The Hindu : KSEB seeks policy shift on naphtha price

Online edition of India's National Newspaper
Wednesday, Dec 10, 2003

Southern States

Southern States - Kerala

KSEB seeks policy shift on naphtha price

By P. Venugopal

THIRUVANANTHAPURAM Dec. 9. The Kerala State Electricity Board (KSEB) feels that only the Central Government can remove some of the hurdles in its path to effecting a recovery.

The amount being spent on power purchase is the heaviest item in its expenses. Over the last few years, the hydel-thermal mix in the energy drawn by it has tilted overwhelmingly in favour of thermal content. As thermal power is several times more expensive than hydel energy, the cost of power purchase has been shooting up.

In 1998-99, thermal energy constituted only 33 per cent of the total power that had gone into the transmission and distribution network in the State. This went up to 40 per cent in 1999-2000 and 51 per cent in 2000-01, went down to 47 per cent in 2001-02 and then shot up again to 61 per cent in 2002-03. The dependence on thermal energy is expected to be in the region of 66 per cent this year.

The increasing dependence on thermal energy took the KSEB's expenses on power purchase up from the level of Rs. 569.9 crores in 1998-99 to 1,872.10 crores in 2002-03.

The main reason why the cost of thermal energy is so high for KSEB is that the thermal power stations in the State are fuelled either by naphtha or LSHS (low sulphur high stock), both of which are expensive. The five thermal power stations located in the State, having a combined generation potential of 4,764 million units of electricity, will require nearly 5,75,000 tonnes of naphtha and 3,30,000 tonnes of LSHS annually.

The cost of fuel was around Rs. 6,000 a tonne when these five projects were conceived. It has now gone up to Rs. 15,000 a tonne. The fuel cost on one unit of electricity generated at these stations alone will come to more than Rs. 2.80 at present. Added to this is the fixed cost element that works out to around Rs. 1 per unit (calculated for a `plant load factor' of 68.5 per cent). "Naphtha and LSHS are released to the fertilizer industry by the Union Government at the export parity price, which works out to be much cheaper.

If our thermal power stations too get this advantage, our financial difficulties can be solved to a great extent," a top KSEB official said.

If the Centre continues with its present policy, the thermal power stations in the State, including the Kayamkulam station of the National Thermal Power Corporation, face the prospect of being closed down.

This is because the Electricity Act 2003 insists that the State form an independent Transmission Utility and independent Load Despatch Centre, besides implementing what is called the system of `Merit Order Despatch'. When these stipulations are put into effect, the independent entities will not be under any obligation to purchase costly power from the thermal stations here, contrary to the situation being faced by the KSEB now. Their priority would be to draw the cheapest energy available from the national or regional grid. Coal-based thermal stations elsewhere in the country will be capable of supplying cheaper power to the State then.

Through the State Planning Board, the KSEB is putting up a memorandum to the Government requesting that the issue of naphtha and LSHS be taken up with the Twelfth Finance Commission.

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