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We have a long way to go: Praful Patel

Venugopal Pillai ,  Tuesday, October 18, 2011, 15:47 Hrs  [IST]

Untitled - 55We have a long way to go," observed Praful Patel, Union ministry for heavy industries and public enterprises, summarizing the achievement of the Indian power sector. He was speaking at the annual convention of Indian Electrical & Electronics Manufacturers' Association (IEEMA) in Mumbai. Patel dwelt on a range of issues including Plan targets, state of the power equipment industry and the financial health of power utilities.

Regarding power equipment, the minister said that the growing phenomenon of imports of equipment from China was a serious issue. Patel observed that the quality of imported equipment, especially from China, is suspect. He alluded to receiving reports to this effect from independent power producers. While admitting that such equipment could come cheap, "it has not passed the test of time," he noted. Bharat Heavy Electricals Ltd and the other emerging crop of equipment suppliers are bound to feel the heat of Chinese competition, he noted, adding that the Indian power equipment industry needs to produce the best equipment at the most affordable price. The minister assured that the government was in serious interministerial discussions on how to tackle the growing quantum of power equipment imported from China.

All the same, Patel admitted that domestic producers will have to face the challenges posed by imported equipment. "In an era of free economy, it is not easy for governments to put a blanket ban on imports, because we are equally keen that our products are exported globally."

In an independent development, a recently workshop conducted by the National Security Council Secretariat (NSCS) on India-China Trade and Economic Relations, in consultation with the Commerce Ministry, brought to light that increasing presence of Chinese equipment manufacturers in the power sector can gravely hamper the domestic players in the business. In the discussions, under the chairmanship of the NSCS and Commerce Secretary, it was pointed out that imports of Chinese boilers and generators are increasing in the power sector consistently. It is expected that in the XI and XII Plan periods, coal-fired units supplied by China would account for one-third of the total.

The IEEMA conference also saw the release of a report "Indian Electrical Equipment Industry Mission Plan 2012- 2022: Base Plan Document," prepared by Ernst & Young for IEEMA. The document charts a roadmap for the Indian power equipment industry in achieving the target of achieving a size of $100 billion (including exports) by 2020 from the current $24 billion. In his presentation, Rajiv Goyal, Director, E&Y, said that the power generation equipment market is estimated to grow to around $30 billion by 2020 from $5.7 billion now and the T&D equipment market was expected to reach $70 billion from the current $18.5 billion.

The mission plan touches on three broad aspects - enhancement of the electrical equipment (EE) industry, increasing exports market share and converting latent demand into real demand. On the first front, Goyal noted that the EE industry could be enhancement through several measuring including boosting the R&D expenditure, improving manpower resources and making the country selfreliant in critical inputs that are currently imported. Goyal said that India's EE sector spends only about 1 per cent of its sales turnover on R&D, as against the global average of 5 per cent. On the critical inputs side, Goyal cited the case of CRGO steel, a key raw material used in the manufacture of transformers, which is almost entirely imported today. Domestic facilities need to built soon, Goyal observed, given that domestic the demand for CRGO steel is likely to shoot up from 2.5 lakh tonnes per year now to around 8 lakh tonnes per year by 2010.

Giving an overview the plan document implementation, the E&Y top official noted that the final version will be released on March 26, 2012. On each of the 14 action plan subcomponents, a working group would be created. A project management review meeting will be held every month to review the progress, Goyal said.

Focus on Generation: Praful Patel accepted that power sector reforms have concentrated mainly on the power generation sphere, with scant attention to the T&D side. In 1991, when the reforms process was taken up, there was lot of emphasis on the power generation side. "We did not go in the next generation of reforms, which is T&D," he said, admitting, "In fact, we have still not been to do much of T&D. I have no hesitation in acknowledging that this (T&D) is an important area of concern."

Power generation project too still have their share of worries, arising from land acquisition, clearances, availability of power equipment, etc. On the subject of environmental clearances, Patel noted that the country cannot be "over-enthusiastic" about environmental issues. "We need to balance the needs of a growing economy and concerns about the environment." On the issue of nuclear power plants, which has spawned much of the environmentrelated debate, Patel said that as the country enhances its power generation portfolio, there will be a big basket of fuel sources and nuclear cannot be ignored. "Thermal will remain as the backbone of India's power generation capacity but we will have to make sure that other forms of power generation are not neglected either." The minister also noted that India will continue to focus on renewable energy sources, mainly wind and solar.

Plan Achievement: The ministry admitted that the country has consistently failed to meet its five-year Plan targets in the power sector. For the ongoing XI Plan period (ending March 2012), the original target for new power generation capacity was around 1 lakh mw. Speaking of the likely achievement, Patel said, "I don't think we would be crossing 60,000 mw or so." The minister also accepted that under-achievement has been observed in other infrastructure segments as well, and not just in the power sector. "As far as Plan target achievement is concerned, there have been slippages. But if we go in that area of debate, will have to go beyond the power sector," he noted. On the government's planning approach, the minister said that too much time in India is spent on debating the past. This leaves the country with serious mismatches between achievement and targets. "Many infrastructure projects are not good for today - they were good for yesterday, leave alone for the future," the minister observed, attracting spontaneous laughter fom the large gathering.

Power Affordability: An important aspect that Patel touched upon was the purchasing ability of the electric consumer-a subject that he claimed rarely comes up in power sector-related debate. The main reason why power distribution utilities are in bad financial health was that the average consumer cannot afford to buy power even at the generation cost. The financial health of the power sector depends on the consumer who is not in the best of position to pay for that cost of power, he remarked. Industrial consumers end up in paying high rates for power because they are subsidizing for power sold to socio-economically weaker sections of society. Patel therefore observed that a vicious cycle was being created in the power sector. Power is an enabler of economic growth and it is this economic growth that will ultimately help consumers pay for the power purchased. "100 per cent of Indians will need power but only 50 per cent of the people will be able to afford the price. The challenge is — how can we produce the power effectively and how can we absorb the cost equally effectively?" he summarized.

Government Interface: In his opening remarks, Praful Patel said that the interaction with government agencies in the power sector is inevitable. He explained that power is a public utility and whenever one deals with "public" goods, the government must step in as it represents the public. He however accepted that the interface between private sector equipment and service providers with the government could be made simpler and more user-friendly. Drawing a contrast with the information technology (IT) industry that did well without government support, the power sector-generation, equipment and allied industries-has seen much government interaction, he observed. In a lightveined remark that drew roars of laughter and applause, Patel quipped, "I would be the happiest person if this industry grows in spite of the government!"
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