Government plans to merge all state-run hydropower firms; thermal projects may be transferred to NTPC

NEW DELHI: The government plans to create public sector energy giants with a massive restructuring exercise that will amalgamate all state-run hydropower firms and transfer their thermal projects to NTPC to create strong companies that can take on the rapidly growing private conglomerates. The exercise aims to merge all four central hydropower companies.

According to the proposal, NHPC, SJVN, THDC and NEEPCO may be merged into one organisation that will control 10,000 mw of existing and 32,500 mw of proposed capacity. It would also transfer 4,600 mw of thermal plants controlled by hydro firms to NTPC, which in turn would shed 1,400 mw of its hydropower plants if the proposal goes through.

The proposal has cheered executives of big firms like NHPC but it has created a flutter among executives of smaller companies as they feel smaller firms were created for specific regional requirements. Also, amalgamation can create redundancies or shift a senior manager in a small firm to a mid-ranking position in the big one. It would also eliminate several positions of directors and chief executives.

Power minister Piyush Goyal first discussed the proposal at a meeting on July 2 with the public sector undertakings and gave SBI Caps the mandate to work out a plan, a senior government official said. The official said NTPC and NHPC welcomed the proposal during the meeting. “SBI Caps has suggested merging the four hydro PSUs into one for increasing efficiency, better management and expertise. The power minister believes that one umbrella company will reduce costs and manage the related challenges in an efficient way,” the official said.
The power ministry is yet to take a final call on the issue, he said adding the legal, financial and technical aspects of the amalgamation have to be explored in detail. A senior NHPC official said, “The move will result in cost reduction and easy management, and there will be competition with just private companies.” The company is struggling to add capacity to its existing 6,507-mw plants. The share of hydroelectricity in India has declined from 37% in 1956 to 17% currently.

A senior official in Satluj Jal Vidyut Nigam Ltd (SJVNL) said that the proposal will have legal and financial complications. “There was a purpose for which we were formed. Amalgamation defeats that very logic as we cater to specific needs of the host and surrounding states,” an official in Tehri Hydro Development Corp (THDC) said.

Industry experts said the merger was not possible and uncalled for. Former power secretary Anil Razdan said integration of hydropower PSUS was not possible as two of them are joint ventures with states that might oppose the move. “SJVN is doing pretty well and is Centre’s joint venture with Himachal Pradesh. THDC is a joint venture with Uttar Pradesh and North Eastern Electric Power Corporation Limited has a regional flavor. Integration is practically not possible,” he said.

Shubhranshu Patnaik, senior director, Deloitte in India said the amalgamation was a bad move as world over, the trend is increasing competition and not creating monopolies. “It is a completely wrong way. SJVN and THDC have lately performed well, forcing NHPC to pull up. When the UK brought reforms, it spilt its power sector that was consolidated. China too has a fairly diversified