March 17, 2017

Speaking at 4th Annual ET Power Focus Summit”, New Delhi

Prateek did try to encapsulate some of the changes that have happened in the last three years now nearly, and I am told that during the course of the day a lot was discussed about UDAY, about reforms in the distribution sector. And I am delighted that the audience here is concerned about the distribution sector because out of that we will come out with ideas of what we need to do next. And I have no doubt in my mind that there is nothing in this sector which cannot be resolved, where we cannot find a solution to the issues that are grappling the nation today.

In fact, the other day somebody was telling me a problem is only a problem until the solution is found. And I am sure the various issues that you deliberated today also will have solutions which will come from amongst all of you, all the experienced people here. But I will draw a thread from what Prateek mentioned about the three areas where we have had some progress in the last three years. I personally believe we still have a long way to go before we can rest on our laurels. This sector really needs a lot of change, a lot of improvements and a lot of innovation in the years ahead. But let me try and see what I believe is the way ahead on these three areas that Prateek mentioned – Coal, Solar and UDAY. And within UDAY, of course, you actually encompass the entire sector, most particularly, the distribution sector.

On the coal side, we made a sincere effort that we ramp up production and we have had reasonable success. I think over the first three years of this government, we would have increased production by nearly a 100 million tonnes. This year production growth has been lower, but on the back of two years of very heavy growth we find that the ability to be able to sell larger quantities of coal this year will hold us back from increasing production once more at the scorching pace at which we saw coal growth in the first two years. But I think that’s a delightful situation to be in where we have the ability to produce more but are held back by market forces which only means that for several years to come one can safely plan that India will have sufficient coal, India will not go down the route of coal imports ramping up and reaching a level of what, a lakh of crores or 1,20,000 crores which it had reached 3 years ago.

In fact, I feel very sad that the same effort was not made 7 or 8 years ago, in which case, we could have actually planned a lot more of our power plants in thermal capacity on domestic coal rather than on imported coal. Because I have come to a piquant situation where while we have coal imports on one hand, we are unable to replace those coal imports with domestic coal beyond a point. I am told that at a 70/30 mix is what these imported coal-based thermal plants can absorb, maybe a maximum of 30% domestic coal. I have been telling Gurdeep Singh in NTPC and even other people in the private sector to see how we can further increase the extent of domestic coal so that we can reduce our coal imports even further.

But this is a unfortunate situation that when India needed more coal and we had probably the world’s 3rd or 4th highest coal reserves in the country. We had explored reserves which were of huge amounts. We had ability in the Indian coal companies to ramp up production. We stagnated at 1%, 2%, 3% growth over the last whole decade. I don’t know what the CAGR of last 10 years of coal growth would be, but I suspect it would not be more than 2-3% for the last whole decade before 2014. And I think that, sadly, is a legacy which will cost this country dear for now the next 25 years, because we will have to continue to import for all these so many years. And when history is written and wrong decisions or policies which cost this country dear are written, while we may talk about the Rs 1,86,000 crore coal scam. And, one can argue about those figures, one can say that the coal auctions got potentially even more revenue with only one-third of the coal mines given out than what loss was estimated, and we can keep discussing that till the cows come home.

But to my mind, the fact that having large coal reserves in the country, which possibly 10 or 15-20 years from now will have no value in the evolving dynamics of the world energy scenario. Possibly, a lot of the coal that we have below our ground may just get dinosourised or something, there may never be any use for that beyond a point. And instead of that we are giving an economic boost to economies of other countries. We are creating jobs in other countries. We are spending scarce and precious foreign exchange in India and importing coal from other countries rather than having ramped up our own coal production in the earlier years and ensuring that we only produce power out of domestic coal. And I feel very sad, if one was to put a value to that, probably, it would be 10 times more than what was estimated in the coal scam. And to my mind, this is nothing less than a scam, the fact that we became an import dependent country rather than focusing on domestic output.

