Tata hopes for a power push in India: Anil Sardana

Now in its centenary year, the company says there is ample scope if the government opens up the sector in a transparent manner

Published: Mar 10, 2015 07:39:18 AM IST
Updated: Mar 10, 2015 04:44:31 PM IST
Tata hopes for a power push in India: Anil Sardana

Anil Sardana
Designation: CEO and MD, Tata Power
Career: Has worked with NTPC, BSES, Tata Power Delhi Distribution
Highlights: Has three decades of experience in the power and infrastructure sector

Tata Power joins a small club of Indian corporations that have been in business continuously for 100 years. The company began with a 12 MW hydro unit in Khopoli (near Mumbai) in 1915, which was built by transporting equipment on horse-drawn carriages from Mumbai. Over the years, it has grown into India’s largest integrated power company and is trying to build a global footprint. Tata Power and its subsidiaries now have an installed capacity of close to 8,600 MW.

The journey, though, has not been smooth, especially in recent years. Its biggest bet, the 4,000 MW Ultra Mega Power Project (UMPP) at Mundra, Gujarat, which is based on imported coal, is reeling under losses after the Indonesian government changed its rules on coal pricing in 2011. Losses at Mundra are threatening the viability of the company. Tata Power’s MD-CEO Anil Sardana, however, is hopeful of better times ahead. He spoke to Forbes India about the challenges facing the company and his vision for Tata Power. Excerpts:  

Q. Four years ago, Tata Power took a call to hold investments in India and look for opportunities overseas. Are you happy with the results?
Let me answer your question with a specific example. In December 2011, we bid for a hydel project in Georgia and one in Himachal Pradesh. In February 2012, we were lucky to be awarded both, to put up power plants of roughly 400 MW each. Today, in 2015, we have completed about one-fourth of the Georgia tunnelling and construction work whereas not even a brick has been put up in the Himachal project. It is likely that in 2017, when the Georgia project is complete, the Himachal project will be in the same shape.  

Yes, four years ago, we started looking globally. In retrospect, we are very happy about that decision. It is sad that 65 years after independence, we are still unable to guarantee quality power to our consumer. This is obviously hurting the entire process of development. Although there are many problems, we have shown that they can be tackled. We were able to turn around a state-owned enterprise [North Delhi Power], which could not be competitive for many decades. Today, the same set of employees has achieved global performance standards.

The power business obviously needs a lot of capital and there is so much to do. Commercially, Tata Power is in tremendous pain. Despite the huge opportunities in business, there is little action on reforms on the ground. After the presidential decree in Indonesia, which made our UMPP non-profitable, we have been pleading for government support to contest it. But we didn’t have any luck. We are going through the corridors of power trying to explain that we can’t continue like this. We continue to supply power from the Mundra project because of our commitments, but that too is in great financial stress. If nothing is done, the project will collapse.

Tata hopes for a power push in India: Anil Sardana
Image: Vivek Prakash / Reuters
Tata Power and its subsidiaries now have an installed capacity of close to 8,600 MW

Q. Has this changed with the new government? Will you look at buying ‘distressed’ power assets?
There is a lot to do if India can open up the power business in a transparent way. Just having a good central government is not enough; we need to see action from the states. We need to align them. States have to let go of (power) distribution to players who can possibly do better. That outlook hasn’t changed as yet. We continue to believe that the time hasn’t come to divert our attention completely to India. It will be some more time before our investment picks up.

Q. How have you fared overseas?
We have created four verticals—India & Saarc, Southeast Asia, Middle East and Turkey and Africa. All the four teams pitch for capital [investment in projects]. Our allocation strategy is to invest in the projects where we have all the clearances and are able to mitigate risk.

Since 2012, we have started implementing the following projects and will see the results in the coming years: We have a 235 MW wind farm in Cape Town, South Africa (under construction), 125 MW hydro project in Zambia (to be completed in 2016), 400 MW hydro in Georgia (phase one expected to be completed in 2017), two distribution circles in Nigeria and imported-coal based thermal plants allocated in Myanmar and in Vietnam.

