Adi Engineer's unassuming demeanour hides a keen intellect and a burning desire to see his company straddle the energy and communications sectors as a top dog. With several decades of rich experience in the power industry, the managing director of Tata Power is well equipped to reorient his company along a new growth path.
Under the stewardship of Mr Engineer, who has been with Tata Power for two decades, the company has already taken the first few steps in transforming itself from a Mumbai-centric power-generating entity to a significant player in the energy and telecommunications arena at a national and global level.
So what are his plans for the coming years? In a power-starved country, where the privatisation of the industry is happening in fits and starts, how does he intend to make Tata Power contribute to the Indian needs? These and more questions were answered by Mr Engineer when he met KA Anantharam for over an hour at his office in Bombay House.
tata.com: On Tata Power
Adi Engineer: Our company has been a pioneer of sorts in many areas of the Indian power industry. We were among the first few to be given a license to operate in this sector and continued to do so despite the winds of nationalisation blowing across the country.
From the very beginning we took our responsibility as a private power-generator very seriously and have always ensured that we operate to international standards in the generating arena. I think decades of, largely, uninterrupted power supply to the city of Mumbai speak volumes of our generating capabilities. Over the years we have gained expertise in a variety of generating processes — thermal, gas-based, hydro etc.
But since the last few years we have been growing our wings. We have consciously moved from being a Mumbai-centric power generating company to being a big player in the national and global scene. We are also moving fast to establish our footprint on the energy and telecommunication sectors.
We have also moved into the management of captive power generating units for the corporate sector, which is clearly an expanding line of business for us. We began by taking over the captive power units of ACC at Wadi and Tata Steel at Jamshedpur and are in the process of taking over and managing such units for other corporate entities. This is a win-win situation for both parties. The company gets to concentrate on its core competencies, while Tata Power leverages its expertise to deliver value to the company.
tata.com: On the Tata Power presence in energy
AE: A power plant does nothing but transform one form of energy to another. Having gained enough expertise and experience in operating power plants efficiently, we have made a conscious move to seek a foothold in other areas of energy. This, we believe, will give us a lot of flexibility and synergies in our core operations.
We have made a beginning with our investment in Tata Petrodyne, which is actively into energy prospecting. Our first partnership in this regard, with Enron and Cairns Energy of the UK, has struck paydirt with the finding of gas reserves in the Gulf of Cambay. Being a significant energy player not only helps us mitigate the risks of being only a power producer, but also gives us an edge in terms of sourcing of energy for our generating needs.
We propose to increase our presence in various other areas of energy over the next few years.
tata.com: On the state of the Indian power industry
AE: The Indian power industry is bedevilled by several problems, largely due to the political overtones any change in this industry takes. The explosion in our population base and laxity in the government have aggravated the problems.
Large sections of our population in rural and urban towns enjoy free power at the cost of the generating units. Where billing of power consumption is possible, billing authorities have been very lax and have, very often, colluded with the consumers in cheating the distribution revenues.
Technical loss to the distribution agencies due to transmission over long distances is normal in all countries. However, in our country this has assumed alarming proportions, and that too in certain states in north India, due to commercial losses, wrong billing and theft. This disproportionately large loss puts an extra strain on the entire national power distribution network.
It is not that this problem cannot be solved. It requires tremendous amount of governmental support and political will. And, this cannot be done overnight. There has to be a well thought out five-year plan over which the defects plaguing the industry today can be systematically rectified.
A large amount of discipline needs to be brought into the state electricity boards. Power tariffs must be revised in phases over this five-year period. Cross-subsidy, like is being done today, should be eliminated so that all consumers find the costing to them fair. The change process should be started across the country in small blocks and accelerated across the country as the experiment with the small blocks yield results. I repeat, this can succeed only if there is a concentrated and sustained effort.
tata.com: On the privatisation of the Indian power industry
AE: I personally believe that privatisation of the Indian power industry has begun at the wrong end. First the power distribution end should have been privatised. Today, most of the power distribution is in the hands of state-owned electricity boards which, for reasons that have been enumerated often, have been rendered inefficient and sick.
What is really required for a vibrant power industry in this country is for the state electricity boards to be reconfigured into corporations, which could then be privatised. In this process of privatisation the governments must keep political influences off the process and allow the private parties to turn these corporations into efficient and commercially viable units.
The current privatisation process is like old wine in a new bottle. By using the existing distribution system and staff you are forcing the private power generators to sell power to these sick distribution units, which would continue to make losses.
Again several procedural issues still need simplification if the impetus for private sector to enter this industry is to succeed.
tata.com: On Tata Power in the privatised environment
AE: Tata Power has been uniquely placed to take advantage of the liberalised policies in the power industry. Our lineage and years of generating experience in the Indian environment make us well suited to get into some privatised projects in the country.
However, we have not jumped into privatised power indiscriminately. There are still several regulatory and licensing issues in the so-called privatised atmosphere. We have only bid for those projects where, we believe, our investments are protected. We have projects in the states of Karnataka, Maharashtra and Jharkand. Our 81 MW project in Belgaum (Karnataka) has already been commissioned. We will continue to seek opportunities in the new environment and seize them as we see a neat fit with our plans and as long as the business is viable with long-term prospects.
In the past Tata Power has worked in about ten countries from Malaysia in the east to the Middle East countries to our west. The latest project we were involved is at the Jebel Ali Free Trade Zone in Dubai.
tata.com: On his recipe for the Indian power industry
AE: The Indian power industry requires a more holistic planning exercise that can cover all aspects of the energy sector. This could include looking more seriously at nuclear power, hydro power, energy exploration and making the distribution network stronger.
India should tremendously increase its oil prospecting so that Indian power generating companies are insulated from the vagaries of the international price movement in petroleum.
With abundant rainfall, the country should tap hydro electric power on a larger scale. Hydro electrical power is very suitable in the hilly terrains of Himachal Pradesh and, despite the longer gestation period, the renewable cost of producing energy is minimal, making it a very attractive proposition.
The ideal formula for thermal generating stations is for them to be at the pit-heads. This would facilitate lesser transportation needs of the coal and can allow the resultant fly-ash to be filled into the empty pits, thus avoiding a major environmental problem.
We should also encourage coastal generating units which could rely on imported coal.
On the distribution front, tariffs should be gradually increased across the country. Only this will ensure a vibrant distribution network that will be up to date and efficient. The regulatory authorities should be given more teeth to deal with problems without undue political influences.
While I do realise the importance of environmental preservation I think we need to urgently bring about a balance between our environmental concerns and the needs of development. Only this would ensure speedy implementation of power projects and help in bridging of the demand-supply gap. In fact, Indian environmental norms are already stricter than some western countries and I think we should look for a way to continue with the development of the country without any significant damage to the environment.
tata.com: On Tata Power's foray into the telecom sector
AE: Our plans for the telecom sector are integrated with the Group's plans for this sector. We are working in tandem with the Group and in line with activities of other group companies. There are ten group companies in various ends of the telecom business. We strongly believe that, with our experience with fibre optic networks, we can stitch together a master plan that will synergise the positives of the communications business for the greater advantage of the Group.