I am delighted to share with you that for the last three years I have been pursuing the Tamil Nadu government that they should, they have a UMPP that is slated to come up in Cheyyur in Tamil Nadu. And I would suspect today’s media would probably be only Economic Times, so in some sense, they get the news first, today. But the Tamil Nadu honorable Minister for Power, along with the Deputy Speaker of the Lok Sabha, came and met me today. And I am delighted to share with you that after three years of pursuing them and, in fact, on earlier occasions they have resisted this change despite my trying to prod them that why do you want to set up a UMPP based on imported coal. I would give you a coal mine in Odisha. We will barge it to Paradip. Ship it to Cheyyur. Put a coal jetty there and through conveyer take it to your coal based thermal plant. Why at all are you looking at imported coal?

And I used to often suspect why they want to focus on imported coal despite my willing to give them domestic coal. But I am delighted to share with all of you that today they have come and suo moto given me a letter saying we don’t want to take imported coal, please convert Cheyyur also to domestic coal. And that is what gives me more satisfaction than some of the big numbers that are often thrown out in support of the work that has happened in the last three years, the fact that the country is thinking differently today. I am in dialogue with the coal companies now to focus on quality improvements. We had started third party sampling, it met with a lot of initial resistance. If there are any power producers here they may recall how much struggle we had to do to get the whole system to accept third party sampling. Then when it got established and large amounts of credit notes had to be written out. I think some editorials or articles were written against me for causing losses to Coal India Ltd by insisting on the right grade being charged to the consumers.

But I can reassure all of you present here today that this government believes the consumer is king. We are, in fact, celebrating Mahatma Gandhi’s Champaran Satyagrah, 100 years of Champaran Satyagrah this year. And Champaran was all about domestic power. It was all about domestic strength. It was all about being self-reliant. If any of you look back, Champaran was the agitation which was against the salt tax. And, in some sense, to show the British that India wants to be a self-reliant nation. We want to protect our own industry and we don’t want imported salt coming into the country. We have the ability to make our own salt.

And when I get a success on a thing like the UMPP at Cheyyur moving from imported to domestic coal, I think there can be no better tribute to what Mahatma Gandhi started 100 years ago than bringing something out of the clutches of imports into domestic reliance. And in that same thread, when we believe that customer is king and we want to give the right grade of coal at the right price to the customer, I think it’s also a measure of our concern for the consumers of India that the profits of the coal companies cannot determine the way coal is going to be sold or priced. That will have to be a function of good governance. It will have to be a function of efficiency. And they will have to make their profits out of efficiency, not out of declaring coal grades which not necessarily reflect the reality.

And I am delighted that the third party sampling has given significant relief to the coal-based power plants. From 1st April, I am going to hold the coal companies to perform on improved quality grades, to perform on delivery of the right grades even more strictly. And we are holding a Quality Conference on the 5th of April where we are going to sit down with all the coal collieries and the coal technical people who are running the coal companies to ensure that the right grade, good quality coal is supplied to all the consumers of coal.

And on the third side, on the coal, the third element is going to be better and more efficient utilization of coal. Very recently, my colleague Dharmendra Pradhan who could not be with you today because he’s gone to Uttarakhand where we have just selected, the legislative party has just selected the new Chief Minister of Uttarakhand and he had to be there today. But he has just in the last Cabinet meeting, day before yesterday, approved a pricing policy and a much more liberalized regime for coal-bed methane development and production. And I am very confident that as more innovation, more technology gets developed, more efficient uses of coal will define the way India uses coal in the years ahead, in a more pollution-free or environment-friendly manner, and in a manner which will help us while retaining the value that we have in our coal reserves we will be able to exploit that in a more efficient manner, in a more environment-friendly manner, in a manner which does not harm the people and the interests of India.

