Time for govt to sell residual stake in Hindustan Zinc: Goyal

Q: Topic of discussion today is how do you do more with less. However in your case you have just had another portfolio added on to your agenda. We know what you intend to do as far as the coal sector is concerned, we have head from you your vision and you aspirations for the power sector, let me ask you to articulate for us what you intend to do as far as the mining sector is concerned because this is the new one that has been added on to your agenda?

A: My colleague Narendra Singh Tomar left behind a very robust framework in the mining sector which will certainly help me to take the sector on fast track basis forward. He has created a very good enabling law to allow faster auction of these mines in a transparent and honest manner so that everybody gets equal opportunity and users of all these various minerals can get down to exploring and mining these products. India has a lot of gold and diamond mines which also have good potential to become an import substitute for the large amounts of gold that we import and add to India's natural wealth. So, it is a sector which is just waiting to take off. There is a great opportunity for companies and people from around the world to participate in this mining activity. We are looking at having more extensive stakeholder consultation in the next 30-45 days particularly to see if the rules that we have made for exploration, for prospecting licenses for mining, also the rules that were put up to me actually two days back, I have held them back, I said let us have a little more extensive stakeholder consultation for offshore mining, exploration of minerals in the ocean. So, I am looking at working together with industry. 

A person came to my office from Jharkhand, he has recently got elected as an member of parliament in the Rajya Sabha, Mahesh Poddar, in the course of the conversation said, now we have so much coal in the country why do you want to have all these barriers that one coal auction is for power sector, one is for non power or non regulated, another is for captive consumers, and it set my mind thinking that maybe it is the right time to make it easier to have everybody participate in these auctions and may the best man who can use that coal most efficiently pickup coal. 

Q: Thank you very much for giving us that big exclusive but if I could just continue to take that conversation forward then because we were given to understand that the coal linkage auction for the power sector was waiting for cabinet approval. We now believe that will require more stakeholder consultation or at least more inter-ministerial consultation? What seems to be the hold back there? 

A: On the linkage auctions certainly for the present they will continue to be for power separately and non-regulated sector separately. Incidentally we have already commenced the auction of non-regulated sector linkages and I believe the initial response has been very good. It is about three or four rounds of auctions that have already taken place and people from the steel, cement all these sectors are getting assured quantities for supply over a long period and at very competitive prices. So, I believe that process has started off quite well. 

On the power side we have to reconcile different conflicting objectives. There is the objective of, of course the highest level of transparency, but there is also the twin objective of keeping power prices, power cost low. There is also the objective that coal linkages reach each person in a most efficient manner. So, somebody out of desperation does not bid for a coal linkage from a very far away mine when it could possibly be more efficient from a nearby mine. So, there are many issues that keep cropping up and we thought it will always be good rather than hurrying into the process to have more discussions and consultations. 

Q: So by when do you believe that those discussions will lead to some sort of conclusion? 

A: We are in the midst of the parliament session, so maybe after we get free from parliament we will be able to take that back to the cabinet. 

Q: You were talking about coal production and yes, coal production under your tenure has been at a record high. Demand is unfortunately not being able to keep pace with the kind of production that Coal India is being able to generate at this point in time and that is a problem of plenty that you are now faced with. But if I could ask you to give us a sense of when do you see demand picking up for the power sector? You have brought in the Ujwal DISCOM Assurance Yojana (UDAY) scheme it has been now little over six months of the UDAY scheme almost all state governments are on board when do you truly see things turning around as far as UDAY is concerned and when do you see people inking power purchase agreements (PPAs)? 

A: Well, at the outset let me set the perspective right. I would rather live in a country where we have sufficient coal and sufficient power than be faced with the kind of problems and chronic shortages that we had taken for granted. We had assumed we are doomed to live in a country where coal will always be at a premium or short supply and leading to black marketing or power will always be something which one will have to struggle to get. So, I am much happier and I believe that is the first imperative towards development of the nation that we have sufficient power for industry, for framers for the poor of India so that every child gets electricity in his home and can give him a better opportunity to compete with the rest of the world. 

Having said that, there is a mistaken impression about power demand not being sufficient. I am sure you will appreciate that and over the years there is a lot of empirical data to suggest that growth in power demand is usually a coefficient of about 0.8 and may be sometimes 0.9 to the gross domestic product (GDP) growth of the economy. So, if we take the period 2004 to 2014 the 10 year period the compound annual growth rate (CAGR) growth in power demand was 5.65 percent. 

These are years where we had the lag effect of Prime Minister Atal Bihari Vajpayee’s tenure where for the first two or three years from 2004 to 2007 or 2008 the economy was on a roll. Then there was this fiscal stimulus of 2008-2009 which led to another two years or three years of huge growth in the economy. So, with an economy which probably in this 10 year period grew at a CAGR of 7 percent plus we saw power growing at 5.65 percent. 

