“The govt is focused on 24×7 power to all and increasing focus on RE”

March 23, 2015 11:17 am0 commentsViews: 52

UmeshAgarwalUmesh Agrawal, PricewaterhouseCoopers Private Limited, Associate Director – Energy, Utilities & Mining, in conversation with R Srinivasan.

What are your expectations from Budget 2015?
The government is focused on two macro initiatives; one 24×7 power to all and second increasing focus on renewable energy initiatives. We believe these two highlights from previous budget shall be rolled over to this year’s budget but with far greater impetus. The government is also likely to increase the focus on the Deen Dayal Upadhyaya Gram Jyoti Yojana project to ensure 24×7 availability of power while reducing the theft of power. While the fi rst budget broadly touched on the key area that the government would focus on, it is likely that this budget will detail out the action plan to achieve the desired objectives. We anticipate a more action oriented budget this year from the government setting the contours for achieving power for all. The previous budget has without doubt touched upon key issues in the sector but did not provide a course of action to achieve targets. It is unlikely that any of the macro issues/ initiatives fl agged in the previous budget will change, however we are likely to see more additions to the budget in terms of future course of action.
The new budget is also likely to touch upon the amendments to Electricity Act especially the introduction of retail competition. The Cabinet has approved the provisions of introducing retail competition which is expected to drive the next set of reforms in the sector. The segregation of retail and wire business at the distribution level will imply that the network/ wire company will focus on coverage i.e. reaching each and every consumer and allowing them the bandwidth to switch suppliers. We anticipate that this initiative will not only signifi cantly improve the customer experience and involvement but also enhance the level of rural electrifi cation much like the telecommunications sector. This initiative will change the face of the industry and provide choice to end consumers.

In the modern world the country that controls the technology controls the supply chain and prices. The government’s initiative towards this has been heartening to bring in technology from developed countries but we need to focus on research at home.

What policy changes would be most welcome for betterment of the power sector?
In the modern world the country that controls the technology controls the supply chain and prices. The government’s initiative towards this has been heartening to bring in technology from developed countries but we need to focus on research at home. Government and the industry need to support both in terms of policy and funds for research in alternate and clean technology. Once we own the technology, prices of renewable energy will become aff ordable. Providing incentives for research and development in clean technology should enable India in achieving this objective.
A majority of the power generation capacity in the country is based on coal. The previous budget only provided pointers that the government would look at enhancing coal production. With the Supreme Court judgment on the de-allocation of coal blocks and the subsequent bidding process being conducted, it is likely that the government would continue to address the issue of improving coal supply to power plants. Coal auction process is likely to fi nd a special mention and the importance to continue the ongoing reforms in the mining sector cannot be overstated. The budget should also look to highlight the development of coal markets and commercial mining in India.
The budget may also address an action plan to revive sick assets, especially the ones that are stranded due to unavailability of gas.

The new budget is also likely to touch upon the amendments to Electricity Act especially the introduction of retail competition. The Cabinet has approved the provisions of introducing retail competition which is expected to drive the next set of reforms in the sector. The segregation of retail and wire business at the distribution level will imply that the network/ wire company will focus on coverage i.e. reaching each and every consumer and allowing them the bandwidth to switch suppliers. We anticipate that this initiative will not only signifi cantly improve the customer experience and involvement but also enhance the level of rural electrifi cation.

What provision/s were left unattended by the last Budget which the current one should incorporate?
The previous budget seems to have completely ignored investments needed in power transmission and the same is likely to be taken up in the upcoming budget.
Another major setback for the sector last year was in implementing the next Ultra Mega Power Projects under the proposed design, build, finance, operate, transfer (DBFOT) route. Private sector companies have found this route to be highly restrictive and the two projects (Odisha and Cheyyur UMPP) on the anvil did not take off . The budget might provide direction on implementation of theproposed UMPPs.

How will the sector fare this year?
Fuel availability is one of the major issues which the Indian power sector has been facing in the past few years. With the coal auctioning process being conducted successfully, the availability of coal is expected to improve – (a) directly by allocation of coal blocks to developers who do not have coal or were relying on coal linkage for a fraction of their capacity, and (b) indirectly by relieving some coal production capacity of CIL and diversion to new linkages or improvement in materialisation factor for existing linkages. Along with the above, imported coal prices have also come down. Therefore, the coal based generation is expected to fare much better as compared to the past few years. However, issues with unavailability of gas for gas based power stations still persist and may continue to pose a challenge for the next year.
Since coal-based generation dominates the power generation segment in India, better availability of coal and reduction in imported coal prices is likely to improve the availability of power for the Distribution Utilities, both in terms of higher PLF of contracted power and in terms of additional merchant power availability. Since the government is committed to reforms, increased tariff recovery on account of rationalisation of tariff s is expected, which will improve the state utility fi nances. Further, successful implementation of feeder separation programs and augmentation of sub-transmission and distribution infrastructure is expected to fl atten the load curve thereby optimizing the peaking power purchase cost and also enable the utilities in effi ciency energy accounting and losses.

Further, considering that the incumbent government is focused on renewable energy and the fact that incentives of accelerated depreciation and Generation based incentive have been restored for wind based generation, the renewable energy generation segment along with the associated OEM industry is expected to see considerable growth in the next few years.

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