On the solar front, and while I was talking of Champaran and domestic self-reliance, you could almost see a twinkle on Rahul’s eyes, he was wondering what the hell am I doing about all the large imports of solar that are coming into the country. But as I have said on earlier occasion, we needed to scale up this industry rapidly, to demonstrate to the world that India is a large marketplace, India is a marketplace where domestic manufacturing can come and prosper. And it was somewhat a chicken and egg story that I was grappling with. If I had focused only on domestic Make in India programme, we would not have been able to get the kind of scale that we have been able to achieve in the last three years. In fact, I don’t know if you are all aware, on 10th March we crossed 10,000 MW of installed capacity of solar, which is nearly 4 times what it was in May 2014 when this government got sworn in. And, I think in another 15 months or so we expect this to go up to 20,000 MW, and we would like to ramp this up further right up to our target of a 100,000 MW by 2022.

But if I had focused only on the Make in India programme, looking at the ability and the capacities that we had in India, we could never have reached this kind of a success. And unless we brought in these economies of scale, we could never have brought the prices down to the level at which we have been able to successfully bring them down, something which today is competitive with thermal power, something which today is affordable for the people of India, something where the resistance of DISCOMs can be mitigated and that price level now will define and determine the future of the solar industry. At these levels, at this scale of consumption, I think domestic manufacturing will now get a leg up. I would urge more and more people to seriously consider looking at domestic manufacturing of solar. We in our Ministry are working out what support is really required to make this industry sustain profitably in India, be self-reliant, be a good investment proposition. I believe in modules we have a reasonably good production base in India. I am also told that it doesn’t require any artificial support. And many of you know that I am one of those who believes that each industry should become self-reliant and should stand on its own feet because subsidies tend to restrain growth of the sector. Wherever possible, we are trying to move out of subsidy regimes and bring in a more competitive framework which is economically viable on its own. I am told modules today have matured and reached that level. We have 6 or 7 GW of domestic manufacturing capacity. And I have told my officials to seriously see how we can atleast eliminate any modules getting imported into the country and ensuring that we get good quality stuff in the country. So I hope the domestic industry will ensure quality is not compromised at any stage.

On the cells side, we still have a long way to go before we can become self-reliant and if the industry ramps it up then just similar to modules I am sure we can also see how we can bring down the imports of cells. And there are many ways we can do it, I won’t discuss that in a public forum. But there are many ways one can ensure that we protect domestic industry within the framework on WTO.

And on the silicon wafer, I believe we will need much larger investments. I have already asked NTPC to see how we can provide land and power at a very very low cost, at a reasonable price. And I am given to understand that sand and power are the two main ingredients to make silicon wafers competitive. We also have the MCIPS, we already have MCIPS where we have expanded the scope, expanded the budget also where capital subsidy is available. But I have been asking the domestic industry and Rahul I would urge you to quickly get your whole people together, even get potential investors who are looking to get into silicon wafers. Do the math and come up to me with what really is required to make this an industry which can prosper in India. And I will have to carefully calibrate the growth of domestic capacity with the ability of imports to affect domestic industry. And I can assure you and most of you know how we have protected domestic industry in the past in different sectors. I won’t get down that path because that doesn’t relate to my industry. But even if you look at NTPC or other thermal plants or PGCIL, they allowed imports up to a certain level, on the condition that domestic manufacturing will be brought in and, today, I don’t think in the power sector we are dependent on imports at all. Even on the balance of plant, on the solar plants that are coming up, by and large India is self-reliant and today when we are looking at solar plants coming up at about Rs 4 crore per MW, roughly, I am told half of that is completely indigenous, the balance of plant part. It’s the basic solar equipment that still comes in through imports. And if we can quickly ramp up cells then module and cell atleast can get out of imports and then whatever time it takes.

Gurdeep you must quickly work with the domestic industry and other investors, or if necessary BHEL and you could take a first mover effort to set up maybe 5 GW of solar equivalent, which means I am told 15,000 capacity of silicon wafers, some such good large scale plant you must seriously look at setting up and then, of course, the private sector will also come up. India will be looking at very large capacities of solar in the years ahead and at these competitive prices getting energy security into the country I believe is a win-win for India. Because this power will give us without any escalation, power for years and years to come. I mean literally only the sun, and sun I hope nobody can take away from us at any time in the future also.

