In an interview to CNBC-TV18’s Shereen Bhan, Goyal discussed the achievements of the government in the power sector as it completes two years in office.
Even as the government has succeeded in increasing power production, some say demand continues to remain tepid given the state of power distribution companies and the broader economy.
But Goyal said the ministry was taking steps to boost demand.
“One is increasing penetration of power for people of India. Second is we are trying to work with mobile companies to see how we can ensure uninterrupted power through the towers. We are working to see how electric vehicles in the long run become another source of big demand,” he said.
Below is the verbatim transcript of Piyush Goyal’s interview with Shereen Bhan on CNBC-TV18.
Q: Let me start by asking you about what we can now expect getting Tamil Nadu on board to the Ujjwal Discom Assurance Yojna (UDAY) scheme is concerned. We have just seen the election results, Jayalalithaa is backed. There has been an acrimonious exchange between you and the government of Tamil Nadu on the issue of UDAY. Can we expect now Tamil Nadu to join forces with you?
A: Of course and where was the acrimony. There was no acrimony at all.
Q: There was an acrimonious exchange publically.
A: A question was asked to me at a CII function relating to Tamil Nadu delaying the payments of their renewable energy suppliers and I innocuously mentioned that very difficult to reach out because I have been wanting to meet the Chief Minister and I have not been able to meet her. Then of course for whatever reasons it became a political issue in the election — elections will always have these kind of side shows.
Q: Of course elections will always have the side shows, elections are over, the verdict is in now, so do we expect movement on Tamil Nadu coming on board?
A: The whole concept of UDAY is in the interest of people of India and I am sure the people of Tamil Nadu also deserve better. In fact, when we did the working, Tamil Nadu enjoys the maximum benefit out of UDAY considering they have had huge losses in the past. Now, there was this one issue which I had publically mentioned also, that Tamil Nadu is a unique case which has a discom, transmission company and generating company all in one. So, one will have to allocate that debt into the three separate buckets and then one can work out what is to be done. Of course, the Chief Minister wrote some letter requesting for several things but requests are always made and we have decided that there is no subsidy involved. The government is not giving any money to anybody and all the states have come on board. However, should Tamil Nadu still choose to continue to bleed, continue to not be able to serve their people and continue to incur Rs 10,000 crore loss or whatever loss they are suffering every year that is a choice which is open to them, it is a voluntary scheme. However, I would think any sensible decision would go towards joining UDAY.
Q: Bonds worth Rs 1 lakh crore have been issued as part of the UDAY scheme, 18 states and 1 union territory on board now. You are hoping that Tamil Nadu will come on board as well. But in earnest when can we actually see the impact on the ground. Coal is suffering on account of that. You are now faced with a problem of plenty as far as coal is concerned. You have got an inventory that you are trying to auction off because of coal off take being low. When can we actually realistically see a turnaround?
A: You have got your concept wrong. How do you say that coal off take is low, it’s the coal production is high. So, we have actually produced more.
Q: Coal production is high, fair point, at a record high. But coal off take also has been on the lower side because there has been low demand from sectors like steel, cement and power?
A: No, I am sorry about it. You again had it wrong. Imports have fallen because we have been able to replace imports with domestic coal, point one. Point two, power demand is usually correlated to the economy. So, in the years 2012 to 2014 power demand grew by five percent. In the years 2014 to 2016 it grew by seven percent. So, we are on a growth trajectory, the economy is growing, power demand is growing. And this is on the back of huge thrust to energy efficiency. So, effectively if I had not done energy efficiency it would have probably grown more. Secondly you must appreciate that nearly 46,000 megawatt of additional capacity has come on board. So, it is not as if the demand is less. We have been able to start all the stalled projects or most of them at least quickly in the last two years. So, that has expanded capacity disproportionate to any possible growth in demand. However that being so we are now focussing on how we can look at long term measures to increase demand. One is of course the greater penetration to the people of India. Second is we are trying to work with mobile companies to see how we can ensure uninterrupted power to the towers.