Our government is only two years old; the growth of power demand in these two years is 7.03 percent. In fact in the first quarter of the current year it is upwards of 8.50 percent. So, power demand is growing disproportionate to the economic growth or GDP growth. Also this is on the back of huge thrust to our energy efficiency programs. So, if I had not probably given out these 140 million LED bulbs and the 80 million that the private sector has sold, so collectively nearly 220 million LED bulbs have replaced bulbs in the country possibly you could have seen another percent or so of growth in the power sector in these two years. 

What I am only trying to allude to is that I believe that the country is recognising the availability of power at competitive and very affordable prices. The vidyut pravah apps gives real time data every 15 minutes on the price at which power is available across the country. I hope the citizens of India put pressure on their states to start procuring more power and serving the people of India with 24x7 power rather than starving them of power just because of their own inefficiencies. 

UDAY incidentally has taken off well, few states which are left have broadly agreed to what is good for them I have been able to demonstrate to every state irrespective of political ideology that UDAY is a win-win for the state, for the people of India and for the country. 

Q: Have you been able to convince Tamil Nadu? 

A: We had an excellent meeting, it was meant to be a courtesy call but landed up being converted into a very fruitful discussion. I saw a very sharp and incisive mind understanding what I was able to convey. All in all I think we made good progress, their team has already interacted with my team and she has agreed to send a very high level delegation led by the Finance Minister and the power minister with all the bureaucrats, the chief secretary, finance secretary and I do believe the bureaucrats have now understood how this can be really beneficial and game changing for the state of Tamil Nadu. 

In the next three years it will save Tamil Nadu and the people of Tamil Nadu nearly Rs 22000 crore odd in the next three years and then going forward an annual saving of Rs 18000 crore for the state of Tamil Nadu. I don't think I can offer anything better than that. 

Q: In terms of the performance review that I know that you conduct as far as the UDAY scheme is concerned, what is the latest now on who is doing well on the performance parameters? 

A: I would think it is still a little early because a lot of the data that we are dependent on, still is not entirely sanitised data. Over the years India has never created a robust framework or infrastructure which could give us data on a real time basis. Therefore as a part of the Deen Dayal Upadhyaya Gram Jyoti Yojana and the integrated power development scheme, we have started the process of putting up feeder meters, smart meters on every feeder in the country in which data will be captured live and will be available for all of you. 

We have started an app called Urja, you can look at that. It is very revealing for the data that is available. So, it is not as if 100 percent feeders are as yet integrated into it. However we have been able to bring in about 30 or 40 percent of the feeders which give real time data and it has been a eye opener. 

State like Uttar Pradesh, the losses or the amount of time that they have outages both the period of outages and the frequency of outages is about 3 or 4 times the national average. 

Q: Since we are talking about power and this has been an area of concern as well as a laggard - hydro power. I understand that about 219 projects odd, barely 7 percent or so are actually on target, a large majority are stalled or have not met with their deadlines etc. What is going to be the priority now as far as hydro is concerned? 

A: Hydro is a very good form of power which India had started off very well with initially. Of course the base in 1962-63 was very small, the entire base was probably 3000 megawatt or thereabouts. At that point of time India's hydro capacity was 50 percent of our total generating capacity. Of course the country has grown by about 50 times since1962-63 to now. After this growth of 50x we are today at about 15 percent odd of hydro capacity. Ideally I would love to see much more action on the hydro front but there are certain significant challenges which are for real. 

One, India's high interest rates is a dampener when we are looking at ramping up hydro more so because the investments have gone up and those large investments translate to high tariffs which become a burden on state discoms and the people of India. 

Second, we have had a lot of concerns about the environment and the ecology flagged off with hydro projects. There are several competing schools of thoughts, several concerns that have been flagged off. In some cases I also think there are certain vested interests not willing to allow hydro projects in Arunachal, Assam to really flourish and take off quickly. It is a very sad situation. 

Let me share with you one example, we have a project called Subansiri, it is in Arunachal Pradesh and will provide electricity for most of the North Eastern region. That project is now stalled for over 5 years and almost a billion dollars, over Rs 6000 crore odd has already been invested in that project and we are continuing to lose over Rs 10 crore per day of delay on that project. That project when originally conceived if it had been completed as per schedule, it would have generated power at Rs 1.86 or thereabouts for the people of the north. Assam would have benefited by nearly 500 megawatt out of that which would have taken care of the entire requirement of that state at Rs 1.86 per unit. Thanks to an agitation, in some ways an agitation which is not entirely founded on a very strong technical or technological footing, we have a situation where that project and its cost overrun has taken up the potential power tariff to over Rs 5.5 per unit now. Also Assam remained deprived of power for six years which it would otherwise have had power at Rs 1.86 per unit. So, look at the damage it caused the economy of Assam just by delay of one project. 

