Interview with C.P. Jain, Chairman and Managing Director of National Thermal Power Corporation.
The National Thermal Power Corporation (NTPC), the sixth largest thermal power generation utility in the world, has been making a significant contribution to the development of the power sector in the country over the years. In its 29th year, the NTPC is gearing itself not only to increase its generation capacity more than two-fold but also to go global and diversify in order to become a totally integrated utility by 2017. C.P. Jain, the Chairman and Managing Director of this Navaratna public sector enterprise, spoke to B.S. Padmanabhan about the strategies being adopted to achieve its vision "to be one of the world's largest and best power utilities, powering India's growth". Excerpts from the interview:
It is now 28 years since the NTPC was set up. How would you sum up its performance and contribution to the development of the power sector over the years?
In the last 28 years, the NTPC has emerged as an organisation that has been successful in the implementation of thermal projects and their operation and maintenance. It is not only the largest and the best-managed power utility in India but has emerged as one of the best thermal generation utilities in the world. Recently, in a global survey, M/s A.T. Kearney ranked it as the sixth largest thermal generation utility.
The NTPC has added substantial capacity to itself and is providing over 26 per cent of the total power supplied. Its total installed capacity, as on November 30, 2003, is 21,749 MW, which is about 19 per cent of the total installed capacity of 1,07,644 MW in the country. It has brought to the country many new systems and technologies.
But its most important contribution is that it has set benchmarks for others to follow. Earlier, the plant load factor (PLF) were low. But when the NTPC started recording higher PLFs everybody else thought why they could not do that. This had helped to increase the national average of PLF. In 2002-03, the NTPC recorded the highest ever PLF of 83.6 per cent for coal-based projects since its inception as against the national average of 72.1 per cent. On other parameters too, the NTPC has done better. For instance, it has continuously reduced the time frame for implementing power projects. During the 1980s, the scheduling for 500 MW units used to be 60 months and above. The NTPC implemented its initial 500 MW units in the time range of 57 to 59 months. With continuous improvement in project implementation systems and reduction in the implementation time, the NTPC has been setting up 500 MW units in the time range of 38 to 39 months as demonstrated at its recently commissioned units at Simhadri and Talcher. This has led to a change in the approach of the power sector so far as project implementation period is concerned.
The NTPC has been playing an active role in promoting sectoral reforms. During the recent phase of reforms, it made a major contribution to the government's Accelerated Power Development and Reform Programme (APDRP).
Every organisation has technological inputs and financial inputs. But the most critical factors that determine the prospects of a company are the people and the systems. The NTPC has been working with a transparent and system-oriented approach. It has a progressive human resource development (HRD) policy, which takes care of the competence of the people, their motivation levels and their attachment to the organisation. We have developed a culture that enables the people to remain committed and feel aligned to the organisation. This has been the basic reason for our success. In fact, this has earned for the NTPC the third rank in the Business Today - Hewitt Associates Best Indian Employer 2003 Survey covering 210 major companies operating in India. Among the first five, all are multinational corporations except the NTPC.
Although we are in the power business, we have given equal importance to other things, like environment management and corporate social responsibility, and this has brought us international recognition. The NTPC's Centre for Power Efficiency & Environmental Protection (CenPEEP) has received the United States Environment Protection Agency's `Climate Protection Award' for 2003 and the `Climate Technology Initiative (CTI) Award' of CTI, an initiative of the International Energy Agency (IEA), and the Organisation for Economic Cooperation and Development (OECD). The other major awards won by the NTPC include the ICC - UNEP World Summit Business Award for Sustainable Development Partnership, the Platts Global Energy Award for Community Development, the Shell Helen Keller Award 2002 of the National Centre for Promotion of Employment for Disabled People and the TERI's [Tata Energy and Resources Institute] Corporate Social Responsibility Award for year 2003. The NTPC has been selected for National Award for Disabilities 2003 as Best Employer, by the Ministry of Social Justice and Empowerment.What are your strengths and weaknesses?
Our strengths are our committed and competent manpower and our price competitiveness. Our average price of Rs.1.47 per unit is very competitive. This is due to our implementing large projects in record time schedules and operating them with high efficiency and economy. The Central Electricity Regulatory Commission (CERC) in one of its orders has specifically compared the project cost and fixed cost of the NTPC with those of some private sector power projects and has concluded that the NTPC's cost is the lowest. This way, the NTPC has set rigorous benchmarks, which help the consumers in terms of lower cost per unit of power.
