Home / Industry / Energy /  Time is now ripe for a power fund: Piyush Goyal

New Delhi: Piyush Goyal, minister for power, coal, and new and renewable energy, is a man in a hurry to weed out the lacunae in the country’s energy security. With only a week left for the National Democratic Alliance government to complete one year in office, Goyal, in an interview on board a commercial flight, spoke about revisiting the idea of a power sector fund that would bail out stressed projects, encouraging domestic industry, while keeping on the right side of World Trade Organization (WTO). He also said the government was drawing up a plan with states to clean the mess in the power distribution sector.

In addition, Goyal, who is representing India at the United Nations’ sustainable energy conference, said the government is looking at the safety of dams and wants to balance “the reality of the past" with the “requirements of the future" for coal linkages. Edited excerpts:

What are your plans for the power distribution sector?

That’s clearly one area where it’s still a work in progress. The earlier philosophy was to come up with some format and assume that it will work for all the companies, whereas I believe that we will have to have a structured case-to-case analysis and there can’t be a one-size-fits-all (solution). There have to be custom-made solutions. Also, the states in the last FRP (financial restructuring plan) had not fulfilled any of their obligations. Lastly, interest rates kept going up after the last FRP and people didn’t factor that there could be further losses after the cutoff date of April 2012 and the implementation happened 18 months late—October 2013—by which time the companies had already flopped, got into a bigger mess. So, now I am looking at working in partnership with each state and we have already started the dialogue, for example, with Rajasthan and Jammu and Kashmir. We are trying to see what steps the state can take, what actual actionable agenda can be made for the state, and then working out an action plan going forward… My sense is that it will be a three- or four-year programme to be able to completely resolve this problem. It can’t be done alone by the centre or the state, or one or the other discom (distribution company). We are working with the states to draw up action plans.

In your interactions with the international investor community, what is the impression you get?

In the initial months, there was a wait-and-watch approach. They wanted to see how the sector progresses. As we speak today, I find a lot of interest. Now, they are wanting to come and invest. There are both national and international PE (private equity) funds, hedge funds who want to come to India. You must have observed in the last six-seven months, you suddenly see an interest in acquiring energy assets, which was missing for many years. And now there is competition also. Two or three bidders try to pick up an asset. I personally feel that it maybe an interesting idea to have the power fund which I had mooted some 9-10 months back. Now the time is ripe. That time maybe it was an idea before its time; today it could work very well.

How will it work for distressed assets?

This could work in terms of some of the power sector companies seeding a fund, inviting international participation as co-investors into that fund, and then providing last-mile funding wherever we have good promoters or even picking up stranded assets with the banks. So, literally these are low-hanging fruits which can be put to quick use if supplemented with adequate and low-cost finance.

Are these public sector companies or can they be anyone?

They could be anyone—I am agnostic. For me, the sector and the industry matters. It could be public sector, it could be private sector.

When we talk about renewable energy, there is a case in the WTO where the US has challenged India over the domestic sourcing of equipment for India’s solar energy programme. Your views?

I believe India did the right thing. We will wait for the decision (of the WTO dispute settlement panel) and then take appropriate action. But India stands committed to both its Make In India programme as well as the WTO initiatives, and we are going to dovetail and balance the two so that we can encourage our domestic industry, but at the same time not fall foul of WTO... For example, government procurement is permitted to be domestically manufactured and restricted. So, defence will come out with domestic sourcing and that is also good from the perspective of its security. It will be going to the ordnance factories and the bodies. Similarly, some of the power that the states or the central government or its companies like railways are using for self-consumption, the WTO allows them to source from the domestic market. So, like that, there are many things.

So, you will do this fine balancing?

It is not a fine balancing, it’s pragmatic working.

What is your plan for the hydropower sector, which is beset by allegations such as those in the coal sector? We have heard of dubious practices such as inflated capital cost, poor construction practices and, in the backdrop of the recent earthquakes, flouting of permission by building excess capacity to charge merchant rates. What is your big vision for the sector?

Well, the big vision can only follow a concrete understanding of what the sector is facing and what the sector has done. Right now, hydel is almost stalled. We have Teesta stuck for various reasons. Subansiri, Maheshwar, Lower Subansiri, all of them have different challenges. Small hydros are facing challenges of transmission, they are facing challenges of local area problems. So, by and by, the hydro sector will need a more holistic thinking. The courts have also taken up certain matters, particularly in Uttarakhand, post the tragedy (of floods in 2013). There is the mission of Ganga to ensure that there is a reasonable flow—Aviral Ganga, which we are committed to. We are working on all of these plans. The environment ministry is doing a holistic planning of the entire hydro sector. We are trying to see what impact it has on the environment, and after we have more clarity about it, and we have resolved some of these older issues... You may recall that the previous government had cancelled three projects. Some of them had already started work. NTPC still has claims of hundreds of crores and they are under arbitration. So, all of these issues need to be resolved before the country can put in fresh money. Otherwise, the investors are not going to put money in this sector.

What about those projects which have flouted rules? Do you want to do the cleansing part on hydro as well, which you started elsewhere?

Well, I haven’t started, but it is a good thought for me to work on.

A significant part of the country’s hydropower potential falls in the earthquake fault zones. What is you strategy going forward?

For example, Subansiri had an issue where the local population had concerns. We immediately got an eight-member very, very high-level expert committee, including Central Water Commission, Central Electricity Authority, and experts from Assam. They are all working together to see the environmental impact, structural impact, riparian state impact and riverbed impact. So, I think it’s the technical confidence, and once all these experts come up with their reports on the stability and the long-term assurance that these dams are safe, then only will we look at further investments in this.

Has a committee on dam safety and structure been set up?

I think the environment ministry is looking at that.

The next step after the coal block auctions is the linkages, which have been awarded in a subjective manner like the coal blocks. When do you start with the linkages?

See, I have to again get the report of the committee which is studying the entire past linkages, the process, and whether any process improvements can be undertaken. But you must appreciate that in the earlier days, Coal India was a monopoly and there was nobody else. It was their duty then to supply coal to everybody. And to that extent, I will have to balance the reality of the past and the requirements of the future, which this committee has been requested to look into in detail. Once the recommendations come, we will take a call on how in the future these linkages should be given.

Is there a roadmap lined up for commercial mining?

There is no immediate time frame, but it is an important element which will serve the women of distant remote areas, the small households who still use coal as fuel, small red-brick kilns, refractory makers, micro industries, and I am very conscious that in the current structure they are the left behind who also need to be served. So, the country should look at some mechanism to serve them faster, and this could be one of those mechanisms that we are hoping to put to use.

The writer was a guest of Coal India Ltd.


Utpal Bhaskar

"Utpal Bhaskar leads Mint's policy and economy coverage. He is part of Mint’s launch team, which he joined as a staff writer in 2006. Widely cited by authors and think-tanks, he has reported extensively on the intersection of India’s policy, polity and corporate space.
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