Prime minister Inder Kumar Gujral has hinted that a subsidy is in the offing for naphtha as fuel for power projects. Maximum value addition to naphtha takes place in the petrochemical industry, not in the power sector, where it is simply burnt to generate steam.

But according to the formula under consideration, petrochemical units will shell out higher prices for naphtha to subsidise power projects. Surely, the era of "from each according to his ability, to each according to his need" is over?

True, the naphtha-based power projects are expected to use coal after an initial period - naphtha is a short-term solution. The proposed subsidy, it may be argued, would also therefore be short-term. But although such honest intentions exist, such a transfer would hardly be smooth. Utilities will be hard put to procure washed coal, since the capacities of the existing washeries are already dedicated almost exclusively to the steel industry. Unwashed coal will pose problems due to low calorific value and very high ash content. Besides, coal-based plants will have to be either shore-based or located near the pitheads, since otherwise they would have to suffer exorbitant transport costs.

It has been decided that a group headed by the cabinet secretary will ensure naphtha tie-ups for the 12,000 MW liquid fuel projects within a month. But there are problems galore with naphtha-use - high final price of power, transportation through any mode other than costly pipelines, and injury to the petrochemical industry being the more expensive fallouts.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.