BackGame of thrones at NTPC
NTPC's director A.K. Jha appointed as interim CMD as incumbent Arup Roy Choudhury's term ended on 31 August
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New Delhi: It’s an open season of game of thrones at state-owned NTPC Ltd.
A.K. Jha, director, technical, assumed interim charge of chairman and managing director (CMD) at India’s largest power generation utility as the incumbent CMD Arup Roy Choudhury’s term ended on 31 August after he wasn’t given an extension.
Jha’s term as NTPC chief is for a period of three months or till the time a successor is chosen or until further orders. The Appointments Committee of the Cabinet (ACC) recommended recourse to the search-cum-selection committee (SCSC) rather than following the Public Enterprises Selection Board (PESB) model, the process under which typically takes a year or so.
Jha, widely respected within and outside the organization, also holds the charge of director commercial at NTPC. He took over from Inder Jit Kapoor, who joined the Appellate Tribunal for Electricity (Aptel) as its technical member last month.
In a first, Choudhury wrote to NTPC’s parent ministry, the power ministry, about his extension about a year ago, followed by another communication and a reminder. “This was for the first time that a CMD had written a letter to the government stating the obvious," said a senior government official, requesting anonymity.
Before demitting office, Choudhury presented a report card to the utility’s board about the performance of the company under his charge.
The adoption of the SCSC route has stoked India’s official grapevine about the possibility that the position of NTPC CMD would go to a member of the elite Indian Administrative Service (IAS). The reason: the SCSC route would allow an IAS officer to retain one’s lien in the service, without resigning, to head the utility. Lien refers to a government official’s right to hold the post of appointment even if the term of the deputation gets over.
“It will be not for the first time that an IAS has headed a public sector unit. For example, Rohit Nandan, the chief of Air India," said a senior NTPC executive, requesting anonymity.
However, doubts are being raised after the government selected Ashwani Lohani, an Indian Railways Service Officer of the 1980 batch, as the new CMD of state-run Air India Ltd for three years. Lohani will replace Rohit Nandan.
The CMD vacancy assumes significance with NTPC setting itself a target of producing 128,000MW by 2032. It is also slated to play an important role for India’s green energy push with its plan to raise its renewable energy contribution to 28% of its planned capacity by then. The utility has an installed capacity of 45,048MW and holds around 17% share of India’s power generation capacity of 274,817.94MW.
This also comes at a time when NTPC has raised its apprehensions about the lapsing of a tripartite agreement (TPA)—between the Reserve Bank of India (RBI), the Union government and the state governments, which provided comfort to power producers against payment defaults by state electricity boards (SEBs)—in October 2016, with no certainty that a replacement would be ready in time.
Under the existing agreement, any state defaulting on dues owed to power companies risks a deduction from its annual transfers. So far this clause has not been invoked as the threat of a deduction has ensured timely payment by SEBs, which are weighed down by $3 trillion in accumulated losses.
“If the TPAs are not renewed, we will not sign the power purchase agreements (PPAs) with the states. We will bundle this power with the electricity from those plants whose PPAs are ending and are hence very cheap. This will result in us bidding for supplying electricity but we will have the cheapest price of around ₹ 3 per unit," added the NTPC executive quoted above.
NTPC has been trying to keep the tariff of power generated across its various projects to an average level of under ₹ 3 a unit and supply power at a uniform rate across the country. In the last financial year, the average rate of electricity sold by NTPC’s coal-fuelled projects was ₹ 3.25 per unit, while the tariff of power from its other projects ranged between ₹ 2 and ₹ 4.50 a unit.
Also, as part of the National Democratic Alliance government’s green energy push, NTPC plans to supply electricity from 10,000 MW of solar power capacity that it is setting up on its own at ₹ 3.20 per unit by bundling it with unallocated power to bring tariffs down. In addition, it plans to sell electricity at around ₹ 5 per unit for 15,000 megawatts that it is buying on behalf of the ministry of new and renewable energy (MNRE) and earn 7 paise per unit in return.
To be sure, the problems at NTPC are a norm in the PSU space rather than an exception. Mint reported on 13 August about 62 full-time, board-level positions lying vacant at various central government-owned units, according to PESB, which oversees hiring for state-owned firms. Of the full-time positions, 17 are for chief executives, while the rest for posts of directors in fields such as finance, marketing, human resources and operations. Some of the key positions are that of CMDs of companies including Steel Authority of India Ltd (SAIL), Oil India Ltd, North Eastern Electric Power Corp. Ltd and Bharat Coking Coal Ltd.
The PESB revised the guidelines for the selection process for board-level posts in May 2011. Given that the appointment of board-level executives is a time-consuming process and takes at least a year, the guidelines stated that such positions be advertised a year in advance of the expected vacancy. The recommendations of PESB are supposed to be sent to the ministry before the term of the incumbent ends. However, things have not moved accordingly.
Interestingly, while Rakesh Singh, secretary, ministry of steel, was given the charge of CMD of SAIL, NTPC’s chief charge was given to an insider after the outgoing CMD Choudhury suggested the same to the government for reasons of continuity.
If only such rationale of continuity pass muster before a position becomes vacant, it would work well for the companies.
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