Make SEBs more autonomous; rejig plan positive: JSW Energy

The Cabinet Committee on Economic Affairs (CCEA) on Monday cleared Rs 2 lakh core debt restructuring proposal for State Electricity Boards (SEBs). The states will restructure 50 percent of SEB loans, and the remaining will be restructured by the lenders.

Citing the SEB restructuring package as directional move, NK Jain, vice chairman, JSW Energy told CNBC-TV18 that, to avoid such losses in future, SEBs must be permitted to function independently. "SEBs must be made a little more autonomous and should be allowed to work freely rather in the clutches of the state governments. They should have a very minimal control over them," he elaborated. If this plan is implemented properly, then SEBs should be in a position to buy power from players like JSW Energy in the next three-four months time, he added. Meanwhile, the company is confident of achieving its target of generating 20 million units in financial year 2012-2013. Below is the edited transcript of Jain’s interview with CNBC-TV18. Q: What is the sense you are getting, do you expect that before long the SEBs will be able to buy your power, do you see that as the main positive for yourself? A: SEB’s health is very critical and important for the entire nation because there is hardly any distribution channel available other than the distribution companies of the state government barring few. Therefore, the health of the distribution companies is a must. In that way, this move is in very good direction and very well thought of. I believe that they should be able to implement it because it is a choice less situation also. They must implement it in all sincerity. SEBs must be made a little more autonomous and should be allowed to work freely rather in the clutches of the state governments. They should have a very minimal control over them. They should be allowed to work independently, so that every year they don’t make such losses. If they continue to make losses of this nature then they will come again after five years. Q: Can you give us details on how this would help increase demand for long-term and short-term power and also help increase the merchant power rates? A: They announced that the power shortage is about 8-9%, I do not agree. For example, the Maharashtra government is saying that the shortage is hardly 500 megawatt (MW), I do not agree to that at all because there is hardly any electricity available to the villages. The power shortage is still there in districts for four-five hours. Power cut can be reduced and there is substantial demand there in the country. However because of the losses they are incurring, their health is not good, so they are not able to buy power and supply to those looking for it. This should certainly help them and they should get subsidy from the government year after year. Q: How do you see it as advantaging a company like yours? Immediately, is there any benefit for you in the sense that until today SEBs have not been able to buy your power, do you expect that in three months, six months time they will be in a position to buy from you at all? Are you also stuck with a PPA and therefore unless that is renegotiated you do have a problem? A: I believe that the SEBs should be able to buy power now in the next three-four months time, particularly, those electricity boards, which were not able to buy power because of finance. Secondly, we do not have a long-term PPA, where we are renegotiating tariff with SEBs. We have the long-term PPA with Rajasthan government. It is an old MoU type of project where everything is passed through, so there is nothing like renegotiating of the PPA, we have already signed it. Similarly, we do not have a long-term PPA with any other government. We have only short-term PPAs of one or two years. So, we are comfortable on that front. Q: How much more units do you think you will sell in the second half of the year or for that matter in FY14 just to understand how this package might improve your prospects? A: This financial year 2012-2013 we have a target of generating 20 million units. We expect that we should be able to reach to that target.