Arup Roy Choudhury, chairman and managing director of the PSU power behemoth, has earned the reputation of getting things done. If he has to put aside diplomacy, so be it
Award: Best CEO-Public Sector
Arup Roy Choudhury
Chairman & MD, NTPC
Age: 57
Interests outside of work: Writing (he penned Management by Idiots) and playing the guitar
Why he won this award: For shaking NTPC out of its complacency and increasing its power generating capacity from 1,000 to 3,000 MW annually, in less than five years—the fastest ever in the history of India
Arup Roy Choudhury is not in the habit of “pushing problems under the carpet”. “Instead,” says the chairman and managing director (CMD) of the country’s largest power producer, NTPC, “I like to meet them head on.”
Not many CMDs of India’s public sector undertakings (PSU), most of which are firmly controlled by their biggest shareholder, the Government of India, can make a similar claim and escape scrutiny. But in a career spanning 35 years, Roy Choudhury hasn’t balked at ruffling a feather or two to get work done. And he did just that, a few months after joining NTPC in September 2010.
This happened at a meeting with the company’s top directors while reviewing each nut and bolt of the power behemoth. A civil engineer obsessed with tracking expenditures and timelines of each project, Roy Choudhury was unhappy that it cost the power generator Rs 7 crore per MW (mega watt) to build a plant. “I told them I won’t give anything more than Rs 5 crore per MW.”
The director (technical) almost walked out of that meeting. “He must have thought this guy has come from another industry and doesn’t understand [how NTPC works],” recounts Roy Choudhury without naming his colleague. But that financial target has been met. Within four years of his leadership, NTPC has started spending Rs 4 crore per MW, in line with the industry average.
“It was the best thing that happened to NTPC, that we got a CMD who came from outside the industry,” says UP Pani, director (HR) and a nearly-four-decade veteran in the company. Not only is the PSU Roy Choudhury’s first stint in the power industry—he’s amassed decades of experience in real estate and engineering consultancy—the 57-year-old is a civil engineer heading a company where the majority of employees are mainly electrical and mechanical engineers. Today, the common perception is that his ‘outsider’ status was an advantage which he used effectively. “Till he came, we could not see the forest for the trees and were too obsessed with minute details,” says a senior NTPC executive who declined to be named. “Roy Choudhury changed that.”
The change is visible in the performance of the company, which generates nearly 30 percent of the country’s electricity. Till 2011, NTPC would add about 1,000 MW of capacity per year. Then on, with Roy Choudhury taking over, it has added an average of 3,000 MW annually. Though the power sector is yet to recover from the post-2008 slowdown, NTPC has been able to keep its neck above water unlike its peers such as the National Hydroelectric Power Corporation (a government undertaking) and Jaypee Group (an independent power producer), to name a few.
NTPC’s revenues have consistently grown from Rs 54,874 crore in 2011 to Rs 71,602 crore in 2014. “While the power sector continues to face constraints in terms of fuel availability and pricing, delayed clearances and rising debt, it is much better placed compared to IPPs (independent power producers) to face these challenges,” write Chirag Shah and Anuj Upadhyay of ICICI Direct in the institution’s August 2014 report.
This is despite some of the structural and regulatory restrictions that plague the Indian power sector. NTPC operates on a regulatory business model with a fixed return on equity (RoE), of 15.5 percent. It doesn’t sell any of its power on a “commercial” or merchant basis as many of its private peers do.
“The PSU has assured fuel supply and offtake pact (for existing and upcoming capacities) with CIL (Coal India Ltd) and SEBs (state electricity boards), respectively, where the fuel risk is a pass through. Furthermore, NTPC’s tariff is based on CERC (Central Electricity Regulatory Commission) regulation and is among the lowest in the country (Rs 2.8-2.9/kWh over FY09-13), which lowers the risk of backdown by SEBs,” write the two ICICI Direct analysts in their report.
At the same time, Roy Choudhury knows that he can’t afford complacency; there is a lot more to do before NTPC becomes a world-class power generator. Its scrip has underperformed in the Sensex, dropping by 36 percent over the past four years. Its net profits have been erratic: Profits were stagnant in 2011 and 2012 (Rs 9,100 crore and Rs 9,200 crore respectively), improved to Rs 12,619 crore in 2013 and fell to Rs 10,974 in 2014.
To be fair to Roy Choudhury, none of NTPC’s peers have fared better. That said, he is aware of changes needed. “We need to cover the entire power cycle—from mining to generation and from distribution to collection. A halwai (sweet-maker) might make a great ladoo, but he needs to set up a good, efficient operation that is scalable; he should open a shop, make money and bring it back to the business… we at NTPC need to do that.”
Next, Roy Choudhury made sure that the company’s “breadwinners” got their due. “In a few families, there is no respect for the breadwinner. Here, too, no one was bothered about the breadwinner… the guy at the station, located in the remotest of areas,” he points out. The changed attitude was taken forward while awarding promotions; a higher percentage of people posted in these sites were given raises. This rankled his colleagues at the head office who were not amused that employees at these remote plants were treated as VIPs.
(This story appears in the 17 October, 2014 issue of Forbes India. To visit our Archives, click here.)