Last Chance for image makeover of Indian Power Sector

Post Dabhol issue, there was not much investment in the power sector from the foreign investors unlike the oil sector which draws attention from foreign like Cairns etc. Power business is certainly a profitable venture considering the huge demand supply gap in India which is predicted to be continued for another 25 years. Still the sector has not drawn foreign Independent Power Producers (IPPs). The reason for this is the various risks, mostly political risks associated with setting up a power project.

Now, Government is taking some steps to boost the sector through its initiative of setting up of Ultra Mega Power Projects (UMPPs). Now UMPPs are seeing bidding from major Indian power producers but not yet from a foreign IPP. Though lot of foreign capital is coming into the sector indirectly through FII but no player has come directly to invest into the sector.

These UMPPs are going to play that crucial role which can make or break India’s image for future investment in power sector. If the successful bidders, Tata Power, Reliance Energy as of now can run the UMPPs successfully then the future scenario of power sector will be very positive.

Government should take care that these UMPPs should fulfil all the objectives for which they are planned to be created.

The latest row happening of AP govt complaining of no development on Krishnapatnam UMPP. Even Sasan and Tilaiya UMPPs are also facing delays. Earlier, Issues like Reliance Power selling excess coal allotted in Sasan and Tilaiya UMPP and Tata Power filing a case against Government for giving preferential treatment to RPower have cropped up which is not good for the sector. The tariff based competitive bidding is a very transparent process and that should not be diluted by these kinds of allegations. Ideally the excess coal should be given to Coal India’s account. Giving the excess coal to Reliance Power has changed the whole economics of the tariff quotation. Reliance had quoted very low tariffs for the Sasan and Tiliaya UMPPs. The permission to utilize the excess coal in its other projects has given an advantageous position.

It is very necessary for the Government to take extreme precautions while handling UMPP related decisions. As many as 16 UMPPs are planned to be set up which amounts to 64000MW with an investment of Rs320000Cr. The whole world is having its eyes on it. Mishandling with it will create another Post Dabhol years where we failed in significant capacity additions.

Successful completion of bid of UMPPs is a small step, the major job of Government lies ahead when it has to monitor the successful implementation of the projects in a transparent way so that all the stakeholders i.e. IPP, consumers, all concerned utilities and the Government himself gets benefitted thereby attracting global power producers.

Movie Impact

This post might not go down very well with some of the readers. Here I want to point out our affinity towards western culture. The English slangs like “F*** ,A**h***” have become very common in our social life so much so, that using them are considered fashionable now a days. Whereas the hindi equivalents are considered very down market. One person who uses the F word will be considered a stylish one and if the same guy uses the hindi meaning of F word he will be taken as a road chaap guy. Now why is it so? It is all because of the movie effect on our society. Every hollywood movie is full of these words. Even the lead actor and actress use these words in their normal/casual conversation. But in bollywood, it does not happen. What I would like to say that IF the hindi equivalents find places in normal bollywood movies then who knows these hindi words might also be considered fashionable in near future.

Note – I am not supporting slangs in any language or in any form, it is just an opinion.

Triple Bottom Line - From a different angle

Now a days, we often come across the terms Triple Bottom Line or PPP (People, Planet, Profit) which are actually synonymous to the terms equitable balance among the economic, environmental and societal fundamentals.

The concept is very novel but the problem with them is they have become some fancy terms, on which everybody believes but no body or very few practice them. The issue with the concept is that the three factors are considered in the same level or they are given same priority. Now corporations or individuals are so engaged with the economic aspect that they often find it amusing to have the economic aspect in the same level of priority with environment and society. Thus the seriousness towards the concept diminishes and it becomes a theoretical concept which is just used in classrooms.

So, in order to eliminate the above issue, the concept needs to be modified a bit. Using a building construction as an analogy, the following model is developed. The economic value or factor is to be taken as a roof which protects you from all the external factors. The pillars supporting this roof are the environmental and societal value or factors. Now the more economic value you need, i.e. thicker the roof, thicker the pillars you require i.e. more environmental or societal value are required.

