The Hindu Business Line : Govt opens up lignite blocks for captive power production

IN A major policy shift, the Government has decided to allot lignite blocks to private sector companies for captive power production. Till now, only coal blocks were allotted to private parties for captive power production.

Lignite blocks would be allotted to private parties along with the provision of allowing several unrelated companies to form a common user group, which would be allowed to treat the lignite-based power plants as captive plants.

For this, the user companies will have to jointly take up 26 per cent stake in the company to which the lignite block is being allotted.

The first allotment has been made to Marudhar Power Pvt Ltd, a wholly owned subsidiary of the Hyderabad-based KSK Ventures Ltd, in Rajasthan for setting up a 150 MW power plant with an investment of Rs 750 crore, Coal Ministry officials said.

Mr S. Kishore, one of the promoters of KSK, told Business Line that this would be the first "merchantile" power plant in the country.

Mr Kishore said that KSK has set up the first power sector venture capital fund in the country with a corpus of Rs 230 crore.

This fund will take up 26 per cent stake in the company. Since the user companies will take another 26 per cent, KSK would retain 37 per cent stake of the remaining 48 per cent. It is currently looking out for a strategic partner for the 11 per cent stake in the company.

"For this 11 per cent stake, we are looking at some operation and maintenance contractor or some power distribution company as a strategic partner," Mr Kishore said.

Out of the Rs 750-crore project cost, Rs 250 crore would come from equities while Rs 500 crore would be debt. KSK would arrange for the debt portion from its long-term associates, Mr Kishore added.

KSK currently runs four power plants in South India and another three are under construction.

The four running plants are a 20 MW plant in Andhra Pradesh, a 21 MW plant in Kerala, and two in Tamil Nadu with a generating capacity of 12 MW and 17.5 MW respectively.

The three plants under construction are two 43 MW plants in Chhattisgarh and Andhra Pradesh and a 60 MW plant in Tamil Nadu.

The venture in Rajasthan would be the company's first foothold in northern India, Mr Kishore said, adding that the company plans to go public in the next fiscal.

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