The poor financial health of many State Electricity Boards (SEBs), which are our customers, remains a critical area for us. We have to survive and grow in an environment where many of our customers are not financially well placed. But with the process of reforms in the power sector our collections have improved substantially. With the help of the Ministry of Power, we have arrived at a one-time settlement of the SEBs' dues. Now the realisation is 100 per cent and we have a better cash flow.
The government has targeted a capacity addition of 41,110 MW during the Tenth Plan. In the light of the Ninth Plan experience, do you think this target can be achieved?
The government is taking steps to help the sector achieve the target. The Ministry has been closely monitoring the progress project-wise and has been revising the targets. But two things will play an important part. One is that the government has to come out with a power policy and a tariff policy. A group has been appointed under the Chairmanship of N.K.Singh, Member, Planning Commission. The policies will have to take into account certain ground realities, namely (a) more than 50 per cent of the people do not have access to power; (b) the budgetary estimate for 2002-03 indicates a loss of Rs.24,614 crores to the SEBs, excluding subsidies; and (c) the SEBs account for about 60 per cent of power generation and over 90 per cent of power distribution.
The policy will have to balance the need for providing quality power at affordable price to people with the need to ensure adequate returns on investment to the supplier of power. At present there is a gap of Rs.1.10 between the average realisation of the SEBs and the cost of supply of power by them. To provide quality power to all by 2012, the sector needs an investment of Rs.900,000 crores The policy will have to look at both the consumer interest and the need for investment.
Secondly, when we talk of affordability of power tariff, the affordability has to be seen from the viewpoints of both the consumer and the investor. In fact, the real long-term interest of the consumer to have adequate, reliable and quality power will be served only if there is enough investment for capacity addition, maintenance, systems improvement and so on. We need to ensure adequate returns on investment, which could be ploughed back for capacity addition, repair and maintenance (R&M), technology upgrade and systems improvement. The price should be affordable not only to the consumer but also to the supplier. Only then will the sector grow. So we have to balance all these factors. All will depend upon how much investment comes into this sector.
What is the role assigned to the NTPC in achieving this target and what are the constraints you envisage in fulfilling this target? Do you want the government to come out with any new policy measures to help you?
The NTPC's capacity addition target during the Tenth Plan is 9,370 MW. Already, 1,500 MW has been commissioned, including 1,000 MW at Talcher and 500 MW at Simhadri. Work is in progress for 5,300 MW, out of which 4,500 MW will be completed during the Tenth Plan and the balance 800 MW (the Koldam hydro project, Himachal Pradesh) will be completed during the Eleventh Plan. Orders are being placed for 1,710 MW capacity. For the 1,980 MW Sipat I project, we plan to place orders by the end of December. Out of the1,980 MW, 660 MW will be completed in the Tenth Plan. Besides these, there are two joint venture projects. One is a 1,000 MW project in Nabinagar in a joint venture with the Railways and the other is a 500 MW project in Bhilai with the Steel Authority of India. Out of this 1,000 MW will be completed during the Tenth Plan. That completes our 9,370 MW target. We are on target. This is by far the largest simultaneous capacity addition effort by us.
As regards the second part of the question, my answer is that we have to work in a given environment. We have been alert to the threats and challenges and have always been able to anticipate and deal with them. In a market-oriented competitive scenario, you do not look for too much of policy support. We have to survive and grow in the given policy framework.
What are your plans for resource mobilisation?
The NTPC needs an investment of Rs.104,000 crores. We will raise 70 per cent of this from the debt market. We have already tied up loans to the tune of Rs.10,300 crores. Loan for Rs.7,000 crores is being finalised. We are planning to raise funds through Initial Public Offer (IPO) and we will hit the bourses by early 2004 with our IPO of Rs.400 crores. We plan to follow it up with an American Depository Receipts (ADR) issue to mop up more resources. We are also approaching multilateral agencies to fund suitable projects.
The NTPC has diversified into the hydropower sector. What is the rationale behind this while there is already a PSE specifically set up for this purpose?
If you look at the cost of generation in the long term, hydropower has two advantages. One is that it is a cheap source. Secondly, it is the most environment-friendly source. It does not deplete any energy source. It is a perennial and renewable source of energy. In India, there is a lot of potential for hydropower. Only about 17 to 18 per cent of the hydro potential of 1,50,000 MW has been tapped so far. For rapid hydro development, as many developers (both public and private) as possible should build big, medium, small, mini and micro hydel projects depending upon their technical and financial capabilities. There is scope for many people to work in this area. From the national point of view it is important that the hydro-thermal mix, which has gone down to 25:75, is raised to 40:60. Secondly, it is in the NTPC's commercial interest in the long run that it is able to provide cheaper power. We have already taken up an 800 MW hydro project at Koldam. Work has already started on this. In addition to that, we have taken up three hydro projects in Uttaranchal. These are Loharinag Pala (520 MW), Tapovan Vishnugad (360 MW) and Lata Tapovan (108 MW). We are looking for more hydro projects.
