While the impact of any rise in diesel prices on captive power generation is expected to be minimal on production cost due to limited use of captive power using diesel as the fuel, any hike in transport cost would be crippling for the industrial units in Tamil Nadu, according to D. Balasundaram, Chairman, Tamil Nadu Electricity Consumers Association (TECA), Coimbatore.

He cautioned that if the oil marketing companies (OMCs) implement a scheme to supply bulk diesel fully priced (without subsidy), it might lead to diversion of diesel from retail supply to bulk consumers (industrial consumers) because of significant difference in the rates for the two class of consumers.

Speaking to Business Line here on Friday, he said diesel-powered captive power plants that were new or well maintained would be able to generate about 3.5 units of electricity for every litre of diesel. At the current rate of diesel at about Rs 50.50/litre, per unit cost of captive power worked out to Rs 14.40 per unit. But the power supplied by electricity board costs only Rs 5.50 per unit, making it impossible to depend entirely on captive power to run the industrial units using diesel as the fuel.

It was for this reason that industries that rely on captive power plants to meet their power needs significantly use alternative fuels such as furnace oil but even these were uneconomical. Generally, industries use captive power plants for short durations as it was “not just possible at all” to operate industrial units fully on diesel-powered gensets.

Balasundaram, who is a former President of Coimbatore Stock Exchange, said some of the large consumers have found procuring diesel from Kerala economical because of the tax difference that made diesel purchase cheaper by Rs 7 per litre compared to the Coimbatore rates. But even this advantage would be lost if the bulk consumers were charged at market price. He was also apprehensive of the price difference between the retail price of diesel and the bulk diesel price driving large consumers to use passenger vehicles to get diesel at retail prices, at least to meet part of their needs.

He feared that industries in Tamil Nadu would suffer a major jolt because of its locational disadvantage both in terms of sourcing raw materials and in sending the finished goods to the markets. Even yesterday he had to pay 15 per cent more as transport charges to bring raw materials from Pudukottai to Coimbatore after the correction in diesel pricing was announced as the operator feared imminent hike.

The hike in transport cost would make Tamil Nadu lose its competitive edge to more strategically placed States such as Gujarat, Maharashtra, Chhattisgarh, Madhya Pradesh etc. and this would particularly be so in case of industries like textiles for whom transportation cost formed a significant share of the production cost. Already many in Coimbatore are running their units only when the grid power was available, mostly in the night shift, leaving the workforce idle during power blackouts.

Balasundaram, referring to reports that the government might look at hiking the cost of diesel passenger vehicles, felt that this was not an economical way of doing and pointed out that any price increase would get amortised over a period of time. He wanted the government to cut the taxes on fuel.

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