Driving To Deliver Your Business

The PSU road to green transport — and profits

“We are a thought leader,” says Kumar. “The way we approach a sector is to look at why it hasn’t gone forward. We try and analyse the bar riers which affect the marketplace of that sector and then design our intervention in a manner which overcomes the barrier while keeping the end result simple for the consumer.” In other words, EESL’s mandate is to create demand for electric vehicles, which it plans to do by making these cars affordable. The company has done this before to great effect.

In 2015, EESL undertook what was to become its biggest success: implementing the government’s UJALA scheme to distribute 270 million LED bulbs. The PSU bought LED bulbs in bulk directly from the suppliers and distributed these under the scheme. With the assurance of a steady market, suppliers started to improve production efficiency.

The result was a massive drop in the prices of LED bulbs, from Rs 300-plus in 2014 to under Rs 50 now. Good news for consumers, sure, but it was also good news for EESL. The PSU was devised as a super ESCO or super energy services company, and not as a manufacturing or distribution company.

By definition, ESCOs work as commercial non-profit businesses to help implement energy-saving projects by devising ways of creating demand for efficient products. EESL is not a classic ESCO; it makes money by charging for the products and services it delivers, although it doesn’t aim for huge profits. EESL has a 13% profit markup on all schemes, and is seen as profitable as well as viable.

The UJALA scheme–along with programmes such as the promotion of smart meters, energy efficient air conditioners, and solar-powered water pumps for farmers–helped EESL clock revenues of Rs 1,227.2 crore and a net profit of Rs 51.8 crore in 2016-17. That momentum does not seem to be slowing. In the first half of FY18, the company clocked total revenues of Rs 601.9 crore and a net profit of Rs 29.7 crore.

Kumar expects that by next year, revenues will go beyond Rs 2,000 crore. At a time when PSUs are getting a bad rap for poor performance, EESL stands testimony to the fact that a public sector company can bring in the money, while doing good. Details of the extent of PSU losses are on page 60 (PSU losses: Rs 1000000000000 and counting).

Reason enough for government think-tank NITI Aayog to identify some of these loss-making PSUs for closure; it is also planning a strategic disinvestment of 20 more Of course, EESL is on no such watchlist. It’s one of the unlikely heroes of the public sector, largely thanks to the fact that “green” is now mainstream; things like climate change have entered public discourse.

More important, the government’s green agenda is clear. Less than a year after coming to power, the Narendra Modi-led Bharatiya Janata Party government set a tough target of having 175 gigawatt of renewable power capacity in place by 2022. More recently, in the Economic Survey 2018, chief economic advisor to the finance ministry Arvind Subramanian used data from the India Meteorological Department to conclude that India is getting hotter and drier.

This is the first time the Economic Survey looked into the impact of climate change on agriculture. To its credit, the government has followed the talk about green with direct action. From finance minister Arun Jaitley’s first budget, the clean energy cess on coal has been doubled every year.

In fact, the government pegs this as India’s carbon tax. In 2014-15, Jaitley doubled the existing clean energy cess of Rs 50 per tonne of coal used to Rs 100. The next year, it went up to Rs 200.

The cess has helped the government raise Rs 56,234 crore since 2014-15. (With the introduction of the goods and services tax such cesses have been subsumed in the larger GST.) The higher cess made thermal power more expensive. Meanwhile, solar power has become cheaper.

That’s important to distributors, who are now willing to supply renewable and thermal power because there’s some parity in prices. Then, of course, there’s the LED bulb distribution scheme, and the electric vehicle plan. Which brings us to EESL’s ambition to repeat the UJALA success with vehicles.

But first, it’s worth understanding the genesis of this PSU. EESL is not a recent creation. Its roots go back to 2002, when the Bureau of Energy Efficiency (BEE) was created under the Energy Conservation Act.

BEE started rating products based on their electricity consumption, but the government found it tough to get people to buy BEE-rated energyefficient products at a premium. “At that point, we were struggling with the creation of a market, and realised this chicken and egg situation of bringing in new products on the one side and demand for products on the other needed to be addressed,” recalls Ajay Mathur, director general of TERI – The Energy & Resources Institute. That conundrum took nearly a decade to resolve.

A decision was made to create a separate company to find a solution to the problem of creating sustainable demand for energy-efficient products. “Anil Razdan, who was secretary at the ministry of power, me, and Saurabh Kumar who was secretary of BEE, created our first concept notes. These moved through government systems and finally it was decided to form a company through a joint venture of four PSUs,” says Mathur. If any company can help meet the government’s ambitious target of only electric vehicles by 2030, that company is EESL, says Kumar.

The tender for 10,000 electric cars came as a shot in the arm to car makers. “We have seen a company which has not sold a single electric car in India–Tata Motors–come in and offer an electric car. That says a lot. You have suddenly changed the equation, where you had only Mahindra & Mahindra, now you have Mahindra and Tata.

The consumer has more choice and the manufacturer has a market,” says Mathur.



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