While hydro power projects involve displacement of persons and their rehabilitation, thermal power projects encounter problems of high ash generation and atmospheric pollution. How do you propose to deal with these?
For hydro projects we have a rehabilitation policy right from the inception as part of the project report. This policy, framed in consultation with the local government, clearly lays down what we will do for different categories of affected persons. We vigorously follow it up. We have an exclusive department under an executive director at the Corporate Office to supervise the rehabilitation activities and ensure that we fulfil our commitments. In all such projects, the affected people may have their own expectations but we are fulfilling whatever commitments we have made. In our first project in Himachal Pradesh, we have not encountered any problems on this score.
So far as thermal projects are concerned, there are two concerns. One is air pollution and the other is the ash generated. To minimise air pollution we are using the latest technology. We ensure that the guidelines issued by the Ministry of Environment are followed strictly. As regards ash, we have taken steps to ensure that the ash is confined to the site earmarked for it and does not travel to outside areas. We also see that there is greater utilisation of ash. We supply fly ash for making bricks, laying roads and manufacturing cement. Ash is also used for backfilling of mines. Thus the uses of ash are being increased. We have been progressively increasing the utilisation of ash. We have developed ash ponds as green belt areas.
Can you give an idea of the Perspective Plan drawn up by your enterprise to achieve the goal of "Power for All" by 2012?
We have prepared a 15-year perspective plan for the period up to 2017. Earlier, we had a plan to generate 40,000 MW by 2012. The target for 2017 is 56,000 MW, including hydropower, liquefied natural gas (LNG), and non-conventional and other eco-friendly fuels. In addition to power generation, we want to become a totally integrated utility by taking up power trading, distribution, coal mining, coal beneficiation, and so on. For power trading and distribution we have set up two subsidiary companies, namely NTPC Vidyut Vyapar Nigam and NTPC Electric Supply Company Limited. For coal mining we have applied for some blocks.
Our vision for 2017 also includes plans to go global. In fact, out of the 56,000 MW to be set up by 2017, 2000 MW will be set up abroad. Besides, we have expertise in operation and maintenance and in power plant engineering. One advantage is that our technical personnel will have exposure to different technologies. We have already finalised an alliance with M/s Black & Veatch International for bidding for a power plant in Saudi Arabia. With Bharat Heavy Electricals Limited (BHEL), we are bidding to set up a 500 MW gas-based power plant with 30 mgd desalination plant in Oman. We are in the process of holding discussions with a consortium in Iran to provide operation and maintenance (O&M) services for a 1000 MW gas-based power plant. A United Kingdom-based company has sought the NTPC's association as O&M service provider for operating two coal-based power plants.
What has been the impact of liberalisation on your enterprise and what strategies are being adopted to face this challenge effectively?
We have welcomed the process of globalisation and liberalisation as a positive development. It gives us an opportunity to compete at the international level and improve our performance. Looking at our competitive advantages, we feel that we definitely stand to gain by this. Any organisation that is working efficiently will stand to gain. We are not afraid of globalisation. In fact, we look forward to it. Our performance since 1990-91, which was the year of unfolding the new industrial policy and the new power policy, had shown tremendous improvement on the financial, operational and productivity parameters. We perceive challenges as opportunities and we feel that a market-oriented and competitive environment will help improve the performance of power sector as a whole and the performance of good utilities like the NTPC in particular.
The technology of power generation has been advancing fast. What are your plans on the research and development (R&D) front to keep pace with this?
So far our R&D division has been doing applied research to help us in our day-to-day operations and find solutions to problems encountered. But now we find it is necessary to look at the new technologies being deployed in the area of generation and operation, identify them, develop them, assimilate them and disseminate them.
Our Board has decided to put up a Power Technology and Research Centre. It has been decided that NTPC will spend 0.5 per cent of its profits on technology development. We want to upgrade and expand the R&D activities significantly. The company is planning to engage itself in research activities in the fields of developing alternative fuels for gas turbines, assessing and assimilating the emerging technologies, developing clean coal technologies to suit high-ash Indian coal, harnessing non-conventional energy sources and so on. In addition, we would like to undertake research on distributed power generation technologies, fuel cell technology, among other things, as a part of our corporate social responsibility. We have begun work on two pilot projects, one at Dadri (100 MW) with U.S. Agency for International Development (USAID) and another at Auraiya with BHEL, to indigenise the Integrated Coal Gassification Combined Cycle (IGCC) technology. This would promote thermal efficiency and reduce greenhouse gas emissions per unit of power generated, while reducing coal requirement per unit of power,
What are your plans for diversification and for joint ventures?
