Power sector in serious logjam between ministries, cos: APP

"There is complete logjam between different parts of government, ministry of coal, ministry of power, CEA, state government and the banking fraternity."

These companies are not being able to get fresh funds because bankers aren’t issuing fresh capital unless fuel supply agreements (FSAs) are provided to them. Coal India on the other hand asks for a power purchase agreement (PPA) to give FSA, this is impacting the power projects to a very large extent, he explained.

The sector is facing too many issues at this point in time and those issues need a timely solution or else the 12th plan targets would suffer very adversely, he added.

Below is the edited transcript of Khurana’s interview with CNBC-TV18. Also watch the accompanying videos.

Q: The fact that the coal ministry is unwilling to supply or subsidized coal as they call it for those who don’t have PPAs (power project agreement) or those power producers who are selling power on a merchant basis. Is this being taken up by the Pulok Chatterjee committee? What is the APPs stand on this is and your future strategy?

A: When they issued the letter of assurance it did not have a condition of PPA and a man who takes a risk of merchant power, he is taking the off take risk. He is not assured of supply or off take for 12 months. Many a times he may not find any take up for his power. So if he is taking the risk he is also getting the reward during scarcity time.

But leave aside the PPA, even those who have PPAs they are not getting coal. When we met the Prime Minister for the first time and then it was 80% trigger point then Coal India has gone back and said they cannot supply a trigger point at 80%, they want to reduce to 65%.

Now 65% trigger point actually takes to do 55% of PLF, which means all plants would be producing almost only supplying power of half their capacity. So, half capital gets stranded, they cannot meet debt service obligation and that is not acceptable to MoP (Ministry of Power).

Today the developer is not even sure those on a linkage coal basis, how much coal will he get from Coal India . How will he meet his normative ability level? How will he service his debt? All these questions are still hanging.

Q: Compared to the position before the Pulok Chatterjee committee was set up has anything materially been resolved?

A: Only one thing has been resolved is the FSA has been signed for many projects which was not acceptable. Even NTPC has not signed it because FSA needs revision. It is the private sector people who have gone and signed the FSAs because they had no option. Coal India said they will not get coal.

So at least they are able to run the plant with 40-45% capacity. That’s the only thing that we know how the document which is not a bankable document, but at least we have a document which has being signed by Coal India which needs revision. I understand in the next board meeting they are considering the revisions we all have suggested.

Q: If it is not bankable, have you atleast seen an improvement in the actual amount of coal that is coming out of Coal India or from any other source for power producers?

A: Not on all plant basis, but some plants have got coal. There has been only a slight improvement in the coal supply but projects, which are commissioned after 2009 are not getting coal more than 40% of their requirement today.

Q: What according to you would be a possible and realistic scale down in the capacity addition of most power companies because we did hear that NTPC has reduced their targets quite significantly and there are brokerage reports also indicating that for FY13 itself, they might miss it by around 700 megawatt atleast?

A: In the private sector majority of projects have been stalled because they are not taking up new investment. They are waiting for clarity on policy and regulatory framework. All projects based on imported coal have been stalled; all projects based on linkage coal are not taking off. The entire private sector is now watching government’s action. It is only when there is enough adequate clarity on the regulation and the coal front, will they move forward.