So we have the ability to scale up our renewable. With battery costs rapidly falling, I do see a time in the future where India could become more and more green. And we also have a very major thrust and a plan on which the government is working where we are looking to see what we can do on electric vehicles in a big way. Because we believe oil imports need to be brought down. We have sufficient domestic capabilities to produce electricity and electric vehicles per se are more efficient. We just had a presentation in which I learnt a lot about electric vehicles; I mean against 2000 moving parts, an electric vehicle has barely 20-25 moving parts. The energy co-efficient or whatever the efficiency of the motors as against the petrol or diesel motors is almost three times more in a electric driven motor, almost you can get 90-95% efficiency. And then when you power that with solar power, it can be a game changer, you are looking at really transforming the environment concerns that India has grappled with for so many years.

So we on our part are looking at large scale programmes which can change the way India works, which can change the way India will be in the future. And I am sure, Indian industry will come up to speed, come up to expectations of the people of India. We have a large responsibility to fulfill. But I can assure each one of you that we are committed to fulfilling the promises and the work that the people expect from us.

On the third aspect, UDAY, we have had a year where the state DISCOMs are getting used to working with constrain. In the past, every time they made losses, all they had to do was approach a bank or a financial institution, raise more money to finance their losses and it just kept accumulating year on year. So you had situation where Rajasthan, for example, was saddled with losses of 15,000 a year, aggregating some Rs 70,000 crore when Vasundhra Raje became Chief Minister in 2013. And once you are saddled with this huge liability, the interest cost on that alone just keeps accumulating more and more losses for you.

Uttar Pradesh, where we will be forming a government in the next 2 or 3 days, had a similar story. I think 12 or 14,000 crore losses for the last several years and the new Chief Minister will have to grapple with a lot of serious problems on the power sector, just like Vasundhraji had. Manohar Lal ji became Chief Minister of Haryana, accumulated losses of 30 or 40,000 crores. So, literally, it’s as if the BJP has to come in and clean the mess that the other parties leave behind in state after state that we are taking up. But I can assure all of you that we stand committed to accepting this challenge, finding opportunities from these problems and coming with a sustainable roadmap in which we can solve the problems that the DISCOMs have had.

This morning I was with my party President and I was sharing with him some of the problems I have had in the last few years in Uttar Pradesh. So he said, ok Piyush, let’s start with those areas where electricity has reached, can we give them 24 hours electricity immediately? I said we certainly can if the people are willing to pay for the electricity. And his words were, एकदम कठोर कदम उठाने पड़ेंगे, बिजली चोरी को हम नहीं माफ़ कर सकते हैं | Same way what Prime Minister Modi did in Gujarat and I don’t know how many of you have really studied the Gujarat, what many people call the Gujarat model of development. When Prime Minister Modi first became Chief Minister way back in 2001, there was an election soon thereafter, in 2002, barely a few months or a year and a few months after that, Gurdeep was a part of that story. And every political pundit or every advisor, of course, we don’t have any Harvard advisors like some of the parties in Uttar Pradesh had. We don’t import our advisors from Harvard to come and teach us how to run election campaigns or how to run the state. But everybody advised Modi ji against going heavily against power theft, and Gujarat at that point of time had some of the highest power tariffs, very high losses and the DISCOM was making I think Rs 2500 crore loss in 2001. On an equivalent basis, probably it would be equivalent to Rs 15,000 crore loss today. But when Modi ji came into government, within the first year and soon after that he had to fight an election. Within the first year almost 100,000 – 1 lakh FIRs were filed against people who were indulging in power theft.

And, obviously, if that state had elected the BJP to power, I am sure there must have been people who are also our supporters who must have been chargesheeted or FIRs filed against them. I hope the Economic Times just doesn’t pick up that as the headline for the day. But there must have been people of ………. but every elected representative was under instruction, don’t come and plead the case of anybody who has indulged in any wrongdoing. The wrongdoer has to suffer. And that single defining moment charted the course that the Gujarat power sector had. He won the next election in 2012 with a bigger majority. He continued on the path of reform in the power sector. And I am happy to share with you, now for, of course, several years and many of you may have business in Gujarat who have experienced the joy of having assured 24×7 power supply that Gujarat has consistently maintained 24×7 power supply for industry, for business, for domestic consumers. It has given adequate supply to their farmers so that farm incomes have rapidly grown in that state; farmers have had a better run than other parts of the country.

