spite of seeing a decent performance over the years, it hasn’t translated into better valuation of NTPC’s stock on the bourses. What is the reason for this? 

You have to judge NTPC vis-a-vis other power sector companies, and I don’t know which other power company’s stock performed better than NTPC. Generally, there is a sense of gloom in the power sector in the country, but this is not because of NTPC. Somehow, we are not able to sell the concept that we are an island and are doing very well despite the sector not doing well. Today, there is no other company in the power sector that has a higher market capitalisation than NTPC.

As new Ultra Mega Power Projects (UMPP) are coming in, power companies including NTPC are preparing themselves for bidding. What is the strategy of NTPC this time? 

We are certainly preparing for both the UMPPs (one each in Odisha and Tamil Nadu) and are quite hopeful as we are aggressively participating in them. We will put a realistic price at which it can be delivered. Also, with more than 37 years of experience behind us, we won’t go back to the government for price increase but will deliver the project at the price we quote. In the last UMPP also, we were the second lowest bidders. Had we got the earlier UMPPs also, then you would have seen the project. 

Where do you see the Indian power sector heading in the time to come? 

Economies all over the world, including that of India, are grappling with the still unfolding aftershocks of the global financial crisis that erupted in 2008. After demonstrating initial resilience in dealing with the global crisis, the Indian economy has also been sucked into the downward spiral. However, I have strong reasons to believe that it will weather the storms and regain its desired growth trajectory, aided by enterprises like NTPC. Despite the current economic downturn, the country has to work to regain its growth momentum. 

NTPC will be among the growth engines in this process. Amid all the uncertainties and challenges, there are some very strong factors clearly indicating a robust growth outlook for the power sector and for the company. Power demand in India is bound to grow due to a growing population, rising standards of living, increasing urbanisation and industrial growth. India’s large power capacity requirement translates into an overall estimated capacity of 778 GW for eight per cent GDP growth and 960 GW for nine per cent growth by 2032. Massive investments are envisaged in the power sector (about Rs 15 lakh crore in the 12th Plan). The 12th Plan capacity addition target is about 88500 MW).