MP's power sale method irks pvt firms

Big private power firms, planning to invest in the thermal power sector in Madhya Pradesh, may contest a state government decision (which is in fact long awaited power policy for private thermal companies) which mandates 5-7.5 per cent of power sale to the state at variable rates.

If a thermal power unit, for example, produces power at Rs 2.35 per unit (at prevailing rates), the fixed cost is 80 paise per unit approximately and the rest is variable charge.

As a result, the company will have to sell power at lower rates to the MP government, which will be a loss to the company.

The MP government in the Industrial Promotion Policy 2004 had decided to promote thermal power generation by private firms. After a long gap of almost three years, the cabinet yesterday decided to ink deals with thermal power companies planning to set up their shop in Madhya Pradesh.

The MP government has decided to offer facilities of identifying projects, coal source and water availability.

The power department wants a fair share of power in lieu of facilities like land, water, etc. The power industry is not happy with the mandatory provision of a minimum 5 per cent to maximum 7.5 per cent power supply at variable rates, decided by the State Electricity Regulatory Commission.

"This violates the Electricity Act 2003. At variable rates, selling power will be a losing proposition," a power industry source on condition of anonymity told Business Standard.

The source also said, "At variable rates, a company will have to supply power at Rs 1.2 per unit approximately against the production cost of Rs 2.25-2.35 per unit."

On being asked if the provisions have been made in accordance with the Electricity Act, 2003, a senior official in the department of power said the decision had been taken to facilitate private thermal power production. The Electricity Act, 2003, does not bar the government to mandate such provisions.

"Companies like Jaypee, Essar, Lanco and Kedia are planning to set up thermal power stations in the state. They may come forward to sing a memorandum of understanding with us and state will be richer in power generation. Similar provisions have also been made by other states like Orissa and Chhattisgarh," said the official.