India’s power sector has been showing signs of revival of late. The demand for power crossed 6.5 per cent in the first nine months of FY19, with the government becoming more proactive in dealing with sectoral issues and lenders to dozens of stressed power project working hard to resolving them. Vneet S Jaain, CEO, Adani Power, which got a major boost in the end of 2018 after the government amended the power purchase agreement (PPA) for its flagship 4,260 MW Mundra power project in Gujarat, shares his outlook on the sector with BusinessLine . Excerpts.

Experts are optimistic about the power sector, as they expect demand growth to remain at around 7 per cent. What are the other factors that could help the sector get back on track?

Increase in demand/PLF will result in better utilisation of the available capacity and reduce the overall cost. Even without considering any pick-up in industrial demand and creation of reserve capacity for reliability and transmission/coal constraints, we believe the current installed and upcoming capacities can best cater to the peak demand in FY21-22 .

Having said so, we firmly believe that there is an immediate need to restart the capex cycle in [power] generation, followed by transmission [segment], as well as immediate attention to ‘distribution’. We hope this will get a boost with favourable amendments to the Tariff policy & Electricity Act, coupled with the implementation of HLEC recommendations and enhanced coal allocation under SHAKTI. We also hope that through commercial mining coal production will improve over the years to come.

Have you seen an improvement in discoms’ health. Will they be willing to sign PPAs for thermal power, going ahead?

The progress under UDAY has been significant as discoms’ losses have reduced from ₹633 billion in FY2014 to ₹190 billion in FY18 and ₹112 billion in H1 FY19, and they seem to be well on track to be contained within ₹200 billion.

Having said so, of late, discoms had been relying on open market purchases for meeting peak demand as the same was available at competitive costs; however, with the recent spike in spot prices, discoms will be willing to enter into PPAs as a sustainable measure. This is also evident from the recent execution of around 2 GW medium-term PPAs. We believe that from a sustainable, long-term viewpoint, discoms would start inking PPAs over the next one year period.

You mentioned government efforts to tackle stress in the sector. Do you expect the issue of stressed assets to get resolved in the next one year, and how actively are you participating in this opportunity?

The government, has taken several steps to address the stress in the sector, which will definitely help resolve demand-side, supply-side and financing issues. But time-bound execution of the same remains the key. Further, the Supreme Court’s clarification, coupled with efforts from the government that public interest is paramount and in such cases even competitive bidding PPAs can be amended, is a significant development that makes us believe that the issues being faced by the stressed assets will get resolved shortly.

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