The Hindu : Industries hampered by power cost

Online edition of India's National Newspaper
Sunday, Oct 26, 2003

Southern States

Southern States - Karnataka

Industries hampered by power cost

By S.K. Ramoo

BANGALORE OCT. 25. The State's industrial growth has been stagnating mainly on account of the high cost of inputs such as power. Karnataka Power Transmission Corporation Ltd. (KPTCL), in the face of stiff opposition, recently recommended an increase in the industrial power tariff. If approved, the higher tariff will further hinder industrial growth. The Government has also imposed electricity tax on captive power generating units.

The fact that Karnataka is in the 10th position in the industrial ranking of States has caused concern to the State Government, which has a set an ambitious target of eight to nine per cent growth during the 10th Plan period.

The industrial power tariff, currently at Rs. 4.30 per unit, is said to be one of the highest in the country and this is mainly because of cross subsidisation of other categories of power consumers. Hence, industries are made to bear the brunt of an exorbitant tariff. The consumption of grid power by the high-tension (HT) sector has been dwindling since 1989-90 from a level of 4,780 million units, which was 25 per cent of the total energy sold, to the current level of 2,800 million units, a mere 13 per cent. This declining consumption has led to a substantial reduction in revenue. This, in turn, has prompted the KPTCL to recommend higher power tariff for the industrial sector, leading to industrial sickness and consequent increase in the unemployment ratio.

Several industrial segments are struggling to survive in the current competitive scenario. Some years back, the Government forced industries, particularly the power-intensive ones, to opt for captive generation involving heavy investment mainly due to the incapacity of the State power grid to provide the required quality and quantity of power. The investment on a 380-kVA diesel generator set is around Rs. 12 lakh and on a 750 kVA set Rs. 35 lakh. The high cost of industrial power also forced several industries to go in for captive generation, mainly to peg the cost of production at reasonable levels. Many opted for it owing to frequent power cuts and voltage fluctuations, which affected the quality of finished products. The Government, at one point of time, insisted that one-third of the power requirement in each industry be provided through captive generation.

The current scenario of inadequate rainfall in the catchment areas of the major hydel reservoirs, leading to a substantial reduction in their water levels, is causing anxiety on the power front as Karnataka depends on hydel generation for over 70 per cent of its power requirement. The industrial and the agricultural sectors are likely to face a severe power crunch in the coming months.

It is against this background that leading trade and industrial bodies, including the Federation of Karnataka Chambers of Commerce and Industries (FKCCI) and the Greater Mysore Chamber of Industries (GMCI), have vehemently opposed the energy tax on captive generation and the proposed increase in industrial power tariff. In their perception, this will have disastrous consequences for the State's economy. Industrialists have expressed their dismay over the failure on the part of the Government to consult the trade and industrial organisations before proposing the "crippling measures".

The State has over 3,000 registered captive generation units generating about 300 MW of power. According to an estimate, the total revenue collection from the proposed levy on captive generation will be negligible. It will be difficult to keep track of the exact amount of captive generation as many industries have been using their DG sets as a back-up during power shut-downs and disruptions. The cost of captive generation is high in the State as it involves maintenance, management, and operational costs, in addition to the high cost of diesel. The captive generators are, therefore, generally underutilised.

According to the GMCI, the proposed levy of 50 paise per unit of captive power is five times more than what is being levied by some neighbouring States.

The high cost of diesel makes captive power expensive. Around 3.6 to 4.2 units can be produced from a litre of diesel.

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