Top company officials have already initiated discussions with global boiler manufacturers like Alston of Germany to explore possibility of generating power from shell-grade lignite of low-calorific value (1500-2000 kcal) and high-ash content. The existing lignite-based power plants in India use fuel of 2000-3000 kcal value.

According to GMDC managing director VRS Cowlagi, over 50 to 60 lakh tonnes of shell-grade lignite was lying unused as wastes at its Panandhro Mines in Kutch after the normal-grade lignite are being excavated for the last 40 years.

He said the work on phase-II is proposed to be started after the completion of the Rs 1,340-crore 250 mw pit-head lignite-based power plant at Nani Chher, the stone for which was laid at a function on Thursday.

As per the clearance obtained from the Central Electricity Authority (CEA) and ministry of environment & forest (MoEF), the first 125-mw unit is scheduled to be completed in 32 months (by April 2002) and the second 125-mw unit in 38 months (December 2002).

Talking to The Financial Express

, Cowlagi said that GMDC had decided to diversify into power generation only a few years back as part of a strategy to add value to its core strength in mining business.

He said that GMDC would also have to stay put against fierce competition from superior and cheaper imported coal in the near future.

With globalisation, he pointed out, the landed cost of imported coal has come down to less than $25 per tonne and it was likely to go down further as crisis continued to grip Indonesia and neighbouring countries.

However, he exuded confidence that the cash-rich GMDC would have an edge in power generation as it has exclusive mining rights on huge quantity of lignite at Akri Mota, Mata-no-Madh and Umarsar, besides Panandhro.

Cowlagi said the company was not only flushed with cash, but also skilled manpower and sophisticated machinery to implement phase-I through its own internal resources.

After global tenders were invited for phase-I of the power project, he said, orders have been placed for circulating fluidised bed combustion boilers with Alston and trubines with Ansaldo of Italy.

Since the power plant is located in the midst of the mines, GMDC proposed to invite tenders for conveyors belt, saving on the transporting lignite on trucks. The plant's nearness to sea would help use sea water for cooling towers and pure water from desalination plant.

The company has been consistently left with a huge profit margin after sale of lignite and other minerals over the past several years. In the last fiscal, it earned a net profit of Rs 84.34 crores from a turnover of Rs 230.14 crores.

Speaking at the foundation laying ceremony on Thursday, GMDC chairman Mukesh Zaveri said the GMDC would raise the entire equity of Rs 270 crore through internal accruals and the remaining debt of Rs 1,070 crore through financial institutions being arranged by SBI Caps.

The state's chief minister Keshubhai Patel, who performed the ground breaking ceremony, said that GMDC would continue to carry out its core business of mining, allaying the fears expressed in certain quarters.