Essar Steel, GEB lock horns over grid issue

Essar Steel is facing power troubles at its steel manufacturing facility at Hazira in Surat.

The development follows Essar Steel and Gujarat Electricity Board (GEB) locking horns over the issue of connecting the power plant to a 220 KV grid system of GEB which was approved by the board earlier.

The matter now has turned worse with GEB moving the Surat Civil Court seeking legal intervention to stop Essar from connecting the plant with the grid and the matter would come up for hearing on Friday.

Essar Steel sources have already expressed apprehension that delays in connecting the grid would eventually hit steel production at Hazira.

It has recently ramped up its production capacity to 2.4 million tonne per annum (MTPA) from earlier 2 MTPA even as the company's 155 mw captive power plant is ready to be commissioned.

According to Essar sources, due to buoyancy in the steel sector, ESL decided to take a number of measures to augment its steel production capacity that includes downstream facilities such as cold rolling plant, galvanising plant as well as expansion of existing manufacturing facility.

ESL also decided to install one 240 mw captive power plant in late 2000 and it requested GEB to get connected with its grid system.

In March 2001, GEB conveyed its approval for installation of the power plant, and last year Essar initiated installation of the power plant of 150 mw capacity and according to sources in the company.

It went ahead with its plan with a clear understanding that it has the permission of GEB to connect the power plant with the board's grid system as per the approval issued by the GEB on March 22, 2001.

Interestingly, by this time, new Electricity Act, 2003, came into effect and as per the new Act, no permission was required for setting captive power plant by any agency in the country.

"Simultaneously, Essar Steel also finalised its plan to hike steel production capacity to 2.4 MTPA from 2 MTPA but it required additional power facility to meet the production demands. ESL also has completed installation of the 155 mw plant at a cost of Rs 300 crore and the plant is now ready for commissioning even as the company signed a Memorandum of Understanding (MoU) with Gujarat to hike its steel production capacity to 3.6 MTPA in due course with an investment of Rs 700 crore," said a source.

Recently, when ESL initiated work to connect the plant to the grid, GEB intervened and informed Essar that the earlier permission stands void which was defended by Essar.

GEB moved the Civil Court in Surat for stoppage of work and the matter is now going to come for hearing on Friday where Essar stands as a defendant.

"This decision of GEB has taken ESL by surprise since based on their application with a specific request that ESL will like to connect the plant to the board's grid system and after having received the approval of GEB, the company has invested Rs 300 crore for setting up the plant. This will affect the expanded steel production facility of Essar which needs power badly and ESL may not be able to meet the commitment of steel supply made to the customers, and eventually it may affect the bottomline of the company," said the source.

A spokesperson of Essar refused to comments as the matter is sub-judice while GEB officials also denied making comment for the same reason.