Power — the weakest link in growth equation

There is little doubt in stating that power drives growth and conversely could impact and stunt development of States.

Maharashtra and Gujarat have been in the forefront of attracting industrial investments but when it comes to power availability they still have to depend on the central pool to tide over their requirements, though the dependency factor is vastly different.

According to the Central Electricity Authority data for October, the requirement for Maharashtra was 12,140 million units (MU) and availability 9638 MU, with the deficit totalling 2,502 MU or 20.6 per cent.

In the case of Gujarat, the picture looks by far better as a requirement of 6783 MU was met with an availability of 6732 MU, with the deficit just 51 MU or 0.8 per cent.

In wattage terms, Maharashtra's actual peak demand for October was 20,595 MW (met with 15,632 MW) while Gujarat's tidings were better with the peak demand of 10, 951 MW met by 10,759 MW.

A few electricity generation projects have gone stream in both the States in the current year.

In the April-June quarter, Maharashtra's capacity addition was Khaperkheda thermal project expansion of 500 MW and JSW Ratnagiri expansion project of 300 MW, besides the Wardha Warora project of 135 MW.

In the second quarter, Tata Power's 800 MW at Mundra as also Adani second unit of 660 MW were added.

For the third quarter, the scheduled were JSW Energy's 300 MW at Ratnagiri in Maharashtra as also Adani Power 660 MW in Gujarat. The fourth quarter Adani Power's Tirora unit of 660 MW and Bhusawal unit of 500 MW have been slotted for going on stream.

With almost all plants being coal based, availability of fuel has become an issue with Coal India unable to meet their needs. The November-end data of the Central Electricity Authority have listed 48 thermal plants in the country as holding coal inventory of less than seven days. Of this, 11 thermal plants are in the western region covering Maharashtra and Gujarat fall under. Fitch Ratings, in a special report, said that the debt of coal-based thermal projects might be impacted by the impending coal shortage, particularly if their off-take arrangements do not have a pass through of fuel costs to the power tariff. Such projects will have to resort to more expensive imported coal that is expected to be blended in various degrees depending upon the plant configuration.

Mr Venkataraman Rajaraman, Director, Fitch Global Infrastructure Group, said, “The financial margins of power projects will also come under severe pressure in the absence of a significant tariff revision or injection of additional sponsor equity. Projects that have substantial dependence on imported coal are most likely to default on their debt obligations. This is worsened by the impact of the recent weakening of the Indian rupee against the US dollar.”

Computing the likely cost of power generation involving varying degrees of costlier imported coal and projected the debt service coverage ratios, Fitch said even with a favourable set of assumptions, it costs Rs 4.41 per kWh (excluding return on equity) for a plant that is fully dependent on imported coal. This is significantly higher than the average merchant tariff of Rs 3.75-4 per kWh.

Providing the industry's viewpoint, Mr Ramesh Chandak, Managing Director, KEC International, said the situation was such that outside Mumbai, all industries had back up diesel gensets while homes either had a genset or an inverter to handle power shortage.

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