The state-owned Karnataka Power Corporation Ltd (KPCL) has pared the cost of its expansion by 12 per cent. The company, which is in the process of adding 420 mw to its Raichur plant in Karnataka, has lowered its estimates from Rs 15,400 crore to about Rs 13,530 crore.
The company has now sought permission from financial institutions to reduce the project debt by Rs 1,850 crore.
Top FI sources said the lower cost was primarily due to reduction in various components of the project, including civil works and financial charges.
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"The company has projected a lower project cost since it has followed a strict procedure of competitive bidding for awarding various contracts. Besides, it has also been able to avail of lower interest rates from banks," top FI source said.
KPCL's expansion plans consist of setting up two units of 210 mw each. One unit is already operational, while another is expected to be commissioned in about a month.
KPCL has now sought to reduce its debt to about Rs 10,500 crore from the earlier sanctioned amount of Rs 12,350 crore. The Industrial Financial Corporation of India (IFCI) has already agreed and decided to cancel about Rs 65 crore, which it has not disbursed.
Other institutions are yet to take a decision on the issue. The company has already availed over Rs 8,000 crore of the sanctioned amount.
Lower project costs are a rarity in the power sector. Even the fast-track power projects have witnessed sharp cost overruns due to lack of clear government policies, the depreciation of the rupee and political uncertainty.
KPCL, on the other hand, has been able to obtain loans at considerably lower interest rates due to its track record. The company already has power plants in operation. It made a net profit of Rs 138 crore in 1997-98. Its net profit for the nine-month period ended December 1998, was over Rs 100 crore. The power plants operate at a plant load factor of about 75 per cent against the Indian norm of 68.5 per cent. % stake