New Delhi: In a long career, he has served six prime ministers. In his current capacity, as member (energy) in the Planning Commission, Kirit S. Parikh finds himself dealing with contentious issues related to energy—also the single biggest infrastructure constraint facing the economy. In an interview with Mint, Parikh talked on a range of issues, including the controversies surrounding ultra mega power projects. Edited excerpts:
The power sector’s performance is a matter of concern. What are your views?
The power generation capacity that has been added does not include the 6,000MW of wind-power capacity as well as the captive-generation capacity in the country. The point is that captive generation is expensive and when people are forced to invest, it is an enormous waste of resources. Nonetheless, that may explain why the economy is growing even if the power sector is not growing at the rate that one may expect.
Are you happy the way things have worked in the sector?
In the Planning Commission, we have always been suggesting that we are not going to reach even the mid-term appraisal target of 36,956MW. In all our subsequent presentations, we have maintained that we would not reach the kind of targets that have been set. So we are quite unhappy in that sense. The final numbers are even lower than our numbers. However, it does not include the gas-based power plants for which no gas is available. Nonetheless, yes, this is a big problem.
We have done the post mortem to find the reason behind the slippages. Some 6,600MW could not be commissioned because the equipment was not supplied in time by Bharat Heavy Electricals Ltd (Bhel) or, in some cases, financial closure could not take place and so on. There are a whole lot of reasons for the shortfalls.
The important thing is what we can do now and what the prospects for the 11th Plan (2007-2012) are. We believe the 18,688MW that could not come during the 10th Plan should be available during the first few years of the Eleventh Plan. We are planning regular monitoring and, if everything goes on as planned, we can get around 68,000MW of power from conventional sources. The ministry of non-conventional energy sources is targeting 10,000MW of capacity from wind-powered plants. I think this is possible.
The power ministry has been talking about how Bhel has not been able to deliver 800MW critical technology due to which NTPC projects have been delayed. What are your views?
There is a problem here. As a commercial organization, they should take proactive steps and anticipate from where the demand is going to come. They should be willing to take some risk and be responsible for it. We are thinking about how we can incentivize Bhel to deliver. We can, say, put in a penalty clause that if you do not deliver in the next month, you will pay 5% of the cost or if you do not deliver within so many months, you pay 10% of the cost. The loss to the economy or to the utility should be made good. Unfortunately, when it is a public sector unit (PSU), such clauses do not bite as hard as it would in the private sector. You really do not care that much if the bottom line goes from red to black or black to red.
The government was talking about setting up of another power equipment manufacturing company. Has work actually started on this?
We are serious about it and indeed want another manufacturer for two reasons. One is that we need some competition and second because we need to expand capacity. Even if we expand Bhel’s capacity fully, we would still be short of the targets.
So, will NTPC do it or will it be any other PSU?
It could be anyone. We could even have some private sector company coming into it. We should really open it up so that anyone who is willing can do so... The main problem is that the firms that want to come into manufacturing are afraid that Bhel’s bids would be given preference as a PSU.
What are your views on the controversy surrounding the 4,000MW Sasan ultra mega power project?
For the Sasan bid, the problem area is peripheral. It is not that the evaluation was not done properly. Perhaps it was a deliberate attempt to mislead people or perhaps it was just an oversight, it is difficult to say. Even if we take the second bidder, that is also a very good deal in many ways because it comes way below the lowest price at which NTPC generates power. These are very internationally competitive prices. Apart from the controversy, I believe the process of ultra mega power plant bidding is quite successful. It provided transparent bidding. There have been significant advances in the way that we are doing things. The biggest advantage of the projects is the special purpose vehicle (SPV) model where the government takes care of all the clearances.
Are ultra mega power projects the only way of adding capacity?
No, I do not think so. I do not believe that we should restrict ourselves only to ultra mega power projects. In fact, the same incentive given to ultra mega power projects should be given to all power projects as recommended by the Planning Commission.
With the rules of the game being changed constantly what are your views on the Iran-Pakistan-India pipeline?
I think the pipeline will not happen in the immediate future, simply because, as you said, people are changing rules of the game all the time. Pakistan’s demand for a higher transit fee for the gas pipeline through its area is neither credible nor acceptable to us. Compared to their demand of more than $1 per million British thermal units (mBtu), we might as well pay $2 more per mBtu and get liquefied natural gas (LNG) from Iran. Then we can tell Iran, do not invest in the pipeline. Instead, we will put money in the LNG at Iran’s end and here.
How competitive are Indian companies in acquiring oil equities overseas? We have lost a lot of opportunities in Africa to China because of the deal sweeteners offered by the Chinese firms.
We should not be so hung up about China. At this stage, we always feel Chinese are getting ahead and Chinese are picking up everything. I do not feel that is quite true.
Is power to all by 2012 achievable?
Certainly. I think we can really connect at least one crore households before 2009, and the remaining one crore and a half below poverty line households before 2011. I think it’s possible and just require some restructuring of programmes. Accelerated Power development Reforms Programme has made some significant progress. Power sector investments have always been considered as safe investments.
There are huge investments required in the power sector for the current plan. Where is the money going to come from?
This is a question that surprises me very much. If an economy is growing at 9% a year, its ability to save, its ability to invest also goes up correspondingly, which one does not recognize. At a macro level, I do not think savings and our ability to borrow internationally would really cause much of a problem of raising these kind of resources.