This assumes significance as the power major is slated to commission the first 115mw turbine of the Kayamkulam combined cycle project on November 25.

Sources close to the power board told The Financial Express that KSEB has turned down the initial tariff rate proposed by NTPC for its Kayamkulam thermal power plant as the SEB found it "unreasonable and exorbitant".

NTPC has fixed a tariff for the thermal power to be generated from the Kayamkulam project, the first naphtha-fired power plant to come up in the state, at Rs 4 per unit working at a plant load factor (PLF) of 68.5 per cent.

The source said NTPC did not even bother to consult the SEB before fixing the tariff. The utility major has reportedly fixed a two-part tariff by imputing arbitrary values for certain key variables, inflating the final tariff rate. For instance, the value of fuel included in the tariff equation is reportedly higher than the actual fuel cost. KSEB had signed the power purchase agreement (PPA) with NTPC way back in 1995.

The power major has forwarded the tariff to the Central Electricity Authority (CEA) and the power ministry for their approvals. Both CEA and the power ministry have cleared the tariff and forwarded the same to KSEB.

The source added that KSEB's decision to reject NTPC's Rs 4 per unit tariff was totally justified, on both technical and economic grounds. He said the average tariff for the power generated from comparable platforms in the country worked out to be only Rs 3 per unit.

The BSES Kerala Power Ltd, the first power project coming up in the private sector in the state which was to put up a similar venture in Kochi on the same technological platform, had suggested a tariff of only Rs 2.84 per unit, he pointed out.

He said that following the refusal of the SEB to accept NTPC's Rs 4 per unit tariff, the latter made a request for an interim arrangement as the first 115mw turbine of the plant was slated to be commissioned on November 25. Following this, top brass from both sides met in New Delhi recently but no tangible solution has emerged.

Meanwhile, NTPC has written to KSEB for hiking the letter of credit amount from the current level of Rs 250 crore to Rs 500 crore to meet the additional costs for the power to be supplied from the Kayamkulam plant. However, KSEB has not responded to the request so far.

It may be recalled that the Kayamkulam project had hit the headlines recently, following the central government's decision to upgrade the plant to a super thermal one by enhancing its capacity to 2,000mw by the year 2002 from the original capacity of 350mw.

However, euphoria in the state over the decision proved to be misplaced when NTPC made it clear that the state is going to get a paltry 10 per cent of the additional capacity.

The Rs 1,300-crore 350mw naphtha-fired combined cycle project, the first stage of the 2,000mw venture, is coming up in three stages. Phase-1 of the venture will involve three units, two gas turbines of 115mw each and a steam turbine of 120mw. The first 115mw turbine is slated to go on stream on November 25 when prime minister Atal Behari Vajpayee dedicates the project to the nation.

Insight

Industry may find tariff steep: The tariff, although on a higher side, must have been determined to earn the assured 16 per cent return on equity at 68.5 per cent plant load factor (PLF) and in that case, KSEB does not have much of a point to contest. However, the point to be considered is that if the state electricity board buys power at Rs 4 per unit, what will be the cost to the industrial and commercial clients? As such, Kerala is not a very industrialised state and tariff at this rate will ensure that industry is not attracted to the state. Normally, it is the SEBs which charge industry at the rate at which NTPC will be charging KSEB.