Industry Analysis

India’s hydro sector dismal: Andritz

Neelav Samrat De, Asst. General Manager (Marketing & BD), Andritz Hydro Pvt Ltd

The government has announced several initiatives to revive the power sector since the time they have come into power. Sharing views on whether these initiatives started delivering or not, Neelav Samrat De, Asst. General Manager (Marketing & BD), Andritz Hydro Pvt Ltd says, “Since the government came into power in 2014, we have had a lot of revival steps for the hydro sector. However, most of these initiatives remain on paper. We hear about the hydro purchase obligation, revival of 40 stressed projects with a funding infusion of Rs. 16,000 crore. These funds are yet to be cleared at the cabinet. The UDAY scheme has surely helped the discoms reduce their debt but the funds have been created from bonds floated in the markets. If the discoms do not conform to a strict revival process, these funds will also become well assigned NPAs. The only positive development we have witnessed is the tendering of projects bearing importance to the Indus-Water Treaty with Pakistan like Pakal Dul (1000 MW) and Kiru (620 MW) coming up.”

India’s hydro sector dismal
De points out, “Arunachal Pradesh with maximum potential still lies stagnant while projects in Uttarakhand seem to have met with their death. We expect to see movement in the rehabilitation of existing projects. However, we have failed to see any fresh funding in the hydro sector and the situation continues to be very dismal. At the same time, we wait for the hydro power policy to be implemented. This policy is a must and will ensure fresh funds into the sector.”

Hydro power policy’s implementation
Pointing out one particular initiative that will change the game in 2017 De says, “The amended hydro policy has been debated for months now. This policy has some very positive proposals to revive existing projects and ways to realise better PPAs, interest subventions being deferred, easier repayment loans, reduction in various land and state related taxes. The proposal to include all hydropower plants under renewable energy (RE) would definitely be a very good boost to the sector since RE currently enjoys a load of sops and benefits. However, in October, we do not see any progress in the hydropower policy’s implementation. (Hydropower policy) this policy is probably the only reviving initiative which now needs to see the light at the end of the tunnel, failing which the ailing sector could almost stall.”

He adds, “While 2017 has almost come to an end, it remains doubtful to see any major developments that could turn the sector around. In fact, due to a negative growth in the hydropower sector, we are witnessing job cuts, reduction in imports and other cost saving initiatives across the supply chain network in the sector.”

Major changes observed
Observing major changes observed during the past one year as far as improving the health of the industry is concerned, De says, “Projects under a central public sector undertaking being implemented in Jammu & Kashmir seems to be the only positive development in India’s hydropower sector seen this year. The central government has made funds available for these projects and they will be contracted either later this year or in 2018. Even while being optimistic, we can still say that the sector is almost dead barring a few projects which were tendered for refurbishment in Uttarakhand and Punjab.”
There is also an interest amongst project developers to explore the option of developing pumped storage plants (PSPs) which are a good peak load sustained energy stabiliser for grid stability, keeping in mind the pace of capacity addition coming through renewable energy sources like wind and solar. “We see movement in West Bengal and Tamil Nadu to develop pumped storage plants which would add 1,500 MW to the national grid by 2021,” he informs.

Andritz’s performance during the past one year
“Andritz Hydro has seen positive growth in the last 2-3 years thanks to our focus on global export orders,” comments De. He informs, “There has been a global slowdown in the hydropower sector in general but the South-East Asian market has remained buoyant. We have received several contracts, with almost 92 per cent of contracts coming from exports. While India continues to remain gloomy, we have managed to retain a formidable position in Nepal and the neighbouring countries. We have also received a contract to refurbish, modernise and up rate a project in Uttaranchal. Though the order intake has not been promising in 2017, there are still some prospects which we hope to bring home in the current year.”

“In the compact hydro segment, the current market is totally a buyer’s market due to lack of projects,” he states. “This has eroded margins with extreme competitiveness amongst the limited equipment suppliers in the market. While looking back this year, so far business has been dull and much lower than expectations. Unless things do not improve in the coming months, most companies in the sector will adopt more austere measures to stay afloat. Andritz Hydro has a healthy order backlog but that does not give much comfort knowing fully well the prevalent conditions of the hydropower market,” he informs.

Andritz’s innovative strategies to remain competitive
Sharing views on innovative strategies to remain competitive De states, “We do not think the market will improve to a commendable situation in the next 1-2 years and we are not of the opinion that the market is set for a massive rebound.” With a falling GDP now down to 5.7 per cent, the grim on-ground situation is simply apparent. The power sector is mired with growth issues in the thermal and hydropower sectors. “The market is devoid of projects and hence is a typical buyer’s market with cut throat contractual obligations. This is not a healthy trend and surely is not a desirable way to thrive in a market,” he adds.

Looking at the current scenario, the company needs to remain competitive, ensure on-time project deliveries, maintain its global quality and stay committed to its esteemed clients across India. “While all does not look good, we remain optimistic for the ground reality to change to a better growth oriented path. We are also optimistic that the government stays committed to its growth initiatives failing which the already failing sector will surely find its own slow death in the near future. In hope we remain,” he concludes.

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