We are diversifying into captive coal mining. We have approached the Ministry of Coal for allotment of suitable mining blocks. After allotment of the mining blocks, we will call for bids on a build-operate-own (BOO) basis to develop the mines. The objective is to fill the gaps in fuel availability to the NTPC plants as an internal fuel security measure and also to attempt a better price benchmark. We also plan to set up coal washeries to feed our stations even where it is not mandatory to use washed coal. This helps in improving the environmental performance of the stations and in improving the reliability of the equipment by reducing erosion-related impacts.
In order to improve gas availability for the existing plants and to ensure gas availability for the expansion projects, the NTPC has initiated the process of international competitive bidding for LNG, its regassification and transportation. The company would consider investing a minimum of 26 per cent in regassification ventures and in the associated liquefaction terminal. We have sought international competitive bidding for the supply of 5 mtpa of LNG for the expansion of gas stations by 4,550 MW. We have received proposals for the supply of 3 mtpa of LNG for expansion of the Kawas and Gandhar by 1,300 MW each and 2 mtpa of LNG for the expansion of Kayamkulam by 1,950 MW. Qualification bids have been received.
We are entering into power trading and distribution business. We have set up a subsidiary, NTPC Electric Supply Company Limited, for distribution. It has signed a preliminary MoU with the Government of Uttar Pradesh/Uttar Pradesh Power Corporation Limited (UPPCL) for acquiring 51 per cent stake in Kanpur Electric Supply Company Ltd. (KESCO). We are having discussions with the Government of Madhya Pradesh for power distribution in the Gwalior city circle and with other State governments for possible distribution in the Special Economic Zones. For power trading we have set up NTPC Vidyut Vyapar Nigam Limited, which is negotiating with the Tamil Nadu Electricity Board for the supply of 180 MW surplus power from the Eastern Region, pooled with 180 MW from the NTPC's Kayamkulam project. In the long run, we want to establish a national power exchange, utilising the state-of-the-art technology. We have set up NTPC Hydro Limited to take up hydro projects with less than 250 MW capacity.
We have joint ventures with the Railways, Steel Authority of India Limited and the Tamil Nadu Electricity Board to set up power projects. We are also planning to go global and become an Indian MNC.
Your consultancy wing has bagged an order from Sri Lanka's Health Ministry for a national HIV/AIDS prevention project. Does this imply that the consultancy wing does not confine itself to the power sector? Can you elaborate on its business strategy?
Our consultancy division has helped the Sri Lankan project in preparing its procurement plan. The procurement is funded by multilateral agencies. The NTPC has acquired experience in the area of procurement in compliance with the systems of multilateral agencies such as the World Bank and the Asian Development Bank. We have also given consultancy to the National Aids Control Organisation (NACO) in formulating its procurement plan. Being the largest single beneficiary of the World Bank's assistance, we have acquired a lot of experience regarding the systems of multilateral funding, their requirements regarding procurement and so on. We have helped the Damodar Valley Corporation (DVC) in manpower planning. We have also given human resource-related consultancy to other agencies. In brief, we leverage our expertise as consultants in non-power areas also.
The consultancy division also seeks to globalise its activities and presence. In that process, it may tie up in areas such as solar power and infrastructure projects other than power. The approach is to utilise the expertise for doing business. We also seek to acquire exposure and expertise by joining hands with experienced organisations in different areas.
The NTPC has recently come out with a road map for organisational transformation under the name "Project Disha". What are its salient features?
Project Disha is a comprehensive organisation transformation project with a view to positioning the NTPC as a globally comparable utility, aligned with global best practices in various areas of its processes and functions. The project is focussed on important areas, such as core business strategy, portfolio diversification, globalisation, services business model, IT strategy, structural initiatives, planning process, unit level processes (maintenance, procurement and inventory), engineering initiatives, project planning and execution, performance management system, rewards and incentives, career development system and knowledge management system. As part of Disha, we are implementing an enterprise resource-planning (ERP) project called Lakshya. The ERP initiative is likely to impart a cutting edge to the company in terms of increased efficiency, quicker response to stakeholders' demands, flexibility and transparency.