The power sector is in focus as statements from the power minister indicate that electricity tariffs across India could rise by between 62 paise and 93 paise per kilowatt-hour during the first year of upgrading coal-fired power plants to make them desulphurised.
The power sector is in focus as statements from the power minister indicate that electricity tariffs across India could rise by between 62 paise and 93 paise per kilowatt-hour during the first year of upgrading coal-fired power plants to make them desulphurised - that is less polluting.
In an interview to CNBC-TV18, Ajay Kumar Bhalla, Power Secretary spoke at length about the same.
Below is the verbatim transcript of the interview.
Latha: If you can take us through what is the game plan? We know that in a year you want all the coal-fired or the thermal power plants to be desulphurised or what you call flue-gas desulphurisation (FGD). Who bears the bill?
A: There are four components on which this tariff was estimated and mentioned in a reply in parliament. One is the desulphurisation the FGD, second is the suspended particulate matter (SPM) to be brought under control, third is nitrogen oxide emission and fourth is a closed water cycle for saving water.
If we look at the retrofitting of all the four activities, the tariff impact has been estimated to be 62 to 93 paise per unit as per our Central Electricity Authority's estimate. Now all the plants do not require this and all the plants will be implementing desulphurisation and nitrogen emission compliance over a period of time.
The plan which we had submitted to minister of environment and forest has been accepted and now Central Pollution Control Board is issuing notices to these plants to comply with these emission norms as per the phasing plan we have submitted. I would like to add here that the phasing plan was prepared unit wise. The unit needs to be shut down to add a desulphurisation unit for few months. So, we had to put it in a phased manner. So, this is a five year timeframe, we have more than 400 units will be acquiring this, so the tariff impact of this nature, one thing for each plant, will not be there and second, it is over a period of time.
Latha: So 62-93 paise is an expense that will be incurred by the entire industry over five years?
A: This is the tariff impact; the capex is shown to be about Rs 88 lakh to Rs 1.28 crore per megawatt as per the Central Electricity Authority estimates for all the four activities. As I said earlier, all the plants will not need all the activities. Investment will be one side and the impact on tariff we have estimated.
Sonia: What would the cost of the total overhaul be with respect to both investment and the tariff hike and will there be any support from the government to these companies for these upgradation costs?
A: About Rs 40 lakh is an estimate for desulphurisation unit and depending on the technology Rs 10-40 lakh – per megawatt I am talking, for nitrogen emissions. Now, impact will be 30 paise for desulphurisation and about 9-30 paise for nitrogen emissions. So it will vary. These are the Central Electricity Authority estimates depending on our assessment of technology. When the tenders are called by individual units, they will get the competitive bids and when such a large scale technology will come in, it will definitely bring down the prices. So impact on tariff will actually be known when the bidding takes place. As of now, yes, the investment will have to be made by the respective plant.
Latha: Who are the people who provide these services because I expect immediately they are the guys who are going to be advantaged. If you can tell us what are the nature of the companies?
A: There would be players in the market and this technology can be developed also. There are already some technologies available for reducing sulphur and nitrogen. Like NTPC has already, for two of its plants in NCR region, gone for the tenders and bids have come from four to five players. So there are different players already available in the market. As I said, it is a period of five years over which this plan will be implemented, more people will come in.
Latha: So now say NTPC or say a Tata Power or a Reliance Infrastructure has to increase its price by 60 paise. They will be allowed to pass it on because most of them are into power purchase agreements (PPAs), so, there is an agreement to supply power at a certain price. Will this be a pass-through?
A: There are two types of things. One is the cost plus model where mostly central government plants and state generating utilities supply power on a tariff which is calculated by the regulator – what we call is cost plus model. There any additional cost incurred will be passed through.
For the bid tariff, it will be treated as a change in law and regulator will consider the investments made and decide accordingly that how much of it will be passed through looking at the recovery period of this investment. The capex made over a period of time will be recovered. So, accordingly it will be decided by the regulator.
These are just estimates, 62 paise again when you say, it is a misnomer; its four activities. Many plants have close cycle water already. So that investment won't be there and suspended particulate matter also is very well within plan in majority of the plants.
Sonia: I just want a clarification, you said two plants of NTPC, so, just two of their plants will go in upgradation and will it be only upgradation or will some of these plants be scrapped as well?
A: In our plan, out of 196 gigawatt coal base capacity, we have submitted that about 10,000 megawatt will be phased out and this now all over the country, not NTPC. Remaining, some plants are already compliant, so it is about 170 gigawatt of plants which needs this desulphurisation and then some of those will need nitrogen emission control also. Now in the NCR region, we have already initiated steps for bringing desulphurisation which NTPC has already gone for bids. Otherwise in the phased plan up to December 22, this needs to be implemented in all the coal based plants.
Latha: By what deadline did you say?
A: December 22, starting from 2018 itself. So it is a five years’ timeframe but it is spread over different units of each plant so that power supply is not effected.
Latha: Can I digress from this issue for a bit, I know we invited you primarily for this desulphurisation exercise, but separately we had some articles in newspaper saying that electric vehicle charging infrastructure is not ready and therefore the promised procuring of electric vehicles has not happened. Many of the government departments, notably EESL, have not procured the promised vehicles although they have been manufactured by the companies say Tata Motors, Mahindra and Mahindra (M&M) because the charging infrastructure is not available. Can you update us on when the charging infrastructure will be ready and when EESL will make the promised procurement?
A: EESL has already brought the bids for charging infrastructure also. The number was reduced because of certain technical issues and those chargers are getting installed. About 150 or some chargers he has already ordered, the remaining chargers, a certification issue was there, that is resolved; the other chargers will also be coming through. EESL stands for its commitment of 10,000 vehicles to be inducted into government systems; that is very much on. It is not that it has been shelved or something.For entire interview, watch accompanying video.