A delegation of business leaders meets PM on problems facing power sector

Prime Minister on 18-01-2012 addressed a delegation of business leaders that included Ratan Tata and Cyrus Mistry, Anil Agarwal, Anil Ambani, Gautam Adani, Prashant Ruia, Sajjan Jindal, Navin Jindal, Ashok Hinduja, G M Rao, Madhusudan Rao and Andrew Brandler and said that PMO will act on a priority basis to diffuse a growing power crisis. At a meeting with power sector industrialists, the PM agreed that short-term problems like coal supplies should be tackled without delay and the PMO is expected to hold consultations to firm up a plan of action within a month.

Principal secretary to PM Pulok Chatterjee will coordinate the government’s efforts as the Centre is keen to ensure power generation does not suffer, while it considers options to help the industry deal with a financial crunch in face of high cost of imported coal and domestic production not keeping pace.

They complained that projects were becoming unviable with coal from Indonesia and Australia becoming costlier, Coal India not in a position to cater to demand and banks leaning on companies who were finding it hard to meet contractual obligations. And, the cascading effect of adverse conditions is being felt by the these industrialists.

The PM assured them that their problems in the medium and long term will be addressed, reflecting the government’s keenness to ensure a power squeeze does not add to the strains being felt on a slowing economy.

The industrialists, who are keen on a higher selling price for the power they generate and account for one-eighth of the country’s total electricity generation capacity, rolled out a list of litanies they said could pull the plug on their projects and leave the nation powerless.

Power sector bosses also raised issues regarding green clearances for their projects with environment minister Jayanthi Natarajan among the ministers present at the meeting with the PM. Anil Ambani suggested that instead of awaiting coal linkages, government should give a clearance even presuming poor quality of coal supplies.

Natarajan is understood to have pointed out that clearances had been given and noted that Coal India was producing at half the production capacity cleared by her ministry. Industrialists also suggested that the government should compound offences under the environment protection Act, but the minister said such provisions were not in the statute.

The industrialists also raised concerns about the proposed land R&R Bill, raising objections to the land pricing formula suggested. They warned that pricing land at five times the market rate would lead to this alone accounting for 30% of the project costs.

The main  theme of the industrialists’ submissions was to secure a higher price for their electricity and save projects from becoming unviable due to rise in fuel costs. Broadly, big power projects have a fixed tariff pattern and are not allowed to revise their rates in line with changes in fuel costs.

Big power projects fired by imported coal, including the 4,000-mw ultra-mega power project of the Tatas, which went on stream recently, and another one of the Adanis in Gujarat, as well as the Sasan unit being set up by Reliance Power, have been seeking tariff revision since international price of the fuel has risen substantially in recent times due to various factors.

Even units using domestic coal are seeking revision of tariffs quoted while bidding for the projects since Coal India raised its rates substantially after a new pricing regime came into force from January 1.

The high-power delegation did not get much by way of assurances from oil minister S Jaipal Reddy and coal minister Sriprakash Jaiswal. Reddy was non-committal about the group’s demands for changes in government’s method of drawing a priority list for earmarking domestic gas, production of which has seen drastic reduction with a fall in output from Reliance Industries’ Andhra offshore field. Only the designated ministerial panel could decide matters concerning gas, Reddy told the group, but assured that their views would also be examined.

Jaiswal was more forthright, clearly rejecting the suggestion of pooling of imported and domestic coal but assured he would see to it that Coal India does not raise its rates “too much or more than required” after a wage revision. He also said production cannot be raised overnight and asked the promoters with captive mines to raise their own output.

The meeting with Natarajan was dominated by complaints over delays and lack of clarity in environmental clearances as well as issues over lack of land acquisition