Ø EcV> (EnV = SV)

· The priority of economic value is higher than the two

· There is indifference of priorities between the remaining two or priorities will be set as per the situation

Ø EnV and SV are two pillars which support EcV

Ø The arrow represents that on Increasing EcV means the pillars need to be made stronger and thicker i.e. others need to be increased

The benefit of the model is that Economic value is made as the key driver i.e. it will determine the kind of investment and focus you require on the other two factors and not the vice versa making the model more realistic and practical.

Jargon Power

It’s actually a good thing that Prahalad came out a phrase or rather popularised the phrase "Bottom of Pyramid". The current economic condition says that the fortune lies at the bottom of pyramid. Company executives knew this before also but they had never been able to form strategies for this segment as this was not a well defined market segment. Till that time only available term was BPL (Below Poverty Line), but no company’s strategies used to be made for that segment as BPL people are not able to meet the basic requirements, how come will they buy their products? So there was no focus on the poor. But this term ("Bottom of Pyramid") and its much popularity gave the company executives an opportunity to form strategies around a defined target segment.

Dejavu in India

How was Al-Qaida formed? Its roots can be traced back to the Soviet invasion of Afganistan. At that time US-Soviet tussle was going on for their expansion. US was desperate to thwart any attempt of Soviet invasion in Afganistan. Thus it supported the native Afghan Mujahideen in the war with arms and funds. Soviet left and ideologies changed for these Mujahideen and they went on to become the deadliest terrorist organisation in the History.

Now why suddenly I went to the past and traced the roots of this organisation. Its because that a similar situation might be possible in our own country, India. Right now, India’s biggest internal threat is from the Naxalites. Unable to counter the Naxalites, Governments promoted the formation of Salwa Judum, an anti-Naxalite movement in Chhattisgarh. The members of this organisation are getting trained from security personnel, access to funds and arms. They seemed to be effective in counter Naxalite operations.

But what will happen, which might not be very soon, when the naxalites will be removed? Will Salwa Judum disappear? I doubt that. The fear is that same situation will follow which happened in Afganistan. This will be even worse than the current Naxal threat.

As per two PILs filed in Supreme Court, a list of 548 killings, 99 rapes and more than 3,000 burnt houses by the Salwa Judum in last three years.

[Source:- http://www.rediff.com/news/2008/jun/19guest.htm].

This might be just the quoted figures. Actual figures may be even greater.

Cooptation in the political parties

We often see political power games happening in the formation of a government. Now a days what happens is that when the political party in the power tries to do something positive, the opposition party is bound to come up with a negative aspect of the initiative and then protests happens, the whole project is jeopardised and finally shelved. That is what happened in West Bengal, where the Buddhadev’s Nano project was shelved because of opposition from rival party chief Mamta Banerjee. Any state can grow only when all the stakeholders forget all the opposition and work constructively towards the development of the state. As of now the political parties perceive themselves as competitors of each other which is actually good because that brings out the best of the system through POSITIVE criticism. Mind the bold positive which is not happening in today’s scenario.

If we compare a state with a company then the Chief Minister is the CEO of the state who comes out of one of the various political parties which are in turn can be compared with various functions like Marketing, Finance, HR, Production etc. Even these functions also compete on budget allocations. But even if the CEO is chosen from one function, the other functions do not start working out of sync. The company becomes a successful company when all the functions work completely in sync which results in an increase in the value of shareholders of the company. Similarly the political parties need to work in sync to boost the growth of the state and increase the value of its shareholders i.e. the residents of the state. So the first thing to do is to eliminate the perception of a perfect competition among the parties in their minds and promote cooptation which is combination of cooperation and competition.

Who is a thief ?

Who is a thief actually? Is it the one who steals something? No, it is actually the one who gets caught while stealing something. See the example of Raju of Satyam, he was a great business leader till the scam came into the public and now everybody criticizes him like anything. But if the real esate bubble would not have happened and Maytas assets were not devalued significantly then he would have been successful and he would be a great business leader now. But then also the fact cannot be ignored that he did forge the books of Satyam. So what is the catch? Getting caught. Our system always follows the practice of “Cure is better than prevention”. So when this kind of issue comes up, the convict gets some punishment and whole episode is forgotten. I am sure there are many corrupt practices even worse than Satyam going on in the corporate world but these will not be prevented because they are not caught yet which goes back to where I started from i.e. “Who is a thief?”