We are working closely with both the governments. We have been able to resolve Teesta hydro project of Sikkim, it was a stalled project which was over 90 percent complete, Rs 9000 crore odd invested. When I became minister it was stalled and everybody was fighting with each other. I am glad that after a lot of meetings, after a lot of effort, working with all the stakeholders, we have been able to put it back on track and by the end of the year its first unit and before the end of fiscal that project will start generating nearly 1200 megawatt of hydro power. So, we are making effort to try and revive these stalled projects. We are working on the small projects also to see how we can get them back on track. 

I do believe unless the investments already underway start getting concluded or start seeing the light at the end of the tunnel, it will be very difficult to persuade investors or bankers to further fund new projects. 

So, my focus currently is on all the stalled projects. 

Q: Since we are talking about efficiency let me also you ask you a question, I know I have asked you this question in the past but let me get your thoughts on this now and often times there are the efficiency or the lack there off within the public sector companies is often spoken about as a drag as far as lot of these public sector undertaking (PSU) are concerned. I know you are going to hit back very strongly but let me nevertheless ask you about what we can expect now in terms of enhanced efficiency, you have been able to do it at Coal India? What more can we expect now as far as the PSUs are concerned that are under your? 

A: While I was on the other side of this stage in the earlier days when I was working in the private sector I had very similar views that we should sell off all the public sector undertakings and India can do without them. The last two years have taught me a lot of lessons. This LED program is after all run by Government Company. Energy Efficiency Services Limited (EESL) has all the problems that any government company has. 

Coal India which would be a laggard with 1 or 2 percent growth there has been no change. The same management, the same team, the directors are the same, the managers the workmen everything remains the same and we are looking at 6.9 percent nearly 8.8 or 9 percent in the second year. We are looking at the kind of transformational growth which you could never imagine is possible.

NTPC has been able to reduce its variable costs on power generation by nearly 15 percent in the last 8 months, thanks to more efficient working of their plants, thanks to cut down on imports, thanks to efficient and rational usage of linkages and thanks to improved quality which Coal India provided. So, the station hit rate has improved by nearly 3 percent. Now all of this is possible within the framework of a government company. I have always held the view and I am on record on this that it is not the nature of ownership of a company, it is really the vision that really defines the success of a company and is really the leadership that you provide a organisation it could be the government, it could be a business channel, it could be a private or public company. For all of us the lessons are in the management books about vision, about leadership, about transparency, about integrity of operations. 

Prime Minister Modi’ government has tried to bring all of that into the working of government and public sector undertakings just like he did it in Gujarat, where the electricity sector was not privatised but a loss making utility was turned around into a profit making electricity distribution sector in barely three or four years through sheer determination, sheer integrity of working, empowerment of the people working there and ease of operations. I think that is the message we have got, that is the learning’s we have from his own experiences in Gujarat which we have been able to translate for the working of the government and PSUs in Delhi. 

Q: I can’t help it but I have to try and get another headline and this has to do with the Hindustan Zinc and Bharat Aluminium Company (Balco) because now they are part of your ministry so let me ask you whether we can expect that residual stake sale to take place or whether you believe that you will need to go back to parliament and get the Mines and Minerals Development and Regulation (MMDR) Act changed again?

A: We are examining all the options and even if we happen to go back and have it amended I see no logic about arguing on this issue. We may all recall that these companies were almost laggards. I remember when Hindustan Zinc was sold and I am often talking to my colleagues in the mining ministry about these experiences, when Hindustan Zinc was sold the expectation was its run out of its raw material and may be four or five years is the maximum that that company can run.It is now over 10 years, it has gone from strength to strength and the residual value that the government of India had at that point of time was barely Rs 1,200 or 1,500 crore. Today we could possibly get over Rs 25,000 crore for it. Now that is the kind of value addition that has happened in that company. If it was a government company also we could have done it but Prime Minister Modi was not there 10 years ago. 

Q: Are you willing to give up on the residual stake?

A: Now that 49 percent is only left with the government and in the other case 26 percent. Once you have gone beyond the threshold of 50 percent and management control has been divested then I think it is immaterial, there is no reason for government to continue to hold that stake. I personally believe it is time that we looked at divesting that stake and giving freedom for that company to grow and progress independently and efficiently. 

Q: This has been going back and forth for several years now so your clear decision has to be taken. Does it need cabinet approval or does it just need the nodal ministry to sign off on it?

A: It does need cabinet approval obviously, it will need addressing all the various viewpoints that have come out. We will also have to look at the court cases that are going on, may be take some more legal opinion. So, it will be a composite decision but I think the time is right for us to start looking at that on a fast track basis.