The first part of this series, “Futureproofing Indian Public Sector Enterprises,” emphasized that to achieve net-zero emissions by 2070 and follow the 1.5°C pathway, India must significantly reduce its use of fossil fuels in its energy mix. This presents a major business risk to key Indian Public Sector Enterprises (PSEs), which have a strategic presence across the fossil fuel-dominated electricity sector value chain in India. These PSEs are valuable assets for the Indian state and provide significant financial benefits to its primary shareholder, the Government of India.

As cost-competitive clean energy sources grow and India commits to global decarbonization, Indian PSEs’ carbon-intensive businesses are likely to face challenges, potentially resulting in losses for the Indian state. This has been highlighted in published literature evaluating the cashflows at risk for Indian PSEs in the fossil fuel-based energy sector. In response, Climate Policy Initiative (CPI) proposes a framework to identify and evaluate suitable business diversification strategies for these PSEs. The framework aims to use their current sectoral position and strong cashflows to de-risk future business and finances. It considers business alignment, technology maturity, market potential, and financial attractiveness to develop a competitive investment portfolio. This framework can enable medium to long-term business planning and strategy formulation for futureproofing these PSEs.

For the evaluation of suitable businesses for diversification and for decarbonized de-risking of future business operations, a two-step approach has been considered in the framework. 

Step 1 – Approach for identifying diversification segments.

The first step in the diversification approach is to identify suitable business segments through qualitative and quantitative analysis. A SWOT analysis (qualitative) and Porter’s diamond analysis (quantitative) can help prioritize these segments. The analysis examines the impact of internal and external factors on PSEs, as well as the influence of government policy and regulation across business segments.

Under this approach, the SWOT analysis captures business nuances and helps identify segments aligned with the firm’s current profile and market conditions. Porter’s diamond analysis provides quantitative guidance for investment prioritization in the identified segments and lays the foundation for step 2: detailed business-level analysis within each diversification segment

Step 2 – Approach for analysing business opportunities within diversification segments.

The second step uses quantitative and qualitative strategy development tools to identify suitable businesses within each identified segment. The quantitative analysis is facilitated by a multi-criteria decision analysis (MCDA), which helps assess the comparative suitability of businesses by weighing various criteria. Consolidated scoring under MCDA can help rate businesses in order of suitability. While multiple suitable businesses may be identified through MCDA, the time-sensitivity of investments requires a tool that can capture business environment information. The growth share matrix synthesizes the businesses analysed through MCDA into a portfolio by factoring in business life cycles, and investment growth potential. This can be used to develop suitable investment profiles based on market share and growth over a defined time period.

The analysis aims to help PSE management make well-informed investment decisions by considering various factors, including potential business segments, technical maturity, government support in the form of policy and carbon mitigation potential, investment potential, return on equity, and business-related risks such as investment gestation period, market competition, organizational experience, import dependency etc.

On analysing the major power sector PSEs through the aforementioned diversification framework, the following insights on key business segments can be identified:

Coal India Limited (CIL)

CIL holds a near-monopoly position in the Indian market, responsible for 83% of the country’s total domestic coal production. The company supplies 80% of its coal dispatch to the power sector, providing a reliable source of future revenue. CIL has also invested in related businesses such as clean energy, aluminium smelting, urea production, and mining of other metals. However, it is important to note that CIL operates in a regulated market and venturing into competitive unregulated sectors could pose new challenges for the company.

The increasing demand for clean energy technologies in India opens up investment opportunities for CIL to enter new business segments and broaden its revenue streams. In this pursuit, CIL has established two subsidiaries: CIL Solar PV Limited, which focuses on manufacturing the solar value chain (Ingot-wafer-Cell Module), and CIL Navikarniya Urja Limited, which spearheads renewable energy initiatives. With a target of 3 GW of renewable energy by 2024 and initiative like participation in the PLI scheme for 4GW Wafer-Cell-Module Solar PV Manufacturing, CIL aims to establish itself as a significant player in the renewable energy sector. While these efforts are praiseworthy, CIL can use the aforementioned framework to develop a broader diversification strategy that could leverage its existing strengths such as strong financials and wide logistics network; and help it in driving India’s economic transformation.

Indian Railways (IR)

IR holds a monopoly market position with strong connectivity across the country. The organization has a large landbank suitable for developing clean energy projects, which can help reduce operating costs for the railways. IR also has a presence in transportation-allied businesses such as ticketing and catering, and these existing strengths can be expanded to other mass transportation segments.

The growing demand for freight and container services, as evidenced by trailer-based road transport, presents new business opportunities for IR. These can be captured using IR’s strong transportation capabilities and network infrastructure.

Investing in high-value passenger services can attract customers from the luxury travel market. These services can be profitable and also help cross-subsidize lower-cost vanilla passenger services.

In line with its ambitious goal of achieving net-zero carbon emissions by 2030, IR is planning to invest in renewable energy (RE) sources. By adopting RE technologies, IR aims to significantly reduce its carbon footprint while generating additional revenue. The company has already identified the potential to source around 20 GW of solar power and 200 MW of wind power by 2030. IR can leverage the diversification framework defined above to further enhance its earning potential while contributing to a sustainable future.

NTPC Limited

NTPC is a market leader in power generation, accounting for over 24% of the country’s electricity supply and approximately 17% of installed capacity. The company has a strong financial position, with a cash balance that can be used to de-risk future cashflows and diversify its business portfolio.

Renewable energy investments are a key component of NTPC’s current growth and diversification strategy. The company has already made significant investments in solar and wind power and has set a target of achieving 60 GW of installed renewable energy capacity by 2032. NTPC is also collaborating with ONGC, leveraging their expertise in deep-sea structures to explore offshore wind generation. Alongside renewable energy, NTPC is actively developing carbon capture and storage (CCS) technology, with a pilot project underway to capture CO2 emissions and utilize them for valuable product production like methanol. Successful implementation could lead to wider deployment across NTPC’s power plants.

NTPC is also venturing into energy storage and electric mobility sectors. Investments in battery storage systems and green hydrogen production will facilitate the integration of renewable energy sources. Additionally, NTPC is actively participating in the development of electric vehicle charging infrastructure and aims to establish 267 charging stations in eight cities under the FAME-II scheme initiated by the Indian government. Moreover, NTPC has already deployed 140 electric buses in various states.

In addition to these initiative, NTPC could utilize the business diversification framework to identify additional avenues to diversify its revenue streams, reduce risk exposure, generate additional revenue, improve competitiveness, and expand its presence over the power value chain.

Overall, these investments could align with the company with the national targets and could also help attract greater capital and market value for the company.

Way forward

Public sector enterprises in India, such as CIL, IR, and NTPC, must consider India’s commitments on transition to a low-carbon economy and its impact on their business and growth plans. This includes evaluating investments in assets, prioritizing investment diversification, incorporating national targets into their strategy, and leading the change towards decarbonization. By taking strategic action and leveraging their position, PSEs can gain significant advantages in businesses likely to benefit from the transition. Aligning with national policies and commitments could also help de-risk their long-term financial position and maintain their dominant position in India’s energy and economic sphere.


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