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Power consumers form group captive projects for rate relief

According to reports, for long, this problem has persisted — and now there seems to be a solution emerging. At least in a few states in the country’s west and south. Drawing power has largely been a constraint owing to poor access from distribution companies and their demand for paying cross-subsidy charge.

Of late, Maharashtra, Rajasthan, Tamil Nadu and Andhra Pradesh among others are witnessing a new trend wherein a group of associations or consumers would form group captive power projects. After all, the Electricity Rules 2005 make it clear: Any association of persons having 26 per cent shares in a generating company can consume power more than 51 per cent — and can be treated as a captive power.

Power industry sources say it provides an easy route for consumers, as the price in the market nowadays is less than Rs 3 a unit while its production (using imported or open-market coal) comes to Rs 3.50 a unit.

“Second,” as a source points out, “consumers of captive power need not pay cross-subsidy charges — they are exempted for a captive power plant under section 42 of the Electricity Act, 2003. Besides, several states have exempted them from paying electricity duty.”

Section 5.2.25 of the National Electricity Policy is devoted to the formation of captive power plants by group of consumers.

Thane Belapur Industries Association says a consumer opting for an open access is looking for a reduction in electricity rate that is charged by the state electricity board (SEB). “When one buys electricity from inside or outside the state, one has to pay electricity charge to the generator plus the wheeling charges depending upon intra- or inter-state and then the cross-subsidy surcharge,” points out its group leader Ashok Pendse.

“Now, the question is that SEBs are asking for a pound of flesh by cross-subsidy surcharge. Hence, the sum total of all these three things is unviable,” he notes.

“The moment you go to captive in any form, the cross-subsidy surcharge becomes zero. Hence the tariff becomes very attractive.”

Further, the consumer will get a relief from knocking the doors of the utility. Third, SEBs are now talking about standby; they have to give power in case of failure. That issue gets resolved the moment you go to captive, Pendse says.

Concurs Jayant Deo, a former member of the Maharashtra Electricity Regulatory Commission. “This is a good trend,” he says. “It is no more the responsibility of the government to supply power. Therefore, society has to make efforts. This is in the right direction.”

The debt-servicing cost is not required to be paid by the users in this set-up; therefore the cost of power will come down.

“Such plants can have a lifetime of about 25 years and thereby securing the power supply for the next 25 years,” adds Deo. “As the years progress, the loan is completely repaid, the cost will further come down.”

Power analyst D Radhakrishna says the group captive power project will be attractive for the consumers.

“For instance, on taking an equity in any company of, say, Rs 5 crore, they can save at least a cost of Rs 1 on a unit, particularly in states like Maharashtra, Tamil Nadu, Karnataka and Punjab besides the megacities of Mumbai and Delhi where they are paying Rs 5.50 to Rs 6 per unit of electricity,” he notes. “Also, they can earn profit in the company where they are pledging equity.”

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