'De-risking Is Crucial For Low Tariff To Sustain'

In an interview with BW Businessworld, Praveer Sinha, MD, Tata Power Delhi Distribution talks about UDAY Scheme and more

UDAY Scheme is the talk of the town with states joining and defaulting at the same time. Is UDAY a good enough scheme for the states for come out of their debt trap
Not commenting on the UDAY aspect directly, but there are a good amount of changes that can happen. I personally feel that the structure of UDAY is good and the process laid down is very transparent with a very robust monetary mechanism. Now its future depends on how good the implementation is and how the states take advantage of it.

Now if you see, UDAY is combined with the IPTS and Deen Dyal Upadhya Yojna which gives states financial restructuring for reducing capital cost and the capability for reducing the inefficiencies of A & D losses. All this would help them generate more revenue and stand at a much better position to bring in more technology. Technology is what will make them more sustainable in the long run. So therefore things are envisaged in a very comprehensive manner under the scheme. The jigsaw puzzle will be solved if we ensure all the missing components are placed properly.

When you talk about the missing components, does the major part of it include tariff revision?
In order to improve the financial health of the state Discoms, regular tariff revision is very important. The tariff revision has to be done timely. Only if the scheme tackles the issue of efficiency improvement and cost reflective tariff hikes by making the states accountable, will it be a complete bailout package for the Discoms. Similarly, the cost of power, where steps are being taken by the generating companies, needs to come down. If the coal supplied from the mine to the power plant is corrected, I think there can be tariff reduction by nearly 10-15 per cent. Apart from the tariff revision amortisation of regulatory assets has to be done. The state regulatory Commission could come out with quarterly PPAC on fuel supply and charge the increase that takes place. Why should the consumers end up paying interest cost on the regulatory asset which have been created over a period of time.

Recently, record low-winning bids of Rs 2.97 was achieved in solar. Is this sustainable? Do you think the hype could trigger states to start pressuring developers to match bids from the Rewa auction tariffs, which has happened in the past.
When you are starting with such an ambitious programs, some hiccups would be there. But we should not get worried, because if one falls, five new suppliers will come in and many of them are big international names. I think there is a lot of appetite for the renewable. The tariff that has come is very good, but internationally companies have gone even lower. The type of de-risking that is being done in these countries, help them reach those levels. De-risking of projects is done in terms of take or pay obligation, land allocation, yearly tariffs revisions which makes them sustainably viable in long run. People understand that reducing the risk will get translated into lower tariffs.

TPDDL has managed to cut down AT&C losses by about 70 per cent, in contrast to states who are on a continuous default mode with huge AT&C losses….
If we have to put together, use of technology extensively in terms of automation, GIS, speed control is what TPDDL undertook, implemented and continue to improve upon it. We created a huge capacity within the organisation to absorb this technology, implement and sustain it. Third, we continue to reinvent ourselves with smart grid technology, smart grid, integration of renewable, demand response, storage technology. Also, operationally we have the best parameters in the industry. States have not been able to improve their collection and billing efficiency, including the AT&C losses because there have been no technology interventions and there are issues relating to capacity building and training of manpower.