Intro: Indian Government needs to upmarket the manufacturing capability of public enterprises, which is going to remain the mainstay of power generation for a long time to come.
The Thermal Power generation industry in India has made rapid strides in the last six years. The years from 2008 onwards saw many new projects initiated in the country, mostly by the private sector developers. There has been substantial accretion to installed capacity of thermal power generation in the country. The total installed capacity in the country presently is 2, 55, 000 MW of which thermal power accounts for nearly 70 per cent of the capacity which is about 1, 77, 000 MW. But the hard fact that pricks us is that just about 65.5 per cent (figure for 2013-2014) of this 1, 77, 000 MW generation capacity is being utilised for actual power generation. The reason is that we have failed to make full fuel (coal or gas) available to the new as well as some existing power plants. The coal linkages got embroiled in the infamous Coalgate scam while the imported coal became costlier and commercially unviable for economic operation of the new projects. Essentially the same is true of gas for the gas based thermal power plants. Keeping this in view, the new government under the visionary leadership of Narendra Modi has made a blueprint for bolstering investment in the thermal power generation area under the ‘Make in India’ campaign.
We must understand that investment in thermal power generation, as in any other area, depends upon a profitable business model. It is a capital intensive area in which the capital cost per MW of generation capacity is Rs 6 to 6.5 crores. To make an economically viable business model, we need to ensure certain things. First and the foremost, we need to firm up fuel linkage. The Modi government deserves kudos for the way it is going about clearing the mess of coal allocations which were rescinded by the Supreme Court of India. Reallocation of coal mines on a rational basis and formulation of coal sector reforms were the expedient steps badly needed to be taken. The Modi government is going in right earnest about undertaking these steps. In the context of profitable business models of power generation, it must be stated that returns to power generation entities from transmission entities and from distribution entities (franchisees and discoms) to the transmission entities depends upon proper revenue collection. This power revenue collection at the consumer level needs to be made foolproof by plugging power pilferage and revenue leakage. For this, the government has to focus its attention on distribution sector reforms through privatisation and
network modernisation. It should even amend the Electricity Act 2003 to make way for privatisation of distribution networks.
There is an issue with thermal power generation—that related to flue gas emissions that add to pollution and global warming. It is clear that the US, driven by its own economic interests, is exerting pressure on India to go in for wholesale nuclear power instead of coal based thermal power. But we should not forget that India has yet tapped only about 23 per cent of its known coal reserves and also the fact that India's contribution to global warming so far has been several times less than that of USA or China. We should add a lot more of thermal power generation capacity in the next few years by improving the investment climate. Banks providing debt funds for thermal power generation projects need to do better due diligence in technical, commercial and project management issues to ensure that unscrupulous ploughing back of money by debtors does not occur and Non-Productive Assets (NPAs) are minimised. The operation of the National Power Exchange needs to be streamlined to ensure that surplus power generated by a power generation entity can be promptly traded through the transmission networks.
Thermal power plants, whether coal based or gas based, are built on set and standard technology most of which is available in the country. The government needs to upscale the manufacturing capability of BHEL to reduce power producers' dependence on Chinese imports. We should
remember that thermal power generation is going to remain the mainstay of our power generation for a long time to come and, therefore, steps as aforesaid need to be
taken expeditiously. (The writer is a senior columnist)