“Restoring the financial health of state power utilities and maintain the same, is the only long term solution for all the ills plaguing the power sector,” says HP Yadav, MD and CEO, Paltech Cooling Towers & Equipments Ltd
Major roadblocks for Indian power sectorMost state power companies are inefficient, suffer power and financial losses, and extend unsustainable subsidies owing to political interference, said HP Yadav, Managing Director and CEO, Paltech Cooling Towers & Equipments Ltd. He observes that despite a couple of massive fund infusions to cleanup past mistakes and start with a clean slate have failed.
According to Yadav, many new projects were stalled in last couple of years on account of: Shortages in local coal supplies and costly imports Banks and financial institutions turning negative on funding power projects Land acquisition and people consent issues related with new upcoming nuclear power plants are yet to be resolved.
The Supreme Court had cancelled allotted coal blocks on alleged irregularities in allocation. Though fresh auction for many blocks has been carried out by the government, practically it has not reached to ground, he observes.
Impact on business sector Cooling Towers sector is involved in manufacturing of components, installing and commissioning cooling towers for new power projects. “In the absence of new power projects, our sector is facing a massive no orders problems in market, resulting closure of few companies and many companies are facing danger to close,” says Yadav.Rising input costs, especially manpower and interest, have further impacted margins. Recent reduction of interest rate by about 1per cent by the RBI has not been fully transmitted by commercial banks to end users, Yadav points out.
“In-ordinate delay from customers’ side in execution of projects is a major problem for our sector, resulting in cost escalations and consequent losses,” he further adds. Suggested short term measuresThe new government has announced to take few steps for rejuvenating the power sector, like reallocating cancelled coal blocks, push to stalled projects and recapitalisation of state power companies. Government must implement its policies in timely and targeted manner, opines Yadav.
He feels that there are not many short term policy options for reviving the power sector. However, he outlines: Interest rates may be brought down steeply for power and other stressed sectors through a special mechanism Excise duty may be reduced for a couple of years for suppliers to the power sector Encouraging power companies implementing new projects to prevent delays from their side and enable speedier completion of jobs by vendors.
Restoring financial healthRestoring the financial health of state power utilities and maintain the same, is the only long term solution for all the ills plaguing the power sector. According to Yadav, this can only be achieved through:
Recapitalisation of power utilities
Ensuring that they charge the right price for electricity supplied
Drastically reducing power thefts or losses
Preventing state governments from interfering in the affairs of the state power utilities for vote bank considerations.