NTPC to sharpen focus on core generation biz

NTPC Ltd plans to put some of its diversified operations, including its entry into the gas value chain, electricity distribution sector and its hydro power venture, on the backburner.This is being done with a view to stepping up focus on its core business of electricity generation and comes against the backdrop of an impending shift from the current regulated tariff model to a tariff-based competitive bidding regime for bagging power projects from early next year, NTPC's new Chairman and Managing Director, Mr Arup Roy Choudhury, indicated.

NTPC is still to find its feet in the tariff-based bidding format and has so far drawn a blank in projects awarded through the bidding route, including the four ultra mega power projects. Slippages in generation project delivery schedules in the last couple of years are another reason why the state-owned firm wants to go slow on diversification plans.

Reviewing strategy

“The shift to the tariff-based bidding is to happen from next year… There is a need to look at … and consolidate strategic thrust and focus on our core area of generation. This does not mean that we will be getting out of our other businesses. But, clearly, the focus will have to be on generation at least for the next two years, and see this transition period (shift to tariff-based bidding) through,” Mr Roy Choudhury told Business Line.

The Government has categorically maintained that the January 2011 deadline for shifting to a tariff-based competitive bidding regime for the procurement of electricity from the market, and disallowing future projects to enter power purchase agreements on cost-plus, regulator determined tariffs, will stay.

The Central Electricity Regulatory Commission (CERC) had in June firmly ruled in favour of shifting to a tariff-based competitive bidding regime for future power projects, citing better price discovery and lower retail tariffs through the bidding route. NTPC, the country's largest power generator, had lobbied hard for an amendment to the Centre's Tariff Policy to permit continuation of the cost-plus tariff structure for public sector undertakings beyond the January 2011 deadline.

Hydro projects

Mr Roy Choudhury, who took over at the helm of the generation major on September 1 this year, also said a “re-evaluation” of its entry into hydro is on the cards, coming in the wake of a cancellation of the Loharinag-Pala project. The company had already spent Rs 600 crore on the project and placed orders for another Rs 2,000 crore. “We cannot have another Loharinag-Pala happening to us. A re-evaluation of the hydro venture is needed,” Mr Roy Choudhury said.

He also admitted he was “definitely worried” about slippages in project delivery schedules in the recent past, and plans to reverse the trend.

“Getting project delivery on track is a top priority. NTPC has slipped in project delivery and I'm definitely worried about that, even though a lot of factors extraneous to NTPC contributed to the delays. The process of ordering is being streamlined and we're firming up a list vendors, within the overall norms laid out by the Government.”