Centre must not lose the vision

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Centre must not lose the vision

Tuesday, 21 January 2020 | Amit kumar

Nobody would like solar and wind power generators also to turn into NPAs with the key parameters being compromised

The national vision of infrastructure services, which raises the quality of life and ease of living in India to global standards, sets the context of the recently-unveiled National Infrastructure Pipeline (NIP) for the next five years. Projects in energy, roads, railways, urban, rural and social infrastructure constitute the NIP. Of the `102 lakh crore outlay of the NIP, energy takes the lion’s share at 24 per cent of the total investment. Within the energy sector, the share of conventional power, renewable and nuclear energy is 48 per cent, 38 per cent and six per cent respectively. About 42 per cent of the projects are already under implementation whereas 19 per cent are under development and 31 per cent are in the conceptual stage. In both the latter categories, key projects are in the renewable energy sector. According to Finance Minister Nirmala Sitharaman, the Central and State Governments would have an equal share of 39 per cent each in the NIP. The private sector, on the other hand, would have a 22 per cent share, which the Government expects to increase to 30 per cent by 2025.

Elaborating on the energy sector vision 2025, the NIP Task Force envisages an increase in the total installed capacity from the present 356 GW to 619 GW. Furthermore, it expects the share of thermal power to come down from 66 per cent to 50 per cent while the share of renewables rises from 22 per cent to 39 per cent in 2025. Indeed, renewable energy’s share in consumption is envisioned to reach 19 per cent from the present nine per cent. The continued thrust on energy transition is certainly encouraging. Interestingly, unlike the conventional power sector where only six per cent of the NIP is implemented by the private sector, in the renewable energy sector, 100 per cent of implementation would be by the private sector.

Without going into the merits of the projected capacity of 619 GW in a decelerating economy at a time when the existing capacity is either severely underutilised or stressed, the private sector’s appetite to reach 241 GW in five years has to be viewed critically. Reasons for slippages in the 12th Five Year Plan outlined in India’s National Electricity Plan, 2018 include problems in acquisition of land; issues in timely completion of power evacuation systems plus capacity of the transmission system and issues in availability of adequate finances from banks and financial institutions.

In fact, even now, the challenges pertaining to land availability, transmission infrastructure/connectivity, inordinate payment delays, and discoms’ disinclination to sign Power Purchase Agreements (PPAs) for renewable energy continue to act as roadblocks to the sector’s growth. On top of it is the tendency of some discoms to renegotiate the existing PPAs because of an excessive obsession with low tariffs elsewhere, without understanding the dynamics of renewable energy technologies. All these factors ultimately have put a dampener on the sentiments of private players. The spate of tender cancellations or multiple rounds of re-bidding is a testimony to this troubling trend.

This in turn has resulted in a perception of political peril among the renewable energy industry, something that would have been unimaginable earlier. Couple it with the risk-averse approach of financial institutions on one hand and a general lack of appetite for new investments by the private sector on the other, and we have a scenario not exactly conducive to implementation of renewable energy projects.

While several Government initiatives such as reverse auctions and ultra-mega solar parks successfully catapulted this sector to commendable heights, it is time for the Government to provide another push by working proactively to remove already well-recognised bottlenecks. A consistent policy regime with long-term visibility is a prerequisite to encourage private sector investments, whether domestic or foreign. Unfortunately, even at the Central level, lack of clarity on various aspects such as applicable GST and safeguard duty did actually disrupt the pace that the industry had gathered. As electricity is a concurrent subject between the Centre and States it adds another layer of complexity. A conducive policy environment at the Centre alone is not sufficient unless it is backed by an equally supportive State-level policy framework. Discoms being the primary buyers of renewable electricity, whether from large plants or from distributed solar energy, their financial health and willingness to purchase renewable electricity play a crucial role. Curtailment from renewable energy generators, overdue payments and reluctance in adopting solar energy are not only indicators of archaic mindsets but are roadblocks. This reinforces the urgent need for reforms in the power sector — much more fundamental and structural than the ones undertaken so far, backed by strong political will. It is equally important  to recognise the risks associated with unviable tariffs. No one would like solar and wind power generators also to turn into NPAs with the key parameters being compromised for the sake of artificially created tariff caps. Against this background, it would be crucial for the Centre to seize the initiative to take along the States, bringing them on board for effective delivery through the infrastructure pipeline.

(The writer is Senior Fellow and Senior Director, TERI)

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