But most importantly, the power tariff in Gujarat has increased the lowest compared to anywhere in the country over the last 13 years. From 2002 to 2017, now 15 years, if somebody was to chart out the increase in power tariffs for all the 29 states and other Union Territories, the increase in Gujarat would be the lowest as compared to any other part of India. And along with that, that Rs 2500 crore loss within 2 years was converted into a profit and, probably, for the whole decade, last 10 years, Gujarat has consistently made profit, served the people with full power and not increased the cost of power. That truly is leadership. That truly is good governance. And that’s what I think the entire country will have to follow, that is what UDAY is all about. The reforms under UDAY are reforms that have to come from within. The government of India is not giving you any doles. The government of India is not giving any money to fund the losses or fund the misdemeanors or inefficiencies of state DISCOMs. That will be a responsibility that the DISCOM has to take up. The onus is on each state to do that.

Haryana, in fact, has had some early successes. Rajasthan has been able to bring down their losses. Today, the Tamil Nadu Power Minister was profusely thanking the central government for all the initiatives under UDAY. They believe that their losses for this year ending March 2017 would reduce by almost 60-65% and by next year they have promised me there will be ……. That is the power of UDAY if implemented with sincerity. Of course, apart from the huge reduction in their interest liability, today he acknowledged the Tamil Nadu Minister was telling me we have saved about a 1000 crores straightaway in our cost of coal. We have eliminated imports in Tamil Nadu. We are only getting domestic coal as much as we want. The power purchase which at some point in the Southern states was as high as Rs 10 and Rs 11 and Rs 12 per unit, he said in the whole of last year they never had to pay more than the average of Rs 3 or under Rs 3 for whatever power they needed to buy from the exchange. The gas based power plants came into operation and gave them assured supply so they were able to give 24×7 power. And transmission capacity to South India has nearly doubled in the last 3 years so that cheaper power could be transmitted to South India. And all of these things put together have helped Tamil Nadu bring down their losses by 65% in their very first year of implementing UDAY.

So I think there is huge potential. It’s for the states to understand that good governance in the power sector makes for good politics. Gone are the days when there was this refrain that states used to say the more we purchase power the more losses we will incur. I think the time has come now to accept that if you run your distribution company efficiently, if you crackdown on evaders, on people who steal power. In fact, I wouldn’t be surprised if some of the people have also appreciated while casting their vote in the Uttar Pradesh election, the fact that what we were offering them was honesty and we were telling the people that look the 5 or 7 people who steal power, it’s not as if that money is paid by somebody up there. It’s the honest people who pay for the power that is stolen. And that message resonated with the people. The people don’t want to pay the high tariffs which are a result of 30-40% losses in the sector, power theft in the sector or line losses and AT&C losses. They want an efficient system in their cities, in their villages. They want 24/7 power for the children of Uttar Pradesh, of the backward states who have remained deprived of progress for so many years. And they want good governance in the power sector.

And I believe as many of you may have seen this almost became an election issue all through January and February, particularly, the discrimination that was happening in the power sector. Particularly, the fact that the Chief Minister and a very senior Minister of the State are on record in public meeting announcing that look we are such a good government that we have not taken action against those people also who did theft of taxes or theft of power. This was a public campaign, rally speech that was being made कि हमने तो उनपे भी कभी कार्रवाई नहीं की जिसने कर की चोरी की या जिसने बिजली की चोरी की, हमारी कितनी अच्छी सरकार है जनता का कितना संवेदना रखती है|

