Reliance: Integrating Telecom and Power

Sick of overhead power cables
This article describes how Reliance will be leveraging the 60000 Kms of Ducts it had laid for Infocomm venture for Power distribution. This master strategy will help Reliance save thousands of crores apart from saving lot of time.

When was the last time Reliance group invested substantially in a sector, which is not related to its core business? What made Reliance invest 25000 crores in a sector which is totally different from its existing business? It’s surprising considering group’s reputation for backward and forward integration. Or is it that we are missing out on the relation?

FLASHBACK: Mumbai, 13th June 2000, Reliance 26th Annual General Meeting: Mr. Ambani lays down before the shareholders group’s plan to invest 25000 crores in Infocom sector and also in the group vision statement mentions the plan to become numero uno in Power sector. To achieve this he mentions the group plans to reach 10000MW of power generation, but admitted that power distribution would be the thrust area.

BACK TO PRESENT: In the meanwhile Reliance group had managed to acquire controlling stake in BSES Ltd through the open offer and creeping acquisition route. It has invested in power plants at Hirma in Orrisa, Patalganga in Maharastra, Jamnagar and Ghogha in Gujrat, Jakamkondam in Tamil Nadu and Goa. The group is also eying the Dhabol power plant in Maharashtra.

BSES is a great investment considering the group’s power ambition. It is putting up power projects in Andhra Pradesh and Kerala. It also has exclusive right for electricity distribution in north Mumbai and has also taken over three distribution companies in Orrisa. Not to forget two new distribution company in joint venture with Delhi government for distributing electricity in two-third of Delhi.

But have we seen the group thinking smaller than the length and width of the country ever. BSES is too small considering RIL ambition. It has to be something Pan-India. Secondly, Ambanis take pride in its complex project building capabilities and prefers to "build" rather than "buy". From what we have seen of the Ambanis buying existing capacities/businesses can be part of its strategy but nothing more than that.

Power is the next destination for any Petrochemical, Oil and Gas giant like the Reliance group. But nothing substantial is happening on ground in electricity distribution even when Mr. Anil Ambani had admitted it is the thrust area. Is something happening below the ground?

RIL is building 60000 kms network of optic fibre for its infocom venture. For it, it is laying 12 ducts of different colors and sizes through the length and breadth of the nation at the speed of Reliance. (Ducts are hollow PVC pipes, which you can see being dug into the ground by groups like Reliance. Optic fibre is new generation telecommunication wires which are capable of carrying much more data than the traditional copper wire and is pumped into these ducts later by the suction mechanism)

But why is it laying 12 ducts when others are like MTNL, BSNL, Bharti etc are laying only 2 or 3 ducts?
Reliance group says that it will pump in optic fibre in only half of those as of now and will be keeping the rest for future demand. Does it make sense when experts are already talking about glut of bandwidth? Secondly in such a high technology changing area where people are already coming up with wireless technologies does it make sense to lay ducts keeping in mind the demand 10 years down the line?

Now think of a possibility: -
Reliance group is laying half of these ducts for its infocom initiative and the rest for electricity distribution. In half of these ducts optic fibre would be 'blasted in' by suction mechanism and the other half would be used for electricity distribution by putting electricity distribution cables in the ducts.

Now the question arises is it technically possible? Let us take up the major stumbling blocks:

1. Magnetic Field: High tension electricity distribution cables develop magnetic field around the area from where the cable passes and disturb the transmission of information etc through traditional telephone (read copper) cables. But optic fibre cables works on the technology in which light travels through cables carrying information or data. Secondly, walls of PVC ducts, which take care of magnetic field problem, separate electric cables and optic fiber cables.
2. Insulation: Insulation should not be a big issue. Scientists have developed many insulating materials like rubber, fibre etc which can be quoted around the electricity cables to take care of insulation. In fact PVC ducts itself should take care of insulation.
3. Inserting these electricity cables in the ducts: Optic fibre cables can be inserted in these ducts by the suction mechanism but how do we insert the electricity cables? I am sure technicians can provide us with better way but if nothing else work we can always use what I call "pajama" technology- When we have to insert string in a pajama we first insert a clip which can be easily inserted (in our case optic fibre) and then pull the cloth string (in our case the electricity cables) by tying it to the clip. Same can be done for the electricity cables too.

I believe the major problem is not technical but political. Getting permission for inserting electricity cables in ducts that were originally permitted only for laying optic fibre cables will be hard to come by. All politicians, state electricity board employees, human right organizations will be on road screaming the potential dangers of high-tension wires. Politicians would like the companies to again purchase "right of way" by bribing them. State electricity board and its employees would like to enjoy their monopoly for some more time. And the human rights organizations will get an issue to scream about and watch themselves on television.
Next important question will be; what forced Reliance to keep it a secret rather than boasting it in front of the shareholders? It can be any of the following:

1. Reliance knew it would be difficult getting “right of way’ if it discloses it intention to use it for electricity distribution. It would need lot of clearances from many government departments. Which will eat up valuable time.
2. It is waiting for the government to announce private participation in electricity distribution before which, such plan is of no value.
3. It want to catch it competitors like TATA POWER on the wrong foot and take an early lead.
4. And above all Ambanis don’t want BSES share prices to shoot through the roof as they are planning to increase the stake to 51%

Okay I admit Mr. Mukesh Ambani had not whispered anything like that in my ears. Its possible that they are not planning anything like that. But the question is if it’s technologically possible and Reliance has similar ambitions WHY NOT? Remember after Reliance Declared its Infocomm plans & started laying the ducts BELL LABS OF USA came up with an innovation which makes it possible to carry 20 times data through the same optic fiber cable, by just changing the input and output point. Which means Reliance has bandwidth 20 times then it really wanted.

Imagine what if it comes true. We would experience in the power sector what we are currently experiencing in the telecom sector:
Prices will fall, Monopoly and blackmailing of the state monopolies will be over, quality of services will improve, uninterrupted power supply and no destruction of electricity appliances due to voltage fluctuations. In one word Competition.

If it comes true India will be able to bridge a gap of atleast 10 years in its infrastructure development. The indirect effect of it will have on the efficiency and working of industries etc cannot be imagined. But all this will be possible only when the State governments end the monopolies of the SEBs which will require a strong political will.