We need to have an end-to-end solution. We can’t manufacture cells and modules but still import the silica ingots and wafers, says Praveer Sinha, managing director and chief executive of Tata Power
Tata Power Ltd plans to cease fresh investments in thermal power and is instead shifting into becoming a consumer-facing power utility in new areas of business like power distribution, renewables, and home automation, Praveer Sinha, managing director and chief executive said in an interview. He said India’s second-largest power company in the private sector will continue to focus on reducing under-recoveries from its 4GW (gigawatt) coal-based power plant in Mundra this fiscal even as it restarts negotiations with the Gujarat government for a higher tariff. Edited excerpts:
Over the last two years, you have focused on reducing the debt at Tata Power, selling non-core assets, solving Mundra and entering new consumer-facing businesses. What more needs to be done?
Yes, Tata Power is shifting from a business-to-business to a business-to-consumer interface. That means changes within the culture, getting more customers and retail-focused and service-oriented. We’re investing much more in digital platforms and giving customers access to information. What we achieved in FY20 was the work of the 12-18 months before that. This company is a hundred years old and directionally, we want to change into new segments and we want employees to identify with these new segments. We’re talking of more renewables, rooftop solar, electric vehicle charging, home automation. These last few years we incubated these new businesses and now, we’re seeing results. We are present in 100 cities for rooftop solar. We did revenue of ₹50-60 crore two years back; this year, we will do ₹500 crore. Two years back, in our solar pumps business, we had installed 2000 pumps. By FY20, we had reached 25,000 pumps. We expect both solar rooftop and pumps to earn ₹10,000 crore by 2025.
And at the same time, you’ve stopped all further investments into coal power?
We saw that we need to be more focused on ESG (environmental, social, and governance). We decided to be carbon-neutral by 2050 and we decided to demonstrate leadership in sustainability. Our existing plants (over 7GW of thermal capacity), once they complete their useful life in another 35 years or so, we will shut them down. We don’t plan to make any new thermal acquisitions either through the Resurgent platform. We won’t be participating in the coal mining auctions.
Was the Gujarat government’s decision to reverse its order on a tariff increase a blow to making the Mundra plant sustainable?
The Gujarat government has said they will finalize the supplement tariff agreements with individual companies instead of doing common finalization. They have asked to take cognizance of some observations made by the state regulatory commission in their Essar Power ruling. When this supplement agreement will be signed is the billion-dollar question. I think everyone is keen to resolve this and move on. We are making all efforts to make Mundra self-reliant—we’re doing a merger into Tata Power. From ₹1,700 crore loss in the past, we brought it down to ₹900 crore last year, and this year, it will be still lower. We want to make the coal cluster profitable.
In renewables, do you think the tariffs have become dangerously low? And will the trade barriers be a deterrent to imports from China?
The demand for renewables is huge in the country; we’re still below 95GW and the plan is to reach 450GW. I think the tariffs will stabilize sooner or later. If people do hara-kiri and bid at crazy numbers, you will see them rescind contracts in the future. And we’re already seeing that happen with projects that were bid out at ₹2.44 a unit and we’ve seen this happen in the past in thermal power.
I don’t think the import duties will be a deterrent, but it will add to the cost of setting up plants till such time we have manufacturing capability in India. Manufacturing solar cells and modules require huge investments in both scale and technology. The current technology will be good for 3-4 years and then you again have to make investments into new technology. It’s important to take care of all these aspects (when we plan to build capacity here). We need to have an end-to-end solution. We can’t manufacture cells and modules but still import the silica ingots and wafers. There is a new technology where you can print solar wafers directly onto glass without the cells and modules. If we are to build manufacturing capacity, it will need consistent government policy in support of it.
You have announced plans to launch an infrastructure investment trust (InvIT) to recycle capital from your utility-scale plants. What will be the size of the InvIT; do you have capital commitments in place?
In terms of size, this will be the biggest InvIT for renewables in India; we want to be always within the top 2 players in the renewable space. That’s why we have 2.6GW of projects operational and another 1.5GW in the pipeline. We plan to increase this to 15GW by 2025. The InvIT will give us the opportunity to do M&A. I think a lot of plants sub-1GW will come to the market soon. We hope to launch it by Q3.
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