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Thursday, Dec 12, 2002

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Karnataka power situation bleak

Our Bureau


THE power crisis in Karnataka is likely to worsen in summer, the State Government has finally conceded.

Briefing presspersons here on Wednesday, the Chief Minister, Mr S.M. Krishna, who holds the power portfolio and who is also Chairman of the Karnataka Power Corporation Ltd (KPCL) said, "Power is available, but we are not in a position to purchase in view of the limited resources."

"To overcome the bleak power situation, we will take a balanced view within the available resources," he added.

Asked whether the Government was prepared to reopen negotiations with Dabhol Power Company, he reiterated that the Government would examine the options based on the tariff.

He admitted that all original assumptions made in the power policy document prepared by the Government were no longer valid in view of low hydel inflows for two consecutive years.

Hydel storage levels were faced with a shortfall of at least 60 per cent, he said.

Mr Krishna, however, said that the synchronisation of Unit 7 of the Raichur Thermal Station, operated by KPCL would mitigate the summer situation. This would result in the addition of at least 5 million units to the grid.

Demand is currently regulated at about 80 MUs per day to match supply. With the availability from Unit 7, the situation is expected to improve.

Unit 7 with a capacity of 210 MW is expected to begin feeding in the next three to four days.

The final completion cost for the project has been estimated at Rs 600 crore and levellised tariff from the project has been estimated at Rs 2.04 per unit at 85 per cent plan load factor.

The commissioning of Unit 7 takes the thermal capacity in the State to 1470 MW from the current level of 1260 MW.

What is interesting is that the project has achieved synchronisation without achieving financial closure.

Unit 7 has not been able to achieve financial closure since some of the milestones signed in the multipartite agreement by the State Government and the lead arrangers, Infrastructure Development Finance Company are yet to be fulfilled.

These milestones include creation of a reform fund out of divestment proceeds out of the distribution companies.

By the Government's own admission there were difficulties in achieving these milestones. Mr Krishna said, "DisCom privatisation will take another two years."

As a result the entire debt funding for the project has been funded through short-term borrowings. The advantage of resorting to these short-term borrowings, KPCL was able to keep the costs of interest during construction down to the barest minimum.

The project soft cost is only Rs 93 crore since KPCL was able to resort to short-term borrowings from banks and financial institution at rates as low 8.5 per cent.

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