ICICI, BICP to work out compromise coal price for 1082MW fast-track project
Anupama Airy
NEW DELHI, January 4: The Finance ministry has appointed Industrial Credit and Investment Corporation of India (ICICI) and Bureau of Indian Cost and Prices (BICP) as consultants to work out a compromise coal price for the 1082 MW fast track power project at Bhadravati.This move follows differences between the Ispat group and Coal India over valuation of fuel supply linkages. Highly placed official sources told The Financial Express that the consultants' report will be vetted by a high-power board for a final decision on the pricing alongwith a host of other important issues related with the revised power purchase agreement (PPA) for this project between the project's developers and the Maharashtra State Electricity Board (MSEB). The board will be chaired by the cabinet secretary and will have secretaries from all the concerned ministries along with the chairman, Central Electricity Authority (CEA). Sources disclosed that a review of the fast track projects was done at a recent cabinet
secretariat meeting held on December 29. A host of issues related to the coal pricing, coal availability amongst other issues were also discussed. However, as per sources, whereas issues related to the coal pricing will be decided after the report of the consultants, the issues related to the coal availability and auxiliary power consumption still remain unresolved. The power ministry has now sought CEA's view in this regard. Senior officials in the power ministry explained that since the coal availability for this project after a certain period is not assured, the developers of this project want to add what is called the "termination clause" in the PPA. As per this new clause, the developers want that in the event of non-availability of coal supplies, they may be allowed to come out of the contract or in other words terminate the contract with MSEB. "But this cannot be granted as this will violate the techno-economic clearance norms. The clearance for CEA was given only with the understanding that
coal will be available for the entire life cycle of the plant. Now if the techno-economic clearance is for a period of 25 to 30 years and if the power producer withdraws midway then it will have a direct impact on the earlier worked out tariff projections for the project", said sources. The insertion of any such clause that the developers should be allowed toterminate the PPA in the event of no coal supplies, not only violates the techno-economic clearance norms but is also against the interest of the state government, to which the tariff cost is a pass-through. Earlier the auxiliary power consumption agreed upon by the promoters at the time of clearance was 8.5 per cent which is now proposed to be raised to 9.5 per cent. Even this is not in accordance with the norm of 9 per cent. The project promoters want the government to give them relaxations on these issues. "If a revised PPA is signed on these conditions, it will clearly violate techno-economic clearance norms. However, the high powered board,
which will soon look into this project, has the authority to `overrule these objections", sources added. Incidentally, the Rs 13 billion Ispat group has a controlling 51 per cent stake in the 1082 MW coal fired fast track project to be set up at Bhadravati in the Chandanpur district of Maharashtra.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
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