Promote smaller power projects - Alstom India chief

By V. Jayanth

CHENNAI, NOV. 30. To revive investor confidence and break the logjam in the power sector, the Central and State Governments must open the doors for at least small projects and captive generation, says Mr. Krishna Pillai, Country President of Alstom India.

Mr. Pillai, who was here for the CII's Energy Summit, said in an interview, ``Since the bigger and mega projects are not taking off, it is time we looked at the medium and small sized projects of 200 MW and 400 MW to keep adding to capacity''.

If India would take time to push ahead with substantive reforms in the power sector, he argued ``it must take at least the small step and focus on the do-able. It must promote captive projects from 50 to 500 MW, extend the definition of `captive', permit cooperatives in the area of power generation and free the fuel''.

Other steps could include allowing direct sale by private power producers to large customers; promoting small scale privatisation in distribution and permitting third party access to the distribution system. In the long term, the tariff structure would have to be corrected.

Mr. Pillai said but for a handful of big projects, most of the Independent Power Producers (IPPs) were not able to achieve even `financial closure'. The investment climate was being vitiated because of the delays and the trend now appeared to be moving towards re-negotiation of power purchase agreements (PPA) by the Government or State electricity board (SEB).

On the one hand, the targets of power generation were not being met. On the other hand, the private sector was not being allowed to go in for captive power beyond a point, lest the ``captive customers'' of the SEBs melted away. Industry was the sufferer because the quality of power was becoming increasingly unreliable and the shortfall in peak periods was turning out to be a chronic problem, he said.

``The Centre and the State governments must realise that for every megawatt added to the SEB's capacity, 40 per cent is being lost through various means. It is dead investment, earning no revenue. At a time when Indian industry needs to be cost competitive, it is being forced to bear the burden of cross- subsidy by the States and their SEBs. Industries must have the option of going in for captive power plants to meet their needs and perhaps pool their resources with neighbouring units'', Mr. Pillai argued.

He said the future of the power sector remained hazy, though the Centre remained verbally committed to reforms. But the mega projects were taking too long to complete and taking up a five or seven year gestation project made it very ``unpredictable''. There were not many new projects coming up because the ``pipeline was blocked''. A few smaller projects would ease the situation and create a new framework and rules to work in.

The planned additional capacity of 40,000 MW in the Eighth Plan could not be realised and a similar situation prevails during the Ninth Plan period. When the Prime Minister was aiming for a 9 per cent growth in GDP, the infrastructure sectors, particularly power, had to expand rapidly to make that possible. While several initiatives had been launched from the Centre, the States were very slow in responding to the imperatives of reforming the SEBs and making them viable.

Apart from the problems with PPAs and the threat of re- negotiations, IPPs were also facing legal hurdles for implementation. ``It takes even six years to sort out the legal problems and this can be very depressing. Unless the rules become clear, this cannot be avoided. Unfortunately, we are still building the road and yet travelling on it'', Mr. Pillai said.

Alstom Power India was awarded the contract for the renovation and modernisation of the Korba power plant in Madhya Pradesh (at a cost of Rs. 241 crores). The 4 x 50 MW Russian built plant was being totally refurbished. A 250 MW IPP in Neyveli was now under execution (the `0' unit) and was the first coal-fired (in this case lignite) IPP to achieve financial closure. The ST-CMS Neyveli plant was planned to be completed in 37 months for commercial operations. It was taken up by a consortium of Alstom Power and Austrian Energietechnick.

Mr. Pillai said Alstom still did not have a major presence in India, but would like to make its presence felt as the reforms continued. Because of the policy impediments (like the purchase price preference in favour of the public sector enterprises), it was not possible for the private sector to bid for or win new projects. A level playing field was imperative to enhance the flow of foreign and private investments into the power sector, he pointed out.

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