NEW DELHI, May 17: The Indian Oil Corporation (IOC) has identified Haryana and Punjab for setting up liquid fuel-based power projects. The proposals which mark the IOC's foray into power sector would come up for board approval on Monday.

While the 300-megawatt Panipat power plant would be based on the surplus heavy residue from its refinery located nearby, naphtha has been chosen as fuel for the 120-MW Bhatinda plant so that pollution levels are minimised.

According to the IOC, the cost of the Panipat project is estimated at Rs 1,528 crore whereas that of Bhatinda plant has been pegged at Rs 366 crore. Both the projects would have a debt-equity ratio of 2:1 and the IOC will pick up 26 % stake in them.

On estimates for levelised tariff on units generated from the power plants, the IOC and its financial adviser I-Sec are at variance. For the Panipat project, the levelised tariff fixed by I-Sec is Rs 1.84 per kilowatt-hour considering a fuel cost of Rs 2,322 per tonne whereas IOC estimates it at Rs 2.80 per unit.

In the case of naphtha-based Bhatinda unit, the tariff estimated by I-Sec is Rs 1.98 (with fuel cost of Rs 7,544 per tonne) and Rs 2.52 (at import-parity price of Rs 10,949 per tonne). IOC has estimated the per-unit tariff at Rs 3.18.

In view of high generation cost, IOC proposes to enter into a power purchase agreement (PPA) with the state electricity boards (SEBs) to ensure generation of revenue. The financial viability, says IOC's Project Appraisal Group, would depend on the PPA since the levelised tariffs seem to be higher than the prevalent rates charged by the SEBs from its consumers.

The IOC has also outlined measures to guard itself against a default of payment by the SEBs. The options, which are yet to be discussed with the respective SEBs, are:

* An Escrow account on a portion of the SEB's collections;

* An irrevocable and unconditional revolving letter of credit opened by the SEB's bank in favour of IOC .