Friday, April 5, 2013

Interview with Mr. Ajai Nirula, COO at TP-DDL on PPP models for Power Utilities in India

Mr. Ajai Nirula, Chief Operating Officer (COO) at Tata Power - Delhi Distribution Limited (TP-DDL) was one of the sessions moderator in recently concluded IUKAN 2013. As a veteran in the Power industry, he shared his inputs on various distribution reforms and the challenges associated with it.
  1. What are the current trends in PPP models for Power Utilities in India? 
    • Presently, three business models are in existence i.e. Privatization, Franchisee Based (Unit Based Input Model) & Concession Based (Now recommended by Planning Commission)
      • Franchisee Based Model: Operates in designated areas, responsible for network maintenance, for a fixed period (generally 15 Yrs.), Bidding is done on price you pay for per unit power purchased
      • Concession Based Model: Fix tenure for 25 Yrs., Bidding party gets a license to operate in the area, bidding is done on viability gap funding concept
      • Privatization Model (Delhi/Orissa): Responsible for AT&C Reduction & maintaining reliability of network, licenses to operate in designated areas, asset valuation at a notional value, incentivization on overachievement of targets, Governed through a regulator
  2. What are the challenges in PPP models in India?
    • Franchisee Based Model
      • How to handle customers if you can’t but power as it is in the hands of  utility
      • How to carry-out enforcement raids (don’t have legal powers to conduct raid)
      • Long term sustainability
      • Quality of material / specifications being used
      • Governance issues as there is no regulator
    • Concession Based Model
      • Not started yet. States are slightly hesitant to go ahead with this
      • Requires calculation of CAPEX etc. for next 25 years
      • No standard bidding guidelines in place
    • Privatization Model (Delhi/Orissa)
      • No political will to take it forward in-spite of a being a successful model in Delhi
      • Asset valuation for future models to be re-looked
  3. What is the future outlook for PPP projects in India’s (Power and/or Water)Utilities
    • Franchisee Based Model: Though in few cases, this model has been adopted; its results on long term basis are yet to be seen. In Bhiwandi, initial results were good but now, pace has slowed down. Agra is yet to show the results. Kanpur has still not been handed over to the party. This model is bankable but only with the support of parent company
    • Concession Based Model: This model can work with few modifications. Needs to be properly explained along-with the problems being faced in franchisee model
    • Privatization Model (Delhi/Orissa): Good model to work for. Some political will is required. It is a win-win situation for private party & Govt. as there is an independent regulator to check the performance and govt. also gets benefitted through better revenue realization in the form of AT&C reduction.
The above views are respondent's personal views, and not to be associated with his company in any other ways.

Posted by: Kunjan Bagdia @ pManifold

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