We are working to see how electrical vehicles in the long run become another source of big demand. I suggested to Madhya Pradesh the other day why don’t you look at giving a ten year contract to new industry to support the Make in India programme at an attractive price. So, typically what do you do, you say the tariff is six months I will give you Rs 0.50 rebate, or Rs 1 rebate if you set up an industry in my place. I am saying why not do a reverse, why not say I will give you power for 10 years at Rs 4 or at Rs 3.5 and encourage industry to come to your state, encourage industrialisation, new job opportunities. So, we are changing the rules of the game, just turning it upside down to see how we can rapidly ramp up demand of power. Having said that UDAY has so many elements and each one contributes. Today I had the Rajasthan review meeting with the state government of Rajasthan. We will be immensely happy to know that Vasundhra Rajeji, the honourable Chief Minister who inherited nearly Rs 15,000 crore annual loss some Rs 80,000 crore accumulated loss and debt. She has been one of the most proactive beneficiaries of UDAY. They have already done a large part of their Rs 35,000 -40,000 crore of UDAY bonds. They have got approval for another Rs 20,800 crore already. Today we have discussed rollout of their discom state government guaranteed bonds and they have agreed to move that quickly. They have been able to save on their coal consumption through cutting down imports and more rational utilisation of their capacity by about Rs 0.50 per unit they told me per unit. They are now talking to NTPC and Monday our NTPC team is going to be there to see how we can look at the overall power purchase cost and helped to bring that down. So, we are working on financial cost, we are working on efficiency and utilisation of coal with them, we are working on efficient procurement of power.
The honourable Chief Minister is so sincere in her efforts to reduce Aggregate Technical and Commercial Losses (AT&C), she has probably called a meeting of all MLAs next week to discuss with them the programme to cut power theft. Today we discussed that they will be looking at replacing every meter in the state with a smart meter for real time monitoring of power consumption. Today we also discussed that they will go back and workout how to work on the replacement of all the agricultural pumps with energy efficient pumps. So, I think game changing things are being done by the state and the state which I thought will take four years to convert from Rs 15,000 crore loss to profit, now today was talking of three years and at the end of today’s meeting has said we will see if we can do it in two years, by next year.
Q: Rajasthan you are saying has promised to bring down losses in two years as oppose to the earlier three years?
A: They had promised to do in three years but after today’s meeting I have urged them to see if they can do it in two years and they are seriously working on it.
Q: Are you seeing similar sort of energy enthusiasm in other states?
A: Absolutely. Look at Andhra Pradesh, look at the game changing work in Haryana, outstanding work has gone into — Haryana could probably turnaround into profit positively by next year. Uttar Pradesh has also in that sense recognised that unless they serve their people with power they are going to be having serious problems. Unfortunately, the pace of work there is slow and there are too many complications within the government machinery, so we are saying then what to do.
Q: But let me move away from UDAY and discussed what’s happening on the renewable side for just a bit. You have been touring whether its London or New York. You had a large investor conference here inviting people to participates in India’s renewable energy programme. In terms of outcome what can we really say has been achieved whether it’s by way of FDI or proposed FDI because you got a very ambitious target on the renewable side as well?
A: Well, we started out with a 20,000 megawatt target by 2022 by the erstwhile government. We will achieve that next year itself, 5 years ahead of schedule. Last year in the 12 months just gone by we bid out 21,000 megawatt of solar power projects. Many of them within the solar parks so land transmission all taken care of, all the projects have a power purchase agreement (PPA) whether reasonably good counterparty most of them with NTPC or performing discom. Now if that is possible in a short span of 12 years, achieving a 100,000 megawatts by 2022 is clearly doable. Next year we will add at least 10,500 is the target, but we will add at least 13,000 in the current year what we are doing now. For which we bid out this 21,000, so I have a cushion and a buffer. This is why I say by next year I am 100 percent confident. Sometime in 2017 we will cross 20,000, five years ahead of schedule. First time after many years we have added capacity more than the target, 3,600 or something of that sort. Today we have in fact released two year achievements and you would find a plethora of information there which will make you proud as an Indian to get everything else.
Q: And for the second year running your ministry has continued to be in the top performing ministry as part of the CNBC-TV18 poll. I won’t give you the details just yet, you will have to wait for the 25th.
A: Though I don’t accept that really.
Q: Why not?
A: You are being a little uncharitable. This could not have been possible unless it was a combined effort of the entire system. So, the Prime Minister’s guidance, the Finance Minister’s support, the Environment Minister going out of the way to sort out my issues. Lot of the renewable things are now all made into category where you don’t require approvals. Now these are not line ministries, they are like staff ministries. So, finance, environment all of these remain in the background. They don’t come in the forefront. So, I may often be getting credit for a lot of the things I don’t deserve really.
Q: In terms of FDI specifically on the renewable side what can we expect, what is the target there?
A: I am not one of those who is very desperate for foreign investment or who is going around pleading for foreign investment. If any of your colleagues has been any of my investor meets and you know they we are all open. All my meetings are with everybody around. Nothing confidential. If they have made any unreasonable request I have been quick to point out it is not going to happen.
Q: So, what are those unreasonable request that they are making which may come in the way of FDI?
