New Delhi, February 25: Independent power producers (IPPs) have asked for a 90-day extension for achieving financial closure for their liquid-fuel-based power plants as against the March 31 deadline set by the government.Informal discussions between the industry and the power and petroleum ministries have already been held on this score. Sources say the Confederation of Indian Industry (CII) is in the process of formulating a detailed memorandum, which will shortly be submitted to the ministries. Assocham also has asked for an extension in its recent meeting with the power secretary.
CII feels that the extension is necessary because a host of important issues in the fuel supply agreement (FSA) needs to be sorted out for making it bankable.
The first contentious issue relate to fuel quantity or the annual guaranteed quantity of fuel. The model FSA says that oil companies will supply fuel to the power producers, enabling them to generate power at 80 per cent plant load factor (PLF). This, producers say,should be increased to 90 per cent PLF.
The second contentious issue relates to the quality of fuel. For instance, naphtha contains trace metals, like vanadium, which affect gas-turbine blades by damaging them.
Producers say that oil companies are not ready to disclose the trace metal content in liquid fuels. Consequently equipment suppliers are not offering guarantees to gas turbines and other equipment, which are affected by trace metals. It is felt that oil companies should give the trace metal specifications in the fuel.
Thirdly, according to producers, there is a duplication of commitment and infrastructure charges, and that there is a lack of clarity in the meaning of the two.
Oil companies will charge Rs 608 per metric tonne of fuel on account of infrastructure charges along with commitment charges of Rs 11 lakh to Rs 16 lakh per mega watt. On account of these charges, the cost of power projects has escalated, and, concomitantly, the cost of power is going up. Producers say that under noconditions will the state electricity boards agree to buy power from them at these charges, and that it will be ultimately them, who will have to bear the brunt.
"The rationale for these two charges is not clear as it is felt that the cost of infrastructure should be borne by the oil companies instead", said a producer.
Following the petroleum ministry's move of fixing December 31, 1997, the deadline to sign fuel-supply agreements and March 31 deadline for achieving financial closure, around 83 producers signed pacts with domestic oil companies, including IOC, HPCL, BPCL, IBP and Assam oil division.
The ministry had made it clear in its notification that if producers do not sign the pact by December 31, their linkages will be cancelled.
However, even after two months of signing the FSA, power producers and national oil companies have been unable to reach a common platform and many issues are still left unsettled in the pact.
"FSA is still not bankable, and it is impossible for us to achievefinancial closure as institutions will not forward funds, unless a host of important issues get sorted out. The government will have to extend the deadline for achieving financial closure", said a leading producer.
Copyright(c)1998 Indian Express Newspapers (Bombay) Ltd.
