Madras Cements has tied up with Gas Authority of India Ltd (Gail) for the supply of gas and the fuel supply agreement was inked on April 15, 1999. According to the agreement, Madras Cements will get 80,000 cu mtrs per day of gas from Gail's Curtallam well. Confirming the development, Madras Cements vice-president (finance) AV Dharmakrishnan said that the company is planning to put up a 14mw to 16mw power plant near the source of gas at an estimated cost of Rs 90 crore. The location is in the process of being identified and the project would be funded by a mixture of debt and internal accruals, he added. The power generated would beused by the company for its Alathiyur plant in Tamil Nadu and the surplus, if any, would be wheeled to sister concerns.

The company already has a 100 per cent back-up capacity by way of diesel gensets, but a gas-based power plant would mean lower power cost. Power produced using gas is cheaper to the extent of about Rs 0.80 per unit compared to grid power. It is also cheaper by Rs 0.30 to Rs 0.40 per unit than the power generated through diesel gensets.

Sedco is a company floated by the Murugappa group with all major group companies viz. Carborandum Universal (CUMI), TI Diamond Chain Ltd, Parry Confectionery Ltd, Parry Agro Industries Ltd, EID Parry etc being its shareholders. The company has tied up with Oil and Natural Gas Corporation (ONGC) for supply of 25,000 cu mtrs of gas per day from its Nallore well, near Mannargudi in Tamil Nadu.

Speaking to The Financial Express, KV Ramesh, general manager (business planning & projects), CUMI, said that Sedco was putting up a 5mw power plant at a costof Rs 16 crore. The electricity generated would be supplied to all the shareholders of the company viz. the Murugappa group companies. It is also planning to enter into a power purchase agreement with TNEB for selling about two million units to the grid.

The company has already identified land, machinery etc and the work on the project would start as soon as the green signal is received from TNEB. The plant would go on stream in about eight to nine months from the date of clearance by the board, Ramesh added.

CUMI general manager (finance) PR Ravi said that it was decided to float a separate company as the power generated would be used by almost all power intensive companies in the group based in Tamil Nadu. These companies will invest in the equity to the extent of 40 per cent of the project cost (balance being debt) and would also pay for the power utilised.