A: Somebody wanted should not the central government do a backstop guarantee to everyone of these PPA. I said I am sorry. You want a sovereign guaranteed bond to be issued. I will issue that, I will take the money and I will enjoy it at very low rates and do it myself. So, if you want a reward you better take a risk. So, ultimately it is all a risk-reward ratio. Investors have to appreciate that. And they have no shortage of money.
Q: But foreign investors still find that perhaps the risks outweigh the rewards at this point in time?
A: Not at all. Otherwise I wouldn’t have had such huge competitive bids for 21,000 megawatts in the last 12 months of solar. I wouldn’t have had wind guys now talking to me that hey, bring us also into the reverse auction, the reverse bidding process. They realised that the strength of that lies in cost becoming competitive, suppliers also becoming competitive. After all with a cost plus regime inefficiency tends to set in but in a pure competitive regime where everybody has equal opportunity. That is the best way in India’s interest.
Q: Let me ask you about solar, because this has got everyone excited. Today when you said that Mr Kant has given the recommendations for solar manufacturing and how do you incentivise more manufacturing of solar panels in the country. You spoke about subsidies which is what got the market excited. What should we expect on that front?
A: What I am proposing on that front is, of course it is yet to be finalised and then put up to the cabinet and we will need of course finances approval and now with the increased coal cess I am quite confident that we will get that. We will have enough funding to be able to take care of that. The idea is that India will have to be self sufficient in our requirement also for the solar equipment and in fact one very large investor who is committed to doing 20,000 megawatts, in one of my first meetings with them in India had mentioned that unless you manufacture it in India you will never get it cheap because there are so many dimensions of logistics, transport and all of that. He was of the opinion India should look at manufacturing in a big way. I am hoping that we will be able to develop at least 10 gigawatt integrated manufacturing capacity, right from the silica wafers and chips and modules and cells and everything. What we will do is we will bid these projects out. We will talk to the states who are willing to participate and encourage who want investments to come to their states. I have asked them to look at a dimension on the lines what I told you earlier. Can we guarantee power, it is a power guzzling investment. Can we guarantee power at a fixed price or at a reasonably fixed price index to something with land and other enablers so that these people can come and do plug and play manufacturing.
Q: Dollar denominated tariffs is again something different?
A: That is a different thing. This is more about manufacturing. I am then going to bid out these projects. So, companies around the world and in India can look at expanding or coming up and setting green field projects and bring manufacturing to India. We are also seeing how to package it with some sort of an assured business for five or seven years which will encourage more people to manufacture.
Q: So, when do you take this to cabinet?
A: I still ought to get finance approval. So, I have still got to make up my own mind the contours. I don’t think slowly. I like to get into every aspects see it carefully, I want to make sure it is a fair process. There is no unreasonable benefits to anybody and ultimately make sure that all of this leads to India’s people benefitting out of it.
Q: You have been able to take production for the coal sector to a record high and aggressive capex plan for Coal India of about USD 8-9 billion over the next couple of years, next five years to be precise. Possible candidate for a buy back divestment that continues to be on the table, what is the goal now, the next goal as far as Coal India is concerned?
A: I had set one primary goal and one secondary goal and I stand by that. The primary goal was that Coal India should produce 1 billion tonnes of coal by 2020. It should be of the right quality. So, washing, crushing all of that become integral parts to that programme. It should be with maintaining safety and security of workmen, good manufacturing practices, technology introduced in the system, we are working on that. Skill development is an integral part of all our plans going forward. We have decided to open new mines so, that we can expand production which work is going on full swing, full speed ahead. We had along with that also worked on ensuring that that will replace the imported thermal coal, not coking as yet and for that it may need some technological innovation for certain plants which are being set up for design to use imported coal. So, I have already talked to BHEL chairman and NTPC to sit down and see what can be done on that. This was also to look at transportation efficiencies for which I have already brought out the policy for efficient utilisation of domestic coal last month I think. All of these things put together was that billion dollar plan and we are well on track on different aspects of that plan. I would say this was my secondary goal. My primary goal to my colleagues and I think we are moving fast towards that was that when you walk out on the street and tell anybody I worked for Coal India, I want that man to look up to you and say with pride wow you are working for Coal India. I want Coal India to be that company – respected worldwide for its work, for its work culture, for its output, for its service to India to ensure that the people of India get uninterrupted affordable power.
Q: In terms of unlocking not to shareholder value, you are of course talking about national value. However in terms of unlocking shareholder value and a lot of the other companies that fall under your various ministries, you have been talking about NTPC through the course of this interview, what really are the targets?
