In-house power holds the key

IN FOCUS / CARBON BLACK

Carbon black units in the country have realised the business potential of the furnace gas generated by the production process to become a source of co-generated power that was both cheap and enjoyed good demand.

Co-generation of power would allow carbon black units to reduce the cost of power used in the production process to international cost, besides eliminating the costof handling a waste material at the factory site.

Take the case of Phillips Carbon Black Limited (PCBL), which has almost completed installation of a 12MW co-generation power plant using process gas at its Baroda plant of Phillips Carbon Black Limited (PCBL). Trial generation would start by end-August and the cost of power would be 20 paise a unit.

The off gas power generation plant needed an investment of Rs 37 crore. PCBL expected additional profit of Rs 10 crore annually through sale of 8MW power to Adani Power, the private sector power trader in Gujarat, under an agreement which has already been signed.

The sale profits would be in addition to savings of Rs 15 crore annually from the 4MW power the plant needed internally.

PCBL recently increased production capacity at Baroda through wo production lines with a total installed capacity of 70,000 tonnes, taking installed capacity at all units to 2,70,000 tonnes from 2,00,000 tonnes.

PCBL was conducting a feasibility study at its Durgapur plant for setting up a 16MW co-generation captive power plant at an investment of Rs 60 crore. The unit has a capacity of 140,000 tonnes.

PCBL's third 35,000tonne plant at Kochi has a 2.5MW power unit as well.

The pay-back period of such investments in power was attractive at only 18 months to two years, given the combination of cost savings and revenue generation.

Low cost power gave carbon black producers considerable leeway in negotiating prices with international buyers which were both price and quality conscious.

In-house power enabled producers to bid for major contracts and at prices that would not have been possible were the units dependent on grid power.

For example, gird power in Gujarat was priced at upto Rs 5.25 paise per unit.

Cheaper power also permitted producers to absorb the rising price of raw materials, which was essentially a petroleum derivative. The Gulf Coast 3 per cent sulphur heavy oil used by PCBL for example had moved up sharply in recent months.

Besides, ocean freight had also shot up, making import of raw materials and export of finished products more expensive. PCBL for one was a major exporter- it would be doubling its carbon black export to Rs 110 crore from the Durgapur plant. Exports were largely to Japan, Indonesia, Australia, New Zealand, East Africa and Spain.

An internationally reputed tyre manufacturer, one of the biggest importers, had entered into a long-term agreement with PCBL. Consequently a big rise in export offtake was on the cards, worth more than $300 million.