Q. Are you considering bidding in the coal auctions? How has the fall in coal prices impacted you? Will you divest in these projects?
Our mines were de-allocated too. But we will look at bidding only after the first two rounds, after the process stabilises. We are mostly into imported coal [Trombay and Mundra]; only our Maithon [Jharkhand] project is based on domestic coal. On the price-volatility front, we are careful; we are clear that about half of our fuel demand should be securitised. We are getting out of one of the four mines we hold in Indonesia. We are waiting for the lender’s permission before there is a closure on this. We will look at the other three after this is done.

Q. How are you planning to celebrate Tata Power’s century?
Our founders were truly visionary. A hundred years ago, they thought of lighting up the region using hydro power. 

They started with 12 MW and this has grown to a complex of 450 MW today. In the centenary year, we plan to start another hydel complex of 450 MW, continuing our commitment to clean power. We are also launching a unique initiative—the Tata Power Skill Development Institute through which we plan to train 2,00,000 skilled workers over the next decade. We will train and certify fitters/electricians/welders in a modular manner. One of their courses will also be on ethics. They can upgrade their skills, and will be paid a stipend while they undergo refresher courses. We hope this will help bridge the skill gap. Over the years, we will ensure that our suppliers and contractors hire from this pool of technicians.

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(This story appears in the 20 March, 2015 issue of Forbes India. To visit our Archives, click here.)

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  • Dr.a.jagadeesh

    Excellent. One area that is open is Offshore Wind farms in India. India has long coast. Unfortunately not even a single Wind Turbine offshore installed in India while Europe leads. An established major business Group Tata Power can go in for Offshore Wind Farms in a big way. Dr.A.Jagadeesh Nellore(AP)

    on Mar 12, 2015
    • Cuckoo

      Thanks for your comment Dr Jagdeesh. Upstream oil PSU ONGC is conducting a pilot on offshore wind power and hopes to launch a biggish project in the western offshore soon.

      on Mar 18, 2015
  • Ashok Thapar

    In a carefully worded message, Sh. Anil Sardana, CEO and MD, Tata Power has not only highlighted many ills and issues of our country\'s Power scenario viz-a-viz other countries but has also given an insight into the current and future endeavors of Tata Power. His concerns about the development of new projects in our country at snail pace (inordinate delays and cost over runs) need special attention. Tata Power would definitely take a cue and make course corrections in their business models as the present Government is indeed showing more action than promises. In a laudable performance of the first phase of e-auction of coal blocks by the coal ministry (barely in four months), has set the tone for allocation and discovery of value of natural resources. With this, the power rate is likely to get reduced by around 6 paise a unit for every decline of Rs 100 a tonne in the bids. Sh. Sardana\'s views reflect optimism and hope in the system. The issues taken-up by him could act as trigger points to be pondered over seriously by the policy makers, particularly by hon\'ble minister of state for coal, power and renewable energy whose proactive approach will definitely bring about a visible change. I firmly believe that before we endeavor garnering multi-billion dollar global investments in power sector, we need to have our own players fully utilized, since they have a better feel of the system. I congratulate Sh. Sardana, his team and the entire Tata group for completing hundred years of successful operation. The backbone of the Tata group has been their ethical approach in the business. Today we too need a similar moral operating system within us. Mr. Sardana, keep up the good work, good luck and God bless. Ashok Thapar, Former Member/Power, Bhakra Beas Management Board.

    on Mar 11, 2015
    • Cuckoo

      Thank you for your comment Mr Thapar. The coal block auction could well be a game-changer of thermal power generators. But it will need a lot more than that to get the power business back on track.

      on Mar 18, 2015
  • H D Thaker

    why the present Central Govt is keeping their eyes closed when a 100 years old power pioneering co is exploring power business out side India. This is more true when we are inviting lots outsiders for make in India. A business remains viable only when break even is achieved but consistently if Mundra is going to loose than what way any business house will have initiative to do business in India that too in power sector which is basic infrastructure. present power centres have to look in to this.

    on Mar 11, 2015
    • Cuckoo

      Mundra was obviously a huge bet for Tata Power- very attractive because of its scale. It makes up roughly half of the company\'s 8600 MW domestic capacity. But it has sadly turned out to be a huge drag and has caused consolidated losses and debt to grow to the highest levels in the company\'s history.

      on Mar 18, 2015
      • Rama

        How come a company like TATA power ignored to consider the regulatory impact on coal exports from Indonesia? how come they failed to have any financial cushion against unforeseen circumstances?

        on Mar 31, 2015