Power News We love to talk!

APR 28 2015

Renewable energy will cost as much as thermal energy: Hari Sankaran

  • Economic Times, ET Bureau / Hyderabad
  • Created: Tue 28th APR 2015

From being an infrastructure financier to becoming a developer, Infrastructure Leasing & Financial Services (IL&FS) has seen its presence expanding across transportation and energy sectors through 11 group firms and a host of special purpose vehicles. In an interview with Jyoti Mukul, its vice-chairman & managing director, Hari Sankaran, discusses issues facing the infrastructure sector. Edited excerpts:

Land is an essential part of infrastructure development. What are your views on the controversy surrounding the land acquisition law?

As an organisation, I need land to build infrastructure. The question is who will give that to me? There has to be a framework dealt by a competent forum; that is, the government. In this case, it is a public-interest project, so it is for the government to provide land. These assets are being created because these are funded through non-budgetary resources. Therefore, there is a need to have a mechanism by which we recover this money; but the asset, even if financed privately, is for public purposes.

In the power sector, hydropower development has been stagnant, given that rehabilitation and resettlement (R&R) issues make it difficult to set up projects. Even in gas-based generation, there has been little capacity expansion. Do you see growth in gas and hydropower generation?

Hydropower development is a matter of policy. Nepal is setting up 3,000-4,000 Mw that we can buy. In India, we need a policy for environmental clearances and to support R&R responsibly. Since natural gas prices are coming down and domestic production will kick-start, these plants will begin generation.

IL&FS has a stake in ONGC’s gas-based power plant in Tripura. And you are in renewables, too. What are your plans for the power sector?

We are creating facilities in Rajasthan in partnership with the state government. We are doing joint ventures to create solar parks with all infrastructure and connectivity to enable private companies to come in after they bag projects under the National Solar Mission. The capacity is 5,000 Mw and it might have two or three parks. We will offer the space with grid connectivity. It is a specialist activity, as we can provide a lot of operational efficiencies in solar parks in terms of speed of implementation, method of synchronisation with grid, and methods that require permits and approvals. The time between you bagging the project and producing power can be quite intensive if you do not have such frameworks in place. As we build our capacity and understand it, we will do it for other state governments, too.

IL&FS also has 40 Mw of capacity in Madhya Pradesh. How reliable is renewable power and are the tariffs viable?

The cost of renewable energy is coming down dramatically. It is already close to parity with thermal. In a matter of time, renewable energy will be as expensive or inexpensive as thermal energy. Renewable power is infirm but when you go to mega scale you need solutions by which infirm power can be stabilised to grid scale. We need a solution where power comes from wind, when wind is blowing; and at other times, power comes from some other source. However, when scales go up, cost of storage gets added and becomes expensive. In India, we have not given capital subsidy but generation-based incentives. This is a very mature policy response.

Where do you see growth in infrastructure sector coming from?

There are projects coming up in roads, railways and waterways, urban development & waste management, and airports. Broadly, these sectors will see private sector investment, so we are going to look at these. We will look at each bid that is good for us. Currently, we are focused on projects that we have in hand and want to complete.

There is distress in a large number of projects, and infrastructure companies are debt laden. Do you think the investment climate has improved?

In the past four years, there has been a big slack in demand, so many projects are in stress. This translates into weaker cash flow for companies. To that extent, they cannot take on more debt, which will directly impinge on how many new projects they can take. The only way out is economic growth picking. Cash flows will then come back to these companies. They will be more comfortable and will invest. Industry is waiting for cash flow to pick up before they plan their next phase of investments. The government is trying to prime the pump by bringing in projects. This will bring momentum in the economy. It is unfair to expect miracles to happen in a year, especially in the infrastructure sector. It will take at least 24 months for investment to pick up, but we are on that path.

Tags

Rajasthan RAILWAYS Nepal Madhya Pradesh Tripura Infirm Tripura State Electricity Corporation Ltd Grid Renewable Energy Gas Wind Natural Gas ONGC Environmental clearances Hydropower Generation Land Acquisition Energy Power Plant United States National Solar Mission Generation-based incentives Power Hydropower India Solar

Related News

  • Government likely to auction coal to power plants with PPA; companies say not feasible  Read more
  • The confusion over rural electrification in India  Read more
  • US-based Evergreen Power in talks to raise $100 million for India  Read more
  • Costly LNG imports, asset underutilisation hit GAIL profits  Read more
  • Power shortage, peak deficit at all-time lows of 2.4%, 3.2%: Goyal  Read more
  • ONGC officers seek PM Narendra Modi intervention to stall Oil Ministry move  Read more
  • MPERC dismisses petition filed by Ramnik Power and Alloys for review of previously passed order  Read more
  • 'High GST may hurt solar heater makers'  Read more
  • Azure Power, GERMI sign MoU for solar certification programme  Read more
  • Solar scam: LDF workers lay siege to govt secretariat in Kerala  Read more