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Friday, Feb 22, 2002

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Essar Power variable cost set to fall

Vinod Mathew


ESSAR Power (EPL) is going in for a makeover of its generation factor whereby the variable cost of the Hazira-based plant will become cheaper by some 50 paise per unit. The incremental annual savings that will accrue on account of this to the Gujarat Electricity Board (GEB) is expected to be over Rs 100 crore.

As against the current variable cost of Rs 3.30 per unit, EPL will be generating power at Rs 2.80 per unit, once gas from the Lakshmi gas fields of Cairns Energy becomes available.

Towards this, the company has signed an MoU with Gujarat Gas Company (GGCL) whereby EPL will be supplied with one million cu.m. of gas per day from the Lakshmi fields.

The variable generation cost of power at EPL is already under a makeover exercise beginning February 1 this year on account of a 16 per cent excise duty exemption granted to it by the Union Ministry of Finance till such time that the LNG terminal which was to supply gas to the plant was not commissioned.

This is expected to result in a scaling down of its variable cost by 30-35 paise per unit, bringing it below the Rs 3-mark for the first time.

With current indications that gas from the Lakshmi field will begin to flow by August-September, EPL stands to avail of the excise duty exemption on naphtha for six-seven months, before it switches to gas as fuel. The Essar unit, along with six other power plants in the country, had been granted the excise duty exemption on naphtha imported as fuel for its 515 MW combined cycle plant at Hazira.

The GGCL's contracted receipt of 1.27 million cu.m. of gas per day from Cairns Energy has been delayed by a few months beyond July as originally planned. This has come in the face of a delay in procuring land from the Gujarat Government where Cairns was to build a 35-km pipeline to bring in gas to its onshore facilities.

The rate of gas to be supplied from the Lakshmi fields, it is understood, would be cheaper by Rs 20 per million cu. ft. than that supplied from the Hazira fields of the Gujarat State Petroleum Corporation (GSPC). Neither GGCL nor EPL officials were available for comment on the development.

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