A citizens’ agitation in Bihar and the state government’s promise to look at the privatization of the state’s electricity utilities have provided NTPC Ltd an opportunity to diversify into power distribution—a logical extension of business for the Central government owned power generation firm, the country’s largest.
This could provide an impetus to the company’s plans for the distribution business. NTPC has been exploring the idea of entering the business and even formed a distribution arm, NTPC Electric Supply Co. Ltd, or NESCL. As part of its forward integration move, NTPC had earlier planned to set up distribution networks in Kanpur in Uttar Pradesh and Mangalore in Karnataka. Neither, however, have come about yet.
As the local population in Bihar continues agitating against the lack of adequate power in the state, chief minister Nitish Kumar, in a bid to contain the political backlash, on Monday said it was NTPC’s duty to provide power to Bihar. Kumar’s statements were made following an agitation, which led to the death of three people in police firing on Friday near the NTPC-owned 1,340MW plant in Kahalgaon in south Bihar.
Opportunity beckons: NTPC Ltd’s T. Sankaralingam.
NTPC has two plants in Bihar, but these are not owned by the state government and their output can only be accessed indirectly by the state from a central pool.
A generation utility located in any of the five power regions in the country supplies power to the region’s load dispatch centre. In Bihar’s case, it is Eastern Region Load Dispatch Centre, or ERLDC, from where the state electricity board (SEB) purchases power.
Bihar has a power generation capacity of 584MW, compared with a demand of around 1,400MW. The deficit is made up by accessing the central pool.
Following the chief minister’s remarks, NTPC is readying to move into power distribution, provided it is issued a power distribution licence by the Bihar State Electricity Regulatory Commission (BSERC), a state government body.
“The state government is trying to divert the issue. Supplying power to Kahalgaon is not our responsibility as it is the job of the Bihar State Electricity Board (BSEB). As per the law, we cannot distribute power. If they want us to do so, let them issue us a distribution licence and then we will consider it,” said T. Sankaralingam, chairman and managing director, NTPC.
The state government can do this only by privatizing power distribution.
Nitish Kumar, immediately after he become chief minister in November 2005, had promised to explore all options, including privatization, to revive the power sector in Bihar.
“BSEB is in a big mess with more than 51% power cut in Bihar. Our units at Kahalgaon are operating at maximum capacity. I will be visiting the state shortly to firm up our plans,” Sankaralingam said.
State government officials do not agree with NTPC’s view and argue that the firm cannot shy away from its responsibility of supplying power. “When you take away land and displace the people from there, these people are given a special status. You cannot treat them as ordinary consumers. While NTPC is maintaining 24-hour power supplies to its operational units, including the railway station used for handling coal (which comes to the plant), they are not willing to supply power to the consumers,” said H.C. Sirohi, divisional commissioner, Bhagalpur.
Analysts say NTPC’s entry into the distribution business will be significant, given the fact that it has a power generation capacity of 27,404MW and plans to increase this to 50,000MW by 2012.
A Delhi-based analyst who did not wish to be named said: “NTPC may negotiate with the state governments to get a distribution company. That is the way forward. There are very few good distribution companies in the sector such as Calcutta Electricity Supply Corp., Tata Power, Torrent Group and Reliance Power. Nothing stops NTPC from entering the power distribution sector. It is a strong player and SEBs have failed in certain respect in certain areas which are primarily managerial in nature.”
“Entering the distribution part of the business will not be a problem for NTPC as it has the access to power generation,” said a Union government official who did not wish to be named.