I don’t believe this can be the national narrative and the people of India also don’t believe that this can be the national narrative. We will have to change. We will have to move the mindset from one of negativity to one of positivity. At least we feel proud and happy that today in Delhi and there are many players here, we have Prateek here, we have Rahul, I think I can see many people here. I would dare anybody to say that they have to had to corrupt the system in Delhi today in the central government to get any work done in Delhi. I dare anybody to give out one example of that. Now we need to percolate that down to the last level. We need that to happen at the bottom of the pyramid if you ask me. We need that to go down right up to the panchayat. And that is where we need the support of all of you. Now if you are going to look at shortcuts then we won’t be able to change the way this country works. That’s why we need support from all the distinguished people who are gathered here today and the people of India at large.

I used to go in campaign rallies. I used to meet a lot of small businessmen, people who are reportedly not happy about demonetization and things like that. But when we got down to a dialogue and I explained what it means to them, what it means to business, what it means to small business, how it will impact the way they work. Ladies and gentlemen, the maximum resonance came from the youth who used to be there in any audience. Whether it was jewelers, whether it was small traders, small businesses, the next generation, the youth used to give the maximum support. They would say we certainly don’t want to do business the way our grandfather or father did it. We want to do it differently. And to my mind, it’s the youth of this country who are going to be the game changers. It is the youth of this country who are going to first raise the flag against corruption, against black marketeering. It is the youth of this country who are going to stand up to an income tax officer and tell him that I am sorry I will not give you a bribe, you do what you want. It is the youth of the country who is going to stand up to that linesman and refuse to pay him a bribe and encourage theft or refuse to pay him a bribe to get his electric connection, but who will raise his voice or write a twitter report or who will go, put up facebook post and say, that this linesman named so and so has asked me for a bribe of so much. I refuse to pay it to him and I want the powers that we need to do something about it.

And I have the confidence that the youth of India are prepared for that. I have the confidence that the youth of India are going to lead that change and I would urge all of you that move out from the thinking, that नकारात्मक सोच जिसको बोलते हैं, the negative thinking. Let’s start getting some confidence into our system. Today in an earlier interaction with the media, a very distinguished journalist raised a question of, will the Muslims feel safe in the new BJP government in Uttar Pradesh? My colleague Manoj Sinha was giving him a very politically correct answer. But I think I felt that this deserved the more correct ……… And my answer was that it’s high time the media also understood the sign of the changing times. Let the media also understand that they have equally played an important role and a very negative role. I am sorry, such organizers of this conference if I rub some people the wrong way. But truly, I mean till when are we going to talk about this disruptive society, about caste, about creed, about religion, till when are we going to keep dividing India and Indian society on these subjects. Can we not start talking about development? Can the media not move the narrative away from negativity?

Today, I was reading a newspaper article about solar tariffs. The heading tried to reflect and tried to say, but you know, ‘actually in the last two years of reverse bidding and all the solar tariffs haven’t fallen at all’. Wow! I loved that. I mean I couldn’t for the life of me figure out the logic and then the article was trying to show that you know, it is the cost of capital that has come down. How did it come down? Because of good policies of this government, it’s technology and economies of scale that have made a difference. How did that happen? Who brought scale into this system? The Modi government. So now if their mindset is going to be so negative then beyond a point, I tell you there will be a time when the people of India and again led by the youth will stop reading these newspapers and stop listening to these news channels which are going to only propagate negativity, but will start looking for people and will start looking for leadership even in the media world of people who are willing to see the signs of change, of people who are willing to accept that change has happened and we will have to move with that change.

I think that is the new future that I can see. And that will be the focus of this government, the focus of the people of India in the years to come, a focus for a new tomorrow, a focus where 24/7 affordable energy is possible, a focus where corruption-free administration is possible, a focus where good governance is possible. And I would urge all of you to join that story, be a part of this new India that Prime Minister Modi has talked about, be a part of the emerging India where India takes leadership position in the world and will no more follow what the world does, but the world will follow what India does.

Thank you very much.

Next Speech

February 21, 2017 Speaking in Outlook Business Leading Edge 2017

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