A: I think they have done absolutely remarkable contribution both to India, to the stock markets and have given huge shareholder value also. NTPC they have a bonus debenture, very few of them hardly five or six companies in the country which have given a bonus debenture, it is a huge unlocking of shareholder value. Coal India maybe looking at a buyback I don’t know that is for the different department to handle and settle. I am ready for it, I have no problem. Last year after all if Coal India gave such huge dividends where did that money go? It went to make new schools, it went to create new All India institutes of Medicals Science, hospitals, it went to drought relief I don’t know where that money went, but it went for good causes. So, all that money they are giving USD 6, Rs 400 per tonne as coal cess. This government has done it from Rs 50 to Rs 400, 8 times but we were willing to do it because we care for the environment. We believe in the polluter pays principle and that money is going to help make the environment cleaner, make the Ganges cleaner. The Ganga after all and all the other rivers of India have to be cleaned up if we have to sort out the water crisis in this country. I think Coal India is doing some wonderful work. Similarly each of these companies they have very aggressive plans. I remember Neyveli Lignite Corporation, the last time I did a review with them we were working on their plans up to 2030 and we closed the meeting with the commitments from them they will try to see how they can meet their 2030 plans by 2022. Eight years ahead of schedule, so we have some wonderful people putting in their sweat and blood and toiling day and night. Many times they had very low salaries not comparable to what has paid in all these hot shot private companies but giving such extraordinary results.
Q: Let me ask you about another issue which the oil minister spoke to us about a couple of days ago. This possibility of reviving stalled powers projects that depend on gas and he said that Prime Minister is going to be visiting certain countries soon and maybe we could expect some announcement on that front. What can we expect on that front?
A: Powers from gas based plants by the way have grown by 46 percent last month and you will appreciate that we did sort out to some extent at least resolve their debt servicing capacity got 11,500 megawatt of gas plants back into action and in the last auction we earned some money out of it. So we didn’t even spend as much money as was budgeted. So, it just goes to show that if you do a job sincerely and we brought the transparent reverse bidding into that also. Now I have been told that has been used worldwide in many ways by private sector and other businesses also.
I floated this idea in Australia and ever since I have been talking to people the honourable Petroleum Minister, Mr Pradhan is seized of my request. Ideally, if we can get gas landed in India at about USD 5-5.50 and we could contract it for long term and give these gas plants a real long haul with purchase at affordable prices then they are good for me for my peaking load also. The spinning reserve required for this large renewable that we are going in for, but it can’t be affordable at the high prices and it can’t be left to the vagaries of market prices. If tomorrow it become USD 16 like it did you will all shut down and then all my plans the renewable spinning will become a problem, so for the entire overall security, I will have to have an assured supply to be able to get them on track. So I am talking to companies, the Baltic Indices are at an all time low, we can get shipping cheap, we can commit large quantities and in this uncertain world, I think countries would be interested in long term commitment at a fixed price. We are talking to some, let see how it happens.
Q: Can we expect now in the immediate term, the near term priorities, you listed out a list of priorities that you are going to be working, not just over the next 12 months, but over the next 5 years, but if I were to ask you about the immediate priorities for instance in the budget, the finance minister did talk about UMPPs, you and I have that conversation, documents have been prepared and kept ready. Are we likely to see move forward on bidding out of the UMPP?
A: No, there is a lot of interest. There is pressure the Bihar power minister calls me up every third-fourth day to say, “kab aa raha hai bhaisahab hamara UMPP”, I like to calibrate my working keeping in mind the long term requirements and keeping in mind the available capacity to make sure I don’t load the system unreasonably also and as thing stands today there is no rush to do it and I am not an ostrich that just because I announced it, I had to do it in a timeline, so that you tick off, okay one more thing done. I would like to tick it off what is in the interest of the country and since there was no urgency, I have not even pushed it too much. Having said that the document is almost final, we had extensive stakeholder consultation and I take a little longer for everything I do because when I do it should be perfect. So we have had lot of consultation, we have now come up with a document. We will take it to the cabinet, get it approved. The coal blocks and all are identified. I am urging states to make sure land is in place, water is in place. I am talking to environment ministry to make sure there is no last minute glitch that will come up like in the past when they go to exploit the coal mines to get the coal out of the mines. So we like to move more and more towards plug and play. Not in a hurry, but at the right time based on the calibrated demand going forward also. I am sure 4-5 UMPPs will be bid out soon.
Q: So, over the next 12-24 months you say?
A: Easily, maybe even before that.
Q: So, 25th I understand the Prime Minister has called a meeting of the council of his ministers. I would imagine that you will now need to make some changes in the government because Mr Sonowal is going to move to Assam as the Chief Minister. The last conversation you and I had this buzz of a reshuffled continued. So, is a reshuffle on the cards?
A: I wouldn’t know. In any case I am not there on 25. But these are absolute speculation that all of you keep doing from time to time and none of us ever bothers about that speculation and I don’t think we even take cognisance of that.