Integrating the ministries of coal, power and renewable energy will improve co-ordination and better align the goals of India’s numerous energy ministries say experts who are lauding the move to club coal and power together in particular given that 70 per cent of India’s power generation is thermal or coal-based.
Of the five ministries – ie petroleum & natural gas, coal, power, mines and renewables, three (power, coal and MNRE) have been amalgamated under Piyush Goyal who has been given an independent charge as a minister of state in Narendra Modi‘s new cabinet.
Some experts Business Standard spoke to said they had hoped petroleum will also be brought under the ambit of an integrated energy portfolio. But the rationale for not merging everything at one go could have stemmed from the fact that the fertiliser and heavy industry sectors also compete for gas where subsidies are a key component.
These factors could have resulted in priorities getting defused as a result of which it was possibly decided that petroleum and natural gas must be kept separate.
“This is perhaps a first step towards having an integrated energy policy that the Planning Commission had envisaged. Gas has been left out of the ambit, but one doesn’t need to reach the goal to merge in a single step. Coal is the foremost problem and hence needs to be prioritised,” said Manish Agarwal, executive director - infrastructure advisory at PricewaterhouseCoopers.
Coal and power ministries have often been at loggerheads with each other, working at cross purposes under UPA-II. They have sparred on a range of issues from coal pooling to raw material sampling on which NTPC and Coal India for instance have had a long standing dispute.
A clubbed ministry will be able to bridge such differences quickly by initiating a “joint sampling exercise both at the point of dispatch and reception,” said Anil Razdan, former secretary of power, giving an example of how synergies can be derived.
With both coal and power ministries working in silos, disputes often went right up to the Prime Minister’s Office in the past with Coal India even being issued with a presidential decree to force it to sign FSAs (fuel supply agreements) with power companies.
“Hopefully under a new integrated ministry such kind of intervention will end and a common minister at the helm will be able to take a comprehensive view,” said Ashok Khurana, director general of the Association of Power Producers.
Razdan believes the much ignored but high performing renewable energy segment will be a big beneficiary of the merger. This is because close co-ordination with the transmission sector is needed to feed wind and solar power into the grid, which traditionally came under the ambit of the power ministry where it never was a priority. Enforcement of renewable energy purchase obligations which have been lax to say the least could also get a fillip.
For a revival of the sector as a whole though, the new integrated ministry will need to do much more than to merely harmonise the coal-power-renewables equation say experts. The centre can play a very limited role in improving the deteriorating financial health of discoms which has resulted in poor off-take and high stranded capacity.
Also nearly 48,000 MW of power capacity that has come up under the competitive bidding framework is facing under-recovery on both fixed and variable costs which calls for quick rationalisation of tariffs which is again under the purview of state governments. Since distribution and transmission, which is the edifice that supports the smooth functioning of the power sector, is a concurrent subject, the need for high level engagement by ministry officials with states will be equally important.
A super-ministry is clearly only the first step in a wide ranging set of reforms that the Modi regime will have to unleash to get the power sector back on track. Reports suggest that initiatives like a PMO chaired co-ordination committee with state chief ministers to oversee key projects like the ultra mega power projects is also in the offing. The sector will be closely watching for such announcements.
