The Hindu : Kerala News : NTPC's help sought to cut power purchase costs

Online edition of India's National Newspaper
Monday, Jan 10, 2005

Kerala

Kerala

NTPC's help sought to cut power purchase costs

By P. Venugopal

THIRUVANANTHAPURAM, JAN. 9. The Kerala State Electricity Board (KSEB) feels its power purchase costs can be brought down substantially if the National Thermal Power Corporation (NTPC) were to consider a new suggestion.

The suggestion relates to bringing down the State's fixed cost commitments on the 360-MW Kayamkulam station of the NTPC. This station is fully dedicated to the State and, therefore, it is up to the KSEB to foot the entire fixed cost on the NTPC's operations at Kayamkulam.

Fresh assessment

With the original power purchase agreement between the KSEB and the NTPC on the Kayamkulam station due to expire on February 28, the former is making a fresh assessment whether it can afford to retain the plant as a fully dedicated one to Kerala. A suggestion being put forth is whether the State can be allowed to retain its claim over 50 per cent of the power generated here so that the fixed cost commitments also comes down by half.

The KSEB also wants an equal quantity of cheaper power from the NTPC's stations in the Eastern Region (ER) so that the high cost of the naphtha-fuelled power from Kayamkulam can be neutralised to some extent.

Between 1998-99 and 2003-04, the KSEB had bought 7,491.65 million units of power from Kayamkulam spending Rs. 3,271.96 crores. The average cost of power was thus Rs. 4.37 per unit, far higher than the cost at which power is available from other sources, including the NTPC's own stations outside the State.

Of the total amount spent, a sum of Rs. 984.48 crores was towards fixed cost to the NTPC and Rs. 162.67 crores towards wheeling charges to Power Grid Corporation of India Limited for evacuating power from Kayamkulam. The fixed cost, which the KSEB could not avoid paying even if it does not draw power from Kayamkulam, had thus come to Rs. 1.31 per unit.

The variable cost of the power generated at Kayamkulam had been of the order of Rs. 2,124.81 crores for the 7,491.65 million units drawn by the KSEB between 1998-99 and 2003-04, making the average per unit variable cost Rs. 2.83, which itself is higher than the total cost the KSEB has to pay for a unit of power from most other sources. The high variable cost of Kayamkulam power is because of the high cost of naphtha, which is used as the fuel at this station.

According to a top Government official, the KSEB is contemplating suggesting to the NTPC that it is willing to shoulder half the burden of keeping the high-cost Kayamkulam station running if around 160 MW of the ER power, which carries a variable cost of only about Rs. 1 a unit, is made available to it.

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