When contacted, Maharashtra State Electricity Board chairman Asoke Basak said, "Oil companies keep increasing the price of these items, but as fuel cost is passed on to the consumers it does not concern us."

However, for consumers the increase in cost of power is a major concern. There is resentment over the hike in power tariffs in many states, brought on by the privatisation of thepower sector. Some projects, which have a higher dollar equity, will become even more expensive once the rupee devalues.

The increase in power tariffs will also hit small scale industries which can neither set up a captive plant nor absorb the additional cost. For them a captive plant is economically unviable as their consumption of power is not significant, say experts. Also, the increase in input costs will affect their competitiveness. The increase will not leave large industries, already overburdened by cross-subsidisation unaffected. Industries have been asking state electricity boards to rationalise the tariff structure. Another increase will only force them to set up captive units, which have in recent years become increasingly popular.

The hike in fuel prices will have a significant impact given the trend in fuel usage in power plants. Most of the new power projects are based on liquid fuel. Presently, of the total 91,000 mw installed generation capacity in the country around 9,000 mw is based onliquid fuel compared to 8,000 mw last year.

The two main industrial states Maharashtra and Gujarat get a large portion of their power supply from liquid fuel-based power stations. Both have approved several private power projects which are based on naphtha.Among the projects to be affected will be the 740 mw liquid fuel-based Dabhol Power plant, commissioned a week ago. Set up by Dabhol Power company, a joint venture between Enron, Bechtel, GE of the US and MSEB it will initially sell power at around Rs 3.50 per unit. This is now expected to go up. A cost escalation is also expected as the rupee depreciates against the dollar.

The use of heavy fuel oils such as naphtha, heavy petroleum stock, low sulphur heavy stock, furnace oil, heavy furnace oil and natural gas was first allowed for power generation in 1995. This was primarily allowed because gestation period of liquid fuel-based projects is lower than coal fired power plants. At the time the policy was formulated the government also had surplus stocksof liquid fuel. Some of these could also be imported on an open general licence.

However, because of the sudden demand of naphtha from independent power producers, the Centre had to ration the use of naphtha. It then decided to allocate naphtha linkage for only 12,000 mw to be distributed among various states which had approved liquid-fuel based projects.