News about power shortage, cuts, tariff hike, is appearing in all business newspapers and magazines, sans a solution.The power sector was liberalised by allowing private entrepreneurs to set up mega power plants (5002,000 MW) around five years ago. Enron, Cogentris, AES among others made sincere attempts to get into business, but only Enron could take off which was also stalled in midway due to various reasons and has gathered only controversies.
When power ministry realised that, most of fast track projects are getting delayed, the State Government was advised to go ahead for liquid fuel-based midsized power plants (25100 MW) which can be set up with short gestation period of 12 to 18 months.Electricity Board of Haryana, Gujarat, Karnataka, Andhra Pradesh, Tamil Nadu, has invited bids and also signed MoUs with many IPP companies since last one year, but hardly few projects have taken off due to unsolved issues by Fuel Linkages, PPA, PLF, Counter Guarantees among others.
Situation of power is continuously worsening in state like Karnataka, Andhra Pradesh, Tamil Nadu, Madhya Pradesh, where there are regular power cuts for long duration in existing industries and practically no power availability for new industries to come up.
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This in turn is resulting into production loss and retardation of growth in industries.Most of the Electricity Boards have also increased power tariff, which is making certain power intensive industry unviable to operate and close down in some cases. New industries are unable to take off due to higher power tariff coupled with high debt servicing cost (since equity participation from public/investors/financial institutions have virtually dried up).
In view of above SEB/state governments should encourage industries to set up captive power plant on BOST basis and charge on mutually agreed tariff. This also eliminated all obstacles of PPA, PLF and counter guarantees. In such a case benefits permissible to industries should be given to operator also, including depreciation, modvating of excise duty on fuel.Other advantage of this solution will be for new industry, who will be able to improve their profitability as power generation cost/unit (including interest and depreciation) will be between Rs 2.25 to 2.50 (if operated through FO) compared to SEB tariff of Rs 3.00 to Rs. 4.30 (varies from state to state). Investment cost of such small plants is low (Rs 2.20 to Rs 2.75 MW) with pay back period of just three years, compared to mega plant which goes beyond Rs 3.5 crore per mega watt. So let us make many of small size power plants if we could not make middle and mega size ones. This solution will also automatically reduce load on grid so that power from
SEB is available for domestic and low tension commercial consumers.
The writer is the executive director (projects) of Powerica Ltd.