NTPC IS the rare case of an Indian public sector undertaking (PSU) that makes real profits out of quality utility service through competitiveness. Started as the National Thermal Power Corporation in the later part of the 1970s, it is managed by professionals with a solid background in Indian and foreign companies of repute. The management has succeeded in keeping away leeches (corrupt ministers and IAS officers kowtowing their line) to transform PSUs into personal estates, even though it is 90 per cent owned by the government. It has expanded operations to notch up a market-share of 25 per cent in three decades while paying attractive dividends. Within the power sector, NTPC's performance is in refreshing contrast to the perennially loss-making power stations of sick State Electricity Boards.
Even the other central venture, the Nuclear Power Corporation (NPCIL), is a huge white elephant producing less than 2 per cent power after gobbling up more public funds every year than it earns to ostensibly fund new projects that go on and on and on. NPCIL is manned entirely by government servants, mostly white collar, with no obligation to perform. It can afford to spend huge budgets to hype supposed "breakthroughs in national strategic interests" by cultivating the media. NPCIL reports directly to the PMO and its accounts and affairs are beyond the scrutiny of the courts, Comptroller and Auditor General (CAG) and even parliament. The highly secretive environment in the guise of "national strategic interests" has inevitably led to corruption and nepotism and non-performance.
This is the case, to a lesser extent with most other Indian PSUs. They enjoy a monopoly and paint a rosy picture by manipulating performance figures with cross subsidies. The PSUs naturally go into the red or even fold up, for example, Heavy Engineering Corporation (HEC), HMT, Indian Telephone Industries (ITI), Air India, and Modern Bakeries - when de-monopolised and forced to compete.
In a shocking anti-reforms development during the regime of the man considered as architect of the reforms, NTPC is now at risk of losing out to powerful self-serving elements. Ministers in the UPA appear to be hell-bent on pushing the NTPC into the gallery of dying or dead PSUs. At stake are thousands of crores of rupees that will flow from the balance sheet of NTPC into greedy pockets in the form of kickbacks. The actual damages they would be inflicting to the company in the long term by interfering in the management issues may be several times more than this.
The corporation had, in 2004, accepted a bid from Reliance Industries for the supply of 12 million standard cubic metres of gas per day (mscmd) for 17 years to its Kawas and Gandhar expansion projects. Reliance subsequently started dragging its heels as it wanted to go back on the committed price of US$2.34 per mbtu (million British thermal units). It avoided the formal signing of a purchase agreement on one pretext or other. In December 2005, NTPC took the company to Mumbai High Court to force it to fulfill its commitments. The oil ministry was not as "tough" about corporate ethics as the NTPC management. Reliance could lobby with the ministry babus to approve almost 3.8 times the investment outlay in exploration and production facilities in the Krishna Godavari field.
The ministry was eventually 'convinced' that the hike would improve peak production from the wells to almost double that originally estimated. Accordingly, the government fixed US$4.20 per mbtu in 2007 as the "minimum price" payable for the gas from K-G D6 block to recoup the additional investment. While this was an acceptable practice, the company enlisted the blessings of the ministry to demand that the new price apply even to the pre-existing firm contracts entered into earlier. The power major has another contract for ten years to procure 2.0 mscmd of regasified liquid petroleum gas (LNG) at US$6. 4 mbtu from GAIL, which works out to a delivered price of US$8.00 mbtu.
The government pressurised NTPC to pay the revised price to Reliance which works out to a delivered price of US$6.70 arguing that that the power company will still be saving US$1.30 per mbtu. But, NTPC management led by Chairman and Managing Director RS Sharma refused to connive in any such sell out. It is keen that Reliance fulfil its commitment for the agreed 17 years. The company has floated a tender for 1.9 mmsc for 6 months starting from September 2009, refusing to touch Reliance gas at more than the committed price. After all, it has a strong case because the tender had been handled with absolute transparency as per global norms. So, it is ready to risk incurring the extra $1.30 per mbtu rather than succumbing to the latter's tactics. The loss amounting to approximately Rs. 1000 crores can be recovered from Reliance if the court upholds its stand. Any sell-out for the sake of pleasing mandarins would also jeopardise its future prospects of inviting global investments.
(To be continued)
