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C. Shivkumar

BANGALORE, July 15

CAPACITY additions in Karnataka's power sector are likely to spill over into the Eleventh Plan period as most of the projects are far from achieving financial closure.

Sources said here that only the 210 MW unit of the Raichur Thermal Power Station of the Karnataka Power Corporation Ltd (KPCL) was likely to be commissioned during this Plan period. This project has not technically achieved financial closure. In fact, Unit 7 is currently being funded by short-term loans being drawn from banks and refinanced. Financial closure of this project has been delayed in view of the State Government's failure to fulfil the conditions prescribed in the multipartite agreement signed in October 2000. One of the main conditions was the proposed creation of a sinking fund/power reform fund out of divestments initially in generating and distribution companies. But so far the State has failed to comply with these conditions.

Moreover, for three other large projects to be implemented by KPCL entailing a capacity addition of 1,310 MW, statutory clearances have not been completed as yet. These projects are the 700-MW liquefied natural gas project (LNG) at Bidadi, the 290-MW Almatti hydel project and the 320-MW Mahadayi hydel project.

Of the three projects, only the Almatti hydel project has received conditional techno-economic clearance. But this project, which is estimated to cost about Rs 695 crore, is yet to resolve the contentious issue of high tariffs. The first year tariff from this project is estimated to be in the region of about Rs 4.60 paise a unit, inclusive of a Re 1 royalty payable to the Krishna Jala Bhagya Jala Nigam Ltd (KBJNL). This tariff is higher than the per unit tariff of liquid fuelled power projects. Accordingly, sources said, the State Government had considered waiver of the royalty charges. But it was shelved since it could lead to major complications, including loss of confidence of creditors to KBJNL.

Interest service for KBJNL borrowings are expected to be raised from the royalty receipts. Besides, the State Government is already charging royalties from micro hydel operators in the State. Consequently, waiver to Almatti would create a precedent and force the State Government to extend similar concessions to these operators as well, the sources said.

As for the LNG-based project, project viability is still in question since the fuel linkage has not yet been established. The State Government, however, has floated expressions of interest from LNG suppliers and only after this, the project viability is expected to be known. But any LNG tariff over $4 per million British thermal unit was equivalent to about $190 per tonne. However, sources said that this tariff was unlikely, since LNG prices move in tandem with global oil prices. And global oil prices are currently rising again, which was likely to make the tariff for this project unviable, the sources said.

As for the 320 MW Mahadayi project, the sources said that this would need clearance from the Union Ministry of Environment and Forests. Such a clearance would be available only after the conclusion of the environment impact study. Besides, this project is an inter-State project, since it has been proposed on the river Mandovi originating in Goa.

Besides these projects, two thermal projects have also been proposed through a joint venture with the Jindal group. These include a 500 MW greenfield thermal project and 500 MW expansion project to the existing 260 MW Jindal thermal power project.

In the former, the Jindal group was to be given a 25 per cent equity stake whereas in the latter KPCL was expected to pick a 25 per cent stake. But neither of these projects had obtained any statutory clearances. Consequently, the only project that is now close to financial closure is the Nagarjuna group's 1,015 MW project, which is awaiting final Cabinet clearance, though availability from this project was unlikely before the terminal year of the current Plan period, they added.

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