Power Grid Corporation of India, which saw its scrip hit a 52-week high last week on the back of its robust financial performance for 2015-16, plans a big international push this fiscal by bidding for engineering, procurement and construction jobs overseas, its chairman I S Jha said. In India, PGCIL is adding capacity to ensure not just evacuation of power but availability of cheaper power, Jha told ET in an interview. Edited excerpts:
PGCIL has reported good results for FY16.What's the focus for FY17?
We have sufficient number of projects to be commissioned. We have projects totalling Rs 1,40,000 crore to be commissioned, of which we need to finance projects worth Rs 1,00,000 crore as the rest of it is already done. We must maintain the same level of capital efficiency to commission the projects. We cannot lose the momentum. We don't have the IPO (initial public offering) money anymore but we feel we can do capitalisation as internal resources are not an issue. So the most important task is to strengthen the core business through capital and operational; and process innovation. For our FY17 capex of Rs 20,000 crore, we will need Rs 5-6,000 crore equity. We can manage it with our profit and cash.
You have been talking of diversification. What are the growth areas for future?
In future, we want to give more stress on growing international business. Since fund availability for capex is a restriction, as a strategy we have only focused on India. But we have been working as a consultant in 18 countries, which provides us some fee income and this is helping us get acquainted with the law of the land of these countries. We intend to start bidding for engineering, procurement and construction (EPC) jobs overseas in FY17 and hope to have a reasonable order book by FY18.The next step would be in FY19, we aim to start bidding for project aboard on ownership basis. We feel by then we will have surplus money to finance these projects. We have already started EPC work in Nepal. We will now look at South Asia, the Middle East and the main focus would be South Africa.
The power ministry is seeking to separate the central transmission utility (CTU) function from your business. How will it impact the company?
PGCIL's primary job was to build-own-operate transmission projects. The Electricity Act made the company a central transmission utility, giving it the additional responsibility of planning and granting long-term open access. These are not revenue-generating operations and have acted more as a restriction, stopping us from getting into generation and trading. So if the CTU functions are removed, PGCIL would continue to own its assets and all the revenue streams will stay with us. The newly formed company would only take over the non-revenue generating operations of the company, like planning.
The current government's policies have increased the focus on transmission. How is that translating on the ground?
Earlier, the role of transmission was restricted to evacuation of power. But with the interstate connectivity improving, it is enabling state electricity distribution companies in acquiring cheaper power and has added vibrancy to the market. Discoms now have the flexibility to buy power from wherever they want and are able to get cheaper power.
How has the decline in commodity prices impacted project costs?
We have seen a decline of 10-15% in project cost, depending on the location, due to commodity prices.